Thursday 10 February 2011

Bakkens, Export land and oil depletion

Contrary to what the doomers would have us believe, we are in fact able to increase recoverable reserves by the use of technology. This is common wisdom in the oil industry and you have to be some kind of conspiracy whack job to dismiss this out of hand.

Two such obvious examples are the recent technological breakthroughs that allow extraction of shale gas in such great quantities that not only has a decade long peak and decline been reversed in North America, but the USA in particular is now so awash in the stuff that they are exporting it to Europe.

Although oil is harder to do than gas and in all likelihood, the USA by itself won't be able to replace ENTIRELY it's conventional output by unconventional oil, there have nevertheless been significant breakthroughs.

The Bakken field in North Dakota has been the focus of much frantic activity in the last five years as new technology was developed by the likes of Chesapeake Energy to extract oil from the tight reservoirs in the Bakken which were previously inaccessible by older technologies. This technology has now become so mature that the decline in oil production in the USA since the 1970s has stopped and actually gone into reverse.

I thought this wasn't supposed to happen?

In any case, it doesn't stop there. Ask yourself this question: Are there likely to be similar reservoirs to the Bakken in other countries?

Is it likely that the Bakken is the only such reservoir in the world?

In fact there ARE other such reservoirs and now industry analysts are predicting that it could be conceivable that the USA would be able to close it's import gap by up to 60% by 2020.

That in contrast to the so-called "Export Land Model" which says the USA will be screwed. In fact it might be Saudi Arabia which instead has a potential problem because their economy is extremely dependent on oil exports.

I'll go further: the Bakken formation on the Canadian side is *underdeveloped* and it's likely that there will be other Bakken types formations in Canada and that continuing and ongoing improvements in process engineering in the oil sands will enable the potential to close the export gap *altogether* with the help of imports from Canada and other friendly nations such as Australia which has recently discovered it's own version of the Bakken which may end up being even more prolific.

I say potential Saudi problem and potential export gap, because I doubt that trade will just stop even if friendly countries can in fact meet the import needs of the USA. We will *still* buy some oil from Saudi. Saudi Arabia is an ally after all and they need to eat. We produce a lot of wheat and other agricultural products and they need to feed their population. We might need to re-sell the oil we buy from them onto the world market but we won't let them starve.

PS This is not to say we should all go out and buy Hummers. Instead I propose we all buy electric cars and we export ALL of our oil. Then there might be a glut. Wouldn't that be a blast.

12 comments:

Weaseldog said...

From a recent Dallas Morning News Article

The operators of Texas’ electricity grid blamed myriad problems at power plants across Texas for last week’s rolling blackouts. But interviews and a review of documents by The Dallas Morning News reveal that the breakdown of a cluster of coal-fired plants in Central Texas was at the heart of the problem.

To compound the problem, many of the natural gas-fueled plants that would normally fire up to restore power didn’t have enough gas.

So early Wednesday morning, officials with the Electric Reliability Council of Texas began shutting off power to customers after a quick, deep freeze sliced through the state.

The grid lost 7,000 megawatts of capacity, enough to power 1.4 million homes, and 50 power plants stopped working. Texans endured eight hours of rolling blackouts.


It seems that some of the plants opted for cheaper interruptible gas supplies. But even with those online...

uring last week's storm, gas operators tapped natural gas stocks stored underground, including from salt domes, to make up for substantial production losses in the field. But Kitchens warned that the industry would have struggled to meet the state's gas needs if the cold weather had continued for three or four more days. He said gas reserves largely have been restored.

This winter hasn't be a bad one for Texas. In 1977 we had a freeze with rain sleet and snow, that lasted six weeks.

If we're in danger of running out of fuel with a cold snap that only lasts a few days, then we're not awash with abundant supplies of natural gas. We're red lining it.

The USA is still producing about as much natural gas as it did in 1970. If we hadn't closed more than 40,000 factories since 2001, then we'd be facing shortages now.

We're fracking like mad, and standing still, right on the edge.

More shortages are likely coming in the next few years.

Dallas Texas has the best economic climate of any city in the country right now. We'll likely start seeing an influx of people looking for work. This will burden the system more. Next year, all we need is a week of freezing temps to run out natural gas and shut the whole state down.

