Guest post by David Middleton
The U.S. Geological Survey has made its largest discovery of recoverable crude ever under parts of West Texas, the federal agency announced Tuesday.
A recent assessment found the “Wolfcamp shale” geologic formation in the Midland area holds an estimated 20 billion barrels of accessible oil along with 16 trillion cubic feet of natural gas and 1.6 billion barrels of natural gas liquids. That’s three times higher than the amount of recoverable crude the agency found in the Bakken-Three Forks region in the upper midwest in 2013, making it “the largest estimated continuous oil accumulation that USGS has assessed in the United States to date,” according to a statement.
“The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more,” said Walter Guidroz, program coordinator for the USGS Energy Resources Program.
Guidroz attributed that potential to “changes in technology” — i.e., the advent and perfection of hydraulic fracturing and horizontal drilling. Such advances “can have significant effects on what resources are technically recoverable,” he said.
While I take issue with describing this as a “discovery” and with crediting the USGS for the “discovery,” this should not be surprising. Past history shows us that government agencies always grossly underestimate what the oil industry will find and produce. Alaska’s North Slope has already produced 16 billion barrels of petroleum liquids. Currently developed areas will ultimately produce a total of about 30 billion barrels. The government’s original forecast for the North Slope’s total production was 10 billion barrels. The current USGS estimate for undiscovered oil in the Bakken play of Montana & North Dakota is 25 times larger than the same agency’s 1995 estimate. In 1987, the MMS (now the BOEM)undiscovered resource estimate for the Gulf of Mexico was 9 billion barrels. Today it is 45 billion barrels.
The MMS increased the estimate of undiscovered oil in the Gulf of Mexico from 9 billion barrels in 1987 to the current 45 billion barrels because we discovered a helluva a lot more than 9 billion barrels in the Gulf over the last 20 years. Almost all of the large US fields discovered since 1988 were discovered in the deepwater of the Gulf of Mexico. In 1988, it was unclear whether or not the deepwater plays would prove to be economic.
Based on the government’s track record, the estimated 116 billion barrels of undiscovered oil under Federal lands is more likely to be 680 billion barrels. That’s close to 100 years worth of current US consumption – And that’s just the undiscovered oil under Federal mineral leases.
When you factor in unconventional oil plays, the numbers become staggering. “Peak Oil,” if it exists, won’t be reached for hundreds of years if the government would just get the Hell out of the way.
It’s just a matter of economics and technology. There will be periods of economic expansion in which demand out-paces supply and there will be periods of supply out-pacing demand… Like the past couple of years.
Technology improves economics. Smaller and smaller oil accumulations can be found and economically recovered even in an environment of stable inflation-adjusted prices because technology is continuously improving… And large discoveries continue to be made in plays that weren’t envisioned just a few years ago. Eventually, we will reach a point where the diminishing returns of technology can’t keep up with oil-related energy demand. But a properly functioning free market will already be delivering economical alternatives as oil begins to price itself out of the market.
Going back to the Gulf of Mexico, two of the eleven largest oil fields in the Gulf’s history (since 1947) were discovered in the late 1980’s and brought on production in the mid-1990’s. There have been several potentially huge discoveries made in the last 5-10 years in the ultra-deepwater Lower Tertiary play. These are currently being brought on to production.
The largest field in the Gulf, Shell’s Mars Field, was discovered in 1989. Prior to the Mars discovery, no one seriously believed that Miocene-aged and older reservoirs existed that far away from the established Miocene plays on the shelf. Since, the Mars discovery, many very large Miocene discoveries have been made in deepwater. The recent discoveries of even older, Lower Tertiary reservoirs in even deeper water was a huge surprise. These reservoirs were thought to have “petered out” even closer to shore than the Miocene reservoirs.
If we’re still finding “giant” fields in the Gulf of Mexico now, in plays that we couldn’t even imagine 30 years ago… What will we find in the 85% of the US Outer Continental Shelf that has never been explored? The handful of discoveries offshore California were made long before modern technology was available. The very few exploratory wells that were allowed in the 1970’s in the Atlantic’s Baltimore Canyon were drilled long before 3d seismic reflection data were available.
Technology also enables us to steadily improve the efficiency of oil recovery from reservoirs. The Bakken formation is thought to have over 40 billion barrels of oil in place. The trick is in recovery techniques. The USGS assumes that 10% is the maximum recovery factor. Twenty years ago, few people thought that Bakken recovery factors could exceed 1%.
Hubbert’s Peak Oil Theory is mathematically sound; however it is dependent upon the total recoverable resource potential. Hubbert’s “Peak Oil” prediction was based on the assumption that the total recoverable reserves in the US and our OCS (offshore) were only 150-200 billion barrels. The current DOE estimate is 400 billion barrels – And that estimate was before 2006 and the shale boom and it didn’t include unconventional resource potential (which dwarfs the conventional potential). Shale oil like the Bakken and Eagle Ford is not unconventional oil. It is plain old crude oil. The recovery is unconventional because it’s different than the prior norm; hence they are described as unconventional resources. Oil shale (Green River Formation) and tar sands (Athabasca oil sands) are unconventional oils because they are respectively bituminous kerogen and bitumen – essentially incompletely formed and degraded crude oil .
The Malthusian record of failed predictions is perfect. Every single Malthusian prediction in recorded history has turned out to be wrong…
Great moments in failed predictions
Posted on January 19, 2013 by Anthony Watts
While searching for something else, I came across this entertaining collection of grand predictive failures related to resources and climate change, along with some of the biggest predictive failures of Paul Ehrlich. I thought it worth sharing.
Exhaustion of Resources
“Indeed it is certain, it is clear to see, that the earth itself is currently more cultivated and developed than in earlier times. Now all places are accessible, all are documented, all are full of business. The most charming farms obliterate empty places, ploughed fields vanquish forests, herds drive out wild beasts, sandy places are planted with crops, stones are fixed, swamps drained, and there are such great cities where formerly hardly a hut… everywhere there is a dwelling, everywhere a multitude, everywhere a government, everywhere there is life. The greatest evidence of the large number of people: we are burdensome to the world, the resources are scarcely adequate to us; and our needs straiten us and complaints are everywhere while already nature does not sustain us.”
■In 1865, Stanley Jevons (one of the most recognized 19th century economists) predicted that England would run out of coal by 1900, and that England’s factories would grind to a standstill.
■In 1885, the US Geological Survey announced that there was “little or no chance” of oil being discovered in California.
■In 1891, it said the same thing about Kansas and Texas. (See Osterfeld, David. Prosperity Versus Planning : How Government Stifles Economic Growth. New York : Oxford University Press, 1992.)
■In 1939 the US Department of the Interior said that American oil supplies would last only another 13 years.
■1944 federal government review predicted that by now the US would have exhausted its reserves of 21 of 41 commodities it examined. Among them were tin, nickel, zinc, lead and manganese.
■In 1949 the Secretary of the Interior announced that the end of US oil was in sight.
UPDATE: reader Dennis Wingo writes in with this table:
Great article. I went into this myself in my book “Moonrush“, I took all of the predictions for the depletion of resources from the book and marked in red the deadlines that had already passed. All of the predictions failed.