Archive for the ‘shale oil’ Category

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US energy sanctions on Russia must thread the needle

May 15, 2014

Russia’s resurgent geopolitical power is dependent on it’s vast energy wealth.  That makes the Russian energy sector a juicy target for policies aimed at punishing Russian machinations in Ukraine.

However, America’s European allies are dependent on Russia as their primary energy source.  That creates a dilemma – how to get European support for meaningful sanctions that won’t end up hurting themselves as much or more as the intended targets?

The US is trying to thread the needle by targeting Russia’s energy future while keeping its current productivity intact.   Although it remains a major exporter, Russia’s reserves of conventional oil are in steady decline.  However, as reported here in the past, Russia has immense shale reserves.  Shale oil has resuscitated the US oil industry (oil production in the US hit a 26 year high last year and the Energy Information Agency projects continued growth to a 40 year high next year).  No other nation has been able to leverage their shale resource as effectively as the US, and Russia needs access to US experience and technology if they want to similarly extend their own energy industry.

Therefore, the Atlantic allies are crafting sanctions that will prohibit participation in Russian shale (and Arctic) energy development by Western companies.  Of course, there is nothing preventing the Kremlin from retaliating by squeezing current exports to the allies, anyway.  It would end up just being a test of wills.  And, so far, Putin has demonstrated ownership of much more of that particular resource as well.

Russia's vast but untapped shale resources

Russia’s vast but untapped shale resources

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The Cline Shale: Texas’ next big boom could be the nation’s biggest yet

July 19, 2013

The Cline Shale formation in West Texas is an oil and gas rich formation that is drawing attention as the two primary Texas shale plays (Barnett and Eagle Ford) approach saturation.  Although the Cline formation is noticeably smaller in physical area than either Barnett or Eagle Ford, the hydrocarbons are denser and, by some estimates, the Cline may yield much more than Eagle Ford and North Dakota’s Bakken – the two largest developed shale plays in the US – combined; perhaps as much as 30 billion barrels:

the field is only about 140 miles long and 70 miles wide. However, packed within that small space could be a plethora of shale oil and natural gas, to the tune of 3.6 million barrels of recoverable oil per square mile. Putting it another way, the Cline Shale’s 9,800 square miles could contain a whooping 30 billin barrels of recoverable oil. That would make the field 50% larger than both the prolific Eagle Ford and North Dakota’s Bakken – combined. The latest estimates for the Bakken top out at 11 billion barrels, while the Eagle Ford top-end figures for recoverable oil are near 10 billion. The projected drilling window of the Cline is also impressive. Early estimates show that the target zone for oil production is between 200 and 500 feet thick. This would be equivalent to having ten Eagle Ford Shales stacked on top of each other

The Cline formation is part of the Permian Basin.  In the map below, the Cline is found roughly within the triangle formed by the three points of Lubbock, Odessa and Abilene.  A group of interested parties has set up and maintain a website to promote Cline Shale which features a set of maps, facts and figures, and other important links.

Texas Shale Areas

 

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Is the Shale Revolution a US-only phenomenon?

July 11, 2013

Assessing the data from thousands of shale oil wells, Belfer Center scholar Leonardo Maugeri comes to two important conclusions:

1.  The US in on a trajectory to become the worlds largest oil producer by 2017.  Also, the size of the various shale formations, coupled with the increasing technological and professional abilities to maximize those plays indicate that this position could be held for a long time.

2.  The idiosyncratic nature of the US oil industry makes it unlikely that this revolution will be experienced elsewhere, at least not in the near term.  Three factors unique to the US are driving the Shale Revolution:  (1) the existence of private mineral rights in the US; (2) the large number of drill rigs with hydraulic drilling capabilities in the US – 60% of all the world’s rigs are in the US, and 95% of those can drill horizontally – this allows a high degree of drilling intensity in the three large US shale plays; and (3) the American tradition of “wildcatting” and independent drillers and operators gives the nation a large number of outfits willing to risk and lose it all pursuing oil wealth.

Fortunately, the Shale Revolution has only just begun in the US.   Most of the current activity is centered in three regions – Bakken shale in North Dakota and Eagle Ford and the Permian Basin in Texas.  There are several other shale locations that are likely to be very rich producers as well.  California’s Monterey Shale alone is estimated to have as much as 4 times the amount of oil as the Bakken formation.  Of course, the environmental movement, and its anti-oil contingent, are very strong in California, so it may be a decade or longer before Monterey shale sees any significant production.

