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Is Peak Oil dead? Not by a long shot! Remember Ladyfern?


Preface. Oil is finite. Period. Don’t be fooled by news stories that peak oil is dead, or we have reached peak demand.  They’re all nonsense. Gail Tverberg at is especially good at explaining this.

Worse yet, what we have left has been and is not being drained as quickly as possible to pay the capital back, and that increases the amount of oil that will be left in the ground forever, which could have been produced with more responsible methods.  But the very nature of capitalism is profits now, not 10 years from now.

This article makes the case that there are lessons to be learned today from the gigantic 2001 giant Ladyfern natural gas reserves in Northeastern British Columbia.

But due to the tragedy of the commons, where too many companies exploited this reservoir too quickly, much less was produced than could have been.  Like shale gas today, a gigantic amount of production drove gas prices down, thanks to the “stupid” middle class money financing companies that were already bankrupt (the banks prefer to get some money rather than none, and besides, it’s not their money).  Whether the gas bubble will be as bad as the subprime mortgage crisis waits to be seen.

Initially Ladyfern was thought to have a trillion cubic feet of recoverable reserves, but in the end had 400-billion-cubic-feet (bcf).  Some of the “missing” 600 bcf that could have been obtained was lost to greedy drilling, though most of this was probably due to overestimating the size of the reserve.  I’ve cut and paraphrased much of the article below (select the link in the title to see the original article).

Alice Friedemann  author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report ]


Terry Etam. January 19, 2016. The Ladyfern legend: huge reserves, frenzied drilling, and no one made money. Sound familiar? BOE report.

Is shale oil and gas too good to be true? History provides examples of the dangers of getting too starry-eyed by banking on seemingly endless natural gas reservoirs.  The historical cautionary tale that follows usually involves a gold-rush mentality that results in efforts to extract the entire reservoir all at once!

As an example, consider the legendary Ladyfern field in British Columbia, and whose story has an ugly lesson worth remembering.

The Ladyfern field was a giant gas reservoir estimated to contain up to a trillion cubic feet of recoverable reserves. There were wells that produced at initial rates of 70 million cubic feet per day. It’s worth remembering that those rates were from vertical wells without 50 stage fracking technology. The cost of producing this conventional natural gas was very cheap. After the initial discovery, companies raced to buy up mineral rights in the area, and once secured, the race was on.

What happened next can be best described as a ‘tragedy of the commons’. Companies acting in their own self-interest harmed all parties. The Ladyfern reservoir saw corporate beasts devour a beautiful gas reservoir like wild pigs upending a garden.

The problem was competitive drainage. Because the Ladyfern reservoir was so porous and prolific, it was in a company’s best interest to drain their reserves as fast as possible or lose them to competitors. As noted in the linked article above, had one company owned all the mineral rights, the reservoir would most likely have been developed more cautiously, or at the very least with a plan. If the competitive drainage phenomena were to have been avoided, reserve recoveries would most certainly have been higher and with far less capital investment.

Maximizing recoveries from a reservoir should be the primary concern, not booming discovery wells that generate hysteria and a “shoot first, aim later” mentality.

This lesson should not be lost on shale gas drillers today now that the latest Utica production test results are bringing levels of excitement akin to the Ladyfern era.

While there are obvious differences in reservoir characteristics between shale formations and the Ladyfern, the mechanics and philosophy of ultimate recovery remain the same. In particular, in new fields or non-homogenous fields being explored and developed, paying attention to the overall field recovery should be one of the most important considerations. But this parameter can quite easily be forgotten by (or fail to even enter the minds of) executives under pressure to deliver production growth and/or meet quarterly expectations. What’s worse, with the current extreme duress in industry, pressure mounts to keep drilling wells and bringing them on to shore up reserve bases to keep bankers happy. While this strategy can serve as  a useful short term survival tactic, more often it equates to bad news in the long run. But on the other hand, it may be the only option for companies that are trying to stay alive until the next price spike.

