Why Shale Gas will Exceed the Hype

[Halfbreed]

Interestingly, spent about 4 hours last night building out a lifecycle discounted cost model for Utica oil wells being drilled right now.

Based on todays CapEx, an assumption of OpEx, a non escalating price scenario ($80/oil, $3/gas ), 80% NRI, hyperbolic initial decline with a hybrid exponential Dmin tail (12%), existing well parameters including a 10% discounting rate, I have to say, if you think making a few million per well is uneconomic, PLEASE sir, may I have more?

Of course you can make money out of previously untenable wells. Oil is trading at $100pbb.

I just finished drilling two last week, they can't be previously untenable because they didn't exist previously. Are you referring to some other type of well?

[Little John]

Interestingly, spent about 4 hours last night building out a lifecycle discounted cost model for Utica oil wells being drilled right now.

Based on todays CapEx, an assumption of OpEx, a non escalating price scenario ($80/oil, $3/gas ), 80% NRI, hyperbolic initial decline with a hybrid exponential Dmin tail (12%), existing well parameters including a 10% discounting rate, I have to say, if you think making a few million per well is uneconomic, PLEASE sir, may I have more?

Of course you can make money out of previously untenable wells. Oil is trading at $100pbb.

I just finished drilling two last week, they can't be previously untenable because they didn't exist previously. Are you referring to some other type of well?

He meant a previously economically untenable body of oil. That is to say, economically untenable in that it would have cost more to extract than would have been recoverable in the sale price. But, then, I can't believe you didn't actually know he meant that. In which case, you are behaving deliberately disingenuously in this debate.

Also, it's worth pointing out that as previously economically untenable reserves come on line, although this may well prove to be a bonanza for the companies involved, it has no bearing, per-se, on filling the global gap in supply. Indeed, it is precisely because global supply is getting so tight that reserves such as these are becoming tenable.

In short, whilst some companies may make a lot of money from ever more difficult to access oil , the world economy will still crash irrespective since it cannot operate on such high oil prices. Expensive oil-energy will become the preserve of the very wealthy, furthering the gap in living conditions yet wider between the haves and have-nots. In turn, this will mean that the haves will have to employ ever more draconian methods of suppressing the majority.

[emordnilap]

Interestingly, spent about 4 hours last night building out a lifecycle discounted cost model for Utica oil wells being drilled right now.

Based on todays CapEx, an assumption of OpEx, a non escalating price scenario ($80/oil, $3/gas ), 80% NRI, hyperbolic initial decline with a hybrid exponential Dmin tail (12%), existing well parameters including a 10% discounting rate, I have to say, if you think making a few million per well is uneconomic, PLEASE sir, may I have more?

Sounds good. Pay the cost of removing pollution and greenhouse gases from the atmosphere and we have a deal my friend!

Who plagarized my post?

Wrong answer.

[Halfbreed]

]He meant a previously economically untenable body of oil. That is to say, economically untenable in that it would have cost more to extract than would have been recoverable in the sale price.

Okay, that I understand.

Also, it's worth pointing out that as previously economically untenable reserves come on line, although this may well prove to be a bonanza for the companies involved, it has no bearing, per-se, on filling the global gap in supply. Indeed, it is precisely because global supply is getting so tight that reserves such as these are becoming tenable.

You are quite correct about the bonanza part. As to the global supply, at the well development level, I worry about the details and let the economists worry about the macro level effects. Better them than me, worrying about making individual projects economically viable is rough enough sometimes.

In short, whilst some companies may make a lot of money from ever more difficult to access oil , the world economy will still crash irrespective since it cannot operate on such high oil prices.

Well, those prices have been high for awhile. Are you defining crash as a recession or something worse, and how much longer do these high prices (lower as of late, in terms of $$/bbl of WTI) have to continue before it happens? I realize the UK is an entirely different animal in terms of lack of the fuel range of fossil fuels available to them, but there have been some recent nibbles of interest in terms of shale gas even there.

Expensive oil-energy will become the preserve of the very wealthy, furthering the gap in living conditions yet wider between the haves and have-nots. In turn, this will mean that the haves will have to employ ever more draconian methods of suppressing the majority.

According to your construct, oil is already expensive, and I can assure you that the tens of millions of Americans driving to grandma's house aren't the very wealthy. I assume you expect it to get worse, a boon for me of course (bonues are tied to performance, and performance is as tied to price as anything I can do in terms of decreasing drilling costs).

Having worked during the boom of the late 70's, I am leery of the current one if only because what goes up must come down, and the last time it happened to the industry, it was pretty rough for those of us in it.

[Halfbreed]

Who plagarized my post?

Wrong answer.

It wasn't an answer, it was a question.