Friday, February 26, 2010

Game-Changer: Oil Industry Booms in North Dakota

WALL STREET JOURNAL — "A massive oil reserve buried two miles underground has put North Dakota at the center of a revolution in the U.S. oil industry, a shift that has radically altered the fortunes of this remote area. The Bakken Shale deposit has been known and even tapped on occasion for decades. But technological improvements in the past two years have taken what was once a small, marginally profitable field and turned it into one of the fastest-growing oil-producing areas in the U.S.

The Bakken Shale had helped North Dakota oil production double in the past three years, surging to 80 million barrels in 2009—tiny relative to the more than seven billion barrels consumed by the U.S. every year, but enough to vault the state past Oklahoma and Louisiana to become the country's fourth-biggest oil producer, after Texas, Alaska and California. If current projections hold, North Dakota's oil production could pass Alaska's by the end of the decade.

The Bakken Shale could contain up to 4.3 billion barrels of recoverable oil, according to the U.S. Geological Survey. That would make it the biggest oil field discovered in the contiguous U.S. in more than 40 years—and many in the industry believe the amount of recoverable oil could be even greater as new technology allows companies to tap more of it.

Oil companies have known about the formation, and the oil trapped in it, since at least the 1950s. But they couldn't get more than a trickle of oil from the dense, nonporous rock.

That began to change in the early 2000s, when companies in Texas began using new drilling techniques in a similar formation near Fort Worth known as the Barnett Shale. They would drill down thousands of feet and then turn and go horizontally through the gas-bearing rock—allowing a single well to reach more gas. Then they would blast huge volumes of water down the well to crack open the rocks and free the gas trapped inside.

The real shift has come in the past two years as companies honed drilling techniques, leading to bigger wells, faster drilling and lower costs. Marathon, for example, last year took an average of 24 days to drill a well, down from 56 days in 2006."

MP: Just like how advanced drilling techniques have led to a revolution in the domestic natural gas industry, new technologies for drilling oil have revolutionized the domestic oil industry. That's one reason that peak oil is peak idiocy: it always underestimates the ultimate resource - human capital (i.e. human ingenuity and the resulting innovation, advances, new technology) - which is endless and boundless, and will never peak.

44 Comments:

At 2/26/2010 10:55 AM, Blogger Jet Beagle said...

What I've recently read is that techniques such as simul-fracing will increase the recovery factor for the Barnett Shale from 15% to 30%. As I understand it, this technique can be applied not only with new wells and reservoirs, but also with older wells thought to be no longer economically viable.

 
At 2/26/2010 11:01 AM, Anonymous Anonymous said...

Peak Oil freaks just don't get it: we. will. NEVER. run. out.

And, if we do: so what? The market will provide...

 
At 2/26/2010 2:52 PM, Blogger rjs said...

"The Bakken Shale could contain up to 4.3 billion barrels of recoverable oil, ... relative to the more than seven billion barrels consumed by the U.S. every year"

 
At 2/26/2010 5:18 PM, Anonymous Aliken said...

Thanks for driving another nail in the coffin of Peak Oil.

Those dire Malthusian fallacies were reduced to rubbish over a century ago. It's amazing how old, discredited theories such as Peak Oil, mercantilism, marxism linger like the stench of a bum at a bus stop. No matter how many times or how well you explain it to them, they are unshaken from their beliefs.

 
At 2/26/2010 5:28 PM, Anonymous Benny "Tell It LIke It Is Man" Cole said...

Excellent post.
We may "run out' of oil someday, that would be commercially viable extraction of oil.
But PHEVs are here already, and biofuels are coming on.
I expect and cleaner and more prosperous future.

 
At 2/26/2010 8:39 PM, Blogger rufus said...

Let's see, our oil production reached a high point in 1970, and has been declining at a fairly steady 1.2%, annually, but we'll Never Peak:

Is that about it?

 
At 2/26/2010 9:41 PM, Blogger PeakTrader said...

We've been at peak oil for over five years. World oil production peaked at roughly 85 million barrels a day in 2005.

