Why US Oil Production Won't Peak Anytime Soon
The U.S. shale oil revolution continues to defy the skeptics, and the country is now producing a record 11 million barrels per day (MMbpd) of crude. Helped by higher prices, production has been up 18 percent since the start of this year alone. Output has exploded 120 percent over the past decade to heights not dreamed about. Production was long thought to have peaked at 9.6 MMbpd back in 1970.
The rush to shale has emanated from the rapid evolution and deployment of fracking and horizontal drilling technologies to extract petroleum and natural gas from shale rock. Texas and North Dakota have been at the forefront, with the former now yielding more oil than Iraq, the world’s fourth largest producer.
Looking forward, given that the United States has accounted for 60 percent of new global oil supply since 2008, one of the most pressing energy concerns remains: how long can the United States continue to produce increasing amounts of oil?
It’s surely a difficult question to answer. The shale bonanza itself has proven that predicting future energy production is a fickle business. Back in 2007, for instance, no forecasting body was projecting how quickly a U.S. shale oil (and natural gas) surge would not just change the U.S. outlook but also transform energy markets around the world. Despite using the most advanced forecasting techniques possible, both the Energy Information Agency’sNational Energy Modeling System and the International Energy Agency’s World Energy Model were completely blindsided.
So it is clear that nobody can be fully counted on to accurately predict future U.S. crude oil production. One reason is that the benefits of higher prices augmented by the non-stop advance of evolving technologies for production cannot be properly factored into any forecasting model. After all, these factors are always in flux and therefore ultimately unknowable.
We do know, however, that false pessimistic predictions regarding the future ability of U.S. companies to produce more petroleum have been around since the inception of the industry, when Colonel Edwin Drake’s first oil well was drilled in Pennsylvania in 1859. The record is known: “peak oil” theorists have been proven wrong every time.
Indeed, too many fail to appreciate oil as an economic commodity powered by market changes, namely the constant advance of extraction technologies. The obsession with reserves (what’s currently available) instead of resources (what’s potentially available with price changes and better technologies) has made most Americans completely unaware of how much oil we have at our disposal.
Proved reserves can grow over time and estimates of the recoverable resource change as new information is acquired—through drilling, production, and technological and managerial development. For example, BP plc reports that the United States now has 50 billion barrels of proven crude oil reserves, a 66 percent boom over the past decade.
The U.S. oil resource is measured in the hundreds of billions of barrels, maybe more. And it is obviously impossible to accurately predict “how much oil we have,” as some 95 percent of the immense, resource-rich U.S. Outer Continental Shelf is off-limits to oil and gas activity.
In fact, without drilling a single new well or making a new discovery, U.S. oil supplies could drastically be expanded. At least two-thirds of the total petroleum in a well is typically left behind after primary and secondary operations because it is too difficult or expensive to extract.
Now a tertiary technique that produces 0.5 MMbpd in the United States, CO2-based enhanced oil recovery (EOR) will grant us even more access to this hard-to-reach oil, while storing CO2 safely underground. Like shale has been, large-scale CO2-EOR recovery is the logical next step in turning the “unconventional” into the “conventional” when it comes to crude oil extraction.
For all of these reasons, it is easy to see why the EIA in recent years has continued to look farther into the future and envisioned more and more U.S. crude production (see Figure).
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