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By Robert Rapier on May 7, 2013 with 7 responses

Estimate for Williston Basin Oil Resources is Doubled

Last week the U.S. Geological Survey (USGS) provided an update of oil and gas resources in the Bakken region. This was their first update since a 2008 report that estimated mean undiscovered volumes of 3.65 billion barrels of oil and 1.85 trillion cubic feet of natural gas in the region. The new estimate includes the Three Forks formation which largely lies underneath the Bakken in the Williston Basin that sprawls across North Dakota, South Dakota, Montana, and southern Saskatchewan.

(Related: The Energy Industry’s Production Challenge: 100 Million Barrels Per Day)

The new USGS assessment stated that the Three Forks formation had not been previously assessed, but that an assessment was warranted based on a rise in drilling and production in the formation. Inclusion of the Three Forks formation added an estimated mean resource of 3.73 billion barrels of oil to the estimated 3.65 billion barrels of oil in the Bakken formation for a total estimated resource of 7.4 billion barrels of undiscovered, technically recoverable oil in the two formations. The two formations were also estimated to contain a mean of 6.7 trillion cubic feet (tcf) of undiscovered, technically recoverable natural gas and 0.53 billion barrels of undiscovered, technically recoverable natural gas liquids (NGLs).

Three Forks Formation

Figure 1. Location of the Three Forks Formation Assessment Units (AUs) in the Williston Basin. Inset map shows location of the Bakken Total Petroleum System (TPS). Source: USGS

The new assessment represents a doubling of estimated undiscovered, technically recoverable oil and a nearly threefold estimated increase in mean natural gas and mean NGL resources from the 2008 assessment. The increase in estimated resources is primarily due to the inclusion of the Three Forks Formation. However, Rigzone reported that a USGS spokesperson explained that the size of the Bakken estimate also increased:

“It’s deceptive, because although our current estimate of 3.65 billion barrels of oil for the Bakken is numerically the same as the 2008 assessment for the Bakken, you have to remember that oil companies have been producing millions of barrels of oil since the 2008 assessment, gradually transforming the undiscovered resources to the proven reserves then production barrels,” the spokesperson commented. “Because our assessments do not include proven reserves or produced barrels of oil, the 3.65 billion does represent an increase.”

While recognizing that “undiscovered resources” are not quite a bird in the hand, these estimates are likely to assure that the oil boom in North Dakota continues for some time. If nothing else, companies will be searching for oil there.

(Read More: The Effect of New Production Methods on U.S Oil Output)

How much oil does this represent? The US currently uses nearly 7 billion barrels of oil per year, so the total from the new assessment of undiscovered oil would represent just a bit over a year of US oil consumption at current rates. Petroleum imports have been declining, but the US still imports about 3 billion barrels of oil per year. Thus, in terms of imports, this new assessment of undiscovered oil amounts to a little over 2 years of US petroleum imports.

So, while it is a lot of oil, it is going to take a lot more than that to make the dreams of US petroleum independence come true. I do expect US oil production to continue to climb for another 3 to 5 years though, primarily as a result of a continued growth in oil production in the Williston Basin, as well as the Permian Basin and Eagle Ford Shale in Texas.

(Related: The Amazing Reversal of the US Oil Industry)

Link to Original Article: Estimate for Williston Basin Oil Resources is Doubled

By Robert Rapier. You can find me on TwitterLinkedIn, or Facebook.

  1. By ben on May 7, 2013 at 10:26 pm

    This was expected based on some nudging of USGS by a certain member of the
    US Senate who hosted a meeting in recent months between the agency and a half-dozen oil/gas firms operating in the basin. Such upward revisions logically reinforce investor impressions about the upside of continued exploration/development. Your points about the relatively modest parameters of such upside offers an appropriate tempering of enthusiasms about the true scale and longevity of exploitable reserves.

    The search for additional reserves continues against the backdrop of an insatiable global appetitie for fossil fuels notwithstanding a welcome decline in overall demand among the leading western economies due to a combination of factors–some of which will prove temporary. Recent demand destruction is helping ease energy prices, but underlying replacement costs remain far above the cost structure that we saw before energy demand of the BRICS reached historic levels of growth.

    Prospects for steady demand growth among the world’s emerging economies when combined with near-term relief from disruptively high average annual prices of the past few years, does not bode well for farsighted adjustments in energy policies and markets. Further slippage in energy prices in the months ahead may only magnify the challenges ahead, even as most consumers welcome the “good news” of cheaper fuel for the vacation season. The notion of suffering from success does come to mind.

    Thanks for your balanced coverage of the energy marketplace.