(Chart at bottom: "Causes and Consequences of the Oil Shock of 2007-08 by James D Hamiliton, Department of Economics, UC-San Diego").

 
At 2/27/2010 3:58 AM, Blogger PeakTrader said...

Rufus is correct. U.S. oil production peaked at about 10 million barrels a day in 1970 and and gradually fell to less than 5 million barrels a day in 2008.

Human ingenuity may not replace oil depletion fast enough, at least over the next decade or two. So, there may be rising prices and increased conservation.

 
At 2/27/2010 4:14 AM, Blogger PeakTrader said...

Peak Oil Wikipedia

Optimistic estimations of peak production forecast the global decline will begin by 2020 or later, and assume major investments in alternatives will occur before a crisis, without requiring major changes in the lifestyle of heavily oil-consuming nations. These models show the price of oil at first escalating and then retreating as other types of fuel and energy sources are used.

Pessimistic predictions of future oil production operate on the thesis that either the peak has already occurred, oil production is on the cusp of the peak, or that it will occur shortly. As proactive mitigation may no longer be an option, a global depression is predicted, perhaps even initiating a chain reaction of the various feedback mechanisms in the global market which might stimulate a collapse of global industrial civilization, potentially leading to large population declines within a short period.

Throughout the first two quarters of 2008, there were signs that a global recession was being made worse by a series of record oil prices.

 
At 2/27/2010 7:45 AM, Blogger juandos said...

"(Chart at bottom"...

What chart PeakTrader?

"Let's see, our oil production reached a high point in 1970, and has been declining at a fairly steady 1.2%, annually..."...

Are you sure rufus that there isn't a political aspect to declining domestic production of crude?

We have plenty of energy resources in this county...

Total Endowment 9,003 billion bbls oil equivalent

 
At 2/27/2010 8:58 AM, Blogger rjs said...

juandos, from your report, p11..
INITIAL FINDINGS AND
CONCLUSIONS
General Findings
􀂃 Growth in world oil demand is outpacing
increases in discoveries of new oil
reserves and petroleum production.
􀂃 America’s increasing dependence on oil
imports underscores the need for greater
domestic fuels production and more
diverse sources of supply.
􀂃 Reducing the rate of demand growth and
increasing domestic fuels production are
both necessary to reduce import
dependence and enhance U.S. energy
supply security (Figure 1).4
The United States has substantial
unconventional fossil fuels resources that
could be produced and converted to
liquid fuels. These resources differ by
region in quantity and composition and in readiness for commercial production.
TASK FORCE INITIAL REPORT 4 SEPTEMBER 2006
Figure 1. U.S. Liquid Fuels Demand and Imports Will Continue to Increase
(See chart on page 12 of report you sited)

didnt you guys get it? the reserves in the Bakken shale, the largest find in 40years, isnt even enough to cover one years current domestic use...

 
At 2/27/2010 2:44 PM, Blogger PeakTrader said...

Juandos, the "World Oil Production" chart.

 
At 2/27/2010 4:13 PM, Anonymous Daniel said...

According to industry experts familiar with Bakken, production is expected to hit a production platue of a few hundred thousand barrels per day for the foreseeable future. While this is welcomed, it's relative pittance for a country consuming over 19mbpd, and is hardly enough to offset the terrible depletion we're experiencing across the globe. Overall, it doesn't even come close to touching the N Slope's peak of 2 mbpd experienced in the late '80s

If peak oil is nonsense, then prove IEA's (an organization which a few years ago would have been on your side) field-by-field study of the world's largest 800 oil fields - the study that found depletion rates are dangerously high at 6.7%. If peak oil is nonsense, then prove that the world has been finding more oil than its been consuming since the '80s. If peak oil is bull, then show everyone that ExxonMobil, a company famous for not wasting money, are a bunch of idiots for willing to pay the Ghana government $100 a barrel for a quarter access to the Jubilee Oil field - a 1.8 bb field (a nice catch, but hardly a Canterell) then prove If we don't have anything to worry with peak oil, why did non-OPEC crude production peak in '04, and why has global production remained flat for the past few years - despite the high prices?