We'd better frack faster.

DB said...

Two things weasel.

1. I actually have oil industry experience.

2. It's interesting to me that you see exactly the same evidence as I do but yet you don't see the big picture and instead pull it apart looking for small details to support your doomer stance. I shouldn't be surprised because it's endemic to the doomer boards.

I don't want to get drawn into a long drawn out argument covering the same ground ad-nauseum but suffice it to say that your point that they are "red-lining" it and that they ran out of gas in three or four days is full of holes.

First of all that's exactly how backup resources are designed: to handle (barely) the third standard deviation situations. They do NOT build to handle one in a hundred year events, merely one in ten year. That very occasionally extreme weather events take place that go over the "redline" isn't surprising at all to me.

Also your point that it shows we're out to lunch that three to four days caused a run down in gas stocks is false. I note with interest that they were EASILY able to refill the stocks. If as you were suggesting there really were shortages, it would have taken a LOT longer to refill. There simply wasn't enough storage in the system. I don't in any way read that as living with shortages.

Anonymous said...

I agree completely with DB here. I find it amusing that many doomers locate energy shortage stories (based on rather extreme cases) as proof of their apocalyptic ideas. As you (DB) said, backup reserves are not meant to handle extraordinary scenarios; this is true for all backup reserves.

Weaseldog said...

DB, said, "They do NOT build to handle one in a hundred year events, merely one in ten year. That very occasionally extreme weather events take place that go over the "redline" isn't surprising at all to me."

Snow and cold weather in North Central Texas isn't a one in one hundred year event.

It snows every winter in this part of Texas. This cold snap wasn't very unusual. It didn't even break any records.

What part of the world do you live in? I can understand that you aren't familiar with the weather in my area.

So I'll repeat, this weather was not very unusual. It was not a one in one hundred year event or even a one in ten year event.

Fact is, after deregulation, prices have increased significantly and service is becoming less reliable.

"Also your point that it shows we're out to lunch that three to four days caused a run down in gas stocks is false. I note with interest that they were EASILY able to refill the stocks."

So you're saying the reservoirs that can be filled, can't be emptied? you can't empty a water glass because it's easily filled?

The rolling blackouts are themselves a 100 year event. It's the first time in my memory we've every had them.

Where you live, these things could well be really common. You might have rolling black outs all the time. So you wouldn't notice another black out as a symptom of worsening service. For North Central Texas, this is something brand new.

In 1977 we had a one hundred year event, in six weeks of freezing rain, sleet and snow. It's the worst winter in my memory.

In that worst winter, we had no rolling blackouts.

Repeat, worst ever, no rolling blackouts.

Typical winter now, rolling blackouts.

DB said...

Weasel,

I'm going to take the gloves off and call it. You're full of shit buddy.
There's no possible way that Texas handles storms or bad weather any different than anybody else.
I know that for a fact since my wife is from Laredo. Recognize the name of the town? FYI I live in the Alberta Oilpatch. Up here we have one of the best electricity networks in the world (because we have the money). Regardless, the power still goes out sometimes here. As for background I have a bachelors in Math/Physics, a masters in business analysis and an MBA. I know what I'm talking about and can see the holes in understanding both in science AND when "scientists" talk about economics.

Your opinions on what constitute a peak-oil provoked power outage don't pass the smell test and instead betray a lack of understanding about economics which you claim is a soft science (and thus not worthy of consideration).
I beg to differ my friend. A lack of understanding of economics combined with stretching the evidence to fit bogus scientific theories to the point of conspiracy-hysteria is EXACTLY what's wrong in the doomer camp.

Anonymous said...

