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THE EIA Thread pt 3 (merged)

Discuss research and forecasts regarding hydrocarbon depletion.

Re: World has 10 years of shale oil, reports US

Unread postby socrates1fan » Mon 10 Jun 2013, 17:57:20

Ten years? That's it? This isn't a call for celebration at all.
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Re: World has 10 years of shale oil, reports US

Unread postby Lore » Mon 10 Jun 2013, 18:06:31

dissident wrote:Whatever. When are we going to see a kerogen to syncrude conversion plant, even an experimental one?


Most likely never. My bet is that we'll get methane plants run by Master Blaster types first.
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Re: World has 10 years of shale oil, reports US

Unread postby John_A » Mon 10 Jun 2013, 19:44:24

dissident wrote:Whatever. When are we going to see a kerogen to syncrude conversion plant, even an experimental one?


It went out of business in 1982.

http://en.wikipedia.org/wiki/Colony_Shale_Oil_Project

Here is a picture of Shell's Mahagony test project. I don't think it has produced as much as th Colony project, haven't really kept track, so maybe, but probably not.


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Extra points for anyone who can find the official publication of results on, as best I can tell, the original reasonably scaled kerogen to syncrude project which happened back in the 40's, when fear of running out was pretty fierce, and was really causing the government to squirm. A clue....I believe for as much money was spent, the retorted oil was basically lab-derived, and the basis for the Colony project 30 some years later. A pricey science experiment, but it's there in history, should anyone have an interest.
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Re: World has 10 years of shale oil, reports US

Unread postby John_A » Mon 10 Jun 2013, 19:47:52

Graeme wrote:World has 10 years of shale oil, reports US

FT


Surely, sooner or later, SOMEONE is going to write a decent "why the horn of plenty must STOP already" article from TOD, or ASPO, or somebody not related to past calls of doom gone bad that takes this sort of stuff down. Shale oil is nice, Bakken shale oil is wonderful light sweet stuff but anywhere in that report does it talk about how a country like, say, Poland, is going to drill the tens of thousands of wells necessary to get it? Is there even that much STEEL for pipe in the world?
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Re: World has 10 years of shale oil, reports US

Unread postby ROCKMAN » Mon 10 Jun 2013, 21:04:00

John – “…but anywhere in that report does it talk about how a country like, say, Poland, is going to drill the tens of thousands of wells necessary to get it?” I do appreciate your question but you might perhaps want to re-evaluate the “technically recoverable” reserve category. It doesn’t mean these reserves are “proven” by any sense of the word. They are not “proven reserves” that might be produced at some high but unspecified price. Technically recoverable reserves are not proven reserves as defined by the SEC and the SPE (Society of Petroleum Engineers). Thus they do not represent wells to be drilled and thus no steel is required. IOW they do not represent 10 years or even 10 minutes of production because they can’t be attributed to 1 well or 100k wells. They are not potentially producible reserves under any assumed circumstances…period.

From the SEC (which the Dept of Energy is required to comply with) the estimates of the proved reserves do not include the following:

Oil that may become available from known reservoirs but is classified separately as “indicated additional reserves”.

Crude oil, natural gas, and natural gas liquids, the recovery of which is subject to reasonable doubt because of uncertainty as to geology, reservoir characteristics, or economic factors.

Crude oil, natural gas, and natural gas liquids, that may occur in undrilled prospects.

Crude oil, natural gas, and natural gas liquids, that may be recovered from oil shales, coal and other such sources.

IOW if 50 years from now enough drilling results indicate that proven recoverable reserves from all the shales on the planet represent only 2% of the DOE “technically recoverable” estimate one cannot claim the DOE estimate was wrong. In fact, the DOE estimate in 50 years may be the same as today or even greater. That number has no predictive value as to how much oil will ever be produced from the shales. TR are specifically defined as reserves that have no proven component. Thus projecting any future production isn’t logical IMHO.