Peak oil has never been about running out of oil. We will always find new fields; we will always find new techniques to sequester more oil, and extend the lifespan of fields. Even the original Drake well, drilled in 1859, still produces oil - 1 barrel daily. When I first started my career in the oil industry in the early '80s, we were able to get about 15-20% of the oil in place. Today we can get about 30%. However, lower-48 state production has continued to fall every year since its '70 peak.

Although we've had 1 1/2 centuries of technological progress, we still can't match the 50 bpd Edwin Drake got with archaic drilling technology.

 
At 2/27/2010 4:41 PM, Blogger Bloggin' Brewskie said...

While it's possible that peak oil may occur within the near future, the result may not be as bad as people think. ASPO, a prominent peak oil organization, predicts declines in all liquids to be less than 2% per annum.

While Daniel is certainly correct to point out that non-OPEC's crude production did peak in '04, the resulting decline has been barely noticeable, and the effect has gone on almost unreported (link - see chart 15).

Some people, however, have been making indications of the aged workforce of the US oil industry: the sheer volumes of skilled workers who'll be walking out the door this decade. This, by contrast, is a genuine concern.

 
At 2/27/2010 5:03 PM, Anonymous Daniel said...

Bloggin' Brewskie,

I fail to grasp the crux of your argument. With a proven depletion rate of over 6%, the world has been losing 4 (maybe even 5) mbpd in production per year. The production we've been bringing online the past few years has barely kept production flat.

When you consider the world has been using more oil than it's been discovering since the '80s, and that discoveries have ridden a downward trajectory since (except for the bump last year, which still wasn't even enough to break even with consumption), it doesn't take a lot to realize a bad recipe is in the works.

Now I've heard others make the slow decline argument, too. I hope you're right, because it would make peak oil something we could adapt to more easily. However, I'm not banking on it.

If there is any short-term hope, it's Iraq. If they can get production up to 10 mbpd or more this decade, like they say they can, it might buy the world a little more time to breathe easily. However, the Iraqi security forces had been better be up to the task, or the world may be in for a rude awakening in a few years.

 
At 2/27/2010 7:15 PM, Blogger juandos said...

"didnt you guys get it? the reserves in the Bakken shale, the largest find in 40years, isnt even enough to cover one years current domestic use"...

Hmmm, rjs I don't think you're getting it sir...

Do you think oil extraction technology is static?

20 years ago, maybe even 10 years ago portions of the Bakken field would've been impossible to extract from, not so today...

If the money's right people will keep on looking and keep on finding new sources of crude...

From the SEPTEMBER 3, 2009 issue of the WSJ: Just two decades ago, the Gulf of Mexico was called the "Dead Sea" by an industry that believed it had already offered up all its big discoveries. But now it is again front and center for petroleum explorers...

From The Street dated 09/16/09: Anadarko Makes West Africa Find: Oil Alert

From Middle East Online dated 2010-02-04: Dubai finds new off-shore oil field

Thanks for the info PeakTrader...

 
At 2/28/2010 4:11 AM, Blogger rjs said...

if you all want to bet your future on pie in the sky hopes, its ok by me, i have nothing to lose if youre right...

 
At 2/28/2010 10:47 AM, Anonymous Daniel said...

Juandos,

2009 saw a total of 15 billion barrels of oil discoveries in the face of 30 billion barrels of consumption. That was considered a good year in respect to recent years: previous years saw oil discoveries slide to 10 billion barrels per year; we had been consuming 3 barrels of oil for every one consumed. This has been a trend since the '80s, when the world began using more oil than it was finding.

Many of the world's large elephant fields - which were discovered decades ago and make up the bulk of production - are now in decline. The IEA was cocksure oil production would be fine until 2030; yet, they did a field-by-field study of the world's 800 largest fields, and found out depletion rates are much higher than previously thought (6.7%), and they've been in a panic about the matter since. Faith Birol made splashes last year, saying "The world needs to find the equivalent of four Saudi Arabias by 2030 just to maintain present production." (http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article5133757.ece)

 
At 2/28/2010 11:09 AM, Blogger Bloggin' Brewskie said...

