Thursday, September 29, 2011

New Drilling Technologies Reshape Oil World

1. REUTERS -- "Oil output from shale prospects in unconventional sources from North Dakota to Texas could reach 1.5 million to 2 million barrels-per-day (bpd) in the coming five to seven years, twice as much as the 700,000 bpd currently produced in these places."

2. NATIONAL GEOGRAPHIC -- "Oil exploration is moving to new corners of the country as drillers use a combination of technologies to tap crude that was always known to be there, but only now can be produced economically.

Colorado’s El Paso County, which had plenty of cattle but never a producing well, sits on the Niobrara shale. The geologic formation stretches from Colorado into Wyoming, while also touching parts of Nebraska and Kansas. The Niobrara is one of about a score of new and renewed oil plays made possible  through a combination of horizontal drilling and hydraulic fracturing.  Gas producers early last decade combined fracking and horizontal drilling with outstanding results, significantly altering the U.S. energy picture and touching off major gas drilling booms in Texas, Louisiana, Colorado, Pennsylvania, and elsewhere."

3. NATIONAL PUBLIC RADIO - The article "New Boom Reshapes Oil World, Rocks North Dakota" reports that in Williston, N.D. parking spaces for RVs are going for $1,000 per month and small one-bedroom apartments for $2,000 - sounds like Manhattan or DC prices.  Here's more:

"The boom in Williston is happening in spots across America. New drilling technology is also fueling boom towns in Texas, Louisiana, and Colorado. New drilling technologies mean companies can extract oil and natural gas from shale rock that was previously thought unreachable. 

The U.S. could have 2 trillion barrels of oil waiting to be drilled. South America could hold another 2 trillion. And Canada? 2.4 trillion. That's compared to just 1.2 trillion in the Middle East and north Africa."


At 9/29/2011 5:27 PM, Blogger Benjamin Cole said...

There are also huge heavy oil deposits Venezuela, and never-throughly-looked-at heavy oil in the Mideast. Saudi Arabia may have heavy oil deposits dwarfing their light stiff.

You have who knows what in Iran, and Iraq talking 12 million barrels a day.

The problem, as ever, is with what happens above the ground---so much oil is locked up in thug nations, where contract law, civil or property rights, or elementary honest government services are unknown. Who would risk money in Venezuela, Mexico, Russia, Iraq, Iran, Nigeria, Libya, Saudi Arabia?

At 9/30/2011 9:39 AM, Blogger Buddy R Pacifico said...

The companies that supply the U.S. shale oil and gas development are benefitting greatly. Here is an article on the best industry rated suppliers. These companies should lead as the other countries pursue unconventional oil and gas deposits.

At 9/30/2011 10:04 AM, Blogger Buddy R Pacifico said...

Water-based drilling fluid, that is recyclable, is providing an innovative alternative to oil-based drilling mud (OMB). Here is the most recent winner of World Oil's top innovation prize. Water-based fluids are much easier to clean-up and can be re-used, which could save about a half million per well.

At 9/30/2011 2:11 PM, Blogger VangelV said...

The recent oil market correction is putting a lot of pressure on shale producers who can't break even at much higher prices. The shale industry is still destroying capital. Why is that good news?

At 10/01/2011 12:56 AM, Blogger string said...

I'm left wondering why so much hype about US oil production is coming out at this time. Since Yergin's puff piece attempting to discredit Peak Oil came out last week, it seems everywhere I look, someone is touting shale and tar plays as being our savior. The fact that these plays are being touted now proves the peak of conventional (read inexpensive) oil has passed (actually peaked in '05-06) and now we are more and more reliant on more expensive and lower quality product. None of the articles I've read this week discuss net energy (ERoEI or ERoI), rapid depletion rates or the low quality of product.

At 10/01/2011 9:50 AM, Blogger VangelV said...

I'm left wondering why so much hype about US oil production is coming out at this time.

Some people want to believe. Others will do what they can to profit from taking advantage of those beliefs. At this time the Wall Street traders find it beneficial to push the price of the shale sector higher. Eventually the reports on actual production, cash flows and profits will cause a tumble and that will allow them to make a killing on the short side.

Of course, there is little that we can do to fight the trends so we are best off to take full advantage of them. Right now the shale hype is driving the shares of conventional producers lower. After people finally figure out the reality you will see an explosion of the price of companies that have ample reserves in safe areas of the world.

And if you want to find commentaries on depletion, political problems, and economic reality of production, there are plenty of them out there.

Shell chief warns of era of energy volatility

Oil and the Future--A lunchtime address by John Hess

And if one looks at CERA's own data, s/he can see that Hubbert has been vindicated.

Shale will not help us very much, if at all. While the companies that have properties in the sweet spot of good formations can make a profit the industry can't. Production will turn out to be much smaller than predicted and profitable production will be rare until the inevitable crash forces investors to face the consequences of real world economics.

At 10/02/2011 3:08 AM, Blogger Ron H. said...

"Who would risk money in Venezuela, Mexico, Russia, Iraq, Iran, Nigeria, Libya, Saudi Arabia?"

Well, obviously someone, as oil seems to be coming out of all those countries.

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