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Shale Oil: The world’s ten largest national reserves

July 9, 2013

Oil and Gas IQ lists the ten nations with the largest reserves of technically recoverable shale oil (note, as always, that shale oil and oil shale – kerogen – are not the same things).  At the link, there is a thumbnail description of each nation’s shale oil resource.  Here, I will simply list (in reverse order) the nations with their technically recoverable totals:

  • Indonesia, 8 billion barrels
  • Canada, 9 billion barrels
  • Pakistan, 9 billion barrels
  • Mexico, 13 billion barrels
  • Venezuela, 13 billion barrels
  • Libya, 26 billion barrels
  • Argentina, 27 billion barrels
  • China, 32 billion barrels
  • United States, 58 billion barrels
  • Russia, 75 billion barrels

The list is based on this report from the US Energy Information Agency (link opens PDF file).  It should be noted that there appears to be an error in the report – in the detailed tables, the report lists Australia as having 17.5 billion barrels of technically recoverable reserves, which would place it 6th on the list, but then leaves Australia off its Top Ten list entirely.  Either the 17.5 is a mistake or the omission of Australia from the Top Ten is an error.  I believe the latter is the case.

Russia is the world’s largest oil producing nation (because the Saudis restrict their production per OPEC policy), and their estimated total of 75 billion barrels of TRR shale oil is nearly as much as its 80 billion barrels of proven reserves of conventional crude.  The US is the third largest producer, and our 58 billion barrel TRR shale reserve is more than twice the estimated 25 billion barrels of conventional supply.  Everywhere but OPEC, the future of oil is in shale.  Indeed, the estimates for Russia may be low – by a wide margin.  Most of Russia’s shale oil lies in the Bazhenov Formation in the conventionally productive West Siberian Basin.  Bazhenov contains a total estimate of over 1.2 trillion barrels; the 75 billion TRR estimate is just 6% of that total.  As production techniques and technologies advance and refine, the total amount of oil generated could grow by an enormous amount.

map_russia-oil-gordon

But shale oil is not the only unconventional resource.  As large as the Bazhenov Formation is – and it is 4 to 5 times the size of Saudi Arabia’s proved reserves of270 billion barrels – it is only the second largest known formation of unconventional oil.  In the US, the oil shale (kerogen) formations in the Rocky Mountain states are estimated to have 1.3 trillion barrels, with up to 800 billion technically (but, currently, not economically) recoverable.

Uinta Basin Kerogen Formation, Utah

Uinta Basin Kerogen Formation, Utah

The largest formation in the world that is currently being produced is the Orinoco Heavy Oil Belt in Venezuela, which has over 500 billion barrels, almost twice the reserves in Saudi Arabia.

Orinoco Heavy Oil Belt

These three unconventional reserves together contain over 3 trillion barrels of oil, which is more than 20 times the total amount of oil that has been pumped since the beginning of the Oil Age.  A little less than half of it is considered technically recoverable, which is still 10x the total amount of oil that has been pumped in our entire history.  The world, as we say, is awash in oil (unconventional though it may be).

Shale oil – and shale gas – are just two tips of the hydrocarbon iceberg.  Combined, there are several times more fossil fuels still in the ground than have been burned in the entire Industrial Age to date.  And that doesn’t even count future generation sources like methane hydrates or captured CO2 recycled into methanol.

The fact of long term availability of fossil fuels is definitively established.  All that remains is to develop the technology to utilize those fuels cleanly and efficiently – and that will require a policy environment that recognizes the need to continue  burning hydrocarbons.  The Obama Administration has already made a dramatic move in this direction with its embrace of natural gas as a lynchpin in its “climate strategy.”  And relying on gas will necessitate a new, more permissive policy regime from the EPA that will pave the way for other unconventional resources in the future.

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North Dakota passes Alaska in oil production

July 27, 2012

From the Alaska Journal of Commerce:

North Dakota has passed Alaska to become the second-leading oil-producing state in the nation, trailing only Texas.

Assistant State Mineral Resources Director Bruce Hicks says North Dakota oil drillers pumped 17.8 million barrels in March, with a daily average of 575,490 barrels.