Daniel,

I understand the hesitancy to the slow decline argument. My suggestion, however, is that rather than taking the issue up with individual proponents, instead, is to take the matter up with ASPO.

Here's Kjell Aleklett, president of ASPO International, forecasting last year a .5% decline per annum:

Rather than oil production rising by 20 per cent to 101.5 million barrels a day in 2030, he says production is likely to fall 11 per cent, to just 76 million barrels a day.

 
At 2/28/2010 4:23 PM, Anonymous Daniel said...

Bloggin' Brewskie,

You can believe what you want, but I think the proven average depletion rate of the world's largest oil fields backs my point. The one thing that may validate your argument (at least for a bit) might be Iraq. If they can fulfill their proclamations, then maybe, oil production can remain flat for a short while longer, and possibly may even get a temporary bump.

Something else I'd keep an eye on is the age of US oil infanstructure. The average GOM offshore rig is 29 years old. If the oil companies aren't careful, I'm afraid one of these days a leg is going to rip apart, it's going to tip the rig over and we're going to lose 250 people. If this happens, it will be our equivalent to Piper Alpha (the N Sea rig that caught on fire in the late '80s).

 
At 3/01/2010 10:22 AM, Blogger rjs said...

there's never a shortage of shoes on this blog...

from yesterday: North Sea oil 'viable for 30 more years' - Scotsman.com Business

THE North Sea has a viable future for the next 30 years, or beyond, provided oil heads above $200 a barrel, an industry expert has forecast.

Matt Simmons, the founder and chairman emeritus of energy investment specialist Simmons & Company International, said there was a bright future for the UK sector of the North Sea "if we come up with attractive investment opportunities". Simmons described even the near-$150 level as "dirt cheap". Asked if $200 was a more realistic price to sustain investment in oil and gas assets, the industry veteran replied: "I'm not sure that's high enough."

 
At 3/01/2010 11:57 AM, Anonymous Daniel said...

rjs,

You hit my point preciously. The problem isn't running out of oil - it's running out of cheap, easy to extract oil. Typically, the first 10-15% of oil one gets out of a field is the easiest and cheapest to extract; after that, the quality of the oil gets lower, the viscosity gets thicker, plus an array of of geological and engineering obstacles get in the way as production goes down. The fact that oil discoveries peaked decades ago, and that we're presently consuming more oil than finding, is indicative we have a problem.

The problem peak oil presents with oil fields isn't that we can't invent new ways to squeeze more oil out of fields, and extend their life-expectancy. The problem is declining production from a plateau, or maximum production peak, that persists despite technological improvements. Sequestering oil from fields is like trying to get water out of a sponge: the first several squeezes are the easiest and get the most out, while the others, not matter how hard, get less out.

Now mind you, I'm not trying to rain down on everyone's parade. I am confident the world can and will transition itself away from petroleum-based fuels. However, it's going to take some time and won't be easy. Plus, with Asia's growing oil thirst, a lot of people in few years are going to wish they listened to the "Chicken Littles," and started the transition sooner.

 
At 3/01/2010 12:13 PM, Anonymous BJS said...

Speaking of Matthew Simmons, I heard he's pushing hard for a huge offshore wind farm to make ammonia, that in turn will go to the purpose as a transportation fuel. Will this work? Does anyone have any information on this?

 
At 3/01/2010 12:34 PM, Blogger rjs said...

china has been putting its massive foreign reserves to use buying the resources needed to sustain its growth, and has already loaned $25 billion to secure oil from russia for 20 years, another loan for long term russian gas supplies, and has signed similar long term deals with iran ($100B), brazil ($10B), venezuela ($16B), iraq (20 yr), nigeria ($50B), and a LNG deal with indonesia…& with 2.4 trillion of foreign reserves, they have the dollars to price us out of the energy market, as they have already become saudi-arabia’s top oil buyer…

 
At 3/01/2010 3:39 PM, Blogger VangelV said...