But estimates can be made of proved developed and undeveloped reserves from the fractures shale reservoirs anywhere in the world…as per the SEC regs. But that requires a significant amount of geologic and production data which would have to be evaluated in detail. This has been done by all US public companies developing US shales as per the SEC regs. That data is available to the DOE as well as every citizen that pulls up any company’s annual report. For instance, It would interesting to see the SEC qualified proved (producing and undeveloped) reserves in the Eagle Ford and Bakken compared side by side with the DOE’s technically recoverable reserves for the same areas. That ratio might offer some hint to the potential of those DOE TR’s to every be realized.
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Re: World has 10 years of shale oil, reports US

Unread postby ROCKMAN » Tue 11 Jun 2013, 08:33:25

Sorry...forgot to point out what I would hope is obvious to most here: the EIA report does not offer one bbl of oil reserves in their analysis. They are evaluating "technically recoverable shale oil resources". "Resources"...not reserves. And if you dig deep enough into the report they begin to significantly qualify their own numbers:

“Because they have proven to be quickly producible in large volumes at a relatively low cost, tight oil and shale gas resources have revolutionized U.S. oil and natural gas production…However, given the variation across the world's shale formations in both geology and above-the-ground conditions, the extent to which global technically recoverable shale resources will prove to be economically recoverable is not yet clear.”

BTW: when have we seen anyone else classify the US shale wells as “low cost”?

“This report treats non-U.S. shales as if they were homogeneous across the formation. If the U.S. experience in shale well productivity is replicated elsewhere in the world, then it would be expected that shale formations in other countries will demonstrate a great deal of heterogeneity, in which the geophysical characteristics vary greatly over short distances of a 1,000 feet or less. Shale heterogeneity over short distances is demonstrated in a recent article that shows that oil and natural gas production performance varies considerably across the fractured stages of a horizontal lateral and that a significant number of fractured stages do not produce either oil or natural gas; in some cases, up to 50 percent of the fractured stages are not productive.”

“The authors of that article noted that: Shale formation heterogeneity also bears on the issue of determining a formation's ultimate resource potential… the tendency is for producers to concentrate their efforts in those portions of the formation that appear to be highly productive, to the exclusion of much of the rest of the formation. For example, only about 1 percent of the Marcellus Shale has been production tested. Therefore, large portions of a shale formation could remain untested for several decades or more, over which time the formation's resource potential could remain uncertain.”

So as transparent as the US data base may be and given all the attention and focus the Marcellus has received, they seem to be implying it may be decades before we can estimate the economic potential of this play. And yet we know very little about the potential of many other shales around the world compared to our knowledge base on the Marcellus.
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Re: World has 10 years of shale oil, reports US

Unread postby John_A » Tue 11 Jun 2013, 08:53:36

ROCKMAN wrote:John – “…but anywhere in that report does it talk about how a country like, say, Poland, is going to drill the tens of thousands of wells necessary to get it?” I do appreciate your question but you might perhaps want to re-evaluate the “technically recoverable” reserve category.


The report doesn't purport to be doing "reserves", in any category. And I certainly have no intent of reinventing the wheel, let the people who do it for a living debate the angels on the head of a pin angle.

Figure 2.1 would seem to indicate that what the EIA did wasn't reserves either, but falls into the contingent resources or prospective resources class.

http://www.spe.org/industry/docs/PRMS_G ... ov2011.pdf

Rockman wrote:TR are specifically defined as reserves that have no proven component. Thus projecting any future production isn’t logical IMHO.


TR sounds like what the EIA did. Therefore they didn't do reserves. As for projecting them...well....whether or not they SHOULD, you know darn well people ARE. And they will do it because of the performance of such once-upon-a-time resources like the Marcellus and Bakken which are now reserves. That can be the real trick with resources, maybe they can become reserves, maybe they can't....and so people will fall on both sides of that line, some will say "you can't project them until they become reserves" and others will say "you know they will become reserves under such-and-such conditions which POD is already causing, therefore I can project them".

It appears to be quite technical, I am glad you are around to explain it.

Rockman wrote: That data is available to the DOE as well as every citizen that pulls up any company’s annual report. For instance, It would interesting to see the SEC qualified proved (producing and undeveloped) reserves in the Eagle Ford and Bakken compared side by side with the DOE’s technically recoverable reserves for the same areas. That ratio might offer some hint to the potential of those DOE TR’s to every be realized.


The DOE in the form of the EIA does list quite a few assumptions about the resources and areas and well sizes which go into their models. Tight and shale oil are on page 123, with a TR listed in the column on the right. I suppose the reserves would be if you multiply out the areas and well results, and the TR is the bucket they are pulling the well sizes from?

http://www.eia.gov/forecasts/aeo/assump ... oilgas.pdf
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Re: World has 10 years of shale oil, reports US

Unread postby Beery1 » Tue 11 Jun 2013, 09:02:23

Graeme wrote:World has 10 years of shale oil, reports US

Global shale resources are vast enough to cover more than a decade of oil consumption, according to the first-ever US assessment of reserves from Russia to Argentina.


