GoM progress over the weekend
Posted by Stuart Staniford on October 11, 2005 - 3:25pm
Today's shut-in oil production is 1,062,530 BOPD. This shut-in oil production is equivalent to 70.84% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.Today's shut-in gas production is 6.042 BCFPD. This shut-in gas production is equivalent to 60.42% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.
The cumulative shut-in oil production for the period 8/26/05-10/11/05 is 54,557,243 bbls, which is equivalent to 9.965 % of the yearly production of oil in the GOM (approximately 547.5 million barrels).
The cumulative shut-in gas production 8/26/05-10/11/05 is 271.661 BCF, which is equivalent to 7.443 % of the yearly production of gas in the GOM (approximately 3.65 TCF).
Staring at this EIA picture for a while, it looks to me like we are probably going to end up losing in the neighbourhood of 100-150m barrels of oil production for the year. That's about 0.3%-0.5% of total global liquids supply. On the natural gas front, we might guess we'll end up losing about 500-800BCF, which is around 2 to 3 1/2% of North American annual NG production. Because oil is a global market, but NG is still chiefly a continental market, these are the ratios us North American residents care about. The proportionate market impact of the hurricanes on the NG supply is nearly an order of magnitude greater than that on the oil supply.
All that assumes that Mother Nature is done kicking our butt for the year, of course.
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According to the EIA weekly outlook, "Natural gas in storage as of Friday, September 30, was 2,929 Bcf, which is 1.4 percent above the 5 year average."
However, the injection rate is half what it should be so that everyday we're falling behind in what we need to get through the winter.
Let's hope its a mild one.
http://headlines.accuweather.com/news-story.asp?partner=accuweather&myadc=0&article=8
The NG situation should have everyone in North America worried. I posted a few days ago that if the recovery is a little slower than you estimate, say we average 40-50% shut-in capacity through the end of March '06, we'll be down about 1 TCF instead of the 0.5-0.8 you mention.
Even with your numbers, though, we're in trouble. It's not the amount lost as a percentage of the annual production that matters here. It's the amount lost as a percentage of what we might expect to produce through the winter. For the past two years, the US has used 11.8 TCF from October through March. If we're down 0.8 TCF, we now have to get through the winter with 11 TCF. If we have even a normally cold winter, there's going to be some serious demand destruction.
Until spring, we're using all that we can produce plus some of the inventory that we should have been building. I don't know how much extra we can pull out of the reservoirs without the pressure dropping too low, but maybe someone will post that info here. I'm sure the NG engineers and planners are already trying to figure out how to make the gas last through the winter.
Thus we can probably scrape the barrel for 500bcf or so of the shortfall. So I don't see dramatic shortages as a result of this, unless we have an exceptionally cold winter. But certainly prices will be high, because demand will be so inelastic, and it really sucks for lower income folks and NG intensive industries. There's a nice piece about the impact here (it's a NYT piece, but I'm giving this link to avoid the registration hassle for folks).
But high stocks at the beginning may not be enough. Enkidu's worst case calculation below shows NG in storage dropping to 283 BCF, which is almost certainly well into the danger zone where they start shutting off pipelines. That's using 517 BCF missing production, your low number.
I still believe that a normal winter could cause shortages.
But will it be enough? I don't know. I wish I could be as optimistic as you seem to be about this.
Thanks for instigating this discussion, btw. It's the best post-Rita coverage I've seen about NG so far at TOD.
It looks like a crisis to the CEO of Dow Chemical because he needs to move most of his operations to somewhere with more NG, which is understandably very inconvenient for him and even more so for his employees. He'd like to persuade the rest of us to conserve more so he doesn't have to do that. But I'm not panicked by his rhetoric yet. "Peak North American Disposable Diapers" -- oh the horror of it -- I believe we can survive with nothing worse than a faint smell (albeit it will be a few more notches on the trade deficit which seems like it's going to keep getting worse).