I'd like to note that in Denmark, we also have complete blackouts from time to time. Though in my part of the country it hasn’t happened in years, they were "once in a year" events doing my childhood: D

Besides, 8 hours of blackouts (which were "rolling" something I understand as being punctuated by periods where power returns), does not represent a "doom" scenario, had it been a week or weeks without power, you would have yourself a situation)

From what I can see, the "100 years" event was the amount of power plants that failed, which in turn required the use of more backup gas...the failing power plants (which were COAL power plants mind you), were the cause of the blackout, not a shortage of gas.

it looks like the backup gas-power plants simply couldn’t fill the gap of the failed coal-plants for a prolonged period of time (most likely because such a power plant break down had never happened before and measures to counter such a scenario had never been taken)

I would also like to note that the article states that "many" NOT "all" gas-plants didn’t have enough gas ;)

”So you're saying the reservoirs that can be filled, can't be emptied? you can't empty a water glass because it's easily filled?" <- this makes Zero sense to me, sorry buddy

DB said...

Even on the short time scale it's all about the flow rate. Supply doesn't scale 100% with demand since at some point infrastructure limits are passed and there is a delay until more infrastructure can be built.

That's what happened in the macro scale in 2008 with global oil supplies and we now have additional built infrastructure and that's what happened in Texas with power outages: the storage infrastructure didn't exist so when the storage tank was depleted there simply was no more.

The situation is analogous to running out of gas in your car and then claiming that there are gasoline shortages.

The proof of that scenario would be obvious: go to the gas station and try to fill up. If you can do it easily there's no shortage for now.

If on the other hand you are told by the gas station attendant that you can only get two gallons THEN there's a problem.

That's EXACTLY what has happened. The gas tank ran out and then it was filled back up a few days later.

This is NOT a case of peak oil shortage and the idea of suggesting that is a shortage isn't just a stretch, it's ludicrous.

Weaseldog said...

Anonymous said, ”So you're saying the reservoirs that can be filled, can't be emptied? you can't empty a water glass because it's easily filled?" <- this makes Zero sense to me, sorry buddy

Ok, lets try it another way, DB argued that you can't empty a natural gas reservoir, because it can be refilled later. So the person quoted in the article was lying, that if the crisis had gone on a few days longer then it would gotten worse.

Weaseldog said...

DB said, "Your opinions on what constitute a peak-oil provoked power outage don't pass the smell test and instead betray a lack of understanding about economics which you claim is a soft science (and thus not worthy of consideration)."

Good strawman. I never mentioned Peak Oil. I love the way you shadow box your strawman.

I've argued that natural gas production in the USA is still stuck at about 1970s levels. Even after shedding 42,000+ factories since 2000, we're still tight.

Natural gas isn't conventional oil by the way. It is a petroleum product. But it's not oil. Peak oil refers to oil, not natural gas.

Weaseldog said...

DB said, "That's EXACTLY what has happened. The gas tank ran out and then it was filled back up a few days later."

Well it didn't run out. The danger was that it was close to running out.

Say you're driving through the Chihuahuan desert in Mexico and you run out of gas a hundred miles froma gas station.

The next day you refill the tank.

Following your argument, you didn't experience a shortage. So you what, drove a hundred miles on an empty tank because you are not out of gas?

Is that your argument? If the plants had run out gas then they would've kept producing electricity and the situation would not have worsened?

DB said...

OK I can't resist answering the least inane two of your multitude of comments.

First of all, check out the title of the blog. That's not a straw man I'm shadow boxing. I'm debunking dieoff. If you choose to participate in this debate on the other side you are taking the part of the dieoff crowd.

State your position. Do you believe peak oil will lead to dieoff?
A simple yes or no will suffice. No bluster.

Also "Natural Gas" isn't oil.
Well duh.

But it *is* a substitute for oil.
And that my friend is the point.

If there are easily switchable substitutes for oil then peak oil is IRRELEVANT. That the substitutes are not perfect substitutes means that there will be cost involved and yes SOME interruption but not (oooooooooh my "strawman" again) any kind of dieoff.

DB said...

@weasel
"DB argued that you can't empty a natural gas reservoir, because it can be refilled later"

Is that REALLY what you think I said or are you intentionally being stupid?

I'll spell it out once more in small words: Of course a natural gas reservoir (i.e. storage tank) can be emptied, it's just not indicative of long term shortages induced by peak oil if it can be refilled very quickly after the short term shortages take place.

I suspect you don't actually read my posts simply because I am on the other side of the fence to you because the holes in your logic and comprehension are atrocious.