That's one reason that peak oil is peak idiocy: it always underestimates the ultimate resource - human capital (i.e. human ingenuity and the resulting innovation, advances, new technology) - which is endless and boundless, and will never peak.

You are missing the point. The new drilling techniques cannot produce enough oil to offset depletion from existing conventional fields. What is idiocy is ignoring the numbers. They show that global production of light sweet crude peaked in 2005. While subsidies for biofuels plus some new investment in tar sands projects caused unconventional production to offset the decline, total production of crude stayed flat from 2005 to 2008; the $140+ price was not enough to cause a supply solution to solve the rising demand problem.

 
At 3/01/2010 3:58 PM, Blogger VangelV said...

Thanks for driving another nail in the coffin of Peak Oil...

It is a false argument. The Peak Oil argument does not claim that we will run out of oil, only that we will run out of cheap oil as production peaks due to depletion.

Instead of getting all excited and making stuff up it makes sense to look at the actual data and history. That shows that MP missed the point. The rise from the $30s to above $100 was insufficient to materially increase production above the 2005 peak. While the data is notoriously bad and not entirely reliable, it still is good enough to show that by 2008 production was still at the same level as the 2005 peak. If hundreds of billions in new investment could not cause production to increase it is clear that the naive optimists have not thought the problem through.

 
At 3/01/2010 4:30 PM, Blogger VangelV said...

didnt you guys get it? the reserves in the Bakken shale, the largest find in 40years, isnt even enough to cover one years current domestic use...

It is obvious that the don't get it because they are ignoring the data and have no idea about what the reported numbers mean. A few years back there was all of the hype about the great deep water discoveries in the Gulf and off shore Brazil. Those discoveries have yet to produce a useful flow test so we have no clue about how much oil or gas can be ultimately produced. And even if the estimates are correct, the most optimistic estimate for meaningful production takes us out to 2017 or so. The total production levels will have to be low in comparison to conventional fields because of the depreciation that is linked to the much greater depletion rate.

 
At 3/01/2010 4:33 PM, Blogger VangelV said...

Speaking of Matthew Simmons, I heard he's pushing hard for a huge offshore wind farm to make ammonia, that in turn will go to the purpose as a transportation fuel. Will this work? Does anyone have any information on this?

I can't see how such wind farms can withstand the massive storms that hit the regions that he is looking at. He will probably have to get the energy needed to make the ammonia by some other means but most of the sea power approaches are still too expensive at this point in time.

That said, ammonia makes some sense because the current engine technology can use ammonia as fuel.

 
At 3/01/2010 10:28 PM, Anonymous BJS said...

VangeIV,

I wasn't certain. Thanks for the info.

 
At 3/01/2010 10:38 PM, Anonymous BJS said...

VangeIV,

Speaking of ammonia... I read this post on dimethyl ether a while back (http://i-r-squared.blogspot.com/search?q=methanol). It sounds promising. Even if it's workable, I doubt it would be sufficient enough to replace petroleum-based fuels. But like ammonia, it may help fill a few holes until sometime down the road (when and if it's possible) to kick our petroleum-based fuel addiction.

 
At 3/01/2010 11:57 PM, Anonymous Daniel said...

rjs,

Something else that's been in the works is the interest among OPEC producers, Russia and China for oil purchases to be conducted with a basket of currencies, rather than the dollar. Russia would love this because (a) they believe it would remove some volatility, and (b) it would serve to undermine the US' influenence throughout the world.

Of course the euro is having its own troubles currently. If they persist, such a turnout may ultimately benefit the dollar some (at least for a while).

However, though, it's hard to see America continuing her superpower act - not with her terrible fundamentals. Be a student of history and it's easy to see the US has all the signs of a declining superpower.

With a diminishing oil pie on the horizon, a hungry Asia looking for more and a sclerotic US in decline, it seems apparent that there's only room for one to gain at the other's loss.

China seems to have a better energy policy than our Congress.