The very good thing is it's raising awareness a little bit ahead of the NG depletion curve.
The big worry, to me, is there might be just as many bad hurricanes in the GoM in the next few years as there have been in the last few.
Then, in addition to the West possibly being generally warmer, what are the population densities like? 1,000 people need to warm up less space than 10,000 people, and in theory that would mean more gas would be needed just in an average year.
Either of these things could mean that the colder temps in the East could make it an above average energy useage for the year, despite being warmer in the west. And this isn't even getting to the question of degrees. Maybe the west coast will be 2 degrees warmer, but the east coast will be 10 degrees colder.
You mention that forcasts this far ahead shouldn't have too much stock put into them, but there's even more unknowns staring at us for the little faith that might be put into them.
(the population of the northeast states above is 14.2million vs IL/MI/OH is 34.1 million so nat gas is 6 times more use vs 2.5 x the population - if we add New York at 8.13% of national both population blocks are identical and we have 23.67% vs 12.15%. Midwest states uses twice the nat gas as east coast (at least) for home heating. I will follow this post with nat gas for electricity use.
Repeating the above analysis (on colder than expected winter) in Northeast, the block of Maine, NH,CT,MA,RI, and VT uses 1.18%,.56%,.83%,3.3%,.82% and 0% respectively for a total of 6.69% of nations nat gas for electricity usage. Adding NY at 5.08% the entire northeast block is 11.77% of total while having 11.72% of population. The bottom line then is that nat gas for home heating is where New England has an advantage (well, if you call using heating oil an advantage...but methinks this winter it will be...)
Lets breakdown the annual use into seasonal usage for electric fuel.
The Northeast utilities are winter peakers meaning that their natural gas usage for electric generation will be higher in the winter than in the summer.
The Biggest users (CA, TX, and FL) are summer peakers and use their gas as electric fuel during the summers for air conditioning.
Looks like the point is that the fuel oil users need to keep the tank topped up this winter. If there is a gas delivery problem, the electricity is at risk in the NE.
There are three important variables
- Storage. The amount of storage going into the heating season. Currently storage is at 2929 bcf. For the purposes of this exercise I am going to assume that at on November 1 we have 3000 Bcf..
- Normal Drawdown. This depends on a number of factors including the weather, the amount of economic activity, and the NG production in the US and Canada. During the last ten years, this figure has ranged from 1485 bcf (2000-2000) to 2222 bcf (2002 -2003). Based on this, we have thress scenarios: High drawdown of 2200 bcf , a Medium draw of 1950 bcf, and a low draw of 1500 bcf
- Prodction Shut In or Destroyed. The Amount of NG currently shut in (Oct 7) is 6.4 bcf. It is not clear how quickly the rest can be brought back on line. After Hurricane Ivan , the shut in wells were brought back on line by February. Total shut for Ivan was estimated by MMS to be 172 bcf for the season. In addition Ivan, also destroyed a number of rigs altogether. This production was lost. The MMS used to consider the daily production potential of the GOM to be 12.3bcf/d. However, they now use the figure of 10 bcf/d. I can only assume the "missing" 2.3 bcf/d was washed away by Ivan.
So what should we assume about Katrina/Rita?. It was apparently worse than Ivan.. Gail Norton recently stated: "We are not seeing this kind of quick recovery this time around." It may take into next year for some of the heavily damaged oil and gas platforms to be repaired, she said.So I suppose the best case is only-as-bad-as-Ivan; i.e. 172 + (2.3 *150) = 517 bcf gone.. Medium case? Worst case? Let' just stick with Ivan for now....
Running the Numbers
Best Case 3000 - 1500 - 517 = 983 Smooth sailing
Medium Case 3000 - 1950 - 517 = 533 Close to the edge
Worst Case 3000 - 2200 - 517 = 283 Unpleasantly high prices
Something else to consider: It is not clear to me whether the full 3000 bcf in storage is all actually available for use. According to Andy Weissman 500 -800 Bcf is needed as "working reserves" which he says are needed for contingencies - and in order to maintain pipeline pressure. See .eg. Days of Shock And Awe Pt 2.
