Peak Oil is You
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Page added on October 13, 2013
Peak Oil Is Dead Wrong
There are 89 billion barrels of oil still trapped inside America’s oil wells. That’s because the average oil well in America only gives up 30% of its black gold. This is oil that’s vital to fueling our economy and it’s just sitting down there.
To put this into perspective, if the U.S. could recover all its oil, our nation would rival Iraq and Iran as a top five holder of oil reserves in the world. This is why finding ways to recover more oil from already existing wells is almost as important as finding more sources of oil. In fact, according to a recent article in the Oil and Gas Financial Journal, Aaron Gatt Floridia from Schlumberger (NYSE: SLB ) states that just a 5% bump in the global recovery factor from existing wells could lead to more oil reserves than “all future exploration activities.” The article goes on to point out the importance of Enhance Oil Recovery (EOR) in meeting the world’s future energy needs.
Bringing aging oil fields back to life
EOR techniques, such as injecting steam or carbon dioxide, enables oil companies like Denbury Resources (NYSE: DNR ) and Anadarko Petroleum (NYSE: APC ) to bring our aging wells back to life. Denbury Resources is a great example of a company specializing in this process as it has built its entire business around using carbon dioxide to recover more oil out of legacy fields. The company has built more than 1,100 miles of carbon dioxide pipelines to move the gas from naturally occurring sources to depleted oil wells. Denbury Resources believes that it will eventually recover over a billion barrels of oil from the wells it currently owns.
Anadarko Petroleum also has had great success in bringing a legacy field back to life. For example, its Salt Creek Field in Wyoming was first discovered in 1908 with an estimated billion barrels of oil originally in place. From its discovery through the 1960s the field produced 19.9% of its oil through primary recovery techniques. From there the field was flooded with water as part of a secondary EOR recovery method, which produced another 24.4% of its oil. Finally, in 2004 the first carbon dioxide floods began and to date another 9.9% of its oil has been recovered. It’s estimated that the field should continue to produce for Anadarko Petroleum and its partner for nearly three more decades with just a slight decline rate of 7% each year.
California steaming
Another company with extensive EOR experience is Occidental Petroleum (NYSE: OXY ) . In fact, its most profitable business is the Permian Basin production it gets from carbon dioxide. Overall, 60% of the oil Occidental Petroleum produces out of the Permian is because of carbon dioxide.
That being said, Occidental Petroleum also has a very robust set of opportunities in California using both steam floods and water floods. The company’s plan this year is to spend 65% of its $1.5 billion budget dedicated to California on these two techniques. It’s critical capital for unlocking more oil. For example, Occidental is running two large steam floods at the Kern Front and Lost Hills fields. So far these fields have only given up 130 million of the billion barrels of oil that’s in place. Occidental believes these steam floods could unlock another 120 million barrels of oil equivalent, which would almost double the oil these fields have given up since being discovered.
The tech behind EOR
One of the keys to unlocking all of the oil still trapped is to find the right technique to unlock it. For example, the key to unlocking the heavy oil in California or Canada is usually steam. Using the wrong technique could lead to failure. This is where companies like Schlumberger or Core Laboratories (NYSE: CLB ) can step in and assist energy companies in selecting the right EOR technique for the job.
Using specifically designed software to determine how best to develop a field can save a lot of the guess work. For example, Schlumberger can work with its customers to examine and create new methods of oil displacement and recovery. Core Laboratories takes this a step further as its entire business is dedicated to helping oil and gas companies optimize reservoir performance to maximize the recovery of each field. One example of this is its Reservoir Management segment, which enables Core Lab’s customers to really see how the reservoirs are performing, which can be critical to the success of optimizing a field with an EOR project.
Investor takeaway
There is a stunning amount of oil still sitting in our nation’s oil fields. Companies like Denbury Resources have built a business to get more of that oil out. It’s just another reason why oil production isn’t going to dry up anytime soon.
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12 Comments on "Peak Oil Is Dead Wrong"
mo on Sun, 13th Oct 2013 2:07 pm
120 m/ b oil equivalant. 5 days worth? There better be a lot of these
rockman on Sun, 13th Oct 2013 3:35 pm
“One of the keys to unlocking all of the oil still trapped is to find the right technique to unlock oil.”
I disagree. The various EOR methods have been known and applied to US oil fields for decades…for some over half a century. We already know which method would be most effective in each field. There is only one primary factor that will drive additional EOR efforts: the price of oil.
And as far as exploiting oil fields east of the Mississippi via CO2 injection Denbury might recover a lot of oil from their fields. All the other companies and the fields they own…not so much. Denbury owns the only major source of CO2 in the entire region and they aren’t into sharing for good reason: helping other companies to increase production would put downward price pressure on Denbury’s output.