    Ben

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    • By rbmacn on May 8, 2013 at 7:05 pm

      “US Senate who hosted a meeting in recent months between the agency and a half-dozen oil/gas firms operating in the basin.”

      Got a link ? Like one that explicitly states the meeting included discussions of the sort that ‘logically reinforce … impressions’ ?
      Cause otherwise I see a lot of nothing but air between these two excerpts.

      “Such upward revisions logically reinforce investor impressions about the upside of continued exploration/development. “

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    • By ben on May 9, 2013 at 4:15 pm

      rbmac

      Here’s a press release that offers clarity. The practical objective was, and remains, to enhance confidence about the economic potential of the basin.
      There isn’t anything nefarious to such initiative. Quite the contrary. In fact,
      I was informed at the time that the senior staff particpating from USGS
      were eager to speak publicly about the constructive nature of the exchange
      in the wake of the meeting.

      http://www.hoeven.senate.gov/public/index.cfm/news-releases?ID=4261a774-3731-4e2e-81ca-a897452fae4f

      I do hope this supplements available oxygen:)

      Ben

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      • By rbmacn on May 10, 2013 at 7:08 pm

        Thanks :-)

        BAU, as it were, eh ?

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  2. By Benjamin Cole on May 8, 2013 at 12:07 am

    At $80 a barrel, there is hardly an oil field in the world not worth developing.

    Yet demand is soft.

    I sense we are into a long period of oil price stagnation. perhaps like the 1979-1999 twenty year period, but perhaps more flat than down.

    Europe and Japan use less oil every year, and the USA might have turned the corner too. What if China mandates electric cars the way they have mandated electric bikes? We may be seeing Peak Demand now, or close to it.

    The good news is that oil can go higher, but probably not by much. At $100 a barrel we see immediate demand destruction, and, of course, long-term demand reduction. Business and consumers adapt, but many of the adaptations are long-lasting. A new car that gets 45 mpg rather than 20 mpg. The 18-wheelers are close to switching the LPG or CNG.

    I am not sure even at $100 a barrel whether a PHEV makes sense, but the GM Volt has proved the technology is there, or very close. Obviously, at some price, the buyer switching to a GM Volt or similar cuts his consumption of gasoline by a radical amount, as in two-thirds or more. we are not talking changes at the margin; we are talking wholesale disruptive technologies with the PHEV.

    It may be in 20 years we are glutted with oil. Who knows what will happen in Iran, Iraq, Nigeria, Mexico, Venezuela, Russia, Libya et al, all of which have huge crude resources relatively unexploited? Even Brazil.

    Iran and Iraq alone could add 20 mbd to global supplies.

    Making prediction is hard, especially about the future and right now that calls the oil market.

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  3. By ben on May 8, 2013 at 10:55 am

    $80 meets current production costs, however, continued exploration/development will introduce higher costs. I wish we were in for price stagnation. I’m afraid the volatility of the past decade shall remain the new normal in the years ahead, even as we continue the transition into alternative energy sources.

    In solving current energy storage constraints–marked progress on that challenge should occur within the decade–the tempo of the impending transition will accelerate. These technical advancements will support a fair slice of the transportation market though I see commercial transport as the bigger/logical market segment for application.

    At the risk of deflating the hopes of our friends in the ag/fibre industry, we shouldn’t expect biofuels to play too large a role in the transition compared to other renewable options. The pivot point here is the disciplines imposed by process energy effciencies. Don’t get me wrong, the reality of coalition politics ensures a place for biomass, it will just evolve toward biopolymers and biomaterials for the manufacture of packaging, fabrics and countless industrial and consumer products. Unlike today’s modest footprint, there will soon be hundreds of major/minor companies involved in the production of these materials across the globe. We are beginning to see some of this capacity emerging here at home, in Europe and, most notably, in SE Asia.

    In short, happy days are not here again by any stretch. Yet, we are in the early stages of a seachange in not only the means by which the world economy generates economic output, but a recalibration of the fundamental ways in which we view production and logistical effciciencies. Sources and uses of energy are central to
    the recalibration. Production costs, as ever, will dictate the speed of economic realignment.

    Ben

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    • By Benjamin Cole on May 9, 2013 at 11:16 pm

      I expect commodities and all manufactured goods to get relatively cheaper in the future. The private sector does more for less continuously. That is the nature of competition.

      Really, was there a single peak-doomer in 2007 who predicted the current surge in USA oil and gas production? Not a one. I read RR’s blog, and Oil Drum and all that. No one predicted this surge.

      But it happened. And the industry is getting better and better at working shale. Is there another surprise on the upside? At more than $80 a barrel, maybe. You do not know—you did not predict the current surge. So why do you think you know about the next surge, or lack of it?

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