So over 10 years worth, if we're lucky. But it's going to take around 30 years to get it all out. Does anyone see a tiny flaw in the plan there?
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Re: World has 10 years of shale oil, reports US

Unread postby ROCKMAN » Tue 11 Jun 2013, 09:51:20

John - "..."you know they will become reserves under such-and-such conditions which POD is already causing'. And this is where it gets tricky and foggy…where we might start chasing our own tails. As I think I understand the process as the EIA handles the matter the definition of “resources” won’t allow them to be converted to “reserves” regardless of future economic conditions. IOW resources are not less qualified reserves but a determination made not using the criteria used to define reserves at least as far as the SEC goes as well as US companies and financial institutions. As best as I can describe: it’s a two track approach to the analysis. I don’t fault the EIA for taking the resource track. It would be monumental task for them or anyone else to try to qualify just the ECONOMIC undeveloped reserve estimate in just one US play like the Eagle Ford. And even with the well-developed publicly available data base for the EFS I doubt a thorough analysis could be done without federal court orders forcing companies to divulge their proprietary info.

So the EIA can’t even begin to offer an estimate of shale RESERVES in the US let alone the world. But they feel they must put some numbers on the table to justify their role in our grand theater production of PO. And this is where I might fault them when I’m not in such a generous mood: sometime the most appropriate answer to a question is: “I don’t know.” The EIA does not know what the reserves are in the shale plays around the world. Offering an answer that appears to be an answer but really isn’t doesn’t benefit anyone…except maybe the person offering the “answer”. The USGS doesn’t know what the total economic RESERVES are in the Bakken. Chesapeake and EOG don’t know what the total reserves are in the Eagle Ford Shale. In fact, I suspect both companies are constantly evaluating what the total reserve potential is in the EFS just on their own leases. And that number floats around a bit as they drill new wells.

And just this morning I got a report in from a partner that is operating a well we’re recompleting in a reservoir to develop the X bbls of oil and Y mcf of RESERVES we are carrying on our books. And guess what: we produced 68 bbls of salt water. So we’ve begun the process to plug and abandon the well. And those RESERVES we were trying to develop? They ain’t anymore. So even RESESERVES aren’t always produced.
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Re: World has 10 years of shale oil, reports US

Unread postby John_A » Tue 11 Jun 2013, 10:43:31

ROCKMAN wrote:And just this morning I got a report in from a partner that is operating a well we’re recompleting in a reservoir to develop the X bbls of oil and Y mcf of RESERVES we are carrying on our books. And guess what: we produced 68 bbls of salt water. So we’ve begun the process to plug and abandon the well. And those RESERVES we were trying to develop? They ain’t anymore. So even RESESERVES aren’t always produced.


Actually...they might be.

You see, once the SPE built the reserve definitions, they did something very...interesting. They said that besides all the economic components of how to calculate reserves, the answer, call it X, is a P90. That means, there is a 90% chance the answer will be greater than X, and a 10% the answer will be less than X.

Figure 2, Page 81 of this JPT article.

http://www.spe.org/jpt/print/archives/2 ... series.pdf

PRIOR TO THE ACTUAL RESULTS, expected reserves of X bbls or Y mcf was completely reasonable, and in the probabilistic scheme of reserves, 68 bbls of salt water, and 0 oil and 0 gas, would obviously be the 1 in 10 chance that the results did not reach the level of the P90. 10% are expected to be lower, and 90% higher than predicted. Unfortunate that you hit the 1 in 10, but not unexpected. Just hope that your partners aren't hitting 2 in 10, in which case they are estimating their reserves poorly compared to the industry standard.
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Re: World has 10 years of shale oil, reports US

Unread postby John_A » Tue 11 Jun 2013, 10:52:35

Beery1 wrote:
Graeme wrote:World has 10 years of shale oil, reports US

Global shale resources are vast enough to cover more than a decade of oil consumption, according to the first-ever US assessment of reserves from Russia to Argentina.


So over 10 years worth, if we're lucky. But it's going to take around 30 years to get it all out. Does anyone see a tiny flaw in the plan there?


