[John_A]

That author says only 1-2% of the oil in the Bakken shales is recoverable but that is totally wrong. The estimates are now running as high as 30% because the shale responds so beautifully to technology applications designed to improve flow and ultimate recovery.

As Oilfinder2 mentioned elsewhere, the USGS is soon to release a new assessment of the Bakken. He does not seem to think that number will be as high as people expect, because of how their system works. And they certainly didn't think that 30% inplace, or anything near that, could be recovered last time. Do you have any references from as credible scientific organizations (as opposed to investor reports and industry claims) supporting your claim?

[ROCKMAN]

Econ – It really does seem odd that I must appear to be an advocate for the feds. But the numbers are the numbers. And I guess I’m missing your point: a mineral lease is just that…a lease. Every bbl of oil and cu ft of NG ever produced in the US has come from a mineral lease…either private, federal or state. Again you seem to confuse cause and affect . I can point out 100's of million of acres of privately owned minerals that aren't leased. And they aren't leased not because the owners are standing in the way but because the oil patch doesn't want those leases. The oil patch has repeated proven it has no interest in leasing the vast majority of the fed onshore land as the following stats prove.

The BLM Oil and Gas Management program has over 63,000 Federal onshore oil and gas wells accounts for 11 percent of the Nation’s natural gas supply and five percent of its oil. The BLM manages nearly 700 million acres of mineral estate. That area represents about 30% of the total area of the country. Another metric: the govt owns no mineral interests in almost half the states. And in four of the states it does own minerals (Washington, Oregon, Nevada and New Mexico) the oil patch has proved there is little to no hydrocarbon potential.

As of December 31, 2011, there are 37 million acres of fed leased. Or only about 5% of the area the feds control. But unlike the offshore leases where the feds decide what to offer in a lease sale any company can nominate any onshore lease they want to bid on. IMHO the primary reason for that low percentage is a general lack of potential recognized by the industry. That seems to be supported by the fact that almost 60% of those leases are not undergoing either production nor exploration activities. Once a company owns the lease they simply get a drilling permit and poke a hole. As of September 30, 2011, there are over 7,000 approved permits to drill on public and Indian lands that have not yet been acted on by companies.

But companies are still taking leases. Roughly 76 percent of the onshore acres offered for sale between October 1, 2010, and September 30, 2011, were bid on and sold for oil and gas activities. In calendar year 2011, BLM held 32 lease sales covering 4.4 million acres, including three of the top five largest sales in the agency’s history (in Montana, Utah and Wyoming).

For the last 20 years the industry has only been interested in leasing just 10% to 15% of the fed onshore leases. But the lack of interest appears to be supported by the fact that 5% or less of all the fed acreage has produced oil/NG for over the last 30 years.

As far as the hot plays: The BLM Montana/Dakotas State Office manages nearly 2 million acres of mineral estate in North Dakota. Although the majority of the Bakken play is under private lands, BLM serves as the leasing authority for all Federal fluid minerals in the Bakken play. The BLM holds quarterly competitive lease sales, returning half of the revenue to the state. In July 2011, BLM held the second highest-grossing lease sale for Federal onshore minerals, which brought a total of $66 million in revenue. The January 2012 lease sale brought nearly $36 million. Drilling applications increased 500 percent over the past five years; half of this increase has occurred on Indian minerals. Since 2007, applications to drill on the Ft. Berthold Reservation have increased from 0 to 175.

Along with BLM’s drilling oversight and surface protection requirements, BLM provides inspection and enforcement for production accountability. These workloads have increased 450 percent in the past five years, with some of these wells producing up to 1000 barrels of oil per day. Federal royalties in North Dakota totaled over $318 million in FY 2011. Indian wells generated $180 million revenues in FY 2011. Since 2007, on Fort Berthold alone, revenues have gone from less than $1 million to $134 million per year. Doesn’t sound like the tribes much to complain about with regards to fed leasing policies.

Sounds like the fed have been by far the single largest mineral owner promoting the development of the Bakken. The feds have been very willing to lease in other states. About 90% of the fed lands in KY are leased. But nearby only 8% of the fed minerals are leased in AL. It seems the explanation is obvious: the feds are more than happy to lease every acre the own, as they’ve done in KY. And would be just as willing to do so in AL. But the oil patch doesn’t want those drilling rights. Just like we don’t want nearly any of the leases in a number of western states.