- What period of time are you calculating for? Is it the 150 days you use in your missing production calculation? Is that November through March?
- You put the amount of gas available at 3000 BCF on 1 Nov., but your calculation at the end doesn't show any winter production added at all. Presumably there's still going to be lots of NG being extracted in the other gas fields.
- You've subtracted the drawdown, which is fine. But why did you subtract the missing production (517 BCF)? I think the number you want is just amount on hand plus production minus drawdown over the period of interest. Or am I confused about what you're doing?
- Why are you using 2.3 BCF/day in the missing production calculation anyway?
- I too want to know how much the reservoirs can safely be drawn down before the pressure drops too low.
Another really important issue here is about the rest of North American NG production. If we've peaked, how do the other fields (besides GOM) look? I shudder to think what this winter will be like if they head into rapid decline at the same time we're hit with this hurricane mess.I would defer to Weissman, however.
As to the total domestic production, our total production has been trending down at about 1% per year. We've also seen an uptick in reserve numbers but that could just be accounting.
I do still have a question about your missing production numbers though. Why 2.3 BCF/day? Also, why did you use 172 BCF lost so far when the MMS says we're already down 272 BCF?
However, with prices up 2x yoy, things are not equal. We will see demand destruction from both large and small consumers. In particular, the chemicals industry, normally consuming over 1/4 of US ng supplies, is hurting both physically and figuratively. Many plants remain down because of K/R, but some might be slow to return to full production because of $13+/mcfu. Accordingly, demand is already down. The picture will remain murky for some time, but K/R may well be the push that shoves the chemical industry off shore, or at least that portion of the business that turns ng into chemical feedstocks. NG is tricky, costly, and maybe dangerous to ship, but ethylene and propylene are not.
See here:
http://www.energypulse.net/centers/author.cfm?at_id=114
If I remember correctly, he was last saying that most of our easy demand destruction had already destructed. Little electric fuel switching remained and any new reductions would be cutting economic meat.
ab3 - given that we don't know how bad Katrina/Rita will be over the long term I was trying to use the Ivan experience as a placeholder for the potential long term shut in (172bcf) and lost production (2.3 bcf/day).
Looks like those numbers will be low esp. if shut in is already 272
==AC
Consumer's Energy total electricity:
Coal = 53%
Gas = 28%
Nuclear = 14%
The rest is a combination
Regional Average (Michigan, Illinois, Ohio, Indiana, Wisconsin):
Coal = 71%
Nuclear = 24%
Gas = 3%
You can't look at just one component and say that addressing it will be the best thing to do. A house is a system with many interacting components, and you have to look at everything. Every house is different.
Anyone interested in really understanding how their house works and what they can do to get the most bang for their buck needs to find a "home performance" contractor, one who understands the principles of building science. (See my website for info and links: ab3 energy.)
Your idea for using a dehumidifier for heating would definitely not be a good idea in many places because indoor relative humidity levels are already too low in winter. I live in the humid southeastern US and use a humidifier in the winter. Otherwise, the RH drops to about 10%, causing dry skin and shrinking wood.
ab3 has the LEED and HERS certifications, which speaks well for him, but in general, I would be very wary about firms that advertise themselves as a "home performance" contractor.
I'd be interested in knowing where your negative opinion of home performance contractors comes from. Have you had a bad experience with one? Did you read something?
Saying you don't trust home performance contractors is kind of like saying you don't trust engineers or doctors or teachers. As in any industry, there're good home performance contractors and bad ones. Most people in the home performance industry, however, have some training in building science and use the house-as-a-system approach.