Yes. The gap will have to be filed out of the other 7 trillion barrels of things the IEA says are still in the ground, and might cost as much as $110/bbl to develop. While you Beery1 are safe from the economic impact of transport on your bicycle, the SUV drivers are not...but there isn't any rush to sell their SUVs just yet either.

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Re: World has 10 years of shale oil, reports US

Unread postby rockdoc123 » Tue 11 Jun 2013, 10:54:08

for clarity on the reserves issue.
The methodology to assess in place resource in shales is based on analogs with wells and similar shales. If mechanical, thermal and organic properties are available for a particular shale then it is possible to assess the amount of adsorbed and absorbed gas that has been generated. Because of the extremely low permeability shales are both the organic kitchen and the trap which makes in-place resource estimates fairly meaningful. This is not talking about how much might be recovered, in shales it is often below 10% of the in-place number with current technological applications.
The problem here is there are many categories of reserves and resources. The SEC only wants reported proven reserves or by definition those reserves which you are 90% or greater confident can be produced economically. The TSX, on the other hand, wants both proven and probable reserves reported, the latter being those that you are only greater than 50% sure can be produced economically (for clarity 50% chance of happening is basically the same as a coin toss). Most reserve audits also review the level of Possible reserves or those reserves that there is only a 10% or greater chance that they will be economic. If you have no idea about the economics then the hydrocarbons fall into two possible categories, contingent resource which covers recoveralbe resources which have been discovered by the drill bit but for which economics are uncertain and potential resources which refer to those resources yet to be demonstrated by drilling but possible confirmed by seismic.
For shale gas, given the low price and the high cost arguably many of the shales in North America have their reserves sitting in the possible category or probable category and not proven. Because most of those shales were economic at the higher price deck they do not get degraded to contingent resource and stay in the reserve category.
IN the case of oil in shales the large differential between break even price and the price or oil means that as long as the shales have been demonstrated to be producible by a well they will fall into the possible reserve category at least. Depth isn't an issue simply because once the shales get too deep they are no longer oil bearing but go through the phase shift to gas....their economics change completely. It could be argued that the only place in North America where there would be shale oil resources and not reserves is either no well has been drilled and core not recovered to do the appropriate tests or where there is some question of the response of said shales to fraccing. The response to fraccing is an important one inasmuch as there does appear to be a relationship between EUR and IP rate and hence the economic viability of that particular shale. Practically if we look at the Eagleford trend there is no place I am aware of where a few wells have not been drilled and fracs conducted. To my mind this would mean the trend could be described in terms of 3P reserves (proven plus probable plus possible) rather than as resource.
The terminology is often confusing as it is used differently by the USGS versus SPE. We can always talk about the resource as referring to oil inplace (how the USGS looks at things) but contingent resource in terms of the SPE terminology is actually a recoverable number, not in place. Where the big confusion arises is because the SEC only allows for reporting of proven reserves some people think the term reserves only applies to that small category with the highest certainty. In reality when you consider the concept of Possible reserves where there is only a requirement for 10% certainty of reaching an economic threshold the term "Reserves" is much broader.
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Re: World has 10 years of shale oil, reports US

Unread postby C8 » Tue 11 Jun 2013, 11:12:54

Here is the stupid layman question of the day- If ND has been drilled a lot already in the past, does that make it cheaper to go after shale since the wells have already been created and all that is needed is to insert new types of equipment into them to cook underground or frack? or does shale require new drilling?
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Re: World has 10 years of shale oil, reports US

Unread postby rockdoc123 » Tue 11 Jun 2013, 11:56:52

Here is the stupid layman question of the day- If ND has been drilled a lot already in the past, does that make it cheaper to go after shale since the wells have already been created and all that is needed is to insert new types of equipment into them to cook underground or frack? or does shale require new drilling?


the shale wells that are of modern vintage are all horizontal, generally at least a km in length if not 3 km in length and have multistage fracs in them (I've seen as many as 25 in a single horizontal section). So you could not get the amount of effective reservoir communication with a wellbore via the old vertical wells but if the old well was abandoned in such a way it could be re-entered you might be able to use it as a pilot hole from which you could drill a horizontal extension. That would drop your costs somewhat but in practice the location of these old wells isn't always ideal for pad construction from which you might drill as many as 6 horizontals so new wells are the standard.
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Re: World has 10 years of shale oil, reports US

Unread postby John_A » Tue 11 Jun 2013, 13:02:04

rockdoc123 wrote:The terminology is often confusing as it is used differently by the USGS versus SPE. We can always talk about the resource as referring to oil inplace (how the USGS looks at things) but contingent resource in terms of the SPE terminology is actually a recoverable number, not in place.