[ralfy]

The estimates that argue otherwise are linked in the same article:

http://www.getreallist.com/is-peak-oil- ... times.html

http://www.davidstrahan.com/blog/?p=1576

[ROCKMAN]

ralfy – Thanks for the links. They tend to support my thoughts but as you imply opinions vary. And while it’s OK to debate the merits of any position I think discussions often ignore the relationship between energy and quality of life. Whether global PO occurred in 2005 or won’t happen for another 20 years doesn’t change current conditions. The unconventional oils plays have increased US oil production and will continue to support that increase as long as prices stay high IMHO. I personally doubt the US will ever return to 1971 production levels but, again, not the critical factor IMHO.

Likewise the US has decreased imports. Partially from voluntary conservation efforts but also from involuntary demand destruction. Certainly other factors have contributed to our economic downturn but the effect of higher energy prices can’t be ignored. And that’s where I would like to see discussions focus. Aside from debates about PO timing and oil production growth many of the discussions cover alts development, political policies including military activity, conservation, climate change as well as local environmental issues, technology advances, increased internal oil consumption by exporting countries as well as their depletion rate, etc. And most important IMHO: the price of oil.

I lump all those considerations into the POD: the Peak Oil Dynamic. Much more inclusive then the relatively simple PO concept. And critical to appreciating the POD is the relationship of price to production increases. We can argue about future US oil production rates till the cows come home but it doesn’t change the obvious fact that recent increases (as well as those in the future) are linked to higher prices. Folks can argue about the profitability of the shales plays but their dependence upon higher oil prices can’t be ignored. The high price of oil isn’t a result of the cost of unconventional reserve development, Deep Water production or enhanced recovery efforts in old fields. All these efforts are being advanced because of the high oil prices brought on by the POD. I’ve yet to see anyone offer potential to significantly increase oil production that doesn’t hinge on sustained higher oil prices whether they include it in the discussion or not. Whether global oil production increases or decreases isn’t the end game. It’s the cost of energy for the economies and their ability to cope with that cost. And that includes what those economies accept as a trade-off over climate concerns. I personally believe that coal consumption will increase as a result of oil pricing even more than we’ve seen to date. It would be great to see alts develop fast enough to stop that transition but I just don’t see that happening anytime soon.

The one great weakness I see in almost every optimistic forecast of energy growth is the pricing assumption. Actually usually the lack of one. When someone offers that the X play has a potential to recover some amount of oil that number is meaningless if it doesn’t include a price assumption IMHO. This is even true of proven reserves let alone speculative ones. I’m about to begin an EOR project that has a reasonable potential recovery of 40 million bbls of oil. But that’s using a $90/bbl pricing forecast. At a much lower oil price that 40 million bbl potential turns into zero bbl potential which is why I didn’t pursue this project a decade ago when I developed the idea. Every geologist has folders in the back of his file cabinet with projects that make sense at a certain oil/NG price. There are literally thousands of NG drilling projects in the US already identified which are just waiting for prices to get higher. Often much higher than we have today. Between 2009 and Dec 2011 I participated in the drilling of $400 million of deep NG prospects. Since then I haven’t drilled one NG prospect. But I have dozens ready to go when they become economic again.

IOW much of the increase in oil production isn’t coming from new ideas but formerly developed ideas that have finally become economic to pursue. The Deep Water Gulf of Mexico is a good example. It isn’t some new discovery found in the nick of time to save us from PO. I saw my first DW GOM prospect over 35 years ago on seismic data at Mobil Oil. The first DW field was discovered in 1976 and since then more than 160 fields have been discovered and developed in the trend. And as oil prices advanced engineering tech was developed to expand the play. Currently DW exploration is targeting prospects that were identified many years ago but weren’t economic to pursue at lower prices.

Likewise the Bakken production was discovered over 50 years ago. And horizontal drilling and frac’ng were developed long ago. The Bakken is booming now because of higher oil prices. And will continue to boom like the Eagle Ford and other shale plays as long as oil prices stay high. At least as long as there are locations left to drill: every play eventually gets drilled up and dies. And at that time these plays may be replaced by others. But only if prices are high enough to support them.

