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U.S. Experiencing the Beginning of a Long-term Energy Boom | The Pelican Post










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Guest Commentary: U.S. Experiencing the Beginning of a Long-term Energy Boom

Energy & Environment, Featured, Pelican Site Featured — By on December 9, 2011 2:09 pm
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U.S. could soon find itself as the world’s largest oil and gas producing countries

NEW ORLEANS, La. - In 1956, M. King Hubbert established the first scientific model behind peak oil to accurately predict the height of U.S. oil production. Hubbert, a well-known geologist, theorized that oil production would peak between 1965 and 1970.

In 1971, oil production did indeed peak. And, for the last fifty years, Hubbert’s theory has held true as global oil production has been in gradual decline since that time. However, new discoveries in the Gulf and the rise of unconventional resource plays across the nation are drilling a metaphorical hole in the peak oil argument. America’s newfound resources are not only challenging peak oil, they are also building the case for U.S. energy independence.

According to data from the U.S. Energy Information Agency (EIA), U.S. oil production peaked at 9.6 million barrels, and despite shortterm reversals, has been in constant decline to 4.95 million barrels per day by 2008. But, today we see oil production on the rise.

U.S. oil production has seen a gradual increase to approximately 5.5 million barrels per day. A large portion of this increase has come from oil shale plays like the Bakken in North Dakota and the Eagleford in south Texas. On top of that, we are producing more natural gas than ever in history. In this year alone, we will have produced nearly 30 trillion cubic feet of natural gas from offshore and onshore resources.

Without question, the use of horizontal drilling and hydraulic fracturing has unleashed these vast reserves and led to the inevitable lowering of US dependence on imported oil by a quarter from 60% of overall oil consumption a few years ago to about 46% currently.

On December 6th, the Institute for Energy Research released a groundbreaking report claiming that the amount of oil that is technically recoverable in the U.S. is more than 1.4 trillion barrels, with the largest deposits located offshore, in portions of Alaska, and in shale deposits throughout the country. The report estimates that when combined with resources from Canada and Mexico, total recoverable oil in North America exceeds nearly 1.7 trillion barrels.

To put this into perspective, the largest producer in the world, Saudi Arabia, has about 260 billion barrels of oil in proved reserves. It’s suggested that the technically recoverable oil in North America could fuel the U.S. with seven billion barrels per year for almost 250 years.

So, what does this mean for our energy future? For starters, it could mean the end of our reliance on imported oil from unfriendly nations.

In April 2006, Saudi Aramco admitted that it’s facing a national composite oil production decline of 2% per year, and its mature fields are declining at a rate of 8% per year. Additionally, OPEC has estimated that the world’s production of nonconventional oil will reach 8.4 million barrels a day by 2035. By then, they estimate that 6.6 million (or nearly 80 percent) of that will be produced in North America.

The global energy balance is shifting and the U.S. could soon find itself at the top of list of the world’s oil and gas producing countries. While primary global sources of energy are in decline, the U.S. is experiencing a renaissance in fossil fuel production.

Don Briggs is president of the Louisiana Oil and Gas Association.

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  • Christopher Balow

    You claim to drill a hole in the notion of peak oil whilst avoiding any discussion of its core implications.  Here’s a hint: “technically recoverable” is not the same as “economically recoverable.” 

    • http://pulse.yahoo.com/_UCCNU5U5V4HLES3NJTXPYG72GM Oil Lady

      I’ll see your hint and raise you a blatant declaration.

      The Shell oil geologist named Dr. M. King Hubbert predicted back in 1956 that the crude oil being extracted from the ground in the Contiguous 48 States would hit maximum peak between 1965 and 1970. He was laughed at by the entire oil industry (an industry that the writer of this article is a member of), left Shell, and could barely even get a job teaching at a university. In 1970, his prediction came true because 1970 was the absolute highest oil extraction year ever for the Contiguous 48 States. That means 1970 was the “peak” or the highest tip of the mountain top. The following year, 1971, the American oil industry quietly noticed that their oil extraction numbers were slipping, but they didn’t raise any alarms. Instead, they raised their prices and so American businesses simply started importing more oil than they used to. But then in 1973, the Arab Oil Embargo happened, and that’s when the truth hit the fan: Hubbert was right! Americans everywhere were spending hours in their cars waiting on gas lines, and for the first time we started buying small cars with fuel economy in mind. Within months Hubbert was sitting in the White House, advising the President. His vindication has been called “one of the biggest I told ya’ so’s in geologic history.” Everything in America changed after that. The Long Bear Market soon followed, and a new lifestyle of austerity gripped the average American. We started insulating our houses and experimenting with solar and wind. 

