[dcoyne78]

Hi All,

I was attempting to evaluate the EIA's AEO 2014 reference case and came across the BOEM's 2011 assessment of offshore oil found at the link below:

http://www.boem.gov/Oil-and-Gas-Energy- ... t-pdf.aspx

Undiscovered TRR mean estimate for US offshore oil is 89 BBO (with F95 at 66 BBO) and they also look at undiscovered ERR (economically recoverable resources) and at $60/barrel the mean UERR=60 BB) and at $120/barrel UERR=75 BBO. Currently reserves are 10 BBO and reserve growth is expected to be 9 BBO so even at $60/barrel ERR= 79 BBO. Note UERR=undiscovered economically recoverable resources.

At $30/barrel UERR=40 BBO and with reserves plus reserves growth ERR=59 BBO.

I imagine others have read this assessment, I would be interested if others find it credible.

[Pops]

I have no standing to comment on the numbers, DC, sorry.

But I'll derail the thread while you're waiting on someone who does.

Although no attempt
has been made to develop an empirical relationship between
the future technological advancements and the estimated
undiscovered resources, BOEM believes that future advances
will significantly affect the portion of the undiscovered resources
represented by estimates of UTRR, resulting in an increased
percentage being classified as economically recoverable
resources.

The operative phrase in that passage is "BOEM believes". A good portion of optimism and in fact booked reserves are related to the belief in an increasing ability to extract oil. So we see areas like the Brazil sub-salt with these huge estimated URRs of 250 billion barrels trotted out but after $250 Billion in investment they are finding it hard to produce any.

What if the ability to find oil has outstripped the ability to extract that oil?

[ROCKMAN]

Well put Pops: “What if the ability to find oil has outstripped the ability to extract that oil?” That has been the case for a long time actually. Back in the late 70’s I was looking at some interesting structures on seismic in the DW GOM region. At that time our production limit was about 600’ of water depth. In time we developed the tech to drill and produce at water depths in the thousands of feet but only because we saw the evidence that it would be worth the effort. IOW we didn’t develop the engineering so we could go find out if there was anything there…we already had the idea something was there.

Same thing with horizontally drilling these fractured shale reservoirs. We understood the nature of the reservoirs and the oil/NG contained in them decades ago. That is what led to developing the horizontal drilling tech: the need to develop what we had already found. And in a way this is also the reason we’ve developed the 3d seismic as we have today. The motivation wasn’t to go out and find productive trends we didn’t know about but to go into mature areas where we knew there was oil/NG left but the remaining targets were too small to find with the older 2d data.

Now that you’ve gotten me thinking about it I’m having trouble thinking of much of anything new from a geologic standpoint that we are going after today. We’re developing what we are for two primary reasons: we’ve developed the drilling/production tech to go after what potential we knew was there and the current oil price that justifies the cost of that tech. Just an hour ago a young fellow asked what the next big play would be after the shales. The short answer was that there isn’t another type of big play left. Maybe some places to poke holes where we haven’t done much drilling yet but not for a different class of reservoirs.

[dcoyne78]

Hi Pops,

My reading of the report is that the estimates for UERR are based on current technology, what does not make sense to me is that not very much investment is taking place with oil at $100 per barrel.

In fact the EIA is only forecasting about 19 BBO from 2011 to 2040 coming from lower 48 offshore in the AEO2014 reference scenario. With 59 BBO in ERR (sum of reserves, reserve growth and UERR) according to the BOEM at $30/barrel and about 89 BBO of ERR at $90/barrel, it would seem that the EIA does not believe the BOEM as their forecast comes up quite a bit short (roughly 25% of the total), in fact if we assume the reserve growth is zero, the EIA only expects 9 BBO from UERR over the next 26 years in the lower 48 offshore.

[dcoyne78]

Hi Rockman,

What doesn't make sense is that the BOEM is claiming that there are 70 BBO of UERR at $60/barrel. Are they just doing a very poor job in their economic analysis?

I know you never make predictions because you don't know what the future price of oil will be, but let's imagine that you thought oil prices would be very unlikely to fall below $60/ barrel for very long and that the real price of oil was likely to be between $60 and $150 per barrel for the next 25 years, do the numbers for UERR in that report make sense (UTRR=78 BBO at $160/barrel)? If not can you give us a wag as to how far they are off by a factor of 2, or 3, maybe an order of magnitude? Thanks.

[dcoyne78]

A mistake on my part is comparing all offshore oil in the report referenced with lower 48 offshore. In that case the appropriate comparison is GOM with lower 48 (there is unlikely to be much new oil produced from Atlantic or Pacific waters.)

For the Gulf of Mexico(GOM) mean UTRR= 48 BBO with F95=35 BBO and F5=59 BBO. For UERR at $30/barrel it is 33 BBO and at $160/barrel 45 BBO for the GOM. Reserves for the GOM are 9 BBO and reserve growth is expected to be about 9 BBO.

It is likely that the EIA expects little output from offshore Alaska before 2040 and all lower 48 offshore (19 BBO output 2011 to 2040) to come from the GOM, this would mean they expect only about 10 BBO from a combination of reserve growth and UERR.

At $90/barrel UERR is 43 BBO, but if we assume no reserve growth only 10 BBO of a potential 43 BBO is expected to be produced before 2040.

The numbers add up a little better, but I wonder if we really think that there is only a 1 in 20 chance that less than 35 BBO of oil will be discovered in the Gulf of Mexico?(Beyond the 9 BBO in reserves and the 16 BBO which has already been produced and the 9.5 BBO of possible reserves growth, URR=69.5 BBO)