IOW it doesn’t matter much IMHO whether we’ve reached global PO or not. Fossil fuel energy will cost more in the long term. And that has and will continue to have a critical impact on the economies of the world. And those economies will continue to accept further degradation of the environment in an effort to lessen that impact IMHO. PO is an intersting discussion. But the POD is our future.

[Econ101]

At least you didnt say the Bakken is causing higher oil prices. It is booming, and the resource has been known for some time with the first well drilled in the early 50s or so. Then it was exclusively a wildcat play. Now its an industry wide cooperative effort.

I have taken seismic crews over hundreds of square miles of it including the Ft. Berthold. They were just begining to understand the formations. Even with those computers they knew it was rich and thick. The bakken alone is probably 90 feet thick or more. We barely scratched the surface.

They are tying it all together now in 3D. Its very rich indeed. Its turning out to be larger too both horizontally and vertically. They are really working on the vertical dimension now but the horizontal area continues to get a lot of looks too. We explored around Glacier Park so its out that far anyway.

In those days, before the turn of the century, they were starting to conceptualize fracking but it was all secret. You would see survey crews tracking a bit because they didnt know how to control where it went. Their concept of fracking was little advanced beyond explosives.

What was known 50 years ago and on-going now are two different things. The "whipstocking" techniques known at that time were far more primitive than the sophisticated drilling techniques we are using and developing now. They were mainly, if not exclusively used to turn a bit into a known formation offset from the drilling pad. Now they drill enhanced horizontal legs extending for miles, accurately penetrating the payzone, stacked at different elevations and drilled around 360 degrees from a single pad. Each bore is then facked with scientific percision that is doubling and tripling all estimates surrounding production.

This is far more than most dreamed it could be and price is only a small part of the total catalyst. Other peak oil political forces were at work too. This political coalition represented by the federal government is no friend of oil production or exploration. They seek political power working against the industry. Their role in the Bakken is very limited because they have little ownership control. It is far from helpful or doing the most to promote the resource.

There is little point talking government leases without acknowledging value. Leases the market tells us are worthless are worthless, at least for now. There is no favor to be earned by offering something worthless.

We know ideas change. You could lease at will in North Dakota 35 yrs ago. Using unsold federal leases to show a benevolent and supportive federal governement promoting exploration is misleading without acknowledging the leases have no value. If they were so valuable and unclaimed as you say wouldn't you buy them?

[Econ101]

The overall productivity of the Bakken aside, it is certainly having an impact on the global order.

Peak oil politics begain having a real negative impact in the 1970s, as shown on production graphs. This impact changed the business model from price competition to monopolistic control assuring the highest possible price.

The old model was carried out in an industry favorable business climate assuring adequate supplies through orderly development. Price was then used as the competitive mechanism to control market share and create profits.

Peak oil politics of the 1970s caused American supplies to shrink, slowly making us more and more dependent on OPEC supplies until they had monopolistic control. That type of market setup assures everyone prices will be as high as the market can bear by limiting supply.

Now, our oil industry has begun to develop and learn about these vast shale reserves. They are soaked with good crude, huge in scope and very responsive to technological adaptations improving production and recovery. With luck they will be vast enough, here and around the world, to return us to a normal market where the lowest possible price provides the greatest market share and profit. That will benefit all of us.

[Quinny]

The overall productivity of the Bakken aside, it is certainly having an impact on the global order.

Peak oil politics begain having a real negative impact in the 1970s, as shown on production graphs. This possible price.impact changed the business model from price competition to monopolistic control assuring the highest

The old model was carried out in an industry favorable business climate assuring adequate supplies through orderly development. Price was then used as the competitive mechanism to control market share and create profits.

Peak oil politics of the 1970s caused American supplies to shrink, slowly making us more and more dependent on OPEC supplies until they had monopolistic control. That type of market setup assures everyone prices will be as high as the market can bear by limiting supply.

Now, our oil industry has begun to develop and learn about these vast shale reserves. They are soaked with good crude, huge in scope and very responsive to technological adaptations improving production and recovery. With luck they will be vast enough, here and around the world, to return us to a normal market where the lowest possible price provides the greatest market share and profit. That will benefit all of us.

Peak oil politics LMFAO. US Peak oil don't you mean?

[Econ101]

I mean peak oil politics: Federal law and policies that have prevented orderly development of known reserves. The resulting decline in production is taken by some to mean the world is running out of oil. The drop in production was actually a political phenomena caused by peak oil politics.

