Shocking Prediction: The 'Second Phase' Of The Oil Boom Could Eclipse The First

investinganswers ^ | December 31, 2013 | Jody Chudley

[ckilmer]

Shocking Prediction: The 'Second Phase' Of The Oil Boom Could Eclipse The First By Jody Chudley December 31, 2013

Shocking Prediction: The 'Second Phase' Of The Oil Boom Could Eclipse The First

Five years ago the idea of an oil boom happening in the North America was not much more than a dream.

Today, the U.S. is on pace to overtake Saudi Arabia as the world's top oil producer by the end of the decade.

It isn't as though the oil industry didn't always know that formations such as the Bakken in North Dakota and Eagle Ford in Texas contained lots of oil. Oilmen have been thinking about these plays for decades.

The problem was that there was just no way of getting that oil out of the ground without losing lots of money.

The application of horizontal drilling and multi-stage fracturing (or "fracking") has changed all that and made the renaissance in American oil production front page news.

What is still to come, and what most investors don't realize, is that the "first phase" of the oil "boom" in America is only recovering a fraction of the oil that it can -- and I predict will --produce in the "second phase," which has already started.

Despite being a true breakthrough, the first phase of horizontal oil production is only expected to recover 2% to 15% of the oil in areas such as the Bakken and Eagle Ford shales.

That means there will still be an enormous amount of oil left in the ground.

In the second phase of production, the most innovative companies will get to more of those reserves, and I predict a more profitable wave of the horizontal drilling boom will occur. If that happens, enhanced oil recovery (EOR) methods will turn oil producers into cash flow machines, and make some investors richer.

Why is this second phase of the horizontal boom going to be so profitable?

Further advances in technology, combined with significantly lower costs of second phase production, could drastically improve profit margins for oil producers.

First, let me talk about the lower costs of producing more oil.

During the primary phase of production, all of the land that contains the oil had to be leased or purchased, roads had to be laid to access drilling sites, pipelines needed to be put in place, well batteries had to be constructed and natural gas processing needed to be paid for.

Now, with the necessary infrastructure in place, that money doesn't have to be spent again. So each incremental barrel of oil produced through EOR is more profitable than the barrels produced under primary production.

The price per barrel of oil sold isn’t going to change, but the cost to produce that incremental oil through EOR is going to decrease.

Enhanced oil recovery techniques aren't new; they've been around for decades. It's just that they haven't been applied to the types of reservoirs that are being developed with horizontal drilling, until recently.

Now, there are several companies already using existing technology to innovate in the oil sector.

My favorite is a Canadian company called Lightstream Resources (OTC: LSTMF) that has found a way to quadruple production from some of its older wells through EOR.

This mid-sized Canadian company is using natural gas injection in its Saskatchewan Bakken play at Creelman to pull more than 200 barrels of oil per day from 5-year-old wells that at this stage of their life should be producing only 50 barrels a day.

To create this production increase, not a lot of incremental capital has to be spent. The main incremental costs to Lightstream relate to the drilling of injection wells (which paid for themselves through primary production before being converted to an injector) and the natural gas that is being injected (which will eventually be recovered anyway).

On top of lower production costs, Lightstream believes by rolling out natural gas injection across its Bakken land base, it can increase the amount of oil it will recover from its current estimate of 15% to almost 30% of the oil in place.

Given that we are talking about a percentage increase that is being applied to 1.69 billion barrels of oil, the numbers involved are very large.

To give you an idea of just how large, every 1% increase creates 17 million barrels of additional reserves for Lightstream. And combined with lower "second phase" costs, EOR can double Lightstream's reserves without coming anywhere close to doubling the amount of capital required to extract the oil.

[mountainlion]

There was a new big discovery in the Gulf announces a couple months ago. I expect there could be a new round of big discoveries under old discoveries and many around the wold also.

[Kenny Bunk]

Boom, Shboom.