The USGS doesn't do in place either, it does technically recoverable. From the newest Bakken press release:

http://www.doi.gov/news/pressreleases/u ... ations.cfm

WASHINGTON, D.C. —The United States Geological Survey (USGS) today released an updated oil and gas resource assessment for the Bakken Formation and a new assessment for the Three Forks Formation in North Dakota, South Dakota and Montana. The assessments found that the formations contain an estimated mean of 7.4 billion barrels (BBO) of undiscovered, technically recoverable oil. The updated assessment for the Bakken and Three Forks represents a twofold increase over what has previously been thought.

From the 2008 Bakken USGS work, in this case, it's written right into the title:

http://pubs.usgs.gov/dds/dds-069/dds-06 ... W_CH_5.pdf

I found the USGS doing this as an in-place assessment, but when I run back through and check their past 20 years or so of work, I find in place only with the oil shale of the Rocky Mountain basins.

http://pubs.usgs.gov/fs/2011/3063/pdf/FS11-3063.pdf

But it is uncertain that what the USGS has anything to do with what SPE does.
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Re: World has 10 years of shale oil, reports US

Unread postby ROCKMAN » Tue 11 Jun 2013, 13:51:27

John – very good. Sometimes I lose track of in place numbers and recoverable numbers: “The (USGS) assessments found that the formations contain an estimated mean of 7.4 billion barrels (BBO) of undiscovered, technically recoverable oil.” But even with that we’re back to the same problem: the USGS has not predicted that 1 bbl of those 7.4 billion bbls will ever be produced. In fact they go to great lengths to avoid offering any idea how much oil will be produced. They assume that if all the potential locations are drilled regardless of the economic merit than 7.4 billion bbls of oil could be produced. I suspect that number would range a good bit. But regardless if it’s 7.4 billion or 3 billion bbls it doesn’t matter what the number is because these are not bbls of oil predicted to be produced since there is no economic thresh hold applied. The USGS is not predicting any volume of oil will ever be produced from the Bakken. If oil fell back to $40/bbl obviously Bakken drilling would fall off a cliff and decline would quickly chip away at the production increases the shales have provided. But folks need to understand that the USGS estimate of 7.4 billion of undiscovered technically recoverable oil would not decrease by even 1 bbls as a result. That number has nothing to do with the price of oil and what is produced today or in the future from the Bakken.

I can point to a field I’m about to drill a hz well in on the Texas coast. There are approximately 4.5 billion bbls of technically recoverable oil RESERVES (not resources) in this field and others along trend. That's a much more reliable number than the USGS has for those RESOURCES they are presenting. These are proven discovered bbls of oil…not “undiscovered resources”. Yet the current economic recoverable reserves from these fields via new horizontal drilling are exactly 0.0000 bbls of oil. If my hz idea works we can start moving some of those proven technically recoverable reserves (not resources, mind you) into the proved recoverable category. And if the idea doesn’t work my company just pissed away $2.5 million. And it is unlikely anyone will try another hz well again in this trend anytime soon. But those 4.5 billion of oil will still be proved reserves…just not economically recoverable proved reserves.
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Re: World has 10 years of shale oil, reports US

Unread postby John_A » Tue 11 Jun 2013, 15:13:36

ROCKMAN wrote:John – very good. Sometimes I lose track of in place numbers and recoverable numbers: “The (USGS) assessments found that the formations contain an estimated mean of 7.4 billion barrels (BBO) of undiscovered, technically recoverable oil.” But even with that we’re back to the same problem: the USGS has not predicted that 1 bbl of those 7.4 billion bbls will ever be produced.


Great way to play it safe, eh? Look at it this way, the USGS doesn't have to produce the "technically recoverable", so they let everyone else worry about it and just forget about it. Sort of like standing at the edge of the water and declaring you are "wet enough".

Rockman wrote: In fact they go to great lengths to avoid offering any idea how much oil will be produced.


