Wednesday, September 05, 2007

How's Your Bank Account?

One thing I do appreciate at The Oil Drum is the level of discourse. Alternative views are welcome, even if they are hotly argued. A case in point:

David Strahan, author of The Last Oil Shock, published a letter challenging Duncan Clarke, author of The Battle for Barrels. Clarke has responded. Both letters elicited a huge outpouring of comments by the Drummers. The one that caught my eye, and appears to be very pertinent is this one posted by Oilmanbob, whose real name is Bob Ebersole. Here is a snip of what he said that I think most folks are simply not thinking about. The context is that he is referring to the BILLIONS (yes that is a B for BILLIONS) of barrels of stranded oil in the USA and what it will take to retrieve it (all bold is mine):

582 Billion Barrels of Original Oil in place
172 Billion BBl. Cumulative production
20 billion Bbl. proved reserves

Leaving 390 Billion Barrels as "future challenge", or stranded oil in old fields in the USA.

Much of this oil can in fact be recovered through the new drilling and production techniques developed in the last 20 years. 3D and 4D seismic allows wells to be more effectively placed to produce wells and the fluid and gas levels to be monitored for best production. Horizontal wells allow more of the formations to be accessed by the wells and really raising the effectiveness of the wells. Steerable downhole drill motors can pinpoint the location of the wells. Tertiary production techniques like CO2 injection, solvent flooding and microbiological enhancement- the conclusion is that we can now produce up to 65% of the OOIP and many fields should be worth redrilling- in fact as much oil remains to be produced onshore as has been produced in the US since Col. Drake's well in 1859.

But don't kid yourself, it going to take $70/bbl to make this worthwhile. The highest US production was reached in 1973 in the U.S.,about 10 million barrels a day. It seems rather improbable that we can get the rate of this production over about 1/4th of the highest US production, about 2.5 million barrels a day and we are using 21 million barrels of oil a day.


$3.00 gallon gas and higher will have to be permanently in place before we see any serious production of this stranded oil. On top of that, we can't expect to see production levels that equal our consumption, so imports and alternatives are still on the table. Are you ready to pay $3.00 a gallon and more to drive your car?

3 comments:

The North Coast said...

I hope we don't have another example of "receding horizons" here.

I mean, how much will it cost to extract when oil reaches $70 a barrel? Will the profitability horizon then recede to, say, $90/barrel?

Such has been the case with most tar sands projects.

Let's hope the industry has developed vastly more effective means of recovery.

Also, the 390 billion barrels left in the ground...where do they get that figure?

Kheris said...

a) Oil prices - per Bloomberg they are over $70/barrel both futures and spot. The real issue may be how long they hold above $70 to convince the companies that it pays to chase the stranded oil. Ebersole is working up just such a project now.

b) 390 billion - the Original Oil In Place (OOIP) was 582 billion, minus 172 billion produced minus 20 billion proved reserves. Again, Ebersole knows where some of that is. Part of the comments in that entire thread reviewed the fact that 2D seismic imaging had located a lot of locations, that simply weren't reachable at the time. The new technology Ebersole refers to makes it worth pursuing given the new economic factors, e.g. the price of oil.

As we all know, the well won't run dry, it will simply become more expensive to get out. And it won't come out as quickly and in the volumes it did before. Eventually, our technological abilities will fail and there will still be stranded oil.

The North Coast said...

The numbers make sense, and they are scary when you think of our vorocious appetite for oil and our growing population, because there are other numbers not being discusssed.

If there are 390B barrels of stranded oil, how much of that could ultimately be harvested? 50%?70%? 30%? Over what period of time? How much per year?

Let's see- we currently burn through 22 million barrels per year;that's over 100 million in five years. Now, we import at least 65% of our oil,and those imports are subject to sharp shrinkage in the near future, as Cantarell becomes almost completely depeted, and as the the middle eastern countries conserve more of their supply for themselves, as they are in steep depletion as well. The North Fields, meanwhile, are collapsing rapidly-depleting at the rate of 15% per year, much faster than industry experts had predicted.

We will have to find a way to get by on much less than what we are currently using. If our imports are cut by 5% within the next couple of years, which seems rather likely, we could be looking at a rapid ratcheting upwards of oil prices. Will these 'stranded' supplies be able to offset the loss of imports? Doubtful, especially if the cost harvesting them keeps rising as the price of oil rises.

We will be squeezed not only for fuel for transport and power generation, but for the chemical-dependent farming necessary to produce the food we eat in quantities sufficient to keep the population fed, and, worse, to manufacture ethanol and biofuel.

Less produce for more demands on it.

Nothing I'm hearing is the least bit reassuring.