More recoverable oil is being discovered in U.S. shale formations, well known for their vast natural gas potential thanks to recent developments in drilling and extraction technology which made shale gas cost-effective to extract.
A few weeks ago we discussed how U.S. shale gas-related companies were now becoming increasingly optimistic about the prospect of economically viable shale-oil, in reference to EOG Resources (EOG) in particular. Their new oil emphasis is partly the result of low natural gas prices, but it’s also the result of better technology enabling them to shift focus.
The latest development of this shale-oil trend is that it’s now believed that North Dakota’s ‘Bakken’ and ‘Three Forks’ shale have substantial amounts of economically-recoverable oil.
Of the estimated 20 billion barrels of oil in the Three Forks formation, about 2 billion barrels, is recoverable. Although the Bakken formation contains about 169 billion barrels, only 2 billion barrels likely will be produced.
That leaves about 4 billion of barrels of oil beneath North Dakota’s surface, Helms said, that should make for about 30 to 40 years of production and if technology improves, possibly more.
Given that the U.S. consumes about 7.5 billion barrels of oil per year, let’s be clear that this development alone is more of an example of oil-from-shale’s viability rather than a sudden cure to America’s fuel needs.
Yet it is an important example of shale-oil progress. It wasn’t long ago that many energy industry professionals were sceptical of shale-gas’s viability (many remain sceptical despite major investments into shale gas by companies such as Exxon (XOM)). Now shale gas is seen as economically viable.
scepticism towards shale oil is even more entrenched than it was for shale gas. Thus it is encouraging to see energy industry leaders expressing confidence in its potential, this time from Continental Resources (CLR):
“I made a statement two years ago I thought the play (Bakken and Three Forks) has 8 billion barrels of oil,” said Hamm, chairman and chief executive officer of Continental Resources Inc., an independent oil and gas company based in Enid, Okla.
Continental was one of the first to tap the Bakken formation in North Dakota’s oil patch more than 20 years ago. And Hamm said his company was among the first to aim for the underlying Three Forks.
About half the wells aimed at the Three Forks belong to Continental Resources, Hamm said.
Continental has trademarked the process of drilling multiple wells into the Bakken and Three Forks from one spot, Hamm said.
As Continental says in the graphic above, Bakken is the ‘Walmart’ of shale oil right now and they expect its potential to keep growing.
Continental’s CEO has been half right so far, in terms of the number of recoverable barrels, but give the exploration and production industry time, and they’ll be able to extract more and more oil at reasonable costs over time. This is good news for the U.S. energy companies involved and good news for American energy security.
Don’t forget — one reason that Shale-oil is economic these days is that it can piggy-back on top of equipment used for the extraction of shale-gas, there are also massive amounts of U.S. oil reserves technically locked in shale formations, even though much of it can’t be recovered yet in an economic fashion. Anywhere that allows for a ‘two-fer’ provides low-hanging fruit for development.
Note: The author owns shares in Chesapeake Energy (CHK), shale-related play. Investors the author speaks or works with may own securities related to any of the companies mentioned.