Saudi Arabia to lower oil prices, the houston boom is over

Yes, cheaper to extract the oil there. The position on the cost curve matters in a commodity market like oil.

 

I'm trying to understand why it's cheaper to extract the oil over there. IE, is it more accessible meaning they don't have to drill very far to get to it compared to the US shales?

I guess some countries also don't have to spend money on the land work/leases.

 

You pretty much have it. It is interesting to see the costs in the US are declining RAPIDLY since the oil boom has busted. My buddy who works for a directional drilled was saying that drilling costs are down like 70% if I recall correctly.

 

How's Vivi?

 

Well yeah cause demand has gone down a lot for drilling services. However you still need to use EOR to get it out.

Saudi just need to stick a pipe in the ground. The US can't compete and they know that. Saudi oil is better than Iraqi or Iranian oil. Not all oil is the same. North Dakota oil is worth negative money.

 

Per Bloomberg

 

So, it's not really that it's cheaper to extract oil. It' more that there's just more oil to extract.

Drilling costs (per well) are actually significantly cheaper in the US than everywhere else due to a glut of technology, personnel, and knowledge. However, US wells are typically all in shale or tight sands which require fraccing. These formations were previously considered trap rocks for the good oil target zones. So, after fraccing the wells produce well for 6 months to a year and decline rapidly.

The wells in the middle east are being produced from very porous and permeable formations. So, even if it costs more to drill and complete the well it doesn't matter since the wells produce more oil. This type of formation has already been depleted in the US.

It's like the difference between guzzling one 20oz bottle of soda and drinking the last sip of soda from a fountain drink with ice. There's only so much there, but you still want it!

 

There are definitely multiple factors that play into the Cost/Barrel, but:

1) Most of the fields in Saudi Arabia, to my knowledge, are onshore, I.e. Cheaper to drill and cheaper to transport, whereas, at least in the USA, we have large deep water and shale fields.

2) The product in Saudi Arabia is a higher quality, so it requires less processing.

 

What an original response. You must be the cool kid on the block.

 

Saudi Arabia was blessed with huge onshore oil fields that are cheap to extract. The US had fields like that historically, like 150 years ago in Pennsylvania where it was literally like the old Beverly Hillbillies show where oil is just seeping out of the ground, but those fields are long exhausted. The original Texas oil fields were like that too, but again they were also exhausted long ago.

Ocean rigs are inherently more expensive and so is fracking the West Texas shale oil, though through improved drilling techniques and the price of fracking sand dropping over 70%, we have managed to drop the price per barrel significantly. Even so, we probably need the price of oil to be around $50-60 for the US oil industry to be moderately healthy.

 

Massive layoffs for tomorrow. Let the games begin. The bringing constables . Lol.. they wild.

 

Where?

 

BP or Anadarko if I had to guess.

 

Walmart

 

Walmart isn't an oil and gas company...

 

it's not kmart and radioshack. they are doing great.

 

Blockbuster is my guess

 

I kid you not, I had the BIGGEST hankering to visit a Blockbuster on Sunday. I wanted snacks and the ability to peruse with no preconceived choice of movie. Didn't feel like Googling which streaming service had which movie, didn't feel like using RottenTomatoes. Movie rental stock up, oil down.

 

I would guess BP and probably Exxon

 

I heard exxon is doing some massive layoffs which is unheard of for them.