6 Comments on "Is Peak Oil dead? Not by a long shot! Remember Ladyfern?"

  1. MASTERMIND on Sat, 2nd Dec 2017 11:52 am 

    New Oil Discoveries by Scientists have been declining since 1965 and last year was the lowest in history

    We have been draining our oil reserves by consuming more oil than we discover since the 1980’s

    HSBC Global Bank warns 80% of the worlds conventional fields are declining and world oil shortages ahead

    Saudi Aramco CEO believes oil shortage coming despite U.S. shale boom

    IEA Chief warns of world oil shortages by 2020 as discoveries fall to record lows

  2. Cloggie on Sat, 2nd Dec 2017 12:02 pm 

    In this article ZERO references to renewable energy.

    Peak oil is dead. Not because conventional oil is an infinite resource, but because the fact that oil reserves are finite is irrelevant for the future of the world’s energy supply.

  3. Cloggie on Sat, 2nd Dec 2017 12:56 pm 

    Hamburg initiates new storage concept for the storage of wind energy: hot rocks

  4. Harquebus on Sat, 2nd Dec 2017 9:43 pm 

    “that oil reserves are finite is irrelevant for the future of the world’s energy supply.”

    They are not irrelevant to the world’s transport system upon which, the manufacture, construction and maintenance of everything is totally dependent.

    Renewable energy is junk science that benefits a few temporarily only. No long term benefits at all. In fact, just the opposite when external costs are included.

  5. rockman on Sun, 3rd Dec 2017 2:53 pm 

    Searched dozens of articles on the field and couldn’t find enough technical data to discuss recovery factor in detail. But these folks were estimating 532 bcf recoverable just 2 years after the discovery. That’s was rather accurate given that short a production history.

    I have to stretch credibility a tad given the lack of documented details. But from little pieces here and there: this was a very high porosity and permeability WATER DRIVE reservoir. In most such reservoirs I’ve dealt with personally a high production rate INCREASES the recovery factor. In the oil patch we call it “staying ahead of the water”. But a tricky balance. Much too complicated to explain in detail. Here’s a short model: produce slowly and the water level reaches the well and commercial recovery stops. Original pressure of the NG: 2,500 psi. Pressure of the NG not produced and left behind: 2,400 psi. But produce fast and pull the reservoir pressure down to 1,800 psi before the water reaches the well and commercial production stops. Pressure of the NG left behind: 1,800 psi. That difference in residual pressure, 600 psi (2,400 – 1,800) represents more of the in place NG recovered.

    The best recovery from a NG reservoir is one with 100% depletion drive and no water production: original pressure 2,500 psi and final pressure 600 psi.

    Given how huge the reservoir was I thought I would find some detailed reports. Maybe someone can. But I did discovery the source of the “they produced too fast” articles and it had nothing to do with hurting the recovery factor. It was all do to SPENDING TOO MUCH CAPEX too produce too fast to recover more NG then the other field producers. Redundant pipelines and roads. Spending way too much for limited services, like $12,000/hour to move a bulldozer by chopper then $200/hr to haul by flat bed truck. Paying 3X as much for a drilling rig. Drilling in the summer when the muskeg required chopper transport then in the winter when frozen ground allowed vehicle transport. That’s how the ROR was badly damaged. Not by reducing URR.

    But I admit I had to interpret much of my sense of recovery factor by reading between the lines. But if you read the articles describing high producing rates hurting recovery you will find ZERO technical data supporting that position.

  6. Anonymous on Sun, 3rd Dec 2017 3:29 pm 

    Of course an individual field or project might end up with lower recovery than anticipated. The oil business is statistical and involves imperfect knowledge. But in general, over time, man has gotten MORE oil/gas than originally anticipated from most fields. IOW, the OPPOSITE of the shark fin. Many reasons for this, initial conservatism, use of existing infrastructure, learning about details of the field, operational improvements, EOR, etc. The Kern River area in California is a good example of a field that has way outproduced old estimates.

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