Posted on 05/26/2014 5:50:04 AM PDT by bestintxas
Last week brought news that the Energy Information Agency (EIA) has reduced its estimate of recoverable oil from the Monterey Shale in California from 13.7 billion barrels to 600 million barrels. To put that in perspective, the U.S. consumes 6.9 billion barrels per annum and produces 2.7 billion barrels. The shortfall of production relative to consumption is made good by spending $400 billion a year-odd on imported oil. While the initial estimate for the Monterey Shale can be put down to hubris, there is another tight oil formation in which the EIA’s reserve estimate looks quite good given the vagaries of geological science. Specifically, their estimate of 3.2 billion barrels recoverable from the Bakken Formation centred on North Dakota. Why we now know that the EIA estimate for the Bakken is in the ballpark is because of these two figures produced by a retired French oil geologist by the name of Jean Laherrere:
(Excerpt) Read more at americanthinker.com ...
It is proving very difficult to find another Bakken.
Especially difficult when the Fed gov puts most workable land under lock and key.
One other thing to ponder is that this administration politicizes everything. Maybe Warren Buffet is getting ready to go into oil production and needs the prices on leases and companies to go down a little bit more?
I don’t agree with this. But some interesting assertions/graphs.
The problem with the guy’s assertion is that in place reserves the Baaken (and Three Forks)are about 500 billion barrels of oil. Addressable reserves—that is oil that can extracted—is only a small fraction of that. A couple years ago that number was only about 3.5 billion barrels. However, because of improvements in technology—the size of addressable reserves keeps rising.
This article cites Goldman Sach and Credit Credit Suisse who both sent analysts out to the Baaken. Here’s what it says:
“A massive, 76-page report from Goldman Sachs from late September suggests 2023—that’s another TEN YEARS of growth—with the biggest growth year being next year, in 2014.
In fact, they say the worst case scenario for the Bakken is now 1.3 million in 2017. One million? Pfffftttt…yesterday’s news.
A smaller examination from Credit Suisse in early October suggests the same thing. Analysts from these investment giants went to the Bakken to find out firsthand whether this prime play has peaked.
And the two groups independently returned with the same answer: no.”
http://oilandgas-investments.com/2013/energy-services/bakken-oil-three-forks-formation/
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What’s happening in the Baaken is happening in spades in the Permian Basin
Recently raised estimates for Permian basin place its addressable reserves as greater than the greatest oil field in the world the Ghawar field in saudi arabia.
http://www.fool.com/investing/general/2014/05/24/the-amount-of-oil-in-this-american-oil-patch-is-go.aspx
I want to see charts like that for the Permian Basin.
It’s proving very difficult to face reality it seems to me
Permian Basin adds one rig this week
http://www.mrt.com/business/article_ed150644-e326-11e3-b0eb-0019bb2963f4.html
With multipad drilling plus several other innovations—rig count has become a secondary measure of future oil production. See the link above to Goldman Sachs and Credit Suisse analysis of the bakken. The article writer that headlines this thread is way off the mark.
Hamm won’t be dissuaded. He says no other company has studied the geology as carefully as Continental. It knows where the oil is, he says, so it’s simply a challenge of figuring how much it can get out, as quickly as possible, at the lowest cost.
The technology that may determine how long and strong the recovery can get is being tested on a 2-square-mile plot in the Bakken that Continental calls the Hawkinson unit. Here Continental is experimenting with a “full field” technique–densely packing wells so that each rig (Hamm has 20 in North Dakota) can do considerably more than the current average of 10 wells per year. On the Hawkinson unit it has already drilled 14 wells, out of a planned 32. The wells go down roughly 3 miles, then curve horizontally for another mile to intersect one of at least four layers of oil-filled dolomite rock sandwiched in between impermeable layers of shale.
The drillers use explosives to pop small “perforations” in the sides of those horizontal pipes, then blast down millions of gallons of water mixed with sand to pulverize the rock and open up fractures, enabling the oil to escape. The trick is to position the “laterals” directly into the middle of those rock layers, but just far enough away from each other that the fractures don’t overlap. If this density works, there will ultimately be room for at least 100,000 total wells in the Bakken. (Fewer than 7,000 have been drilled so far.) The implication: If you assume a conservative average of just 300,000 total barrels per well, the ultimate recovery from the Bakken could be 30 billion barrels. The U.S. uses 7.5 billion barrels per year. “Suddenly, you see the enormity of what we’re talking about here,” says Hamm.