Gasoline (and soon please God, Diesel) is the lifeblood of our country. At $3.50 per gallon, it is also killing us, business, and everything else in Obamaland.

How soon until we get back to reasonbly priced American-sourced fuel? Where are the new refineries? Until we get the green Left wing assklowns of the EPA and the Obamanauts off'n our arse and get back to normal activity, we are economically SOL. I know we'll never get back to "cheap" gas, but a fair supply and demand price strikes me as around $1.50. As far as supplying the CHICOM, screw'em. Let'em deal with OPEC on their own. They run it now ... so what's the difference.

We have Mexico on our team, Canada, Brazil, and when Fidel dies Cuba, plus our own immense domestyic resources. So, why this agopny at the pump.

On the price of gas alone The Mombasa MF should have been shut out of the WH. I do not understand 53% of those what are supposedly my countrymen.

[CPT Clay]

Didn’t EPA, Interior Dept and this administration put most of the Green River formation off limits?

[ckilmer]

How soon until we get back to reasonbly priced American-sourced fuel?

Its easier to predict imho that USA oil production will keep increasing by about 1 million barrels a day for at least the next two years according to the iea. (I think that the USA will continue to increase oil production by 1 million barrels a day at least through 2018 and maybe through 2020 because of massive easily accessible oil in the Permian basin plus surprises elsewhere.

Somewhere 2-5 years from now prices at the pump should ease by up to a dollar. Trouble with oil is that unlike natural gas—prices for oil are set by worldwide demand. Right now worldwide demand is huge and growing. The USA is one of only a few countries with growing production. Many others are seeing their production falling. So it will be a couple years before supply catches up with demand.

Where are the new refineries?

This was always a false report. Its always been cheaper for the refiners to add new capacity to their existing plants than to build a whole new plant from scratch.

[thackney]

Do you use coal without an temperature controlled air-duct system?

[spokeshave]

Didn’t EPA, Interior Dept and this administration put most of the Green River formation off limits?

It's on federal land....so I guess so...

anyway...its a resource just waiting for a change in regime.

[Kenny Bunk]

Thanks.

The biggest disappointment of the GW admins was this "awl man's" abject failure to leave us with a 50-year plan. For the remainder of this century, at least, the world will continue to run on Oil-Gas-Coal-Nuclear energy sources.

IMNVHO, there is absolutely no natural shortage of any of these sources. Certainly there is enough to cover Mother Earth while the world transitions to hydrogen fuel cells, etc.

IMNVHO,If government is to have a role, it should be to foster as complete a state of energy independence as possible. Right now in the interplay of private companies and government meddling, we have the worst of all possible worlds in the energy markets.

Of course this is magnified 10-fold when the government is in the hands of the LoonieLeft, particulary within the regulatory agencies that really run things.

[thackney]

Does it include...

* Low Friction Tubing ( Plasma coated with a Diamond Like Coating )
* The Various “Ceramic” beads instead of Sand.
* Other “Fluids” such as Propane instead of H20 and Sand?

- - - - - - -

The last two are hydraulic fracturing. That is a well completion or well stimulation activity.

EOR is typically a reference to ongoing systems that continue while production continues. For example, pumping in fluid on the outside edges of the field while production flows out of the center; both run continuously. Hydraulic Fracturing is done at a point in time either before production begins, or after stopping production to re-stimulate production after done.

Hydraulic Fracturing can be done at stages for EOR, but it is not a continuous ongoing activity like water flood or CO2 injection.

The Low Friction Tubing I am not familiar with. I’m not sure how that would be applicable to flowing “raw” production fluid that will include water, sand, gas, etc.

[Little Bill]

They started pumping on my Uncles Land in the 60’s. The oil is asphaltic and very heavy, steam injection.

They stopped pumping on non Indian leases because of the cost.

