The newer fields are not cheap to drill while the old standbys continue to decline.
Both Bakken and the shale gas are based on techniques for using horizontal drilling through “tight” rock strata that is fractured with pressurized water. It works, but it’s not at all cheap, creates plenty of environmental mischief, and may end up being only marginally productive. At best, Bakken is predicted to produce around 400,000 barrels of oil a day. That’s not much in a nation that uses close to 20 million barrels a day. Shale gas works too, though the wells deplete shockingly fast and will require the massive deployment of new drilling rigs (do we even have the steel for this?). I doubt it can be produced for under $10 a unit (mm/BTUs) and currently the price of gas is in the $5 range. In any case, we’re not going to run the US motor vehicle fleet on natural gas, despite wishful thinking.
Several other story elements in the oil drama have remained on track to make our lives more difficult. Oil export rates continue to decline more steeply than oil field depletion rates. Exporters like Iran, Mexico, Saudi Arabia, Venezuela, are using evermore of the oil they produce (often as state-subsidized cheap gasoline), even as their production rates go down. So, they have less oil to sell to importers like the USA – and we import more than 60 percent of the oil we use. Mexico’s Pemex is in such a sorry state, with its principal Cantarell field production falling off a cliff, that the USA’s number three source of imported oil may be able to sell us nothing whatsoever in just 24 months.
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Written by Rig Report
Topics: General