America's Oil Reserves Are Growing On Trees

Goats grow on trees, apparently Rystad Energy believes  American oil reserves do too. In a recent press release dated June 15, 2018, Rystad declared that the United States now holds 310 billion barrels of "recoverable" oil, more recoverable oil than Saudi Arabia, enough oil to meet America's needs for 79 years at current output levels of 10.75MM BOPD. 

 

Rystad added nearly 47 billion barrels to this estimate in one year; it says because..."this

vast (no shit !) increase of estimated recoverable oil in the US over the past year relates largely to a doubling of hydraulic fracturing operations in the Permian basin, where it sees more reserves per well drilled, and to new areas and formations that have been geologically proved." 

 

I am unclear what additional "formations" have been added to the mix in the Permian Basin party in the past year and if by "new areas" Rystad means, for instance, Apache's Alpine High prospect... these guys are nuts. As to increased reserves per well drilled in the Permian, BP's chief economist, Spencer Dale told Platts, S&P Global..." tight oil well productivity has now flattened out in the Permian Basin based on initial output per completed well [1]."

 

Mox nix; Rystad has some of the weirdest reserve classifications I've ever seen and over 218 billion barrels of "recoverable" reserves in America come from reserve classifications other than proven developed (1P) and proven plus probable (2P), the worldwide industry standard for KNOWN reserves. Rystad says those 218 billion barrels might exist from something called 2PCX reserves that are primarily "resources" (shale),  technically recoverable with todays know-how, but are as has yet to even be found, and include "non-commercial volumes."

 

                                                                                                                                      Rystad's Reserve Categories

 

 

From 2008 thru February, 2018, a total of  56,582 unconventional, horizontal shale oil, or shaley carbonate wells, have been drilled in the United States' three major shale oil basins (Bakken, Eagle Ford and Permian) and one minor basin (Niobrara). Those wells have produced 8.4G barrels of oil (148,457 BO per well). Over 53% of those wells now make less than 48 BOPD [2].

 

Including initial acreage  and drilling and completion costs I estimate those 56,582 wells have cost the upstream unconventional shale oil industry something in the order of $535 billion. According to Thomson Reuters Analytics, as much as $240 to $300 billion  of that total capital expenditure is unpaid, long term debt [3].

 

In its reserve allocation graphs Rystad implies that 264G barrels of the total 310G barrels of so called, "recoverable," oil will be from unconventional shale. Using 350K BO of ultimate recovery per well it will require over 750,000 wells to achieve that imaginary recovery, costing an estimated $7.0 trillion. 

 

You can read Rystad's  press release, here, and sort it out for yourself.  Personally, I think it is dung heap and does nothing other than to create confusion about America's hydrocarbon future among the general public and even more confusion among an already bunch of really confused yahoo's in Washington, DC that barely know the difference between oil and orange juice anyway. The fallacy of shale oil abundance in America is impacting foreign policies, our position on future exports, conservation measures, mileage standards for vehicles and when to fund a gradual, but very real need to begin transitioning away from hydrocarbons.

 

Anybody that ever balanced a check book in their life can clearly see the shale oil phenomena in the US is the master of business disaster. Therefore, no discussion about our hydrocarbon  future, even the wild-ass guessing of technically recoverable resources,  can legitimately ignore the cost of future wells, how old debt can be managed (as in pay the stuff back, ALL of it !) along with new debt that is being added every day, and how our oily future is going to ultimately be paid for.  

 

Hell, the US shale oil phenomena can't even pay for what it has already produced.

 

 

 

[1] https://www.platts.com/latest-news/oil/london/bp-questions-pace-of-us-tight-oil-growth-as-productivity-26973295?utm_source=twitter&utm_medium=social&utm_term=oil&utm_content=news&utm_campaign=newsarticle&hootpostid=4c5c8d32a3a7904b041fd55c2368435c

[2] https://shaleprofile.com/index.php/2018/06/04/permian-update-through-february-2018

[3] https://uk.reuters.com/article/energy-refi/refi-wave-lurks-for-energy-borrowers-on-back-of-higher-oil-prices-idUKL2N1T20NG?rpc=401&
 

 

 

 

 

 

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