Alaska Oil and Gas Conservation Commission statistician Steve McMains says that state pumped 17.5 million barrels in March, with a daily average of 567,480 barrels.

McMains says Alaska’s oil production has slipped about 15 million barrels a year since 2008.

North Dakota was the ninth-largest oil-producing state just six years ago, but the state’s oil production has nearly quadrupled since March 2007.

North Dakota passed California in January as the third-largest oil-producing state in the nation.

Tip of the hat to James Coan at the FuelFix blog, who posted this item today, and adds:  “Now that North Dakota has overtaken Alaska in oil production, it can learn a lot from how Alaska handled the flood of wealth that comes with an oil boom. Both states have populations of about 700,000 and face similar sustainability challenges.”

 

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The Second Age of Oil

July 11, 2012

When I began my study of the geopolitics of energy, which pre-dates the existence of this blog, I quickly became convinced that technological innovation was about to unleash a new era of petroleum production – both globally and, in particular, in the United States and Canada.  It was controversial 5 years ago (and remains so today among some), but the facts are becoming increasingly clear.  What was scoffed at in 2007 is embraced by the mainstream in 2012.  Harvard University’s Belfer Center last month published a study by Leonardo Maugeri that concludes we are, indeed, in the midst of a massive increase in oil production:

Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption. This could lead to a glut of overproduction and a steep dip in oil prices.

Based on original, bottom-up, field-by-field analysis of most oil exploration and development projects in the world, this paper suggests that an unrestricted, additional production (the level of production targeted by each single project, according to its schedule, unadjusted for risk) of more than 49 million barrels per day of oil (crude oil and natural gas liquids, or NGLs) is targeted for 2020, the equivalent of more than half the current world production capacity of 93 mbd.

After adjusting this substantial figure considering the risk factors affecting the actual accomplishment of the projects on a country-by-country basis, the additional production that could come by 2020 is about 29 mbd. Factoring in depletion rates of currently producing oilfields and their “reserve growth” (the estimated increases in crude oil, natural gas, and natural gas liquids that could be added to existing reserves through extension, revision, improved recovery efficiency, and the discovery of new pools or reservoirs), the net additional production capacity by 2020 could be 17.6 mbd, yielding a world oil production capacity of 110.6 mbd by that date – as shown in Figure 1. This would represent the most significant increase in any decade since the 1980s.

And, if anything, Maugeri is under-selling the potential.  He includes shale oil (like that found in the Bakken and Eagle Ford formations) but not oil shale -the massive kerogen resources found primarily in Utah and Colorado.  As discussed earlier this week, this is a non-controversial choice by Maugeri because processing oil shale presents particular economic and environmental challenges.   However, I believe that we are as close to solving those problems now as we were with shale oil a decade ago; and, if the oil shale problem is engineered to a solution, then the United States will become – at once – the worlds largest consumer, producer and exporter of petroleum products.

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Environmental issues temporarily block Uinta Basin oil shale project

June 26, 2012

Regular readers know that EnerGeoPolitics has been following efforts to develop oil shale for a long time.  The engineering problems seem to be nearly solved, but environmental issues may prove to be a more difficult obstacle to surmount.

Red Leaf Resources is the developer of an innovative process that turns kerogen, commonly known as oil shale, into petroleum without the use of vast amounts of water (other kerogen processing technologies use as much as three gallons of water to produce a single barrel of oil).  The EcoShale process, if successful and cost effective, would revolutionize the world energy picture – the Green River formation alone has recoverable reserves estimated to be triple those of Saudi Arabia, and that is just one of many shale formations around the world.

In April, Red Leaf obtained a permit to begin mining and recovering kerogen in a Uinta Basin section of the Green River formation.  However, late yesterday that permit was halted after an appeal from western US environmental group Living Rivers, which fears possible water contamination from the project.   Red Leaf appears to have agreed to the halt (which is just a hold, not a revocation).  Although there has been no comment from Red Leaf officials, reports are that they agreed to provide more data for analysis.

Oil shale has been just out of reach for decades, but the EcoShale technology appears to be the best hope ever of turning the resource from merely theoretical to profitable.  Accessing this resource is so important that it is crucial that we cross every “t” and dot every “i” early in the process, in order to make sure we can fully exploit it for decades to come.   Stay tuned for more details.