The total contribution to overall US production from federal lands is very small, maybe 10% annually for oil and gas. It is very low considering how much land they control. Im sure US production could easily be 3 times what it is, extended over time, in an industry friendly environment.

Now along comes shale. Because supply is expanding rapidly it may no longer make sense to try and control development. All out orderly development on both public and private lands would get this business model based on monopoly pricing to change back to what it was. We can all have abundant, inexpensive energy at a competitive price. We can do that by getting our production up to where it could be. We have to let the oil industry expand.

[ralfy]

Peak oil politics is nonsense, especially given a peak in oil production in various countries.

Conventional production was employed because energy costs were lower. We are now resorting to non-conventional production not because of "orderly development" but because we have no choice:

http://www.economist.com/blogs/dailycha ... onsumption

Given that, are we assured of "vast" production thanks to "vast" reserves? Only if we ignore points raised in articles linked here:

how-the-us-oil-gas-boom-could-shake-up-global-order-t68055-20.html#p1146149

[Econ101]

The second link is a year old and so much has changed that the broad assumptions made are not even relevant. His depletion rates are vastly understated. Production is rising and a greater percentage of oil locked in those shales is going to be recovered.

Peak oil politics has worked against the oil/gas industries. These absurd policies forced the US to import more and more crude as our own ability to explore and developed was hobbled by peak oil politics.

As far as the global order goes, the monopolistic oil markets were thrust on us by ill concevied political policies that caused oil production in North America to drop dramatically. It didnt start to recover until exploration and development on private lands caught up with the declining production rates coming from our older oil fields. Now we are seeing it upturn and for some reason people among us refuse to acknolwedge the facts: oil production is going up for a long time into the future. It will go up faster if we let the industries operate in a favorable business climate. That is not the case today in the USA.

[ralfy]

The second link is a year old and so much has changed that the broad assumptions made are not even relevant. His depletion rates are vastly understated. Production is rising and a greater percentage of oil locked in those shales is going to be recovered.

But the second link refers to one of the sources that has been used to argue that production will "skyrocket." Also, if "depletion rates are vastly understated," then that actually goes against your views.

Peak oil politics has worked against the oil/gas industries. These absurd policies forced the US to import more and more crude as our own ability to explore and developed was hobbled by peak oil politics.

Actually, it's not "peak oil politics" but reality that first forced the U.S. to import more crude, and now to resort to non-conventional production. The only "politics" involved in this issue is the belief of "skyrocketing" production essentially based on duffed maths.

As far as the global order goes, the monopolistic oil markets were thrust on us by ill concevied political policies that caused oil production in North America to drop dramatically. It didnt start to recover until exploration and development on private lands caught up with the declining production rates coming from our older oil fields. Now we are seeing it upturn and for some reason people among us refuse to acknolwedge the facts: oil production is going up for a long time into the future. It will go up faster if we let the industries operate in a favorable business climate. That is not the case today in the USA.

Again, your own views work against you, for if this is true, then the implication is that there is a lot of crude oil available such that non-conventional production would not be necessary.

Thus, you end up playing both sides of the field and shooting yourself in the foot in the process: claiming that "politics" is the reason for lower conventional production and then arguing in turn that non-conventional production will save the day (which implies that no "politics" is involved for lower conventional production).

[Econ101]

Are you sure you are correct about that third sentance? It looks to me the logic of your entire rebutal is confused?

Conventional or non-conventional is simply another way to slice and dice the logic trap of peak oil. Its production is no more unconventional than the rotating bit or switching from steam to diesel power. Oil is oil, energy is energy. Every formation in the world has drilling techniques effective in their development. Not all oil is produced in a cookie cutter fashion. Quit the opposite.

No matter how it is produced the crude coming out of the shales in North Dakota is very high quality. Energy is fungible. Trying to deny its value by calling it unconventional is conventional labeling, which is itself an attempt to confuse logic: You are trying to prejudice others against the value of shale products to humanity by providing them with a diminutive label.