Similarly I know of a field in west Texas that contains over 700 million bbls of oil just 2400′ below the surface. Two similar offset fields have more than doubled the recovery attained from this field via CO2 injection. This field only produces a total of 60 bopd today and will do so for many years to come if not for decades. All the CO2 available in the area is going to the other two fields. There is no other commercially viable source of CO2. While this EOR method can be very effective it is a very slow process and typically takes 15 to 25 years to complete the recovery. Much of current US oil production is from fields that have been undergoing some form of EOR for decades.
While the article might impress some folks with the X billions of potential recovery, PO has nothing to do with bbls of oil…it’s solely about bbls of oil per day. Thus the “5 days worth” isn’t really appropriate…it would probably take a couple of decades to recover a significant amount of those X billions of bbls of oil. And that’s only if there’s enough CO2 to start all those EOR projects tomorrow. Which, of course, is impossible since the CO2 isn’t available so even a decades long time frame isn’t realistic.
But there’s another potential source of CO2: emmisions from power plants. There is a pipeline being laid from a Texas power plant to an oil field for CO2 injection. The pipeline will cost $160 million. And how is this project commercially viable? The US tax payers will cover $120 million of the cost. Even with that subsidy there no guarantee that the project will prove to be commercial. I’m familiar with that field and I have my doubts as must the field’s operator since they were unwilling to cover the entire cost. And they understand the field better than anyone…they’ve owned it for 20 years.
Arthur on Sun, 13th Oct 2013 4:08 pm
As the article indicates, future technological development will probably enable us to wring out the fossil sponge even more. Not that we should. The (probably permanent) high oil prices will pave the way for renewables to become competitive, if they are not already, hopefully minimizing the painful aspects of the inevitable energy transition.
Mike999 on Sun, 13th Oct 2013 4:54 pm
Oil has had 100 years of subsidy. End this NOW.
Then give Solar and Wind 100 years of subsidy. That’s the only way to cheap future energy.
shortonoil on Sun, 13th Oct 2013 6:25 pm
“It’s estimated that the field should continue to produce for Anadarko Petroleum and its partner for nearly three more decades with just a slight decline rate of 7% each year.”
Guess the folks that wrote this article skipped a lot of their math classes. At a 7% decline rate the production of these wells will be down 98.2% in twenty years. Bet they never heard of the “Principle of Diminishing Returns” either? EOR techniques has been used for more than 50 years; the benefit that can be derived from it gets smaller and smaller as time progresses. What is left is called scrapping the bottom of the barrel!
rollin on Sun, 13th Oct 2013 10:30 pm
So after the American public has incurred a lot more debt providing new sources of expensive CO2 because the natural sources are already spoken for, and years of pipeline building, they get maybe a half million barrels a day out of this for a decade at most.
Now thirty more percent of some of the oil in place has been removed, how do they get the rest? They don’t.
Next article will be about kerogen reserves and how they will provide the oil of the future.
Others on Sun, 13th Oct 2013 10:46 pm
29 % of America’s Oil comes from Shale.
http://www.businessweek.com/articles/2013-10-10/u-dot-s-dot-shale-oil-boom-may-not-last-as-fracking-wells-lack-staying-power
That means conventional oil is running out fast despite EOR.
James A. Hellams on Sun, 13th Oct 2013 11:09 pm
This article is DEAD wrong about peak oil being dead.
The total number of barrels of oil, cited in this article, as being still available for production, are 89 billion barrels.
How wrong this article is!!
The annual consumption of oil in the US each year, the last time I looked, was 8 billion barrels annually. This would consume the 89 billion barrels of oil in 11 years. The worldwide oil consumption is 33 billion barrels annually. This would consume the 89 billion barrels of oil in just 2.7 years.
This article is TOTALLY, ABSOLUTELY, DEAD WRONG!!!!
Newfie on Mon, 14th Oct 2013 12:18 am
The IPCC says we have 15 years to kick the fossil fuel addiction. Or we’ll fry.
BillT on Mon, 14th Oct 2013 1:27 am
The only ‘transition’ will be to solar powered agriculture as in photosynthesis and their limits. Muscle power in the form of humans and animals is the ‘transition’ coming. Fueled by whatever we can grow on a ruined planet. Solar panels will go the way of cell phones and the internet, but are useful in some instances until then.
I just listened to an agronomist who mentioned that we may be pushing against the limits of photosynthesis, meaning that there are limits to agriculture also.
J-Gav on Mon, 14th Oct 2013 7:38 pm
BillT – Absolutely! That’s a limit the “techies” you often rail against will have some trouble overcoming, isn’t it?
GregT on Mon, 14th Oct 2013 8:45 pm
This:
“The IPCC says we have 15 years to kick the fossil fuel addiction. Or we’ll fry.”
Or this:
“The only ‘transition’ will be to solar powered agriculture as in photosynthesis and their limits. Muscle power in the form of humans and animals is the ‘transition’ coming.”
That is our predicament.