US to be leading producer of oil?? What does that mean?

Lifted from a note on energy from Reader rjs comes a link filled narrative on oil and production issues for oil.  He deals with one aspect of drilling for “energy independence”.

From reader rjs:

Saudi America?

The release of this year’s edition of the World Energy Outlook from the IEA (International Energy Agency) received quite a bit of media attention over this several weeks, mostly for its forecast that the US will overtake Saudi Arabia to become the world’s largest oil producer by around 2020. That such would happen shouldn’t be much of surprise to anyone who’s followed world oil production for any length of time; the Saudis, Russia and the US have been the world’s leading producers for at least 40 years.

 Just compare historical production for the US, for Russia, and for Saudi Arabia).  Our problem has always been that we’ve consumed more than twice our production, while the Saudis, with their smaller population and domestic usage, have been the world’s leading exporter and the one country seen as having reserves ample enough to backstop the markets. Apparently the IEA feels that even with enhanced recovery methods, the Saudi’s cant squeeze much more out of their declining Ghawar oil field, which supplies 60% of their production, and for the next few decades US production will increase due to our unconventional recovery techniques, notably fracking.

But we should note is that even if this temporary switch in world production leaders were to come to pass (and there are plenty of skeptics), this near energy independence will not lower our costs of gasoline for several reasons. The most obvious reason self sufficiency in energy wont lower prices is that crude oil is fungible and prices are determined by worldwide demand & supply. Moreover, the IEA figures include natural gas liquids in our expected production, which by 2011 had come to account for 28% our total unconventional production, & you cant produce gasoline from natural gas liquids. The other reason that domestic oil will of necessity stay high priced is the amount of continued investment that is needed to produce oil from shale.

The adjacent graph, which comes from a report from the N.Dakota Dept of Resources (pdf), shows the production over time from a typical well in the Bakken shale, which is now the most productive field in the US. What you see here is that unlike conventional oil wells, where you might drill one well that produces decently for 40 years, the typical bakken well production falls by over 80% in just two years, because after the initial oil flow from the pulverized rock, the flow slows to a trickle.

So to continue to produce oil from the bakken, or any other shale formation, you have to drill more & more wells, smash more bedrock, truck in millions of gallons more of water & chemicals, all of which is an ongoing capital drain. And even though we are expanding our capacity to tap shale oil considerably, the seven fold increase in oil drilling rigs in the US since 2009 has only produced about a 20% increase in oil production

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