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Bakken: Cold Facts on Shale Oil

February 21, 2011

Our blogs on the Bakken Formation of Montana and North Dakota, and other “tight” or “bound” petroleum-bearing units, have addressed the fantasy that such shale oil and gas sources will provide the United States (and in some versions, the WORLD) an unending energy bonanza. The unfavorable comments tend to contain put-downs, some couched in a rather personally antagonistic tone. This tends to happen when the commenting parties lack the data to back them up. The comments generally miss the mark, however.

We do NOT say that the U.S. has no extensive oil fields able to keep on producing petroleum for U.S. consumption, nor have we implied that some of the known fields are not currently economic. We do say that the aggregate production will not make up for the steep production declines at a majority of the oil fields that once fueled the U.S. economy and military. As a result, as long as the U.S. economy remains tied to petroleum, we will continue to rely on imports from Canada and beyond.

Industry and government data supporting our position are exhibited and discussed on many websites. We cite a few of them in what follows.

World Energy Consumption (horizontal scale) in billions of barrels, Compared to National Incomes (vertical scale) in billions of dollars

So what keeps Bakken and other shale oil sources from being our salvation? One part of the answer is that the U.S. is one of the world’s leading petroleum consumers. In our book we wrote (p 313): “By 2000 Americans represented less than 5% of the world’s population but consumed about one-third of its annual energy supplies.” To meet our demand requires finding new oil at a rate many times higher than the current rate of new U.S. petroleum discoveries. This “new finds” deficit (in terms of the estimated resource available in the newly discovered fields) has been developing since 1930, and grows larger with every passing year.

Another part of the answer involves the difference between “shale oil” petroleum resources, like Bakken, and the bonanza “conventional” oil resources of 100 years ago. In those early days, petroleum gushed out of relatively few holes drilled into very large underground pools, driven by dissolved gases. Many fewer holes were needed to extract most of the recoverable oil from those large pools of yesteryear than are now required to extract oil from Bakken.

Some of the shale oil is in small dispersed “pools,” but much of what’s there is attached (“bound”) to the rock and must be coaxed out the ground, using varied techniques such as “fracking.” The dispersed pools and need for injecting “fracking” fluids mean that the Bakken developers will drill many, many holes and use a lot of energy to get the petroleum out and process it into fuel. As a result, the NET ENERGY[1] for producing this oil will be a lot less per drill hole compared to even 40 years ago, when U.S. petroleum production was at its highest point.

There is no currently known domestic oil bonanza that will keep supplying current U.S. petro-thirst far into the future, and certainly no supply that will support unending consumption growth. There is equally no petroleum bonanza beyond U.S. borders that can supply unending growth in worldwide consumption.

As Kurt Cobb wrote in a Resource Insights article[2]: “In the United States alone the new process could mean 2 million barrels a day by 2015 from … fields once thought too difficult to develop ….” (But note that the U.S. consumes more than 20 million barrels of petroleum a day.) And Cobb continues: “[I]f … the projections are correct, then oil flows from tight oil in the United States will represent about 2 percent of world production in 2015. And if the more pessimistic estimates of the U.S. Energy Information Administration come closer to actual U.S. tight oil production in 2015, [it] will represent about 0.5 percent of world production. Neither amount is enough to move the price of oil ….”

But Cobb also notes, “There is reason, to doubt the claims … for tight oil supplies … beyond the fact that the companies making them are often publicly traded and therefore have incentive to manipulate their stock prices … The original shale gas promoters believed that natural gas would be uniformly available from the giant shale basins found in the United States. They were wrong. Only a few sweet spots have been profitable. As humans have done throughout the age of oil, tight oil developers will target the sweet spots first since they are the cheapest and easiest to exploit. Then, they’ll move on to areas that are progressively harder and thus more expensive to exploit. Over time tight oil won’t become easier to get; it’ll become harder to get just like shale gas.”

Gail Tverberg’s blog[3] has addressed the contention that advanced “new” techniques will add vast amounts to U.S. Geological Survey estimates of the Bakken resource, contrary to Bill Bergseid’s assertion in his recent comment on our Bakken blogs.

Says Gail: “… this is not really a new drilling technique … hydraulic fracturing was first used in the United States for oil and gas wells in 1947. It was first used commercially in 1949. Directional drilling, including horizontal drilling is almost as old, but … not widely used until downhill motors and semicontinuous surveying became possible. The techniques have gradually been refined …. A major reason we are using these techniques is because much of the easy-to-extract oil has already been extracted. Horizontal drilling and hydraulic fracturing are more expensive, but can be used to get out oil that would be inaccessible otherwise. The hope is that oil prices will be high enough to make these techniques profitable.”  At present, natural gas prices do not provide much profit.

Gail also agrees with Kurt Cobb about the potential for disappointing results: “There are several reasons why the hoped for [2 million barrels per day] might not be realized … [o]ne is … inadequate infrastructure [that could] prove to be a roadblock to meeting ambitious production goals … currently oil is being transported to market by rail and truck, and drilling companies have erected camps for workers. … What tends to happen when there isn’t adequate transportation for the oil is the selling price of the oil tends to be depressed, relative to other types …”

But then high oil prices “tend to send the economy into recession, so world prices may not rise as much as hoped–they may oscillate instead, rising, then putting the economy into recession and falling again …”

Too much optimism before drilling, such as now being spread on the web, also can be a trap — Gail again: “It is natural for those who are trying to get others to invest in these ventures to base their assumptions on an optimistic view of the future. If experience with shale gas in Texas is any clue, once realities start setting in, the level of drilling may decline, and overall production, after an initial run-up, may decline.”