From Webster's Dictionary:
Definition of FUNGIBLE

being of such a nature that one part or quantity may be replaced by another equal part or quantity in the satisfaction of an obligation <oil, wheat, and lumber are fungible commodities

The shales show us an immense future supply they are not a sign of shortage. They are a sign of plenty. Their potential must now be combined with all the potential currently off limits on federal lands. Its no accident this boom is taking place in one of the states that has the least amount of federal land. North Dakota has only about 10% federal ownership and is the nations second largest oil producing state behind Texas which also has less than 10% federal ownership.

Alaska on the other hand with unimaginable oil/gas reserves is almost all federally owned and production has been falling for many years. Same in California. Both states have huge undeveloped known oil/gas reserves off limits because of peak oil politics.

[Econ101]

if "depletion rates are vastly understated," then that actually goes against your views

Really? Is this another logic trap for you?

Let me straighten you out. Depletion rate is defined as the percentage of remaining reserves you are taking out on a year by year basis. If depletion rates are falling you are taking out less and less of the remaining reserve each year. If something doesnt change you will go dry at a predictable rate.

On the other hand if depletion rates are rising, allowing them to be understated as I mentioned, you are removing more of the remaining reserve on a year over year basis and things are booming. This is the case in North Dakota. Depletion rates are higher than offical records. They are understated.

[Quinny]

??

[Econ101]

[Econ101]

Its no accident the nations #1 & #2 oil producing states - Texas and North Dakota - each have less than 10% federal ownership. If we could get the same development underway on rich federal lands as we have on rich private lands we would eliminate our energy problems because we would restore the price competition model.

[ralfy]

Conventional or non-conventional is simply another way to slice and dice the logic trap of peak oil. Its production is no more unconventional than the rotating bit or switching from steam to diesel power. Oil is oil, energy is energy. Every formation in the world has drilling techniques effective in their development. Not all oil is produced in a cookie cutter fashion. Quit the opposite.

The last two sentences of your paragraph contradicts everything else you wrote.

No matter how it is produced the crude coming out of the shales in North Dakota is very high quality. Energy is fungible. Trying to deny its value by calling it unconventional is conventional labeling, which is itself an attempt to confuse logic: You are trying to prejudice others against the value of shale products to humanity by providing them with a diminutive label.

From Webster's Dictionary:
Definition of FUNGIBLE

being of such a nature that one part or quantity may be replaced by another equal part or quantity in the satisfaction of an obligation <oil, wheat, and lumber are fungible commodities

The problem isn't "quality" but production rate. Citi and others forecast at best an increase in production to 12 Mb/d for North America by the end of the decade, but current oil consumption for the U.S. alone is 19 Mb/d.

Politics.

The shales show us an immense future supply they are not a sign of shortage. They are a sign of plenty. Their potential must now be combined with all the potential currently off limits on federal lands. Its no accident this boom is taking place in one of the states that has the least amount of federal land. North Dakota has only about 10% federal ownership and is the nations second largest oil producing state behind Texas which also has less than 10% federal ownership.

The problem isn't supply but production rate.

http://www.slate.com/articles/health_an ... dance.html

In fact, supply overall is not a problem at all even for crude oil, as even the KSA argues that we've used only a quarter of all crude oil available worldwide. The problem is production rate. That's why the Saudis could barely bring up production to 10 Mb/d even though it insisted that it would easily breach 15.

Alaska on the other hand with unimaginable oil/gas reserves is almost all federally owned and production has been falling for many years. Same in California. Both states have huge undeveloped known oil/gas reserves off limits because of peak oil politics.

The problem isn't peak oil politics but production rate driven by EROEI. In fact, it's a worldwide phenomenon, which explains why oil production per capita peaked in '79. Will it go back to the highest level? The best-case scenario reveals an increase to around 90+ Mb/d worldwide in two decades. The catch is that we need to increase global demand by up to 2 Mb/d just to maintain global GDP growth. And the increase has to be higher to meet a growing middle class in BRIC and emerging markets.

Thus, the U.S. "boom" will certainly "shake up global order," but not in the way you imagined.

[ralfy]

Let me straighten you out. Depletion rate is defined as the percentage of remaining reserves you are taking out on a year by year basis. If depletion rates are falling you are taking out less and less of the remaining reserve each year. If something doesnt change you will go dry at a predictable rate.

On the other hand if depletion rates are rising, allowing them to be understated as I mentioned, you are removing more of the remaining reserve on a year over year basis and things are booming. This is the case in North Dakota. Depletion rates are higher than offical records. They are understated.

