We’ve all heard the MSM and politicians crow about the miracle of shale oil and how it is going to save America and make us energy independent. The storyline being sold to the masses is that we have 100 years of shale oil under our feet. What a crock of shit. We have a government agency whose job is to spin our energy situation in the most optimistic manner possible reporting that we have 58 billion barrels of technically recoverable shale oil. This is surely the most optimistic scenario. Let’s assess the 100 years storyline.
We consume 18 million barrels of oil per day. That amounts to 6.6 billion barrels per year. If we have 58 billion barrels of technically recoverable shale oil in the U.S., that means we have 8.8 years of supply at current consumption rates. If our economy ever recovers and goes back to consuming 20 million barrels per day, the supply would only last for 7.9 years.
Now we get to the part the MSM and politicians never talk about. It may be technically recoverable, but is it economically recoverable? A company will only extract oil if they can make a profit doing so. It is extremely expensive to extract shale oil. The cost to extract shale oil is approximately $80 to $90 per barrel. So don’t count on $2.50 per gallon gasoline in the future. In the good old days you would essentially stick a straw in the ground and pump thousands of barrels per day for years. An average shale oil well requires massive amounts of water, steel, chemicals, and tankers. The average shale oil well pumps 58 barrels per day and the depletion rate is astronomical. The EROEI is barely above that of ethanol.
Oil will always be a fungible product. There is no law or regulation that states that Bakken oil must be sold in the U.S. It will go to the highest bidder. As consumption grows in the developing world, it won’t matter that our consumption is flat. The price will go up. If the price breaches $120 per barrel our suburban sprawl economy grinds to a halt. If it drops below $80, the producers will stop drilling wells. Shale oil is our Red Queen.
World has 10 years of shale oil, reports US
By Gregory Meyer in New York
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.
The US Department of Energy estimated technically recoverable shale oil resources of 345bn barrels in 42 countries it surveyed, or 10 per cent of global crude supplies. The department had previously only provided an estimate for US shale reserves, which it on Monday increased from 32bn barrels to 58bn.
Monday’s assessment indicated that Russia has the largest shale oil resource, with 75bn barrels. Russia and the US were followed by China at 32bn, Argentina at 27bn and Libya at 26bn.
The report said gas from shale formations increased world natural gas resources by 47 per cent to 22,882tn cu ft.
The question of whether other countries can replicate North America’s success in drilling in shale rocks has captivated geologists and diplomats. US crude imports are at a 16-year low, reconfiguring the map of global oil trade.
“Looking at shale resources has typically been understated by outside market participants because the geology is new and the technology is growing rapidly,” said Edward Morse, head of commodities research at Citigroup.
Production from shale has helped keep a lid on crude oil prices at about $120 a barrel, giving western countries leverage to impose sanctions on Iran, a key supplier. World oil demand is about 90m barrels a day, suggesting the world shale oil resource covers 10.5 years of consumption.
The US and Canada have advantages including large domestic pipeline networks. Both countries also have enough water and specialised drilling rigs to support fracking, which involves pumping huge quantities of liquid and sand underground to crack open rocks and release energy reserves.
Private US landowners also have rights to hydrocarbons beneath their properties. According to Mr Morse, this situation istruly unique to the United States and makes oil and gas exploration more efficient.
The US report looked only at technically recoverable resources without regard to profitability, and warned the estimates are highly uncertain.
Adam Sieminski, head of the department’s Energy Information Administration, said: Today’s report indicates a significant potential for international shale oil and shale gas, though the extent to which technically recoverable shale resources will prove to be economically recoverable is not yet clear.
Prospective shale areas including formations beneath large oilfields in the Middle East and the Caspian Sea region were left out of the assessment.
The International Energy Agency said in its five-year oil market forecast last month: Although uncertainties remain, it is impossible to ignore the possibility that current non-conventional technologies, as they spread and get both perfected and mainstreamed, could lead to a wholesale reassessment of global reserves.
The new US estimate of world shale gas resources at 7,299tn cu ft is 10 per cent higher than a previous estimate made in 2011.
Inside the US, shale now constitutes 30 per cent of oil and 40 per cent of natural gas production, the department said.