Dumb upstream engineer question...What's to stop US/Canada/Mexico from being energy independent? Relatively low cost Saudi oil? Can't we tell them to take a hike and take care of ourselves?

Our refineries aren't really set up to handle that much light sweet crude. There are probably other reasons too.

Dan Scott said:

---

XOM and LNG about to blowup down there

---

Yes they are.

GarlandAg2012 said:

---

Our refineries aren't really set up to handle that much light sweet crude. There are probably other reasons too.

---

That is why Corpus is seeing a boom in exports. The refineries there aren't equipped to handle the light sweet crude, mainly the heavy crude. There is an article in OilPro talking about this same subject.

I try and tell this to people all the time. It's traded on the global market. If you want energy independence you've have to make a law that all North American refiners only buy North American crude and all North Americans producers only sell to North American refiners.

So what is the correct term for the situation we're headed for in which we domestically produce more energy than we consume? I understand that energy is a global market which creates certain interdependencies, but even so there are those who are primarily selling and those who are primarily buying and it would seem the US' position is about to be reversed............

A net oil exporter.

Sort of, but not really. If there were another OPEC embargo, there would still be a lot of strife.

Not if we refit refineries.

Would the subsidies for green energy be enough to fund the refit if reappropriated?

Latest Permian acquisition. Carrizo buys 16,488 net acres at $648MM


http://ir.carrizo.com/releasedetail.cfm?ReleaseID=1031688

Refitting our refineries to refine simpler crude would be a giant waste of money.

It doesn't matter if USA or North America can claim 100% energy independence. Or be a net exporter.

But at the next meeting, they can put it on the table.

AgLA06 said:

---

FHKChE07 said:

---

Refitting our refineries to refine simpler crude would be a giant waste of money.

---

Why?

---

because refineries are built to refine cheap crudes. By cheap I meant heavy, longer hydrocarbon chains.

Ragoo said:

---

AgLA06 said:

---

FHKChE07 said:

---

MRefitting our refineries to refine simpler crude would be a giant waste of money.

---

Why?

---

because refineries are built to refine cheap crudes. By cheap I meant heavy, longer hydrocarbon chains.

---

Cheap is relative. While the crude is cheaper the capex and opex is higher to refine heavy crudes. As the differential between light and heavy crudes becomes closer, or turns around in some cases, the lighter crudes become cheaper (more profitable) to use as a feedstock. The equipment to refine the light crudes is cheaper than the heavy crudes it just takes years to design order and install the equipment.

As long as the light crudes maintain price stability and are plentiful refineries will retool. They have to do major overhauls on a regular basis as required by maintenance, economics and regulations. This is no different.

HAL in talks to buy artificial lift company.

https://www.reuters.com/article/us-esp-m-a-halliburton-idUSKBN19J13B

Summit is a good little company; I went to their training class/plant tour a few months ago. Hope big red doesn't ruin them.

ESPs will represent lower market share of the lift systems in resource plays than historic averages. Rel perm effects over time and sand production being the headwinds to ANY FORM OF PUMP. The places where they might have a place is normally pressured resource plays and super high PI (Bakken core) plays. ESPs are by and large value destroyers in resource plays.

Gas lift will continue to gain market share in all the major basins.

Do you have any literature you can share on ESPs impact on relative perm in shales?

Because at this point in time, it would be simpler and cheaper to just build 7 new refineries (or however many it would take) then try to refit the old refineries to go back to simpler crude. And that says a lot because building 7 new refineries is nearly impossible. And I have to believe it is part of a conscious strategic decision that oil companies have made to keep technology for efficiently refining complex crudes in places where IP can be protected. It is why your major complex refineries are in the west or in places like Japan and Singapore. Otherwise you are just handing your technology to the competition who will just take it.

So we make high margins on refining cheaper more complex crude that nobody else can refine and export more expensive light sweet crude for other countries to refine at a lower margin.

