An oft-repeated energy statistic states that the United States only holds 3% of the proved petroleum reserves in the world, and yet we use about a quarter of the world's oil output. People often use this statistic to make a general claim that we cannot drill our way to oil independence.
Certainly, it would be foolish to adopt an energy policy that concentrated on drilling and exploration at the expense of research into and adoption of renewable energy sources. That being said, oil will be a vital energy source in the United States for many years to come. And ongoing research taking place in the Williston Basin in eastern Montana and the western Dakotas may end up leading to discoveries that could dramatically narrow the gap between what we produce and what we use over the next few decades.
First, some background: According to the Energy Infromation Administration, at the end of 2005, the United States held proven reserves of approximately 21.7 billion barrels. And during 2005, the United States produced a little bit more than 1.7 billion barrels of oil domestically.
So therefore if we continue producing at approximately 1.7 billion barrels per year, we will completely exhaust our domestic oil in 12 or 13 years, right?
Well, no. What's missing is the fact that we learn more about what we have every year. Our proved reserves statistic gets revised each year, based on new discoveries, adjustments to fields already under production, and so on.
And as it turns out, since 2000, we've revised upwards our proven reserves by nearly the same amount as we've removed from the ground. So despite the fact that we've produced an estimated 11.1 billion barrels of oil during that period, our proved reserves have only fallen from 22.0 billion barrels to 21.7 billion barrels: a mere .3 billion barrel decrease in our proved reserves over a five year period.
So we are far from knowing everything there is to know about our own domestic oil opportunities, and new discoveries of domestic oil are hardly out of the realm of possibility. New domestic discoveries are not only possible, but they indeed occur every year.
And that's why a particular item of geology known as the Bakken Formation underlying the western Dakotas and eastern Montana is so interesting.
US Crude oil production, in the 2007 EIA report, is projected to increase from 5.2 million barrels per day in 2005 to a peak of 5.9 million barrels per day in 2017, primarily as a result of increased production offshore in the Gulf of Mexico. Production is then expected to fall to 5.4 million barrels per day by 2030.
In 2006, EIA projected much steeper declines from 2017 to 2030. They predicted crude oil production to fall from a slightly lower level of 5.8 million barrels per day in 2017, to 4.6 million barrels per day in 2030.
The 2007 report assumes a 16 billion barrel increase in US production because of the application of new technology. The eleven percent increase is expected to be produced using carbon dioxide injection into the rocks, according to energy expert, David J. Bardin, Counsel to Arent Fox Kinter Plotkin & Kahn, PLLC, who is also a former Deputy Administrator of the US Department of Energy.
Although the EIA doesn't break it down, Bardin attributes 3.6 billion barrels of that increased production specifically to the Bakken oil formation, for which he recently said, "ROIP (remaining oil in place) estimates run as high as 500 billion barrels."
Evelyn Pyburn, editor, Big Sky Business Journal
There's a lot of interesting stuff here. For one thing, in one year, the EIA made an upward revision of domestic oil production in 2030 from 4.6 million barrels/day to 5.4 million barrels/day. That's a 17% increase in projected oil production in 2030 in one year. And we have a former high-level official in the Energy Department telling us that a large portion of that increase is attributed to the Bakken Formation.
And then, there's that startling number: 500 billion barrels. Rememember that our current proved domestic reserves are only 21.7 billion barrels; in fact, 500 billion barrels is a larger amount than even the proven reserves of Saudi Arabia (264 billion barrels of proved reserves). Granted, these numbers aren't diectly comparable, because even if that estimate of 500 billion barrels were accurate, much of that oil may not be technically recoverable. But we're still talking about a highly significant amount of oil.
The lofty predictions of Bakken oil trace back to the work of Dr. Leigh Price of the US Geological Survey. Dr. Price (deceased in 2000) left behind years of research into the Bakken, including a paper entitled Origins and Characteristics of the Basin-Centered Continuous-Reservoir Unconventional Oil-Resource Base of the Bakken Source System, Williston Basin. This paper states:
Our calculations suggest that 413 billion barrels of oil have been generated, with a potential upside of 503 billion barrels and a minimum of 271 billion barrels.
A current USGS survery of the Bakken, a continuation of Dr. Price's work, is nearing completion and is due to be released within a year. It is almost certain that the upward revision of long-term domestic oil production projections is based at least partially on this ongoing work. It will be interesting to see how the projections are altered once this study is released.
You may be wondering: why hasn't more exploration and production been occuring in this region already? Well, Pyburn's piece touches on that:
1. As oil prices have risen the past several years, drilling contractors have increased their prices. Drilling costs in the region have tripled, according to a local expert. For the drilling contractors to have such pricing power, it's probably safe to assume that there is some scarcity of contractors with expertise and equipment to drill in the area.
2. The existing pipeline out of the region only has a capacity of 100,000 barrels a day, and is filled to capacity. Producers of additional oil would have to sell their oil at below-market rates to get it into the pipeline. (Larger pumps being installed on the existing pipeline may come online later this year, improving capacity by 30,000 bbl/day. Also, an additional pipeline parelleling the existing pipeline got approval last year.)
3. Current production levels still are minor compared to the more well-known oil-producing areas off the Gulf Coast and in Alaska. However, oil production in the region is increasing rapidly. For instance, oil production has doubled in the past three years in Montana, due to incresases in Bakken production.
Despite the inescapable fact that we must take steps to move away from non-renewable fuel sources for a variety of reasons, the advantages of additional domestic oil production over the next few decades are undeniable. Additional domestic production will create jobs and tax revenues while reducing our trade deficit and decreasing the geopolitical risk of imported oil to our economy. At present, even if we were to cut our oil consumption in half, we would still need to import significant amounts of oil. To put that in perspective, if we could take every passenger vehicle off the road permanently this minute, it wouldn't reduce our oil consumption by 50%.
So if you're interested in energy, remember to keep an eye out for the USGS report on this region-- significant discoveries could end up closing the gap between what we produce and what we use, and put us on a more rapid trajectory toward oil independence.