If you just call the insulation contractor, he's always going to want to sell you insulation. If you call the HVAC contractor, he's going to ask for your money even if insulation is a more critical need. As the old saying goes, if all you have is a hammer, every problem looks like a nail. I don't know why anyone would settle for contractors with tunnel vision to tell them what they need.
I didn't say I had a negative opinion of home performance contractors. I advised readers to be wary of someone calling themselves a home performance contractor because I'm not sure how you'd know they were qualified, or even honest. In some places, it still isn't that hard to get a contractor's license and call yourself almost anything (plumbing, heating and electrical are better regulated). In times of increasing energy costs, I expect that many self-styled contractors will jump on the energy bandwagon, offering super-insulation, triple-pane windows, etc. to the gullible. Be careful, get references, call the references.
Back in the seventies we had a very cold winter that also caused some disruption of coal deliveries by barge along the rivers because of ice.
But generally you can run the power plants for electricity pretty steadily and warm houses up during the day so they don't get so cold at night during peak power use in the winter at night.
Sunbelters our here are the ones that use power during the summer during the day and peak then.
==AC
True there is a LOT of credit in this conutry. But a Lot of Poorer folks do not have credit, or very limited credit. These folks, just will stop buying things, stop the extras, heat the home and feed the kids and bundle up.
Even the More well off, or the folks with more credit will be hurting, are hurting, they limit the use of the things they have planned, the trickle down costs of the higher energy means less spending in the other sectors of the economic pie.
The economy is not designed to go backwards, but humans are adaptable, we can and always will be able to get by on less. The prices at the Pump, will change our habits, it might take a few days or a year, but they will change.
That and a lot of Folks I know are at the max on the credit cards, They can't get more, they have to spend less, so they ARE changing. I can't speak for EVERYONE, but nor can you. We only see the PARTS of the World that we touch on a day to day basis. I live in the south, North Alabama, we get a few days of below freezing weather every year and a lot of days below 50. (Recently it hit a cool snap, people in light jackets, me in shorts and short sleeves, I look so out of place but I have not run the AC or the Heater in over a Month, I suck through the cool night air, and blow it around in the day time.).
WE can and We WILL change, we are abaptable, WE might Live in big cities but we still do change.
Money talks, Let the market make you change. (sarcasism)
Charles,
After you plant your fall Radishes, Snip the young leaves and add to salads as a spicy green.
I started keeping similar graphs about 9/2. Yours look nice with the smoothing and interpolation. But using linear interpolation to fill in missing data for 10/8...10/10 may be masking a reasonable-to-expect "knee" in the production recovery curve. (testable hypothesis - If I'm corrrect, there will be substantially less daily improvement in the data for 10/12 and subsequent days, for quite a while.)
You'll note that for both Ivan and Katrina, there was a rapid recovery for about 8 days post-landfall, followed by a lengthier period (a week to a month) where there was little or no progress, then a third phase where % production recovery/day was very small. The most plausible explanation for this is that it took about 8 days to inspect and restart platforms that had been shut down as a precaution but that suffered no damage. Starting at day 9, what was left were problems that required trouble-shooting, parts, work crews, helicopters, work boats, etc. to fix, as well as very-long-lead inspections/repairs of undersea pipelines.
The analogous process (to the 8 days of inspect& restart undamaged platforms) post-Rita appears to have taken much longer. An earlier post on TOD referred to severe shortages of helicpters, fuel, personnel, work boats, docks, etc. after Rita tore through much of the shore infrastructure that Katrina missed. It looks as though the first phase - inspect & restart the easy stuff - has taken 16-18 days (post-Rita) and we are just about to hit the second phase of the recovery, where shut-in production remains static for a while.
If the magnitude of the post-Rita damage compared to Ivan and later to Katrina by itself has caused available resources to be spread so thinly that phase 1 of the recovery from Rita took twice as long, it does not bode well for expectations of how long phases 2 & 3 of the post-Rita/Katrina recovery will take, since they are even more resource-intensive IMO.
