64 comments on US Petroleum Supply, Ethanol, and State of the Industry - API
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Hi Gail,
It seems proabable to me that the Western oil will continue to increase. It is interesting that it is getting into the range where it can offset declines elsewhere. The Bakken formation is getting a lot of attention with estimates of oil in place moving towards 300 billion barrels. North Dakota is considering a state owned refinery to attempt to handle some of the new supply and there are a least a couple other refinery proposals. If consumption can be made to decline, this could put a dent in the fraction of oil that is imported.
Chris
I'd like to see 2007 data regarding Western oil, and look at information regarding expected future production. Talk of building a new 130,000 barrel per day refinery in North Dakota makes it sound like there is promise for increasing production.
I expect this would be fairly expensive oil to produce. Anyone have ideas on costs of production?
It looks like North Dakota oil production is increasing at about 10,000 to 15,000 bpd per year, although the net rate of increase may accelerate with time.
Two key questions: (1) Is it commercially productive across a wide area or only in discrete areas, e.g. on heavily faulted/fractured structures; (2) Can operators boost the recovery factor above low single digits?
And these are expensive wells. However, this--nonconventional oil & gas production--is the best thing, in aggregate, that the US OIl & Gas industry has left to pursue onshore. The other model is for generally small companies to look for small, high quality, missed oil and gas fields.
The idea is that there is a thin pourous layer between two shale layers and oil collects there. Horizontal wells are used with fracturing to get the oil out. People don't seem to be at all sure what fraction can be extrated but they do seem to be pretty happy with the production of the wells. The Canadian portion of the formation seems to be seeing the highest growth right now.
Chris
US OIl & Gas producers can and will make money by finding new small fields and exploiting nonconventional resources. The question is whether or not we can flatten or reverse the long term decline. From 2001 to 2006, US crude oil production fell from 5.8 mbpd to 5.1 mbpd.
That was what I was finding interesting, that the growing production is begining to show up in aggregate numbers. Any decline can be reversed if the decline continues long enough. A very small discovery reverses a decline that has fallen below the scale of that discovery. The numbers for the Bakken are larger than for KSA so the potential scale is large but I don't think we know about how much can be recovered. I think some Montana wells are beginning to decline now so there might be a way to make a informed estimate if the drilling methods are sufficiently similar.
Chris
Keep in mind that there is a vast difference between original oil in place estimates for a group of the world's best conventional oil fields and original oil in place estimates for a nonconventional shale resource play.
I think that is correct. I'm just not sure if this should be called a shale play since the drilling is not in shale but in dolomite and sandstone. I think this is why people are so uncertain about how to make a guess about the recoverable fraction. Estimates range between 50% and 3%.
Chris
The key point is that the Middle Member--the shaly dolomite/limestone/sandstone--is productive locally, presumably in discrete traps. The billions and billions of oil estimates principally come from extrapolating the shale thickness across the whole basin. Again, the two key questions are to what extent the shale members are commercially productive across a large region and what the recovery factor is going to be.
http://www.contres.com/index.cfm?id=50
The description, as I understand it, is that it is continuous so the oil does not pool up anywhere, it just fills the middle member. I think that the geology has been mapped so that it is more interpolation than extrapolation. Perhaps we won't know how much can be recovered until it is all recovered. The USGS is unwilling to publish the study it had done though you can read in on the web: http://www.undeerc.org/Price/
Chris
Okay, let me try one more time. From the excerpt above:
The middle member is not continuously productive across a widespread area--that is what locally productive means.
The shale members are continuously productive across a wide area.
The key question is whether the shales are commercially productive across a widespread area.
I think the Bakken formation would be an interesting topic for a TOD post or a guest post.
On the natural gas side, unconventional production has done very well, and has prevented a steep decline in natural gas production. We can't expect as much on oil, but every little bit helps.
I think I see where we are missing each other. My meaning is that it is spatially continuous. There are no places that it drains to, it is just one wide layer or trap. Your meaning is that the oil is located where it formed (or nearly so). My picture is probably too simplistic, as some areas will have more oil than others and those will be the commercial portions. This model is a little above my head but it might help you get a feel for what people are thinking: http://www.searchanddiscovery.net/documents/2006/06035flannery/index.htm
Again, what is interesting to me is that there seems to be something to be remarked on in the aggregate production numbers from the conference call. Perhaps this is a slow motion discovery that is significant. I'm paying attention because I'm trying to figure out how much carbon dioxide needs to be cleaned up. An extra 20 years of US oil consumption could be a problem.
Chris
From peakoil.com: Finally, the Bakken makes the national media (NY Times). Lots of links there. Peak oil: Do you want it to occur? detoured into Bakken territory as well.
Also would love to see a TOD piece on this. API of 41 they say.
How much more of a drop in imports until the US is off non-Western Hemisphere production??
To answer my own question, this page puts non-Western Hemi imports at 7.49 mbpd for 2007:
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_l...
This is primrily: Saudi Arabia (1.47 mbpd), Nigeria (1.12 mbpd), Algeria (677K) Angola (513K) Iraq (495K), and Russia (422K). Thus, getting off non-Western Hemisphere imports would be tough, something like a 33% reduction in consumption. However, with further reductions of about 2 mbpd, the US could live without Middle East oil. That would be a nice headache to be rid of.
Yes, it is a fungible commodity and a disruption in the ME affects the global price, but one wonders how long post-peak the free market in oil will continue to operate as such.
I think they say they like $60/barrel oil.
Chris
I was wondering if this North Dakota oil is considered "west" or is it part of the 10,000 to 15,000 barrels per day increase in the "Midwest" described above. I'm not in the oil field myself but know many people who are in small scale oil and gas in SE Ohio and western West Virginia where there is a mini oil boom. There are many wells that had been abandoned in the 1980's that are now being pumped again. Also natural gas players used to be annoyed with their gas wells that also produced a little oil. They had major problems "disposing" of the oil by-product. Now they are happy to purchase and install tanks and have a truck pick up the oil once a month or so. I also know drilling in the area has doubled in the last 2 to 3 years. Granted the biggest one I've heard of produces 6 barrels a day. But this is an extremely old oil area having peaked in the 1890's. I can't seem to find data on Ohio/ West Virginia production and I realize the volume is inconsequential but I'm wondering if the data shows that an area 110 years passed its peak is capable of reversing the decline.
I was assuming North Dakota was in the Midwest. The EIA summarizes its data by PADD, and this seems to put North Dakota with the Midwest. I assumed they did the same.
My 10,000 to 15,000 estimate was based on production increases through 2006. The increase may be higher in 2007. I didn't have the data.