[Chode]

yes, the stove is in the main room and has no ducts(no basement) i have a couple of overhead fans to circulate the air and there are two simple control knobs, one for the feed rate and the other is for a fan that blows the heated air from the stove...

i know where to set the feed rate/blower for a given ave outdoor temp of 20-35 deg to keep the house ~68deg and only have to adjust it for cold snaps in the zero to minus 10/20 range

but there is a an add on thermostat unit i can get to fine tune it to stay at a given temp but it usually only varies from 65-70 so long as the ambient outside temp stays relatively constant 20-35

[stickywillie]

there’s a great pressure, way down in the earth, that pushes the crude near to the surface on it’s own. it’s pushing up against the bottom of the underlying rock source. do we have reason to believe it will ever stop doing that?

[ckilmer]

IMNVHO,If government is to have a role, it should be to foster as complete a state of energy independence as possible. Right now in the interplay of private companies and government meddling, we have the worst of all possible worlds in the energy markets.
...............
Oh man, the current oil revolution has come despite the best efforts of the feds to kill it.

The coolest thing the feds could do is invest in thorium lftr reactors. LFTR reactor would cut the cost of electricity by 1/4-1/10 current lowest cost coal.

That’s the deal that makes the 21st century a success.

That requires wisdom from the feds. A commodity that has been in short supply lately.

[sefarkas]

Try the calculator at: http://riversidecoal.com/coal-calculator/heating-calculator.html

According to http://www.eia.gov/kids/energy.cfm?page=about_energy_conversion_calculator-basics

100,000 BTU can be generated from 0.00045 metric tons of coal, 9.78 cuft Natural Gas, and 0.0017 bbls of crude oil.

One reference has coal at $82.75/metric ton coal (http://ycharts.com/indicators/australia_coal_price). Approximate oil at $100/bbl and natural gas at $4 per 1000 cuft.

That works out to 4 cents for Natural Gas, 17 cents for crude oil, and 37 cents for coal to generate 10,000 BTU.

[ckilmer]

there’s a great pressure, way down in the earth, that pushes the crude near to the surface on it’s own. it’s pushing up against the bottom of the underlying rock source. do we have reason to believe it will ever stop doing that?
...........
I’m no expert. I can tell you that there are some who believe that crude doesn’t come from the dinosaurs and cretaceous plankton but rather from internal earth processes. might be I don’t know. current thinking is that there’s just a lot of oil in the ground but most of it is not commercially addressable. that is for various reasons its too expensive to extract. in the last 150 years the oil men have extracted 10% of the oil in the ground. the current fracking revolution may extract another 3-15 percent of the oil in the ground.

[arthurus]

LSMFT= Lucky Strike Means Fine Tobacco.

[Oatka]

However in my mind the BIGGEST and Brightest aspect of all of this new recovery of oil through horizontal wells is that it was the spike that ended the dreams of the Democrats and so-called elites to totally kill the U.S. during BHO terms of office.
Yes they still might succeed, but they would be finished by now if it hadn’t been for the ‘new’ energy boom in petroleum.

What's going to piss me off is that the Democrats will take credit for the economy this industry saved from destruction - and the Kool-Aid drinkers will extoll them, just as they did Clinton, who profited from $10 a barrel oil.

[therightliveswithus]

Wow. Would be something

[taildragger]

The Low Friction Tubing I am not familiar with. I’m not sure how that would be applicable to flowing “raw” production fluid that will include water, sand, gas, etc.

Lower friction in the tubing, less pump power required. Check this out tell me what you think...

http://www.youtube.com/watch?v=EcCsQ1Hr3D4

They are now part of a non publicly traded company out of Canada if I am reading correctly...

http://www.sub-one.com/unlimitedCoating.html

[bricks4all@aol.com]

taildragger,

I can’t find whether Sub-One has commercialized anything yet or even still in business. Can you advise?

[SoothingDave]

If the day comes when oil is purchased in some other currency, you will learn the true meaning of “devalued”.