Oil Farming

Herbert Hoover is one of the most misunderstood presidents of the United States ever. His presidential term took a very negative turn due to the fallout of the world economic crisis. He took the reigns of the country right after that fateful year 1928. The great depression forever carries his name. An attribution he did not deserve.

Hoover was a mining engineer and a man of the land. He was also the author of one of my favorite quotes from history.


“I am proud to have been born in Iowa. Through the eyes of a ten-year-old boy, it was a place of adventure and daily discoveries – the wonder of the growing crops, the excitements of the harvest, the journeys to the woods for nuts and hunting, the joys of snowy winters, the comfort of the family fireside, of good food and tender care.” Herbert Hoover


I love this quote.

Like few others, it expresses the best and ultimate American virtue. To live with the seasons, the years, the changing times. To adapt and optimize to make the best of what nature gave rewarding strenuous effort. Every year this very cycle would repeat all over again ad infinitum. The first settlers on the North American continent blended into this meta-cycle.

The American farmer, that cornerstone of American culture, embodies what’s best about America. Someone who lives and thrives with the perpetual rhythm of sowing, growth, and harvest. 

You reap what you sow, you will never harvest more than you sow but you collect what you sow. What you get, what you have, depends only on your efforts, your diligence. Work hard, and you will reap the harvest. There are no good things to expect if you don’t do what you have to do.

Compare that with the mindset of conventional oil extraction. Better yet, compare it to the mindset that dominates NOPEC countries. Oil is a bounty from the heavens bestowed upon the good people of whatever country we talk about. It is here for exploitation to derive great benefits. It’s a freebie that fell on their head. No sowing required. You get what you have not extenuated yourself for. 

You play for the big win, the grand paycheck, the bounty from the promised land. No sowing required, no preparing. Drill a hole and you are rich. No wonder that business models reflect that attitude. Oil projects are big and grandiose. They need many years or sometimes more than a decade of lead time. Once the oil flows, it will provide cash flow for decades. Those monster investments need reimbursement. 

The very nature of big oil played into that business model. It only skimmed the easy oil on the top so far. A revolving work schedule repeating year by year was not at the core of people’s minds. No harvest to prepare as the harvest is there, waiting for the lucky soul, lifting it. One went in for a Herculean upfront effort. Then you watch the nodding donkey pumps to their work forever after. 

Sure enough, things have become more complex since the first oil wells produced their initial barrels. Even conventional fields need maintenance. Complex reservoirs or complex oil compositions need a lot of after-treatment. But the core mindset is ever-present regardless.

But as we have seen in the first post of this series, easy oil is over. The Casino model is still on in the vast majority of projects. It will take decades for it to die. If it ever does. Why working hard if there is this big, crazy bounty out there waiting to make a lucky people rich. It’s a basic human urge that we all have.

The farming model transforms more and more into:

  • develop oil acreage;
  • learn how it behaves;
  • learn how external influences optimize flows;
  • milk it every year through re-stimulations. 

That’s why I also like to call it oil field milking).

No sitting and waiting for the nodding donkeys to do their work. But rather constant monitoring of every single well. You never stop learning about them to understand their particularities. You work the reserve to counteract negative influences. And you act to improve on positive developments. You fine-tune your oil/gas flow in conjunction with cash flow. 

It’s like farming. Today’s farmers can only trust in what works. They are the ultimate no-nonsense people. As such, they observe and follow the market every second. They look into niches and adapt to short term developments. They deal with weather on a daily basis. They see and plan things over generations. They rely on the wisdom of the old but they try new stuff fast and on a small scale to see where they can tweak and improve. They cut duds loose quicker than a politician can say “energy politics”. They know how plants and animals live and thrive and profit from what works. They are like the new breed of oilmen (and women). 

I am not talking about multi-billion dollar corporations. I am talking about mom-and-pop stores in the oil world. The countless small drillers and milkers of wells. The entrepreneurs that scratch some few millions together to do their own shale well. Their own little frac job. They know their wells and they work them like a farmer works his crops or his cattle. Know your patch, know your stuff and be razor-sharp cuts deeper here than deep pockets only.

They are small fry and don’t account for massive volumes of oil. BUT – the roots of the shale revolution go back to those untameable folks. Because long before big corporation poured 3 digit billions onto the shale turf. Long before anyone believed in shale. Long before anyone ever spoke of American energy dominance. They were there and they tilled the land and tried new things. This spirit is not broken yet, it gets a steroid boost by a failing international oil juggernaut.

Like in every grand industrial shift, there will be rivers of corporate blood. New players try to find their path. They try out all sorts of different solutions, many of them will turn out to be bad ones.

But a few avenues will show real promise. Those will lead the oil world into a new paradigm. A paradigm that will do away with the traditional oil business as we know it. In time.

Does that mean that there will only be shale in the future and traditional oil will go away? 

No way – old unreformed industries sometimes limp along for decades. They might even thrive again before they bite the dust for good. They will come out with bouts of fresh innovation to make up lost ground. Don’t underestimate a wounded lion.

But in the grand scheme of things, the gritty sweaty redneck in the brush has already won.  He has beaten the Saudi Princes and the Russian tycoons. What motivates them is a “no-nonsense” attitude and sheer grit. It will enable them to survive things the Casino gamblers cannot hope to survive.

There is another aphorism that I like “When you have lemons, make lemonade”.

Image by Free-Photos from Pixabay 

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