The risk, of course, is that if these wells can’t churn out that kind of output,
source: Forbes May 3rd
I had a couple clients/jobs in the Monahans - Hobbs corridor building rail loadouts for crude oil unit trains. The Hobbs paper had a rig count every week for Lea County, IIRC. Exciting place to be... and my firm would do well to try and solicit work there... it’s real work, real capitalist investment with a PROFIT MOTIVE... not bullshit of chasing around grant money for useless projects.
I miss the Permian Basin... as much as it was fairly brutal being in the field working 112 hrs a week.
If you assume a conservative average of just 300,000 total barrels per well, the ultimate recovery from the Bakken could be 30 billion barrels. The U.S. uses 7.5 billion barrels per year. “Suddenly, you see the enormity of what we’re talking about here,” says Hamm.
The risk, of course, is that if these wells can’t churn out that kind of output,
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I believe Hamm can do what he says he can do. That the numbers are what he says they are. There for the risk imho is that the price of oil will collapse. I don’t think that will happen in the next couple years because demand around the world is so strong, many oil fields around the world are old and in decline, fracking is difficult so the technology and infrastructure won’t jump to other countries for a couple years. So american frackers will have a free hand to increase US oil production for another 4-5 years. but somewhere +-2020—overseas oil producers will get the hang of fracking oil and volumes will go up worldwide—plus natural gas houses trains trucks and buses plus electric cars will finally clip demand enough to force down prices. Then for the next two decades there will be a steady crushing pressure on the price of oil. Luckily the first frackers to be taken out will be the overseas frackers who won’t be nearly as good as the likes of continental eog devon apache et al.
I miss the Permian Basin... as much as it was fairly brutal being in the field working 112 hrs a week.
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A young man can do that and come out stronger wiser and wealthier.
A old man — not so much.
The EIA says that US oil production will peak out in 2015 about 9.3 million barrels @ day. I’ve long thought they were off. But not because I thought the Baakken or the Eagle Ford would peak out in 2015. I’ve believed that that was true. Rather I thought that the Permian Basin production rate increases would go parabolic starting sometime next year —because companies like EOG and others would transfer the skills they learned in the Baaken and eagle ford to the permian to ratchet up oil production.
But this article shows that the Baaken has a ways to go. If this is true for the Baaken its also true for Eagle ford and a host of others.
On a thread yesterday concerning Chinese fracking, I sent you a link to a story about CNOC's purchase of high-tech automated German rigs that only require four personnel. This makes no sense economically, since their wage rates are one-third of ours. Plus the capex is much greater, double perhaps. What it flags to me, however, is the desperation of the Chinese to develop their unconventional resources, along with their inability to get technology transfer from their JV partners Chevron, etc. The majors are wise to the Chinese brain suck. Your five year estimate sounds right.
You miss my underlying point on all this: There is no other place like the Bakken in this country.
No other place has as large a % of its extent truly commercial. Maybe up to 50%.
Eagleford? Maybe 10% as only a very tiny window, albeit long, holds commerciality.
The tough thing is to extract liquids from such poor quality rock. Just won’t flow.
Now gas is something else. It will flow and flow well if properly completed.
Our abundance is not in oil, it is in gas.
I work the Bakken and have 41 years analyzing reservoirs as a reservoir engineer.
You miss my underlying point on all this: There is no other place like the Bakken in this country.
No other place has as large a % of its extent truly commercial. Maybe up to 50%.
I work the Bakken and have 41 years analyzing reservoirs as a reservoir engineer.
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bestintxas
I just enjoy research online. So I’m just looking at letters and numbers and not the real thing. So I’ll defer to your opinion on these matters.
My understanding of the reservoirs is that what we’re talking about is the difference between oil in place and addressable oil. I’ve heard that the Baaken has maybe has maybe +-450 billion barrels of oil in place of which less than 10% is addressable oil or 25-30 billion barrels.