Government work. Where can the rest of us get some....
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Re: World has 10 years of shale oil, reports US

Unread postby ROCKMAN » Tue 11 Jun 2013, 16:39:01

John - I would normally cut the USGS et al a lot of slack. I've spent months working with teams to develop a reasonable estimates of recoverable reserves from a single relatively small field. And often didn't come up with a reasonable consensus. And that's having every scrap a data at our finger tips. It really is a very difficult job. OTOH I dislike the way they don't try to explain how their analysis really isn't very useful predicting future oil production rates but readily leaves the readers with the impression that there will be a lot of new oil coming on line.

There seems to be an unavoidable mandate that they put out positive new even if they don't have the details to back it up. Like me little story: consider if I stood in front of my owner and described those 4.5 billion bbls of proven oil in that trend and then said nothing else. His response would be to ask me why I was telling him such a fact without a plan of action, including the economic justification, to deal with that situation. He (and every other person running an oil company) doesn't care how much oil is there. He wants to know how much I could get out and at what profit margin. The USGS is just telling us there's a lot of oil in those rocks. Well, for many decades we've all known there was a lot of oil in a lot of rocks all around the world. What we are trying to discover is where there's oil we can drill for now and get it out at a profit. That does not appear to be the mandate the USGS is working under. Consider how much space our conversation has taken up here. And yet we know nothing about how much oil and at what rate we’ll be getting from the Bakken based upon the USGS study. But a lot of folks in the public would think they did get such an answer from the USGS.

As I've said before we are going to get a lot of oil out of the Bakken as long as oil prices stay up. The USGS hasn't even made such a broad statement that I've been able to find.
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Re: World has 10 years of shale oil, reports US

Unread postby rockdoc123 » Tue 11 Jun 2013, 18:05:07

I can point to a field I’m about to drill a hz well in on the Texas coast. There are approximately 4.5 billion bbls of technically recoverable oil RESERVES (not resources) in this field and others along trend. That's a much more reliable number than the USGS has for those RESOURCES they are presenting. These are proven discovered bbls of oil…not “undiscovered resources”. Yet the current economic recoverable reserves from these fields via new horizontal drilling are exactly 0.0000 bbls of oil. If my hz idea works we can start moving some of those proven technically recoverable reserves (not resources, mind you) into the proved recoverable category. And if the idea doesn’t work my company just pissed away $2.5 million. And it is unlikely anyone will try another hz well again in this trend anytime soon. But those 4.5 billion of oil will still be proved reserves…just not economically recoverable proved reserves.


I guess I'm not being clear enough. The term "proven" when used with reserves refers only to those reserves for which you are greater than 90% sure will be "economically" produced within a reasonable time period. There is no such thing as "proven reserves" which are not currently economic at the latest 12 month average commodity price. There is also no such thing as probable or possible reserves which are not currently economic, the term reserves no matter which of the 3 categories implies the economic threshold has been reached. What you describe above is before you drill it Potential Resources....once you drill it but haven't proved commerciality then it is Contingent Resources and once you have shown it is economic then it moves into the reserves category. How much sits in proven versus probable and possible depends on how many wells, what the drainage area per well assumed is etc. I get a bit testy about the loose manner in which the terms are applied as I did play a very minor role in making suggestions to the working group that created the Petroleum Resources Management System that has now gained wide acceptance pretty much everwhere in the industry.
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Re: World has 10 years of shale oil, reports US

Unread postby rockdoc123 » Tue 11 Jun 2013, 18:29:55

The USGS doesn't do in place either, it does technically recoverable. From the newest Bakken press release:


yes you are right for this report. In previous analyses the USGS has sometimes just estimated OOIP. In this particular study they estimate OOIP and then multiply it by the average success rate and recovery factor for the formation. Under the SPE guidelines this would equate to Potential Resources but I don't think that term can be used appropriately in this case since the USGS is not just talking about yet to be discovered but includes areas where wells have been drilled and hydrocarbons produced....hence there is undoubtedly a mix of different types of reserves and resource categories here. Hence their need to use a somewhat different term.

It makes sense if you think of the number as being...."this is how much hydrocarbons we believe are in the shales based on the known rock properties and based on the average recovery factor and chance of success this is approximately what the recoverable number would be". Doing it this way avoids trying to project costs and commodity prices which is a bit of a moving target. As an example although prices for gas dropped down below $3/MCF over the last year costs for the Eagle Ford and Marcellus dropped as well (some operators reported savings of 20% - 30%). If I knew where either of those numbers were headed in the future I could make a killing in the market!
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