Bakken illustrates flexibility of proven reserves and breaks the ‘peak idiocy’ concept – peak oil #5
I’ve been using Daniel Yergin’s Wall Street Journal article There Will Be Oil as the jumping off point to explain that the concept of ‘peak oil’ is invalid. The posts have been combined into a page. You can click here or click on the “Peak Oil” page at the top of this blog.
Mr. Yergin comments on the Bakken field. Look at the appearance of unknown oil:
In 2003, the Bakken formation in North Dakota was producing a mere 10,000 barrels a day. Today, it is over 400,000 barrels, and North Dakota has become the fourth-largest oil-producing state in the country. Such “tight” oil could add as much as two million barrels a day to U.S. oil production after 2020—something that would not have been in any forecast five years ago.
(I think the stat for 2003 production is far too low, but the underlying point stands strong.)
Notice the unexpected growth in Bakken production? The huge amount of oil behind that 400k per day output wasn’t anywhere in the proven reserve list in 2003. Wasn’t even an idea in anyone’s head.
Mark Perry points out the North Dakota production is 575,490 per day in March. That’s 43% higher than just last September.
In April production was 609,373 barrels per day.
With Bakken and Eagle Ford heading toward 1M bbl per day in the next two years, at least that’s my guess, we could hit that 2M/day number by 2014 instead of 8 years from now. Furthermore, that would be from just two fields, not including several others that are in development.
And if the Bakken field is going to hit 30,000+/- wells instead of the current 6,000+/-, we could blow out that 2M bopd projection from just one field.
By the way, I have not seen one long-term estimate for Bakken or Eagle Ford from the last few years that was not severely understated when compared to actual production a year or two later.
That’s the phrase from Mike Munger at Kids Prefer Cheese way back in December 2009.
He points out the impact of the price signal. If prices rise, people would cut back usage, industry would explore more, pull oil out of the ground that wasn’t economical before, and encourage substitutes.
If we did start to use up the oil we have…(though, counting shale oil, we still haven’t used even 10% of the total KNOWN reserves on earth, and there are lots of places we haven’t looked)…but suppose we were on our way to using it up. Three things would happen.
1. Prices would rise, causing people to cut back on use. More fuel efficient cars, better insulation on houses, etc. Quantity demanded goes down.
2. Prices would rise, causing people to look for more. And they would find more oil, and more ways to get at it. Quantity supplied goes up.
3. Prices of oil would rise, making the search for substitutes more profitable. At that point (though not now!) alternative fuels and energy sources would be economical, and would not require gubmint subsidies, because they would pay for themselves. The supply curve for substitutes shifts downward and to the right.
Again, here is one of the problems with peak idiocy: Peak oil assumes that there will never, ever be any improvements in technology.
None of the Bakken or Eagle Ford oil counted in proven reserves even as recently as 2003. It was not technically possible to get that oil out. It didn’t enter the equation even 5 years ago.
Then new technology arrived.
- Horizontal drilling.
- Hydraulic fracturing.
Throw those on the table and all of a sudden there is over half a million barrels a day from Bakken and the same from Eagle Ford. That’s today’s production. Right now. Every day of the week. I’ll make a wild guess that production in Bakken could increase by a factor of 4 or 5 and sustain at that level for several decades.
There’s huge amounts of oil that couldn’t be pulled out of the ground a decade ago.
New technology from human creativity. New fields we didn’t know about. Increased exploration because of rising prices. More oil that we realized in existing fields. More oil economically recoverable as prices rise.
Can we finally drop that ‘peak oil’ concept that we are going to run out of oil the day after tomorrow?
Fossil fuels will give us all the power we need until there is a breakthrough in energy that we can not even see today.