      Hubbert next predicted that the entire planet (not just the Contiguous 48 States but the entire world) would hit peak in the extraction of conventional oil some time around the year 2000. This time he was wrong. Instead, the planet hit the peak of its ability to extract conventional oil somewhere between 2005 and 2008 (so he was off by 5 to 8 years in a prediction he made three decades earlier, and some say he was off because he didn’t factor in the extreme fuel efficiency we would embark upon). And the oil industry (an industry that the writer of this article is a member of) has been quietly noticing their oil extraction numbers for conventional oil slipping since 2008, but they are (as back in the 1970′s) refusing to raise any alarms.  Instead, the industry is going after the extraction and refining of non-conventional oil. That’s what we call tar sands and shale oil and extra-heavy crude and ultra-deep sub-ocean crude and arctic crude. Non-conventional.

      Non-conventional oil is not merely the oil of tomorrow, it’s also quite sadly the oil of today. And non-conventional oil will be the complete undoing of the American economy. Non-conventional oil costs many multiples more to extract and refine than conventional, and it also requires many multiples more of energy inputs to extract and refine than conventional. Sometimes it requires unprecedented inputs of fresh water, robbing water from farmers and aquifers. Non-conventional oil will wreck the US economy and grossly downgrade the American Way of Life to near-Third World conditions. Good old fashioned conventional oil is cheap and easy. But the cheap and easy stuff is gone forever. The non-conventional stuff is not cheap and not easy, It saps money, and sucks water, and devours energy. And that’s why our whole way of life is about to go down the drain.

  • D M

    Quite right… the writer of this article needs to look at price of oil. Technically, a person with clogged arteries has as much blood in their system as when they were young, but the body will be ill and they’ll be out of breath with every painful step. Likewise, expensive oil, though plentiful as before, is like clogged arteries for an oil-driven economy, and the economy, as long as it tries to run off oil, will be out of breath with every ailing feeble step. d

  • http://pulse.yahoo.com/_UCCNU5U5V4HLES3NJTXPYG72GM Oil Lady

    This article written by this oil industry representative, Don Briggs, President of the Louisiana Oil and Gas Association, strikes me as noting but an advertisement for pumping up public enthusiasm for the false hope of non-conventional oil and gas extraction methods. Those non-conventional methods are being passed off by some people as some kind of a magic bullet which will “save” us from the dire future of energy scarcity that the oil industry refuses to admit is right now looming before us in the next 10-15 years.

    Please be VERY cautious about how articles written by oil industry representatives often toss around precise specimens of oil industry jargon, and yet do not explain what those bits of jargon really mean. Many in the oil industry seek to “educate” the public by selectively presenting limited and unexplained concepts, and also by holding back other crucial concepts that could shed a very damning light upon what is really going on in the industry itself.

    This article uses terms like “production” and “technically recoverable” and “total recoverable oil,” but doesn’t clarify what those words mean. The terms sound impressive and the tone of the article has an upbeat feel. But unless you truly understand the actual meanings of those words, you can be led astray into thinking all is well with our energy outlook.

    The article also tosses out numbers such as US production increasing to “5.5 million barrels per day” without ever mentioning that the USA actually consumes about 20 million barrels per day. Nor does the article mention the former glory days of the US oil industry back in the late 1960′s when we literally cranked out roughly 10 million barrels per day –glory days that are gone forever. Even with all our new fangled technology, we can’t rise above 6 million barrels per day anymore, and that’s because our fields have been pushed to exhaustion.

    Here below is a small portion of a laymen’s primer on various oil industry terms. These terms are just a meager fraction of the vast body of knowledge that the industry has amassed over the past century and a half. But even though this is a brief list, these terms can help you when you are reading some of the vague articles that frequently get written by oil industry insiders now adays.

    Education is a good thing. But I’d prefer not to get my education from someone who’s got something to sell.

    ——————————-

    OIL VOCABULARY

    One barrel of oil = 42 gallons.

    Current planet-wide oil consumption is
    now roughly 89 million barrels per day (89 mbpd).

    Current US oil consumption is roughly 20 million barrels per day (20 mbpd)

    Current US oil imports
    stand at roughly 14 million barrels per day (14 mbpd), which means just about 6 million a
    day is still domestic oil (mostly from Texas, Alaska, the Gulf of
    Mexico, California, and a few other sources like Arkansas, Louisiana, etc). But this 14/6 ratio will likely shift more heavily toward imported oil as US oil wells run
    dry. The only way it will NOT keep shifting is if we increase the domestic US production of “non-conventional oil.”

    Conventional Oil is oil that exists below dry ground, at a moderate depth, in a conventional liquid medium, and can be obtained via conventional drilling technology. Conventional Oil = Cheap.

    Non-conventional Oil
    is oil that cannot be gotten via conventional drilling and instead must
    be extrapolated from the Earth via unconventional and non-drilling
    techniques. Unconventional oil includes Tar Sands, Shale Oil,
    Extra-Heavy Crude, Sub-Ocean Crude, Ultra-Deep Crude, Arctic Crude, Bio-Fuels, and Cellulotic Fuels. Non-conventional Oil = Expensive.

