Western Railroad Discussion > The End of Bakken etc shale oil by 2025?

Pioneer Natural Resources warned yesterday that the end of the US shale oil boom is in sight. It fingered 2025 as the likely end, with only parts of the Permian basin remaining in growth mode. This echoes similar warnings from Continental Resources, investor Goldman Sachs, and other producers.  Shale oil, frac sand, and some associated liquids are huge sources of revenue for the railroads. To be clear, it's the expansion that's being discussed. Continuing pumping of better holes may continue for decades with suitable investment.

I'm not sure I'd give up on this. For one thing, gas drilling hasn't even begun in NY state. Huge investments are being made in PA OH WV midstream processing.  I understand that the best parts have been explored. I understand that many players paid too much for lousy property, and are reluctant to invest $ when prices are so fluid. And putting too many wells on one pad may not always be a good idea.

So, should the railroads be adding new oil tank cars and access to terminals?  The province of Alberta, the state of North Dakota, and the state of Colorado seem to be expanding their drilling envelopes.

( I have some small positions in related stocks. Parsley Energy and Pioneer Natural Resources are the holdings.)

The current glut isn't helping investor confidence, last weeks massive inventory buildup caught everyone by surprise. The
world economy is cutting demand so it would seem that there are better places for new money. Your point on natural has though
is well taken, there's some opportunity there. One little yuck, for years Pennzoil's claim to fame has been their Pensylvania
crude base for their lubricants, now all of a sudden it's crude is dirty and natural gas makes better motor oil. Sure, natural gas
which has zero lubricity and takes a whole lot of massaging to turn into motor oil, progress you know.

Out

we COULD eventually need coal again........

66

It's a whole lot more complicated than the hare-brained media and most of the public can fathom.  The panic over the years has been "running out of oil."  We aren't running out of oil--yet--but we will run short of inexpensive oil.  Fracking and other various enhanced recovery techniques work, but their cost goes up as fields get further depleted.  As an oil company guy told me years ago, "We can wring more oil out of existing fields with enhanced recovery when oil sells for $250 per barrel, but no one could afford to buy it."  Shrewd investors are seeing the production cost vs. marketable price squeeze coming on the horizon and they're getting rightfully nervous about it.

There's another problem with a couple of the biggest enhanced recovery oil fields--the Julesburg Basin in NE Colorado, Southeast Wyoming, and some of western Nebraska, and the Permian Basin in West Texas and SE New Mexico.  Both fields produce a large amount of natural gas liquids along with the petroleum--enough that "by-product"  natural gas liquids production is actually putting downward pressure on natural gas prices in the whole natural gas market.  That is putting some real hurt on natural gas producers operating in fields that produce almost all natural gas.  I live near one such gas field, and new drilling and new enhanced production has essentially stopped.  Natural gas from oil field production is also filling natural gas pipelines to capacity, making it even more difficult for natural gas from gas-only fields to get to market.  Pipeline capacity is tight enough in the Permian Basin that a lot of natural gas from oil wells is going back to the old practice where it is simply being flared.  Needless to say, that has the greenhouse gas eviro crowd up in arms.

As to pipelines, aside from all of the potential environmental rancor about them, a big challenge is that the pipeline industry very much resembles the railroads of 50-75 years ago when it comes to regulation.  The best description that I heard, that came from a pipeline operator, was that an oil or natural gas pipeline could more or less charge a "fare" like a taxi cab, explaining that the pipeline could charge so much per unit per mile to move the product, regardless of the price of the product itself--like a taxi cab driver getting the same fare whether he was carrying a lower-class working stiff or the richest guy in town.  In that economic environment there isn't a lot of incentive for the pipeline operator to expand capacity, especially if the long-term forecast indicates that the amount of available production to go through the pipeline is going to stagnate or decline.

I will go out on a limb and predict that, 10 or 15 years from now, we will be re-opening coal mines (at great expense compared to the cost of just keeping them in production now) because natural gas and oil prices will have inflated wildly due to overconsumption and declining production.  Your electric car may be (indirectly, through a power plant) coal-fired. 

The Permian Basin also has it own problems.  One problem is TOO MUCH water.

https://rbnenergy.com/down-in-the-flood-permian-crude-producers-brace-for-a-deluge-of-produced-water


Allen



Edited 1 time(s). Last edit at 08/07/19 14:25 by bradleymckay.

goneon66 Wrote:
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> we COULD eventually need coal again........
>
> 66

Tumbleweed...

exhaustED Wrote:
-------------------------------------------------------
> goneon66 Wrote:
> --------------------------------------------------
> -----
> > we COULD eventually need coal again........
> >
> > 66
>
> Tumbleweed...