 
At 3/02/2010 3:33 AM, Blogger rjs said...

daniel: china has a functioning government: you can see ours is dysfunctional...here's what they got with their stimulus...
they have agreed to currency swaps* with belarus, several asian nations, and argentina, widely seen as a first step towards internationalizing their currency and replacing the dollar in trade; the yuan is already accepted in cross-border trades transacted in cash in most ASEAN nations…

*official swaps, including Japan (USD $29.3 Billion), Malaysia ($11.7 Billion), Belarus ($2.9 Billion), Argentina ($10.25 Billion), South Korea ($26.3 Billion), and Indonesia ($14.7 Billion).

 
At 3/02/2010 8:50 AM, Blogger VangelV said...

http://i-r-squared.blogspot.com/search?q=methanol

This article illustrates perfectly what some of us have claimed for decades. What we get is some claim of cheap and abundant energy that gets a lot of publicity and attracts investors in hope of making a quick buck.

Because the process is not competitive, the managers of the companies that are trying to cash in on the hype turn to the government for assistance. Politicians see their chance to gain valuable publicity so they approve grants, loans, loan guarantees, subsidies, mandates, etc., that are designed to help the rent seeking companies. Because none of these actions change the science or the underlying economics of the process, the companies wind up going bankrupt and shareholders who did not cash out are wiped out. And as usual, taxpayers and consumers wind up paying most of the bill.

That having been said, the case of shale gas and shale oil are far more positive because exposure to the taxpayer is lower. Of course, if the fracture process leads to contamination of aquifers and contaminate reservoirs used as sources of drinking water (and irrigation), that picture will change very quickly and taxpayers will be stuck with a massive bill.

 
At 3/02/2010 10:03 AM, Blogger rjs said...

VangelIV, or anyone else:

having brought up the issue of water, what are the water needs to exploit the Bakken shale? after all, north dakota is fairly arid, and it was just in the news that shell abandoned its bid for water rights in colarado, putting that regions oil shale development in limbo...

 
At 3/02/2010 10:19 AM, Anonymous BJS said...

VangeIV,

Sorry, I gave you the wrong link (of course the Range Fuels article was good, too). Here it is: (http://i-r-squared.blogspot.com/search?q=Keep+Your+Eye+on+DME+).

 
At 3/02/2010 10:58 AM, Anonymous Daniel said...

rjs,

Here's one report that's looked into N Dakota's water situation in regards to oil (www.ndoil.org/.../Bakken_Water_Optimization_Study_-_John_Harju.pdf).

Shell's water battle was a losing one from the start. During my undergrad studies in the late '70s, a number of oil companies were toying with Colorado oil shale. By the early '80s, a number of them had given up - and this was when oil prices were still high. The truth is we've had the technology since the '20s to convert oil shale into usable petroleum, but Colorado simply doesn't have the water.

Some companies are researching alternative pathways that minimize water usage. All prospects, however, require immense energy, which in turn demands high expense, which in turn means it won't be easy. Even if someone figures something out, it doesn't seem plausible that Colorado's oil shale will do much to contribute to the energy picture.

 
At 3/02/2010 11:14 AM, Anonymous Daniel said...

VangeIV said:

"Of course, if the fracture process leads to contamination of aquifers and contaminate reservoirs used as sources of drinking water (and irrigation), that picture will change very quickly and taxpayers will be stuck with a massive bill."

You aren't kidding with this aspect. There's going to be a lot of frustrated people scape goating the energy companies in the future. Any gas company that screws this up is going to have a killer lawsuit and a swarm of politicians down their throats.

 
At 3/02/2010 11:16 AM, Blogger rjs said...

for the record, from Daniel's report, for those who dont want to download the pdf:

As much as 1.0 million
gallons of water per well to
fracture the Bakken
Formation.
• Typically transported to well
site in 7500- to 8000-gallon
tanker trucks.
• Transportation costs for long
haul distances can be
excessive.
Permits to obtain water from high-quality
groundwater sources can be difficult and timeconsuming
to obtain.

• The North Dakota State Water Commission
(SWC) is encouraging withdrawal of water from
the Missouri River system for uses like fracing.
• The SWC and Corps of Engineers are currently
working together to identify “low-risk” corridors
for water extraction (i.e., easy access, low
probability of cultural features, etc…).