U.S. Crude Oil Production since 1985

But here’s the bottom line — that is, the thin to very thin blue line at the bottom of the chart at left (Gail’s Figure 4). She explains: “If we look at a graph of countrywide US oil production, it has been decreasing prior to an uptick in 2009 and 2010. Bakken oil production (in ND +MT) is shown near the bottom of Figure 4. It appears as a thin blue line that was a bit thicker back in the late 1980s, became thinner for many years, and now is a bit thicker (reaching an average of about 370,000 barrels a day in 2010). Getting that line, or that line plus some other areas that are only starting up, to increase by 2 million barrels a day, to 2,370,000 per day by 2015, would be a tall order.”

At the same time, “US crude oil production has been headed downward for a long time–actually since 1970, not just since 1985 [as] shown on … Figure 4. If overall production is to … increase by 2 million barrels a day by 2015, it will be necessary to overcome these [other] declines, as well … What happens is that each year, more and more oil fields and oil wells within oil fields become non-economic. These are closed. Also, what is extracted is an oil-water mix, and the proportion of oil tends to fall over time. This means that if a given volume of oil-water mix is processed from a well, each year the well will yield less oil and more water.”[4]

References


[1] Net energy is also called EROI or EROEI (energy returned on energy invested).

[2] Kurt Cobb, The week of the game changer in oil, or was it? Resource Insights, Published Feb 13 2011 (Archived at http://resourceinsights.blogspot.com/2011/02/week-of-game-changer-in-oil-or-was-it.html)

[3] gailtheactuary (Gail Tverberg), Is “shale oil” the answer to “peak oil”? Our Finite World Posted on February 14, 2011 (http://ourfiniteworld.com/author/gailtheactuary/).

[4] gailtheactuary also contributes substantial commentary on The Oil Drum website (www.theoildrum.com).

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6 Comments leave one →
  1. Joanne Bachmann permalink
    April 15, 2011 4:15 pm

    ‘ The dispersed pools and need for injecting “fracking” fluids mean that the Bakken developers will drill many, many holes and use a lot of energy to get the petroleum out and process it into fuel.’

    I understood that fewer holes would be required because of horizontal drilling techniques– the ability to go down once and out multiple times from the same vertical hole. Am I missing something?

    • April 16, 2011 9:09 pm

      The vertical segment takes a pipe down to the producing level. Because the oil is more tightly bound to the rock, or found only in crevices, drilling horizontally away from each vertical hole in favored directions yields a longer production life for each central drill-hole. But whether vertical or horizontal they are all holes. Horizontal holes are 2 to 3 times more numerous than vertical holes, and some are as much as 1500 ft long. Horizontal drilling takes energy, and perhaps more than the vertical drilling because gravity is not helping. The longer the holes (vertical or horizontal), the higher the costs for energy and other resources. Thanks for a thoughtful, substantive comment!

  2. November 28, 2011 3:57 pm

    Honestly, I think the best thing about the Bakken, and other oil shale reserve areas is that so many are being put to work right now. This gives hope.

    What we need in America is to get back to manufacturing and creation of products and jobs. We’ve been sorely outpaced by other nations for some now and without that, we will lose the economy we’ve all grown accustomed to for the last few decades. We’ve given it all away.

    We’ve got American companies giving jobs to American workers, in places that people can creatively begin entrepreneurial endeavors. Now, if we could just make that happen in all sectors of business and society.

    • November 28, 2011 7:49 pm

      You sign in with an ID linking you to Bakken, and a comment that has nothing to do with the commentary on this website. It would be nice if we could find a lot of new, cheap oil and go back to the old days of using more and more and more energy per capita to “get the economy back on track.” Bakken is not such a source, unfortunately. More on this later.

  3. Patty permalink
    March 21, 2012 2:45 pm

    The U.S. may be large energy consumers compared to the rest of the world, but I think people also forget that at the same time we are consuming the U.S. has also been a major inventor of many things that have benefited the world in general; medicines, computers, airplanes, internet, the U.S. Army launched the first satellite in 1960, laser technology, and many others…

    • March 21, 2012 5:52 pm

      The high US energy use is not due to innovative industrial contributions or technological leadership, but to the constant promotion of individual life styles that consume ever more energy.

      Energy-conserving household appliances are a relatively new phenomenon in the United States. Highly energy-conserving automobiles and buses are even more recent, and only now has the government required a meaningful conservation target for cars. Energy conserving rapid transit is still controversial in the US. Residential and commercial buildings consume 40 percent of the US electricity production (mostly coming from coal).

      Nearly all the other highly developed countries in the world have a vastly lower per capita energy consumption level than the US. Until the 2007-08 worldwide economic collapse, triggered by the collapse of the US real estate market, all had as high or higher standards of living.

      Why don’t we turn our innovative system to figuring out how to do that also??

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