[TheAntiDoomer]

http://www.midasletter.com/2013/04/enha ... s-1304022/

$this->bbcode_second_pass_quote('', 'M')elzer has no doubts about the oil. He calls west Texas residual oil zones, or ROZ in drilling lingo, the rozapolis because of their enormous potential. Montana, North Dakota and Wyoming are also rich in residual oil, says Vello Kuuskraa, who helped develop wells near Fort Worth, Texas, in 1997 that showed the viability of hydraulic fracturing, or fracking, and unleashed U.S. fossil-fuel fever.

Unlike fracking, in which drillers blast water, sand and chemicals into wells to shatter shale and release oil and gas, CO2-enhanced drilling induces a chemical reaction that makes oil less sticky and helps it flow from microscopic pores in the rock. CO2 costs about $35 per metric ton in west Texas, and drillers recycle it as many times as possible to dislodge more oil.

Such drilling has the potential to unlock 100 billion barrels of recoverable U.S. reserves, says Kuuskraa, president of Advanced Resources International Inc. in Arlington, Virginia. U.S. reserves total 222.6 billion barrels this year, the EIA says.

[ROCKMAN]

Thanks to high oil prices there are certainly EOR projects that have become viable or at least have a potential that can be tested. In 3 weeks I’ll drill a straight hole in a 60 yo Texas field. If I get the reservoir data I’m hoping for we’ll drill a horizontal well to try to capture the residual oil. But not a new idea in this trend. Was first tried by another operator almost 20 years ago but didn’t prove to be economic. I developed an alternate method about 10 years ago but the project wasn’t marketable until oil prices increased sufficiently. There’s another field on trend that has a CO2 line being built to it from a power plant in a nearby county. The line will cost $160 million with the govt chipping in $120 million of that. Good to be sequestering that CO2 but even better if the tax payers didn’t have to pick up the majority of the cost. Much the same dynamic with the shale plays these days: the potential in these plays has been known for decades and the tech to produce them has been around for 20 years. Just took higher oil prices (and desperate public companies IMHO) to jump start them.

But I think there may be too much optimism as about the potential for significant oil recoveries from other EOR projects. True: lots of residual oil out there. But for the last 60+ years every project with such potential has undergone some level of EOR that was economical at the time to pursue. Much of the current production in west Texas is coming from reservoirs that had EOR techniques applied to them beginning decades ago. Every field I’ve produced over the last 38 years utilized whatever technology that was ECONOMIC to max recovery. IMHO there is no vast inventory of fields where EOR methods have never been applied. But there are reservoirs that may now be viable for EOR given higher oil prices.

Some folks consider the recent increase in US oil production as an indication that PO isn’t a factor. IMHO the increase in the exploitation of unconventional reservoirs is one of the best proofs that we are on an EVENTUAL down ward trend. I drilled and frac’d my first Eagle Ford Shale well over 25 years ago. I pumped my first super frac (500,000#) in a fractured reservoir down a straight hole in 1979. Neither effort proved economical. If oil prices were still below $40/bbl I doubt many, if any, shale wells would be drilled today. But they are and are adding to our supplies. More EOR projects, which are now economical due to those same high prices, will likely add more to our production. But such predictions are read by much of the public as a forecast of eventually lower oil prices. In reality, just the opposite is true IMHO: the gains will be attributed to high oil prices…not a relief from them.

BTW: the viability of frac'ng horizontal wells was proven long before anyone frac'd a well outside of Fort Worth. The horizontal drilling and frac'ng of the Austin Chalk in south Texas was the hottest play in the US at the time. I'm more then glad to acknowledge Mr. Kuuskara's efforts but he weren't the first. He didn't prove nuthin many other operators didn't already know.

[Poordogabone]

$this->bbcode_second_pass_quote('', 'S')uch drilling has the potential to unlock 100 billion barrels of recoverable U.S. reserves

[MD]

$this->bbcode_second_pass_quote('ROCKMAN', 'T')hanks to high oil prices there are certainly EOR projects that have become viable or at least have a potential that can be tested...

