An oil drilling rig in the North Dakota portion of the Bakken formation.
New technology is enabling new oil production so fast, says Lou Pugliaresi, President of the Energy Policy Research Foundation, that experts, including government data crunchers, “can’t keep up.”
Matt Marshall, Manager of Energy Analysis for Bentek Energy, says 25 years of decline in U.S. oil production “have been erased in five years.” Production last year hit 5.67 million barrels per day, according to the Energy Information Administration, a 14% increase from its nadir in 2008, much of it from North Dakota’s Bakken shale.
Potential oil shale formations are “all over the place,” said Tyler Van Leeuwen, Project Manager, Advanced Resources International. His company predicts 4 million barrels per day production by 2035 from just four formations that are already producing.
And Timothy Dove, President & COO, Pioneer Natural Resources, said new technology is expanding drilling so fast, “it’s not in the numbers you see today.”
The predictions came during an April 3 conference organized by the Center for Strategic and International Studies and the National Capital Area Chapter, US Association of Energy Economists.
Technology and Legal Framework Are the Keys
More than a dozen experts agreed on tight oil’s potential. Exploration and production companies have taken the horizontal drilling and hydraulic fracturing technologies developed in natural gas shales and figured how to apply them in “wet” shales. That’s let producers retrieve natural gas liquids, which can serve as petrochemical feedstocks, and more recently, oil.
Brenda Pierce, Program Coordinator, Energy Resources Program, US Geological Survey, said traditional oil comes from reservoirs, created underground when oil formed over eons in deeper rock that seeps upward. But lots more oil, NGLs and gas stays in the “source rock” below. The new technology extracts directly from that source rock for the first time.
“It’s clear to me we can grow production pretty dramatically,” – Dove
Don Paul, Executive Director, University of Southern California Energy Institute, says North America has “arguably the best source rocks in the world” and the technology is “resetting the clock for US resources,” even though the US has already produced more oil in total than any other nation.
As important, he said, is the US legal structure that allows individuals to hold title to minerals. That’s driven technological development, he said, and given the country historically cheap energy.
Resource and Economic Uncertainties
Pierce said one big unknown is how fast oil shale wells will decline. Predictions now are based on just a few years’ experience. Natural gas wells tend to be highly productive the first year and then steeply decline, but production companies have been refracking wells to extend production with some success.
Hill Vaden, Senior Analyst, US Upstream Research, Wood Mackenzie, said the unknowns are not discouraging investment because shale wells now pay out within two years.
Dove said his company has gone back to areas of the Permian Basin where vertical wells were once drilled but then considered uneconomic, and drilled productive horizontal wells. In the Wolfcamp shale, he said, the company believes it can drill at least 3,000 more wells on its existing land holdings.
For more on transformative oil and natural gas drilling technology from Breaking Energy, read here.
“It’s clear to me we can grow production pretty dramatically,” he said. “The growing plays will swamp the decline in other areas.”
As with natural gas, where shale abundance has driven prices to historic lows, Van Leeuwen said the future problem for the oil industry may be “to find markets.”
This is the first of a two-part series on this topic. Check back soon for Part 2, Getting to Market: Detours on the Road to Oil Abundance.