Relatively low recovery of the original frac
water within the first 10 days.
– Ranges from 15% to 50% recovery
• Very high salinity in flowback water.
– Salinity levels as high as 200,000 mg/L
• Water chemistry is predominantly sodium
chloride (NaCl), with lesser amounts of
calcium, potassium, and sulfate.
Bakken Recycling Challenges

• Slow recovery of flowback water
• Relatively low volume initial recovery
• Extremely high dissolved salts early in the
flowback
• Treatment very challenging, even with the
most robust technologies
• Treatment very likely not cost-effective in
most cases

Current Frac Water Costs
• Acquisition costs
– $0.25–$0.75 raw water cost
– $0.63–$5.00 transportation costs
• Disposal costs
– $0.63–$5.00 transportation
– $0.50–$1.00 disposal via deep well injection
• Total costs
– $2.00–$11.75/bbl

 
At 3/02/2010 11:44 AM, Blogger VangelV said...

having brought up the issue of water, what are the water needs to exploit the Bakken shale? after all, north dakota is fairly arid, and it was just in the news that shell abandoned its bid for water rights in colarado, putting that regions oil shale development in limbo...

You may be thinking of the old shale oil process, which was not scalable because it required a great deal of water. The process that is being discussed here is the one that uses horizontal wells that are fracture-treated to ensure adequate permeability and flow rates.

The idea is to use one horizontal well to extract oil from an area that would require two vertical wells (or more). If you can get the cost of the horizontal well to be below that of the vertical wells that would be required to extract the same amount of oil you would make the process more economical.

The problem is not the economics but the total output from each well. The first Bakken horizontal well was drilled by Meridian. It cost around $2 million to drill and produced less than 300 bpd. From 1987, when it was drilled, to the end of 1998 it produced around 350K barrels. While that is profitable, it is hardly a solution to our depletion problem.

Just because I can make a good return drilling shale oil, it does not mean that I can do much to offset the aggregate production peak. Of course, things are a bit more complicated than what I suggested above. To maintain flow rates wells have to be reworked by injecting nitrogen or fluids to clear fines that clog up the flow pathways.

When Cantarell goes imagine how many horizontal shale wells will be required to replace its production.

 
At 3/02/2010 12:25 PM, Blogger rjs said...

vangelIV: here's the article from last week i was referring to: http://www.latimes.com/business/nationworld/wire/sns-ap-us-oil-shale-water,0,7343990.story

the Bakken Water Optimization Study that daniel posted and i quoted was dated sept 2009...are you saying water needs have changed since then?

 
At 3/02/2010 1:35 PM, Anonymous Daniel said...

rjs,

The Bakken and Green River Formation are not the same. The Green River is composed of fine-grain sedimentary rocks that hold a considerable amount of kerogen. Traditionally, either underground or strip mining need to be conducted, then the petroleum-like qualities of kerogen are sequestered through ex-situ or in-situ processing. The water commanded can be excessive (often 5 barrels per 1 barrel of synthetic crude garnered), and a lot of pollution is left behind. If Alberta was short on water, I can tell you the Canadian tar sand industry would have the same predicament as the Green River.

The Bakken is different. One can use horizontal drilling to drill wells and hydraulic fracturing to get petroleum. It's the real stuff, not synthetic crude.

 
At 3/02/2010 1:57 PM, Blogger rjs said...

daniel: ok got that...

but let me get this straight: does that Bakken Water Optimization Study from you that i downloaded apply to the horizontal drilling to and hydraulic fracturing methods you just referred to?

 
At 3/02/2010 2:23 PM, Anonymous Daniel said...

rjs,

That's correct.

 
At 3/07/2010 10:32 PM, Blogger VangelV said...

The Bakken is different. One can use horizontal drilling to drill wells and hydraulic fracturing to get petroleum. It's the real stuff, not synthetic crude.

Bakken wells do not produce much oil. While they can pay for themselves, they can't give you enough production to offset depletion from conventional sources. And that is what this debate is ultimately about.

 

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