Oh, you must mean Tumbleweed Connection, the album by Elton John from 1970...

Allen

goneon66 Wrote:
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> we COULD eventually need coal again........
>
> 66

Or conservation COULD become the basis of energy policy...

Some level of intelligent use, call it conservation, is always a good idea though conserving for success
t'aint quite the solution in an comsumption oriented society. Plan B wouldn't be popular in the US. I'm
waiting for the cost of recycling to finally be reaiized.

Out

Coal is dead.   

Not mentioned, fracing can be done in old fields thought to be played out and bring production back again.  A geologists told me there is lots of oil in Nevada and Utah deserts but it needs water to frac it out.

JohnM Wrote:
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> Coal is dead.
Only in some parts of the world      expanding in some places actually new mines opening   in the land down under   Cheers Dennis

JohnM Wrote:
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> Coal is dead.   

... until it isn't.

Posted from Android

Conservation is best represented by all the huge pickups roaring past my 32 mpg Fiesta on the local freeways.
And coal is dead...

Bill Deaver
Tehachapi, CA

RuleG Wrote:
-------------------------------------------------------
> goneon66 Wrote:
> --------------------------------------------------
> -----
> > we COULD eventually need coal again........
> >
> > 66
>
> Or conservation COULD become the basis of energy
> policy...

conservation of energy is a given IF demand EXCEEDS supply because those that could not afford the price increases of dwindling supplies of energy would go without..........

66

As an old economist, let me share this alert

Colleagues, a large part of this theme is speculation.

Think before investing.  Cheers!

This headline, from Reuters, is from yesterday. Coal is most definitely not dead. 
 



Edited 1 time(s). Last edit at 08/07/19 17:52 by MSE.

---

bradleymckay Wrote:
-------------------------------------------------------
> exhaustED Wrote:
> --------------------------------------------------
> > goneon66 Wrote:
> --------------------------------------------------
> > we COULD eventually need coal again........

> > Tumbleweed...

> Oh, you must mean Tumbleweed Connection, the album
> by Elton John from 1970...


What's the connection you're making, that the most polluting fossil fuel and the album you mention are both pretty crappy and best forgotten?



Edited 2 time(s). Last edit at 08/07/19 18:21 by exhaustED.

Lackawanna484 Wrote:
-------------------------------------------------------
> Pioneer Natural Resources warned yesterday that
> the end of the US shale oil boom is in sight. It
> fingered 2025 as the likely end, with only parts
> of the Permian basin remaining in growth mode.
> This echoes similar warnings from Continental
> Resources, investor Goldman Sachs, and other
> producers.  Shale oil, frac sand, and some
> associated liquids are huge sources of revenue for
> the railroads. To be clear, it's the expansion
> that's being discussed. Continuing pumping of
> better holes may continue for decades with
> suitable investment.
>
> I'm not sure I'd give up on this. For one thing,
> gas drilling hasn't even begun in NY state. Huge
> investments are being made in PA OH WV midstream
> processing.  I understand that the best parts
> have been explored. I understand that many players
> paid too much for lousy property, and are
> reluctant to invest $ when prices are so fluid.
> And putting too many wells on one pad may not
> always be a good idea.
>
> So, should the railroads be adding new oil tank
> cars and access to terminals?  The province of
> Alberta, the state of North Dakota, and the state
> of Colorado seem to be expanding their drilling
> envelopes.
>
> ( I have some small positions in related stocks.
> Parsley Energy and Pioneer Natural Resources are
> the holdings.)

Somewhat sensationalist and misleading thread title...

I hate to pour cold water on those hoping for the ressurection of coal, but it isn't going to happen -- for the simple reason that the coal is gone. Yes, there are pockets here and there even in the Swiss-cheese hills of southern West Virginia, southwestern Virginia, and eastern Kentucky, but what's left in most of the traditional coal-producing regions of the US is in small, irregular remnants between now worked-out mines, or thin, of marginal quality, under too much cover, or suffer from some other disadvantage, which is the only they are still left. And yes, there are large resources left in parts of Colorado, Wyoming, Montana, and New Mexico, and some more limited quantities in Utah and Arizona, but again most of what's left is there because of quality or minability problems. Nobody would like to see coal's recovery more than I would -- I spent 40 years in and close to the industry and (quite literally, I'm sure!) have coal dust in my blood, but it's just not possible at the scale we saw as recently as ten years ago.