This is the way that fool.com puts it as of 5/5/2014:
“No one knows exactly how much oil is soaking the rocks underneath North Dakota and Montana. Estimates range from 150 billion barrels of oil to as much as 900 billion barrels of oil, according to Continental Resources. Given current technology, the industry won’t recover more than a low-single-digit percentage of that oil. Continental Resources estimates that current technology will allow the industry to recover about 3.5% of its oil estimate, or about 32 billion barrels of oil. “http://www.fool.com/investing/general/2014/05/05/the-bakken-shale-hits-a-billion-how-much-more-is-l.aspx
Is your contention that 50% of that 150-900 billion or lets split the difference and say 450 billion barrels is addressable oil—using the new innovations that continental is coming up with? So that we’re not talking about 30 or even 45 billion barrels of addressable oil in the bakken but rather over 200 billion barrels of addressable oil in the bakken. That really when continental talks about their oil production rising fast as a result of their new techniques —they’re talking about a fast rise over the next couple of quarters—maybe even the next couple years. That’s how significant their new innovations are.
This is the way that fool.com puts it in the same article.
“However, new technology could push the ultimate recovery of oil higher. In fact, an improvement in the recovery factor to 5% means the industry could eventually extract as many as 45 billion barrels of oil. Still, that recovery factor is well below the average of conventional oil reservoirs, which typically give up about 10% of the original oil in place through the primary recovery method, which is typically adding a pump to pull oil out of the reservoir. After that, a secondary recovery method of injecting water or gas can result in the recovery of 20% to 40% of the original oil in place. Finally, a third method, enhanced oil recovery, can ultimately push out 30% to 60% of the oil once trapped below the ground There’s thus tremendous future potential for the Bakken. “
http://www.fool.com/investing/general/2014/05/05/the-bakken-shale-hits-a-billion-how-much-more-is-l.aspx
Based on current technology and prices, bestintexas, how much oil will be pulled out of the Williston Basin? Leaving the definitions of proven, probable, addressable, etc. aside, what do you think will happen, based on your experience?
The key in unconventional oil like the Bakken is economic extraction over a widespread area.
It is proving very difficult to find another Bakken.
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are you also arguing that you’ve seen the geology in the permian basin and its convinced you that despite recent reports that the Permian basin has more addressable oil than the the world’s largest oil field —the Saudi Gwadar oil field—that this oil is NOT addressable. Or at the very least you can’t get the same kind of economies of scale in the Permian basin that you can in the bakken—because the oil is so spread out.
http://www.fool.com/investing/general/2014/05/24/the-amount-of-oil-in-this-american-oil-patch-is-go.aspx
Therefor we will not see the sort of parabolic rise in oil production in the Permian basin that we’re seeing in the Bakken. That further the bakken oil production rises will continue to be parabolic past the end of 2015.
To be fair here Pioneer Natural Resources is not suggesting that there is anything like +200 billion in addressable oil in the Permian basin. Rather their numbers are in the 75 billion barrel range of addressable oil. This might seem plausible to many because there are so many more pay zones stacked on each other in the permian basin than in the eagle ford or the bakken.
anyhow, what say ye?
What it flags to me, however, is the desperation of the Chinese to develop their unconventional resources, along with their inability to get technology transfer from their JV partners Chevron, etc. The majors are wise to the Chinese brain suck. Your five year estimate sounds right.
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jeeze louise you would think that the whole world would be wise to the Chinese brain suck by now. The Chinese had been offering the Russians a ridiculously low price for Russian natural gas for a decade and then suddenly it appears the Chinese accepted terms closer to what the Russians were getting from Europe. Why? I was thinking that the Chinese were getting more push back in the south china sea than they anticipated. as well, seems to me I’ve heard that the Chinese will likely get to produce top of the line russian armaments...which means the russians will be paid for the first batch off the line but later batches—not so much. The russians will be exporting a lot of natural gas but it won’t get started for another 5 years. in the meantime they have to invest 40 billion to install the pipelines on their side of the border. The chinese have to invest something like 25 billion on their side of the border to get things up and running.
The links you posted suggested that the Chinese are going to make their first natural gas production goal from their own fields next year—which bodes well for them making the next much higher goal in 2020.
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