After having been approved several times in the House of Representatives over many years, the Keystone XL pipeline is finally likely next week to be brought up for a vote in the United States Senate.
As has been the case with some 300 House-passed legislative initiatives over six years, the Keystone XL was never permitted a Senate vote prior. This is because environmental extremists control the Obama Administration, with their anti-American tentacles extending into the existing, but soon to be former, Senate leadership.
Obama is not through yet harming America; just wait until next week if you doubt me. But it's reassuring to watch as his relentless attack on us begins to falter and disintegrate.
Let's hope this is only the beginning of efforts to stop Obama and his fanatical groupies!!
Explain to me why we want to help the competition. Natural gas in our area will create more jobs than that pipeline ever will. Natural gas needs pipelines too! Let the "enviros" have their victory when in fact oil sands are a waste of time as oil prices go down and nat gas goes up! We are going to be the number one oil producer soon so why help the Canadians and their socialist way of life!
So you're saying that helping producers in the Bakken get oil to US refineries on the Gulf Coast is going to hurt the US? That's...interesting?
Explain how stopping the XL pipeline prevents Bakken oil from going south?
Rail cars ship the crude, which is not only expensive but significantly more dangerous.
Pipelines are cheaper and safer. Period. And that extra "Transportation" cost comes out of the royalty owners checks - in many cases even when there is a no post-production clause in your lease. So instead of deducting $18 A BBL., you only are whacked for $5 or less.
And yes, Canadian oil is still going to come here unless they decide to sell it to the Chinese. We are not self-sufficient and the kinds of crude oils being produced here are not the same heavier sweet crude oils of the Middle East - the kinds of oils that produce the most gasoline for the buck.
It is what geologists is Oklahoma City are saying. And look at the record. Devon was debt free 10 years ago. They now owe about 12 billion. Chesapeake is shedding property faster than a snake sheds its skin. The investment is huge.
When NatGas was $7 and higher, many operators were saying they were profitable at $6. After it went to $3, they still claimed to be "profitable" but that isn't possible.
The Fayetteville Shale is possible the simplest economics. Having run over 200 decline curves in the past 2 years in that play I can safely say few wells EUR exceed 3 BCF.
What is 3 BCF? 3,000,000 thousands of cu. ft. Thus, 3,000,000 x $3 gas = $9,000,000
The AFE shows an estimate of $3 million to drill alone. Post-production expenses increase over time, but basically average somewhere in the 20% range. And the typical royalty is 3/16th.
So an operator get 13/16th of 9,000,000 less 20%. If the big shots get overrides, deduct another 2 - 5% and you are left with $5,000,000. From that you need to figure the cost of running a company, hiring seismic, geologists, etc... the G & G costs. And that 640 acre unit also cost you $300- $1,000 an acre for the leases. You are now whittled down to $4,000,000 or less net to you and that has to be spread out over 20 years. Perhaps 50% of it will come in the first two years, but you just spent $3,000,000 to drill the well. Basically, if the well does not pay out within 2 years, you are operating it on borrowed money until it does and "commercial paper" tends to be high cost. And if the price drops below $3, no way will it pay out in the lifetime of the well. At $6, it is paying for itself in 1 year.
For the wells that produce less than 2 BCF, most do not pay out, they only pay part of the bill. For the wells that produce 5 BCF, they will pay out (and likely produce more gas quicker.) But again, running the numbers, there are a lot more 2 BCF wells in the Fayetteville than there are 5 BCF wells. These exceptional wells have to compensate for the not so hot ones. And that applies in every play. A glut in the Marcellus meant many wells were shut in awaiting a pipeline and gas was sold for under $2 MCF, and the light hydrocarbons also are discounted to 50% or less due to glut of them. "Legacy" oil, mid range refinery grade has not increased like the light hydrocarbons.
BTW, there are operators who are blending heavy crude oils from the states with light "liquids" and selling for a premium. There are blending plants in OK and TX.