Some folks consider the recent increase in US oil production as an indication that PO isn’t a factor. IMHO the increase in the exploitation of unconventional reservoirs is one of the best proofs that we are on an EVENTUAL down ward trend.

... But such predictions are read by much of the public as a forecast of eventually lower oil prices. In reality, just the opposite is true IMHO: the gains will be attributed to high oil prices…not a relief from them.

[ROCKMAN]

MD – I think the real tragedy is that some folks think we’ll repeat this process as oil prices increase. We saw what happened when oil hit $146/bbl. As a result of those high prices and the subsequent demand destruction we added less oil reserves. Same thing we saw with NG. And some day NG prices will recover and a lot of dry gas shales will once again be drilled. But it will coincide with consumers paying 50% or more than they are now. This is not a new cycle…been happening since the beginning of the fossil fuel industry. But there’s a big difference in the future IMHO. Today we are exploiting reserves we knew were there but weren’t economic to develop at the then current prices. As I mentioned elsewhere some folks think the DW Gulf of Mexico play is something new but it actually began about 35 years ago with over 160 fields out there developed to date. We developed the technology to chase it and eventually the price of oil got high enough to swing the effort into high gear.

But IMHO there’s no price of oil that can get high enough to make us push into deeper waters because there’s little potential left in deep waters of the world’s oceans. The vast majority of the oceans have zero hydrocarbon potential. That was proven decades ago. And the shales? At least in the US the vast majority of the shales have been tested and have little or no potential even at current high oil prices. I’m talking 100’s of formations in different areas. Which is why more than 80% of all shale production is coming from just two formations. There are numerous shale formations above and below the Eagle Ford that have been evaluated for decades. The hottest play in the US about 25 years ago was one of these formations: the Austin Chalk was horizontally drilled and frac’d in a frenzy comparable to what we see going on today. But today the AC is fairly dead because most of the viable locations have been depleted. Even $100+ oil didn’t revive the play.

There still may some big upside potential in foreign shale deposits. But a number of non-geologic factors hinder their potential IMHO. Only time will tell if they’ll add any significant production to the global total. Perhaps the biggest undeveloped potential remains in Venezuela. Political change is required to make that happen IMHO. And the Canadians will certainly keep dishing out nice production from the oil sands. But those numbers are already accounted for. Nothing new to look at here…move along. LOL. And the Green River Shale? Just a wild guess but I doubt we’ll ever sustain a high enough oil price to make it viable.

So IMHO: no…there are no big oil reserves out there that can be developed at 50% or even 100% higher oil price then we have today even if the economies could sustain themselves at such a price level.

[Pops]

Kopits and the WSJ are again saying we've reached that Nirvana called peak demand, people just don't want oil anymore so maybe we don't need to amp up production?

[snort]
Could it be that we just can't handle the cost of "enhanced recovery"?

Here is what I guessed a couple years ago:



The red band is my WAG at the limit the economy can handle and the orange trend line is my other WAG at the increasing cost of extraction. The lines converge sometime soon, what happens then?

The price can't rise beyond what people can pay and on the flip side it can't fall below the cost of new production to replace depletion or supplies would become so short the price would rocket and...

Actually I think that is exactly what will happen - increasing volatility as commercial stocks and spare capacity alternately dwindle and surge causing the price to likewise wobble. But the big change will be the ceiling of what people can afford to pay falls because the economy will shrink.

Here's my 2020 peak oil challenge price chart:



As of 2005, 60% of global production came from just 1% of fields, 25% from 20 fields (Hook, et al) Perhaps we'll just ride the giants down the slope.

[ROCKMAN]

Pops – WAG’s are WAG’s but your logic seems valid. I’ll assume when you refer to what limit the “economy” can handle you mean the US economy. Obviously there are other economies in the world that have already reached that intersection…some long ago. Greece is an easy example including the social unrest that comes along with the increased unemployment and decreased lifestyles. Other factors led to their current condition but energy costs have had their impact.

