Peak Oil doctrine is still dead. #40
Previously discussed an amazing article by Mark Perry at Carpe Diem. Post provides yet another reminder that Peak Oil is a failed concept.
Check out the June 23 post from Carpe Diem at American Enterprise Institute: Bakken updates: 1) Williston as ground zero for the American spirit and 2) Here comes Shale 2.0!
The post quotes a correspondent who works for a drilling company and has deep knowledge. This correspondent says the expectation at the beginning of the boom was 3.5% of the original oil in place would be recovered. Industry estimates today suggest the recovery rate is 15-18%. With additional technological developments, the correspondent’s guess is there could be another 5% of the oil recovered.
Get a fresh cup of coffee and journey with me as my little brain processes through what this means.
Let me pull together a few numbers. Watch the progression.
- 3B – 2008 estimate from USGS
- 6.5B – NDIC estimate as mentioned in this post in February 2015
- 24B – Continental Resources estimate, which MDW considered pushing the limit
- 35B – my guess based on 500B OOIP x 7% recovery. Recover rate of 3.5% would be ‘only’ 17B.
- 78B – midpoint of correspondent’s estimate of 15-18% current recovery rate
- 102B- extra 24B recoverable based on correspondent’s guess of 5% increase in recovery rate
Oh, by the way, keep in mind that same technological knowledge can be applied in Eagle Ford and Permian Basin.
What Peak Oil
It isn’t as if more indicators are needed that the Peak Oil concept is dead, but the above correspondent provides yet another.
Keep in mind the Hubbert curve that is the core of Peak Oil doctrine.
In one oversummarized sentence, that means oil production will rise on a roughly bell-shaped curve until it hits a peak, at which point production will begin an irreversible slide back to near zero with the shape of the production curve looking somewhat like a normal distribution.
In Figure 20 of his 1956 paper, Dr. Hubbert calculated worldwide cumulative production of crude oil was 90B barrels with proven reserves of 250B. The Hubert curve precisely calculates there will be 910B barrels of additional oil discovered in the future. That means total worldwide production of crude oil for all of time will be 1,250B barrels.
In other words, we will run out of oil, we can calculate when that will happen, and the date will be soon.
That increase in recoverable oil in the Bakken field only from 3B to somewhere around 80B today and to something that may be in the range of 102B is severely problematic in light of Peak Oil doctrine. That increase represents approximately 8% of Dr. Hubbert’s precisely calculated total production for all of time. The estimated 102B+/- recoverable is equal to 11% of all the oil that will ever be discovered, according to Dr. Hubbert’s calculations.
Actually, every drop of oil that has been pulled out of any one of the Bakken and Three Forks benches is severely problematic.
When he made the calculation, the vast majority of the known oil in the Bakken field was absolutely untouchable. You know those current wells with initial production of hundreds of barrels of oil from one of the Bakken benches? In 1956 there was no way, no how, no possibility in the world of ever getting even one day’s worth of production from a well drawing on the tight oil in the Bakken formation, let alone a million barrels a day across the state.
One possible way to resolve this tension is that perhaps what we are seeing in North Dakota today doesn’t actually exist. It isn’t happening. Maybe itt’s all a scam from Prof. Perry, his correspondent, the state regulators, and all those people who have installed fake oil pumps in North Dakota.
Or perhaps all that production will collapse next Monday afternoon and be zero by the end of next month. Or the end of the year. Or the year after.
There’s another possibility. Perhaps Peak Oil doctrine is completely invalid. Perhaps it has always been invalid.
Look at this from another direction
If you don’t know why I am pushing so hard against Peak Oil, then never mind. Instead just consider this from a completely different perspective:
Seven years ago, the best estimates were that the Bakken fields would produce about 3.5B barrels of oil.
Today, an estimate from someone with detailed industry knowledge is guessing the recovery with current technology will be somewhere around 65B to 90B barrels. Tech developments that nobody currently knows about could increase that to somewhere around 90B to 115B barrels.
That massive increase from around 3B to something maybe in the range of 100B is due to newly discovered knowledge.
Even that initial 3B was untouchable 15 years ago.
To put that in perspective, at the current production level of 1.1M barrels of oil a day (bopd), the 2008 estimate of 3.5B barrels would represent almost 9 years of production (3.5B / 1.1M bopd / 365.25 = 8.7 years). Continental’s ‘out there’ estimate of 24B would be about 60 years of production (24B /1.1M bopd / 365.25 = 59.7 years).
Those point estimates of 78B at current recovery rates and 102B at what recovery rates might be in a few years would be 194 years and 254 years, respectively. If production steps up to and sustains at 2M bopd, that would be merely 107 years and 140 years.
Again, for any of that oil to be recoverable is only because of human ingenuity which invented new ways of getting to oil that was previously untouchable.
Update: Bruce Oksol at Million Dollar Way also discusses the article: Getting Ahead of Our Headlights, part II.
Superb reminder that the recovery rates tossed around are primary recovery. If you get that comment, all the above info is even more astounding. If not, I’ll need another post to explain.
Recovery rates he mentions:
- 3% – initial estimates
- 8% – later estimate from him based on his reading
- even higher – indications in 2012
- 15%-18% – Carpe Diem’s correspondent’s estimate of recovery rates today
- 20%-23% – possibilities for five years out
Every extra percent is around another five billion barrels of oil.
Mr. Oksol points out the 440B or 500B OOIP estimates do not include lower benches of Three Forks. If recoverable oil is found there, increase all the above production guesses accordingly.