    Oil Production is the industry term for the act of extracting oil from the ground, and/or synthesizing oil from alternative (non-conventional) materials such as shale, tar sands, sugar cane, etc.  

    Oil Reserves is a very generic term to describe the oil that’s still in the ground — in any given field, or even any given nation, or under any given body of water, etc. This number is almost always stated in barrels (sometimes in gigabarrels) is usually very high, and (it is rumored) often very very VERY over-stated. (Other natural resources use the same terminology to describe the deposits that are still inside the ground –coal reserves, natural gas reserves, copper reserves, iron reserves, etc.)

    Estimated Reserves is the number of barrels (or gigabarrels) still below ground that has only been initially guessed at but not proven.

    Stated Reserves is the number of barrels in an oil reserve that the owners of the field (be it a corporation or an entire nation) officially tells everyone else exists down there. However, stated reserves need to be verified and proven. Stated reserves tend to be exaggerated, especially among OPEC member nations.

    Proven Reserves is the number of barrels in an oil reserve that has been verified and demonstrated to actually exist via extensive geologic surveys, as well as peer reviews/third-party audits of those surveys.

    Recoverable Reserves is that portion of an oil reserve that a commercial oil interest believes is realistically and economically (i.e. in a commercially profitable manner) able to be extracted, refined, and sent to market. (“Recoverable reserves” are always substantially less than “Proven reserves” because some oil is simply unable to be extracted and/or refined while it is in its current state, from its current geologic and/or geographic location, and with current technology.)

    Ultimate Recoverable Reserves or URR (sometimes called Technically Recoverable Reserves) is oil that can be physically and scientifically recovered, whether it’s commercially profitable or not.

    Oil Initially in Place or OIIP is a VERY tricky definition that needs to be paid close attention to. It refers to the oil that IS in the ground right now, as well as the oil that USED TO BE in the ground but has already been drilled and extracted, and it also refers to the oil that MIGHT be in the ground but has yet to be discovered. And it also includes all the oil that is deemed unrecoverable. The OIIP of any given field or nation or planet is always the absolute most over-inflated number of all, and so it needs to be used with extreme caution. It is almost always stated in gigabarrels (Gb).

    The Recovery Factor or RF of a given field or a given reserve is determined to be URR/OIIP.

    Well Output is how much oil (the number of
    barrels) that a well is actually putting out on a daily basis. A well’s
    output can rise and fall as its quotas rise and fall. If a well (and the
    drilling team assigned to that well) is pressured (by the guys in the
    suits back at the head office) to increase output, that well might not
    be able to according to the upper limits of the “maximum capacity” of
    that well, and also (more importantly) according to the “spare capacity”
    of that well.

    Capacity or Current Capacity or Maximum Capacity
    is the maximum output of oil which a well (or even an entire field) is
    capable of pumping. Capacity is not to be confused with output. Output
    is the actual measurement of realized/recovered barrels per day, while
    capacity is what the well is capable of, regardless of whether it’s
    pumping or just lying dormant. Capacity of a well is never static
    and it changes gradually over the lifecycle of a well. “Young” wells
    often have an excellent capacity, freely (and quickly) flowing with
    light crude during the initial years of operation. But then that
    capacity slowly declines as the well ages, most often due to the
    increasing recovery of difficult (thick/viscous or “heavy”) oil as time
    goes on.
     
    Spare Capacity = Maximum Capacity – Well Output. As a
    well gets progressively older, and the oil crews continue to pump it,
    the spare capacity continues to diminish, unless the quotas for the
    well’s output are (mercifully) lowered by the oil executives back at the
    head office. When spare capacity reaches a value of ZERO, the well is
    said to be operating “flat-out.”

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  • Michael Ervin

    I would strongly second what Oil Lady said.  This article is long on hype and short on facts. In addition it uses as its main source of quotes the Institute for Energy Research and says it has issued a groundbreaking report.  First of all the Institute for Energy Research has no expertise in energy – it is a group of free market economists whose mission is to attack government regulations of all kind.  Nothing wrong with that but their report is laughable.  It conflates resources and reserves and acts as if all resources are easily and economically available if we just got the government off our backs.  It even counts the oil shales of the Green River formation as available oil.

    And Mr. Briggs acts as if recent US production of 5.5 million barrels per day refutes peak oil in the US – right after saying that peak production was 9.6 million barrels per day. Come on  man.

    We have a serious oil crisis facing us.  It does not help when oil industry representatives try to confuse the issue with incoherent articles like this.

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  • Anonymous

    “Technically recoverable” oil has no economic meaning what so ever..

    A barrel of oil that takes more than a barrel of oil’s worth of energy to produce, that takes $2,500 to produce or takes 100 years to drag the last drip out are all “technically recoverable” oil.

    The vast majority of “technically recoverable” oil in the USA – quoted in the article – is kerogen “oil shale”. Not one barrel of kerogen oil has *EVER* been profitably produced, even when oil was $147/barrel..

    This article is an artfully contrived lie.

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