The best way I can explain it is like this. In oil pipelines, there is an additive that is put in them called a drag reducing agent. This decreases pumping costs on the order of 30-40%. This was developed really heavily in the 70s and 80s but not really understood until the 90s fully. Older pipelines now have some of the pumping stations turned off because they aren't needed anymore. However, newer pipelines just moved their pumping stations further apart because they didn't need them so close. The problem is, now they can't run their pipelines without the DRA because their flow won't make it to the next pumping station. Not a problem normally unless there is a supply disruption. But what has happened is you have gotten in to a situation where you can't go backwards without significant service disruption and cost.

Quote:

---

If there were another OPEC embargo, there would still be a lot of strife.

---

That would be fantastic.

The existing literature out there won't tell you that - oil resource plays are too new. And it takes a few years of having the data to figure it out. And once you have the data companies argue over what it means.

I'm telling you what the future literature will be written on, and it won't look kindly on ESPs or rod pump in oil resource plays or it will advocate them as a method of last resort when in development mode. There might be a place for them when testing a new well in an area or shallow resource plays, but not a long term operating solution for a developer in more over pressured resource plays. So a private company looking to sell may want to accelerate oil/information for purposes of marketing. Once the developer takes it over, that OPEX no longer makes sense.

Jetta is in an interesting point, being a developer, where they are arguing for them in the southern DB while offset operators are going away from them - look for them to change in 2-3 years when they have processes all the information. They've already made it public that they work - once you make things public it usually takes a few years to revert. The mistake they made is they have the new production data and the new production forecast (which looks better on ESP) but they are missing the cost data that occur in the future. So their cost data is off and they don't know it yet.

You in the gas lift valve or compression business?



Only kidding!

I think you have a misunderstanding of where the majority of ESP's are deployed. The majority of ESP's deployed in the world are in benign, low oil cut/high water cut wells that are on the right side of the decline curve, not in new developments. Are their ESP's deployed in new developments, absolutely, but new development deployments probably make up 5% of the total ESP's in the market. It's very common knowledge in the ESP business that deploying ESP's in the early stages of a well when it's left of center on the decline curve is going to lead to change outs due to changes in flow rates and putting pumps out of their working range as the flow characteristics of the well change. Doesn't mean you don't do it, but it's not the majority of the market for ESP's. Not even close.

Main point in saying all of this is saying that future publication is going to look bad for ESP's is simply wrong based on what the primary market of ESP's is. It's not what you are speaking of.

Corpus,
Do you have any sources to back up your claims? The only difference I can see from a reservoir prespective is a lower flowing bottom hole pressure. What is basically happening is a limited drawdown flowback (GasLift - slowback, I hate that word) vs ripping open the choke (ESP or pump).

It's based on the information I look at and what I see from other companies operating in resource plays - it's advice/estimations based on what I'm seeing. So you'd have to decide if I'm believable or not for yourself.

ESPs rarely if ever worth it in resource plays. Agree with Corpus.

I have a hard time believing 5% based on how many are run in West Texas but I don't have any data to support my belief.

aggie028 said:

---

ESPs rarely if ever worth it in resource plays. Agree with Corpus.

I have a hard time believing 5% based on how many are run in West Texas but I don't have any data to support my belief.

---

Using you as an example, I think most people associate that the ESP's used out here are going in all of the new horizontal wells and that's not necessarily true. Most are going in older wells as rod lift replacement, and there are A LOT of those out here. I'll see if I have some of my older information my BHI days at my house, not sure, but the ESP market is built on rod lift replacement.

Rod-pumps are/can be expensive to maintain, thus the rise in use in esp's. West Texas is a good use since you have a lot of older fields/wells(stripper) there, so it makes sense from an economical point. I've worked with all three, pump-jacks, esp's, and gas lift/plunger lift systems. I've always been partial to gas lift as it is not as expensive, or didn't used to be, and pretty reliable/efficient.

Geez guys, in horizontals ESP's are really only used in the early months to pull as much flowback off the formation as possible. Then they switch to conventional pump or gas lift.

Not all operators do this. Some try to leave wells on ESP for the long term and have major issues with sand and gas. I think that's what Corpus is talking about.

GarlandAg2012 said:

---

Not all operators do this. Some try to leave wells on ESP for the long term and have major issues with sand and gas. I think that's what Corpus is talking about.

---

Maybe I shouldve stated 'good operators'.