Sorry, did not mean to impugn your graphics capability. And I did not notice the lack of data for 10/11, which would also explain why I did not see a slight flattening of the recovery curve as I did when I updated my own version of the graph.
Les Lambert
That being said, 6 months from now, brings us to April 06. Is a 4 to 6 month window of getting the rigs and platforms up and running a good estimate? Or is it a WAG?
If all the rigs are back on line and producing at max speed, then by June they are watching out for storms again. so they have a few good months for producing, then it can be sporatic depending on storms drifting through. thus the cycle starts all over.
How long will it take for the lost rigs to be replaced?
I thought i read somewhere that there is a 3 year wait on new rigs. is that about right?
And of the rigs lost, what was their volume of production?
First frosts are two weeks later in many places in America than the fifties. Expect hurricaines two weeks later for the same reasons.
At the EIA site there is pdf files by state on power plants. the link is
http://www.eia.doe.gov/cneaf/electricity/st_profiles/e_profiles_sum.html
They know what they're doing, all right.
"Iran, OPEC's second-largest producer, shut two oilfields in the Persian Gulf because of difficulties selling the heavy oil the sites produce, said Royal Dutch Shell Plc, which helped develop the fields.
Iran shut the Soroush and Nowruz fields less than three months after Shell handed their operation to Iran, said a Shell official, who declined to be identified. The shutdown allowed Shell, which still has a maintenance contract for the sites, to make repairs to the fields, the official said in a telephone interview.
The fields were producing 130,000 barrels a day from capacity of 190,000 barrels, Al-Hayat newspaper reported today, citing unidentified Iranian oil officials.
Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries, on Aug. 29 offered all its spare capacity of about 1.5 million barrels a day to meet any surge in demand following damage to production facilities in the Gulf of Mexico because of Hurricane Katrina.
By Sept. 17, there were no takers because the oil offered was of the heavy variety, Ali al-Naimi, Saudi Arabia's oil minister, told reporters in Vienna that day."
http://www.bloomberg.com/apps/news?pid=10001099&sid=a2am.HjIsRxE&refer=energy
http://futures.fxstreet.com/Futures/news/afx/singleNew.asp?menu=economicnews&pv_noticia=11291212 59-105c0f08-26754
They were right about increased hurricane activity, but I don't know NOAA's record on predicting warm or cold winters.
First, there are production platforms and then there are drilling rigs (MODU's - mobile offshore drilling units). People tend to confuse the two, but platforms are used for production operations and rigs are used for drilling.
When Ivan hit in 94, it took the industry a full year to get everything repaired, and even then some platforms were not fully back to where they were prior to Ivan. This year they had Cindy, Dennis, Katrina, Rita and Tammy - all of these caused various levels of shut-ins and evacs.
The platforms that were lost (with 1 or 2 exceptions) will not be replaced, and that production will be essentially lost forever. The damage from Rita/Katrina is greater than that from Ivan, so I would expect repairs to take longer, with numerous platforms unrepaired when next season hits. I have an industry source who confirms this.
The rigs that were lost are likely to be scrapped, with the exception of the semisubmersibles, which simply broke loose and floated away. Jackups run aground are basically out of commission permanently, or if fixed, out for a minimum of 2 years. Last count, there were 10 rigs aground (scrap), 5 heading for Saudi Arabia for higher contracted rates and 4 rigs due out some time in 2006. Net loss of 11 jackups in the Gulf of Mexico area, which will drive drilling costs up appreciably.
I have no numbers for rigs or platforms lost in the Pacific from the typhoons. These losses also drive drilling rig demand and platform construction timetables. It is normal to move offshore drilling rigs all over the world, and the platform construction industry is limited to a few international shipyards, especially after the damage to Gulf Coast facilities..
"As of October 6, there are 20 natural gas processing plants in Texas, Louisiana,
and Mississippi each with capacities equal to or greater than 100 million cubic
feet per day, which are not active. A number of the inactive plants are expected
to be operating within 4 weeks.
