justin_o_guy2
Serious Thumper
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What happened?
Posts: 55279
East Texas, 1/2 dallas/la.
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Something that not everyone understands about oil production is Not all oil is created equal. In Saudi Arabia, oilfields that we developed in the sixties and seventies, the geological dome that contains the oil bearing formation has gas at the top. Drilling into it low, out on the edge allows the pressure of that gas to drive the oil up and out. No pump jack required. No downhole pump to maintain. No sucker rods to inspect / replace, no paraffin buildup to heat treat off. These are called Lift costs. They have none on many if not all, I don't know the numbers.
American wells all vary. Some of them produce two barrels of water for every one of crude. That's costly to transport and pump down an injection well. Exploration FOR oil is expensive. Either drill in a known, producing field and bypass having to do the seismic studies, hoping to See a reflection indicating a possible oil bearing formation, or, go hunting, hope to find what appears to be a production zone, hire a drilling contractor, punch the hole. Very expensive, either way. Just like any business, you gotta look at the cost going in, and weigh that against the potential for profit. Not all oil is as valuable as the next. Some is high in heavy stuff, some is light. Easy to refine AND has more Of the most important elements. Asphalt is the stuff that DIDN'T make kerosene or diesel or gasoline, etc. Some wells produce hundreds of barrels per day, others, twenty a week. The Cost of production versus the number of barrels and cost of well maintenance, it all plays in to whether or not Owning a particular well is an asset or a liability. I've been there for the drilling and I've been there when it was time to plug and abandon the well. The Railroad commission will sometimes tell an owner to plug their well. Those wells sitting dangerously close to the line are called Stripper wells. The guy I worked for would sometimes make a deal not to plug one when the owner was considering it. He would take the well and produce it, and accept the liability for plugging and abandoning, should the Railroad commission demand it. When we plugged one, first thing we did was have a company come out and strip the well of the pump jack , everything but the stuff in the hole. We took sucker rods, production tubing out, then got hooked up to the 8&5/8ths casing, pulled 100,000 pounds, measured the stretch, calculated how far down was it cemented in, ran explosives down to a tool joint and shot it off. Then we salvaged the casing. Set a packer, and cemented it up.
The profit margin for a barrel of oil varies, depending on all those things, maybe more than just those things.
The oil that is still profitable at forty dollars a barrel must have low production costs.
I'd rather have a healthy economy and pay three dollars a gallon than have rampant unemployment and a declining economy and cheap gas.
I could go on about the timing of and cause of the supply over demand... but, no one cares.
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