<Biofuel Conference Call Including a New Biodiesel from Algae The Oil Drum Summer Streets a Success! >
<DrumBeat: August 22, 2008 DrumBeat DrumBeat: August 24, 2008>

175 comments on DrumBeat: August 23, 2008

Comments can no longer be added to this story.

Show without comments | PDF version

euro on August 23, 2008 - 10:19am Permalink | Subthread | Parent | Comments top

Costs are escalating. I'm adding here a recent post from DownSouth:

Yes, and this gets reflected in the financials of those operators that are heavily committed to the exploitation of these shale plays.
Take Chesapeake Energy, for instance. Direct from its own financial statements, look what is happening to costs:
Investment in
Quarter Oper. Costs Property & Equipment
(per MCF) (per MCF produced during qtr)
Q2-2003 $2.27 $58.86
Q2-2004 2.60 63.54
Q2-2005 3.11 120.80
Q2-2006 3.90 116.52
Q2-2007 4.50 154.00
Q2-2008 4.73 142.71

In the last five years, production costs per MCF have increased by 208% while the amount of investment required to produce an equivalent amount of gas is up even more, by 242%. Gas prices, however, have increased only 142%, from $5.64 in Q2-2003 to the current $8.11.
If some pretty hefty increases in the price of natural gas are not in the offing, I would question the continued economic viability of these resource plays.

Comments can no longer be added to this story.
westexas on August 23, 2008 - 10:35am Permalink | Subthread | Parent | Comments top

Also, there is the net energy aspect. It takes a lot more energy to put swarms of smaller wells on line to offset a smaller number of high volume wells.

BTW, if we use a six to one conversion factor for gas to oil, to get barrels of oil equivalent (BOE), which is accurate for BTU content but not price, some historical perspective for Texas oil & gas production, in terms of BOE (RRC data, assuming the annual data are reasonably accurate):

1972: 7.83 mbpd

2006: 3.69
2007: 3.86

This illustrates my point about the difference between making money and making a material long term difference in total energy supplies, especially on a net energy basis.

Comments can no longer be added to this story.
Pitt the Elder on August 23, 2008 - 10:46am Permalink | Subthread | Parent | Comments top

Q2-2003 $2.27 $58.86
Q2-2008 4.73 142.71

In the last five years, production costs per MCF have increased by 208%

Just to help keep the discussion clear: going from $2.27 to $4.73 means costs have increased by 108% or to 208%. Compare to "increased by 10%".

Comments can no longer be added to this story.
DownSouth on August 23, 2008 - 12:44pm Permalink | Subthread | Parent | Comments top

I stand corrected.

Thanks, Pitt the Elder.

Comments can no longer be added to this story.
Pitt the Elder on August 23, 2008 - 3:54pm Permalink | Subthread | Parent | Comments top

No worries - it's an easy enough mixup to make. I just wanted to clarify. :)

Comments can no longer be added to this story.

175 comments on DrumBeat: August 23, 2008

Comments can no longer be added to this story.

Show without comments | PDF version