If the depletion rate is "understated," as you pointed out, then the actual rate should be even higher. In which case, not only will production be higher but also the time production hits a peak.

What you want, then, is a low depletion rate per source and more sources to extract oil or gas. That gives you a high production rate and a lengthier period before you reach peak production.

[Econ101]

Say ralfy, explain what affect this information is having on depletion rates, EUR and eroei:

The oil fields in North Dakota are in the early stages of development.
Oil production in North Dakota rose 5.6 percent in February to 778,971 barrels per day, according to preliminary figures released Tuesday.

This was disappointing to the industry. They know What they are sitting on and they are anxious to see those production numbers soar.

BISMARCK – Oil companies operating in North Dakota are keeping the brakes on this spring, but a “big surge in production” is expected this summer and fall, the director of the Department of Mineral Resources said Tuesday.

Several things including weather, road conditions, technological advances in flow and recovery, infrastructure for shipping product and supplying wells are all contributing allowing well count to increase.

They say 2000 new jobs will be opening up as the Bakken continues its amazing growth.

Oil production in the US is up 25% in the past 5 yrs. as things ramp up expect it to double in the next 5-7 yrs. Remember, this is happening without any new additional federal lands coming into production. the Feds are trying hard to maintain the peak oil illusion but production from private lands is beginning to overwhelm that political strategy.

These bright prospects will indeed impact world events, help ease world poverty, work against hunger and certainly raise the standard of living of thousands upon thousands of Americans finding work and careers in the industry.

There is a tremendous amount of wealth assembling and flowing out of North Dakota. With it comes power. The resource, at least as measured in the human time frame is finite in the same sense solar energy is finite.

[ROCKMAN]

The feds sitting on the side lines? Opinions vary. By 1972 production in the GOM reached about 1 million bopd and began falling. And now thanks to the feds leasing the DW GOM: by 2001 = 1.6 million bopd and DW oil production surpassed shallow water offshore oil production for the first time. And by 2009, 80% of offshore oil production and 45% of natural gas production occurred in water depths >1,000 ft with the industry drilling nearly 4,000 wells to those depths. Folks need to contemplate that number for a moment and let it sink in: 4,000 wells in waters deeper than 1,000’. And all of it on leases awarded by the feds.

Many folks have been lulled into thinking the oily shales are the backbone of US oil production. They have been a great addition to say the least. But in 2009, GOM production accounted for 31% (about 2.2 million bopd) of total domestic oil production and that doesn’t include the oil production from fed onshore leases such as in the Bakken play. I don't think I would use the term "overwhelmed" but maybe that's just me. In 2007, a record 15 rigs were drilling for oil and gas in water depths of 5,000 feet or more in the Gulf of Mexico. Operators have drilled about 700 wells in water depths of 5,000 feet or greater. Again, everyone knows the Macondo story by heart. But the other 3,999 DW wells? And the other 160+ DW oil fields that haven’t blown out? And the $195+ billion/year in just oil production coming from fed offshore leases?

What has happened in the Bakken (including the fed leases) and the fractured shales has been great. Unfortunately folks don’t hear nearly as much in the MSM about the offshore effort beyond the Macondo blow out. I doubt even 1% of the population has any idea that President Obama has approved over 400 offshore drill permits since BP’s little nightmare. The vast majority of the Joe6packs probably think nothing is happening out there.

As far as the booming Bakken development goes according to the U.S. House of Representatives Committee on July 14, 2012 about 91% of all Bakken spacing units contain some federal mineral ownership or trust responsibility. And very important: even if a proposed Bakken drilling unit contains just 1% federal lease it can’t be drilled without govt approval. Needless to say the feds are the single biggest oil lessor in the Bakken play. I wouldn’t think there would have been a surge in N. Dakota oil production had the feds not cooperated. The federal govt has no legal obligation to award any oil lease to any company if they chose not to do so.

How much oil is being produced from fed/Indian leases in N Dakota? Total royalties collected in North Dakota in fiscal year 2012 from those lands was $253 million. Given they collect a 12.5% royalty this equates to a total value $3.2 billion from those leases. But that $1/4 billion in royalty isn’t much compared to the $10 billion the feds typically collect every year from offshore royalties. The feds seem to be pleased with leasing to the oil patch: mineral royalty is the second largest source of income for the federal govt.