Setting the Record Straight on U.S. Oil Reserves
The Difference Between Oil Shale and Oil from Shale Formations
There has been some confusion lately about the overall extent of U.S. oil reserves. Some claim that the U.S. has hundreds of billions or even trillions of barrels of oil waiting to be produced if the Obama Administration will simply stop blocking development. So, I thought it might be a good idea to elaborate somewhat on the issue.
Oil production has been increasing in the U.S., primarily driven by expanding production from the Bakken Shale Formation in North Dakota and the Eagle Ford Shale in Texas. The oil that is being produced from these shale formations is sometimes improperly referred to as shale oil. When politicians speak of hundreds of billions or trillions of barrels of U.S. oil, they are most likely talking about the oil shale in the Green River Formation in Colorado, Utah, and Wyoming. Some have assumed that since we are accessing the shale in North Dakota and Texas, the Green River Formation and its roughly 2 trillion barrels of oil resources will be developed next. But these are very different types of resources.
Even though the oil in the Bakken and Eagle Ford is being extracted from shale formations, the term shale oil is reserved for something entirely different. The oil in these shale formations actually exists as oil, but the shale does not allow the oil to flow very well. This oil is properly called “tight oil”, and advances in hydraulic fracturing (fracking) technology have allowed this oil to be produced. The estimated amount of oil in place (the resource) varies widely, with some suggesting that there could be 400 billion barrels of oil in the Bakken. However, the reserve (the amount that can be technically and economically produced) is a very low fraction of the resource at 2 to 4 billion barrels (although some industry estimates put the recoverable amount as high as 20 billion barrels or so). For reference, the U.S. consumes a billion barrels of oil in about 52 days, and the world goes through a billion barrels in about 11 days.
The Eagle Ford formation in Texas is similar to the Bakken, in that it is oil in tight formations that is being accessed via fracking. The amount of technically recoverable oil in the Eagle Ford is estimated by the U.S. Department of Energy to be 3.35 billion barrels of oil.
Without a doubt, these two formations are a major factor in the current resurgence of U.S. oil production. But the Green River formation is the source of talk of those huge oil resources — larger than those of Saudi Arabia — and it is a very different prospect than the tight oil being produced in North Dakota and Texas. The oil shale in the Green River looks like rock. Unlike the hydrocarbons in the tight oil formations, the oil shale (kerogen) consists of very heavy hydrocarbons that are solid. In that way, oil shale more resembles coal than oil. Oil shale is essentially oil that Mother Nature did not finish cooking, and thus to convert it into oil, heat has to be added. The energy requirements — plus the fact that oil shale production requires a lot of water in a very dry environment — have kept oil shale commercialization out of reach for over 100 years.
Summarizing the Definitions
To summarize, let’s review the definitions for the important terms discussed here:
Oil resource — the total amount of oil in place, most of which can’t be recovered
Oil reserve — the amount of oil that can be recovered economically with existing technology
Oil shale — sedimentary rock that contains solid hydrocarbons called kerogen (e.g., Green River Formation)
Shale oil — the oil that can be obtained by cooking kerogen
Tight oil — liquid hydrocarbons that are obtained by hydraulic fracturing of shale formations (e.g., Bakken Formation and Eagle Ford Formation)
Conclusion: Resources are not Reserves, and Tight Oil isn’t Shale Oil
It is pretty clear that at current oil prices, developments in the tight oil formations will continue. It is not at all clear that even at $100 oil the shale in the Green River formation will be commercialized to produce oil. In order to commercially convert the oil shale into oil, a much less energy intensive method of producing it must be found (or, one would have to have extremely cheap energy and abundant water supplies to drive the process). My prediction is that despite having an oil shale resource that may contain the energy equivalent of 2 trillion barrels of oil, the reserve will continue to be zero for quite some time because there are too many technical hurdles to overcome to realize a commercially viable process.
Link to Original Article: Setting the Record Straight on U.S. Oil Reserves
- For those who want an inside edge in the energy sector.
- Written by veteran energy analysts and insiders with a track record of accurately predicting trends.
- 100% FREE!
- And Much More...
2014 EIA Energy Conference
July 14-15, 2014 - Washington, D.C.
Platts 4th Annual NGLs Conference
Sep. 29 - Oct. 1, 2014 - Houston, TX