But here is where I might dissect your chart a tad. There’s always been a segment of the American economy that fell beyond your intersection. In the 1950’s there was some percentage that fell outside your envelop but I won’t try to put a number to it. As a child growing up in New Orleans my family fell into that group beyond your intersection for whom energy in the form of gasoline or electricity for air condition were out of reach. And that portion of the population has probably varied up and down over time depending on the state of the economy. Perhaps what we’re seeing now is that as we approach your intersection a greater and ever increasing percentage of the US population is slipping towards that dark side. This lackluster “recovery” may be a manifestation of this dynamic.

So now I envision not just one curve but several curves with intersections at different dates. I don’t know: maybe 5 curves each representing 20% of the population. This also leads to the concept that supply will always satisfy demand if one defines demand as what one can afford and not what one desires or needs. But for the upper 20% it won’t be a walk in the park…the other 80% aren’t going to disappear. Some see the Mad Max world developing and others a less dramatic future. I won’t offer my own hypothesis. Seen to many sci-fi movies and thus weirdly prejudiced. LOL.

The only potential I see to alter that path is for the alts to start pushing that intersection further into the future. But chicken/egg slaps us upside the head: we have to continue to consume expensive energy to maintain economies while we expend even more capex to develop alts that will EVENTUALLY lower the cost of energy. That’s where I see the hoped for transition period not developing quick enough.

Of course, the solution is obvious: just load everyone into the Way Back machine and go 40 or 50 years into the past and start making those adjustment we now know we needed to start back in the day.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'B')ut I think there may be too much optimism as about the potential for significant oil recoveries from other EOR projects. True: lots of residual oil out there. But for the last 60+ years every project with such potential has undergone some level of EOR that was economical at the time to pursue. Much of the current production in west Texas is coming from reservoirs that had EOR techniques applied to them beginning decades ago. Every field I’ve produced over the last 38 years utilized whatever technology that was ECONOMIC to max recovery. IMHO there is no vast inventory of fields where EOR methods have never been applied. But there are reservoirs that may now be viable for EOR given higher oil prices.

[Pops]

Thanks roc, you 2 rocks have a good time but let me ask a couple of questions.

There are over 500m wells in the US with an average production of 10b/d. We have a large infrastructure and lots of small independent operators who can do fine with a string of strippers producing a tiny amount of oil, right? But that is that true elsewhere?

Considering most reserves are controlled by national oil companies and those that aren't are run by the majors and some in very inhospitable locals (unlike Crawford county TX, lol), what is the probability that the level of sponging up dregs employed in the US will ever happen elsewhere?

And again the question isn't entirely how much can ultimately be extracted but how fast? An extra 10 or 20% would be great – but spread out over 100 years not so much.

[ROCKMAN]

Pops – Very valid observation about squeezing the last few drops out. US independents are in a very different world them most other operators around the world. Lots of reasons you have probably guessed. Sweat equity is the short answer. And not just by the operators by also the small service companies. The Halliburtons/SchlumbergerSema do fine working for the bigger companies low profit margin operators require low margin service companies.

And then there’s the character of the mineral owners. Private US mineral owners exist at a scale virtually unseen in the world. Here you negotiate with a single individual (or perhaps his lawyer) over tens or hundreds of acres of leases. Overseas you may negotiate with a bureaucratic system over a concession covering perhaps hundreds of thousands of acres. And sometimes just bidding against other major players. There’s no room for a 2 or 3 man company in such a horse race. But there have been some smaller but well-funded that have on occasion beat the big guys.

I don’t like predicting the future but it’s difficult to imagine the dynamics changing significantly even when an NOC starts sliding towards lower productivity wells. Not universally true but many of the larger US marginal fields were once owned by Big Oil but sold them off to little oil because they just couldn’t allocate efforts to such small scale operations.

rocdoc - I'll catch up with you in the morning.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'C')onsidering most reserves are controlled by national oil companies and those that aren't are run by the majors and some in very inhospitable locals (unlike Crawford county TX, lol), what is the probability that the level of sponging up dregs employed in the US will ever happen elsewhere?

[ralfy]

12 Mb/d for North America to meet 19 Mb/d US oil consumption, probably with the hope that consumption will drop significantly while not affecting the economy.

About that last point, though, a related one:

"These Charts Better Not Reflect The True State Of The US Economy"

http://www.zerohedge.com/news/2013-04-0 ... us-economy