Nov
23
Reasons Why I’m Not Spooked, But Oil Speculators Should Be or The Biggest Discovery of Oil Was This Year In the U.S.
November 23, 2007 | 5 Comments
In the U.S. there is a large body of research and development underway in the U.S. and around the world to enhance oil and gas production. The number of projects and the success rates are a little unnerving for knowledgeable speculators. To offset “declining” recovery and oil field “depletion” it’s alleged that “new” discoveries must be made to make up the shortfall and to meet increasing demand. In a static world that would be an irrefutable statement. But the oil economy is a very very long way from being static; rather it’s about as dynamic as any, and likely one of the most dynamic in history so far.
In large round numbers, its safe to say that for every one of the 1.+ trillion barrels of oil mankind has lifted to date there is at least one more and in some oil fields many more than one more barrel to be lifted out. That makes the “recoverable reserves” a changing number.
Advancing enhanced recovery is multifaceted science. As an example, here is a report about drilling shallow gas fields for substantial production in less than a day. ‘Microhole’ Drilling Rig Demonstrated Successfully in Midcontinent with a coiled tubing drilling rig. The technology has been supported by the U.S. Department of Energy and has strong business follow-up. It seems this technique could drill to perhaps as deep as 10 to 12 thousand feet. The cost savings are considerable too, making more well prospects economic.
The U.S. DOE calculates that amount of oil in already discovered U.S oilfields at less than 5000 feet to be more than 218 billion barrels. Keep in mind that just 10% of that equals 10 years of OPEC imports at today’s rates, all of it is enough to run the U.S. economy for 25 years. All of which is just sitting there, in known places, thousands of them that at the 5000-foot and shallower level which exceed the proven reserves of Saudi Arabia. It also leaves out all the oil left behind when wells ran dry – which comes to 300 billion barrels. It’s a resource that the 7000 or so non “Big Oil” U.S. oil companies can bring to market. I’m not even considering that there are thousands of additional oil fields scattered across the world.
So the “Big Discovery” is back at May 9, 2007 when the U.S. National Energy Technology Laboratory news release came out that revealed that it has now, in its hands, a refined and workable means to do the underground work to pinpoint where to drill which is an affordable and much quicker way to get the information to the oil producers. Back in May at the release date, two companies already adopted the technology and the technology will undoubtedly get around fast. More shock – the price tag for the research, less than a million dollars.
So while the ill-informed rant and blame, you’re now informed. While the basic run up in oil prices are still the machinations of OPEC and the Axis of Oil, the financial community bullying the Federal Reserve into saving them from their greed based mistakes and of late the result of those cheap dollars, a driving of speculation money trying to preserve cheap dollar value by investing in oil futures, the folks in the awl bidness are busily coming up with more!
I’m real encouraged about the near term going into next year. With everyone seeming to believe that oil will go way past $100 and U.S. retail gasoline headed for $4.00 you won’t catch any of my money on that bet. The real issue is, can the American consumer, using a quarter of world production, back off fast enough to get oil back down to its real economic value and those 7000 oil producers get equipment and personnel quickly enough to made a little drama in the market? Well, truthfully I have more confidence in the oil producing business than American consumers. America is a country full of small egos than need prestige cars and profligate waste to pump themselves up. Sigh . . .
On the other hand, this news is known in the oil industry, in OPEC, the Axis of Oil and it’s coming; there is no stopping it. While it will buy a lot of time for transitions to alternatives and new energy and fuel, the world won’t likely wait. The danger is the risk of consumption keeping too much pressure on while the supply choking we’re experiencing chokes, too, that might simply choke the whole world economy, the dream come true for the Axis of Oil of Iran’s mullahs, Venezuela’s Chevez, and to some lesser extent the nationalists of Russia. There are a few hints that the Russians and mullahs are realizing this path will be extremely painful on the other side, while Chavez is too dimwitted to get it.
Right now the other worry is can the U.S. Congress get its act straight. Somehow the incentives for renewable and alternative resources are positioned against incentives for oil and gas production. I have to wonder why, as the production of both offer huge economic growth, the oil and gas to get us the time to get to the renewable and alternative resources. Failing to keep and improve oil and gas incentives will just make everyone poorer and quickly while failing to improve incentives for renewable and alternative resources will make the economic thresholds of adoption higher and the postpone the adoption.
Lastly, while having spent a couple of days with the oil and gas community a couple of highly relevant points. Big Oil, looking at massively expensive new oil and gas prospects has the information above in mind as well as the alternatives. Chevron made the point that this year will see their investment in renewable and alternative resources as about the same as the Blind Faith platform expense. That billion-dollar segment of deep-water oil investment needs to be measured against the prospect of investing in efforts like those mentioned here. The Blind Faith platform is expected to ship 30,000 barrels of oil a day where a thousand wells in an old field doing 30 barrels each would allow each well a budget of million dollars each. They are understandably, having a gut check kind of year.
The other issue is that while the consumers (yup, its us) are busily burning oil and gas up at prodigious rates the suppliers of our burning tools are simply not facing up to the problem. As conservation, or prolonging the resource, as you might care to think, is a critical part of the supply and demand equation, consumers are also limited by what the products available will do. As an example, there just aren’t any series hybrid vehicles to buy. Nor do manufacturers aggressively pursue the ideas and concepts out in the world that we have looked at here. Which opens the door to valid and serious charges available to level at all of the world’s automobile manufacturers in particular. I think a serious whippin’ is in store for all the producers of goods that use oil or gas while operating. It’s a good thing for them they have big advertising budgets or the fingers would already be pointed their way.
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I’ve checked out your blog and like the fact that you recognize the impact that new technologies will have on oil and gas supply. This figure shows how horizontal drilling and a CO2 miscible flood have reversed production declines in the Weyburn oil field in Saskatchewan – http://static.seekingalpha.com/wp-content/seekingalpha/images/weyburnoilproduction.jpg
This video shows another EOR technology – http://www.youtube.com/watch?v=QVMRu7GjR7o that allows injection rates to increase 2-5 times without increasing the reservoir pressure. Companies like Encana, PenGrowth, a top 5 global producer, Greentree, Energex, ARG Resources, and Halliburton are using it.
US oil consumption declined 1.6% in 2006. So much for the big egos.
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