Sorry Doomers: An Impressive Future for North American Tight Oil&Gas

North American energy prices for oil and gas have stabilised over the past few years, as production from tight rock has risen sharply. Production for both oil & gas is expected to continue rising over the next decade, perhaps much longer.

This may be a good time for “peak oil doomers” to take a powder.

Tight oil production [alone!] is expected to reach 6 million barrels per day (MMbpd) by 2020 in the Lower 48, thanks to production in the Eagle Ford, Bakken and Bone Spring/Wolfcamp plays in the Permian Basin, John Dunn, who manages Wood Mackenzie’s Lower 48 upstream research, told reporters at a media briefing Wednesday in Houston. Overall U.S. liquids production in 2020 is forecast to reach nearly 9 MMbpd.

Oil and condensate production from the Eagle Ford play in South Texas is expected to reach 2 MMbpd by 2020, while Bakken production is forecast to hit 1.7 MMbpd by 2020, according to Wood Mackenzie estimates. By 2020, oil and condensate production from the Bone Spring/Wolfcamp play in the Permian Basin – the new kid on the block – is expected to reach 800,000 barrels per day (bpd).

Natural gas production in the Lower 48 also is expected to rise — primarily to the Marcellus and Utica shale gas plays in the U.S. Northeast – with 2020 production of 25 billion cubic feet per day forecast.

… For the Bakken and Eagle Ford alone, Wood Mackenzie estimates that $40 billion in capital expenditures will be spent on development this year. Oil and gas companies are now moving from the exploration and appraisal phase to development in the Bakken, Eagle Ford and Marcellus plays. Now that operators have figured them out, they’re trying to make things work where they work where they know it works, said Dunn. The pace of development in the Permian Basin also is picking up, Dunn noted.

… Wood Mackenzie estimates that 21 billion barrels of light sweet crude oil will be ultimately recovered from the Bakken and Three Forks play in the Williston Basin, higher than the U.S. Geological Survey’s (USGS) April 2013 updated estimate of 7.4 billion barrels. The amount of recoverable Bakken resources has increased as estimated ultimate recoveries for wells have improved, thanks to completion techniques and technologies and to spacing of wells, said Jonathan Garrett, an analyst on Wood Mackenzie’s U.S. Lower 48 Upstream Research team who focuses on the Bakken.

… Due to limited pipeline infrastructure, Bakken operators have relied on railroad to ship crude to market. The amount of Bakken crude being transported by rail has more than doubled, from 30 percent in early 2012 to 70 percent more recently. However, rail is not just a stop gap measure. With the netback for barrels minus transportation, crude by rail is still preferred as it fetches a price closer to North Sea Brent crude versus Cushing, Okla., prices.

“Companies are making money, even though rail is expensive,” Garrett commented.

By 2016, the gap capacity gap between rail and pipeline capacity is expected to shrink due to three pipeline projects: Enbridge’s expansion of its pipeline to Superior, Wisconsin, the Double H pipeline to Guernsey, Wyo., and Energy Transfer Partners’ planned pipeline project that would take Bakken crude to the Gulf Coast.

… The Eagle Ford’s estimated crude and condensate production in 2020 will equal the production from Alaska’s entire North Slope at its peak, nearly half of the production from Ghawar, the world’s largest onshore field, and 150 percent of combined Bakken and Three Forks production on a barrel of oil equivalent-basis, said Cody Rice, who works on Wood Mackenzie’s Lower 48 Upstream Research team and focuses on the Gulf Coast, Permian and Mid-Continent regions.

Wood Mackenzie this year raised by 23 percent its estimate of Eagle Ford production in 2020 from its previous estimate made last fall, and its estimate of 2014 CAPEX spending. This year, operators will spend $27 billion in CAPEX on the Eagle Ford, $4 billion higher than Wood Mackenzie’s fall 2013 estimate, with nearly 80 percent of spending focused on the play’s condensate core.

… Wood Mackenzie believes the Wolfcamp play in the Permian Basin is an elite shale play, and belongs in the same conversation as the Bakken and Marcellus plays, said Benjamin Shattuck, Wood Mackenzie Lower 48 Upstream analyst who focuses on the Permian.

The oil-soaked Permian Basin, which has been producing for a century, is at the jumping off point for a long future of production, Shattuck said. __Rigzone

The article above focuses exclusively on “tight rock” production, sometimes referred to as shale oil & gas. It predicts US lower 48 “tight oil” production of 6 million barrels per day, or 6 MMbpd. That is not counting conventional onshore and offshore oil, nor is it counting on a relaxation of draconian Obama moratoria against production on federal lands or the majority of US offshore fields. And it is definitely not counting production in the multi-trillion barrel kerogen deposits, the huge potential for coal to liquids or gas to liquids, or the massive deposits of gas hydrates available onshore and offshore. In other words, although tight rock oil & gas production represents only a fraction of the total energy available (in the absence of green energy-phobic policies), it still makes a huge difference to economies around the world — especially North America. And will continue to do so for decades.

But if US energy producers were set free from artificial government restraints, a significantly greater increase in energy production would be seen. And since energy production and prices drive other industrial development, economic prospects for North America would improve significantly — despite the deadly, strangling grip of ideologically based government regulations and policies in both the US and Canada.

More: What happens to oil dictatorships when US stops buying their oil?

Desperate oil dictatorships in Africa and MENA have oil, but either can’t get it to market or can’t find ready buyers — or both. A significant reason for lack of buyers is the North American tight rock bonanza, which continues to boom in spite of Obama’s energy-phobic policies.

Nigeria facing desperate times as US stops importing Nigerian oil

Trouble in OPEC

Should we be surprised that global oil prices remain relatively stable, despite all the unrest in Libya, Syria, Egypt, SS Africa, Afghanistan, Venezuela, and elsewhere within and near oil-producing areas?

Remember: For Putin’s grand neo-imperialist schemes to succeed, he needs for oil prices to rise to around $150 bbl. The North American energy boom stands in the way of Putin’s ambitions. So why is it that Obama’s new green energy policies appear to march in goose step alongside Putin’s goals? Obama should remember how easily “back-scratching” can revert to “back-stabbing.”

Putin desperately needs higher oil prices, to fund his adventures overseas and his promises of higher pay and benefits made to Russians and Crimeans alike. Russia’s growth has slowed, the government has promised to spend $48 billion building up Crimea, and foreign capital is leaving the country. With 70 percent of Russia’s exports and17 percent of the economy dependent on oil, an aggressive U.S. energy policy could have been a powerful weapon. –


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1 Response to Sorry Doomers: An Impressive Future for North American Tight Oil&Gas

  1. Matt Musson says:

    A little known side – the US is basically self-sufficient for it’s own liquid petroleum needs thanks to new drilling and fracking technologies. We still import roughly 2 million barrels of oil a day – but we export almost the same amount of refined liquids.

    The anti-pipeline folks use this statistic to say that we do not need the new Keystone pipeline.
    What they fail to understand is – that oil is still going to be produced and shipped. It will just go by a more expensive – more dangerous route – by rail.

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