By October 11, the Department of Energy's Office of Electricity Delivery and
Energy Reliability reports that about 181,290 customers in Louisiana and Texas
remain without electric power, down from a peak of 2.7 million.
EIA's baseline projections in this Outlook reflect a scenario of continued
recovery of energy infrastructure in the Gulf region through the end of the year.
In this scenario, Gulf of Mexico shut-ins for December 2005 are projected to
average 33.1 percent for crude oil (10.4 percent of total U.S. production) and
20.6 percent for natural (4.2 percent of total U.S. natural gas production). For
refinery capacity, 1.7 percent is projected to be offline."
Gas heating prices up $375, oil heat up $378, elec heat up forty bucks. etc etc
Lotsa stats and info in today's Press Release: http://www.eia.doe.gov/steo
I know this is not strictly on-topic but it may affect supply ;)
In Canada Warns That Tariffs on Lumber Could Imperil U.S. Access to Oil from the NY Times today, we learnI love this kind of stuff. Hit 'em where it hurts!
In a bau scenario (no hurricanes) we could have expected supply for the winter to be down at least 100 Bcf compared to last year, due to declining production. At the same time we could have expected demand to be up at least 200 Bcf due to increased housing, increased use for electricity generation, and increased economic activity, and all of this assuming winter temperatures like last year. Thus if we could have started this year where we were last year, and had a similarly mild winter, we could have ended the withdrawal season with 850 Bcf in storage. We are now looking at 400 Bcf due to the hurricanes effect to end Oct.
To make matters worse, the curve of restoration to production is starting to flatten and looks like 4 Bcf/day still shut in by end Oct., and the damage reports suggest at least 2 bcf/day still out of action by end March. That's at least another 400 Bcf unavailable this winter, leaving hypothetical storage at zero. The long range weather report suggests gas weighted near normal temperatures on average across the country for the winter, which is quite a bit colder than last year, so we can expect to go to -200 Bcf.
However we know that to keep enough pressure in the lines to ensure delivery, and to minimize price spikes (like Feb 2003), we need to finish the winter with at least 800 Bcf left in storage. Therefore we need 1000 Bcf (1Tcf) of demand destruction over the winter. That's about 9%. To make matters more interesting, some of the winter demand is already hedged and therefore relatively immune to destruction, and rebuilding from the hurricanes is going to increase a considerable chunk of industrial demand. Therefore, we will probably have to cut 12 to 15% of the demand that is amenable to reduction. If that happened as a linear down ramp, starting at maybe 100 Bcf already, we would end the winter with demand down 20 to 25% on the amenable fraction.
How high will prices have to go to make that happen, and how high will the price spike be when the LDCs panic and start bidding for the limited available supply?
In my opinion "we ain't seen nuthin yet!".
I would like to know if anybody can guess the current consumption by the chemicals industry, which seems to me to be the only large consumer able to demand destruct (go somewhere else where gas is cheaper.)
the people's memory is about 1 month old, seems to me. by January 06, this will all be old news, but guess what? the price of oil will still be high, the platforms will still be missing, the rigs will still be missing. Natural gas will still be up, probably around $20. And most people will never know why. they will still be waiting for that new scientific development to save the day and bring the price of oil down to $25, within 60 days.
I was at work about a week after Rita hit and happen to mention that 99% of oil production and about 78% natural gas production has come to a screeching halt due to the storm. (something i learned from TOD) The look i got from co-workers, was astonishment, a few raised eyebrows, mostly complete silence, deer in the headlights look. after about a minute someone mentioned Baseball scores and the topic immediately changed. Many people do not want to know, so i have say i am ok with that. But when the world around them decides to crumble, i will not be there to help. Fair warning. People will decide not to pay attn. I will always try to stay informed. And the kicker is that i live and work in Houston!
Damn the torpedoes, full steam ahead! straight into a brickwall!