Energy has been the theme of this week’s blogs, and we have paid particular focus to the latest developments in oil and gas. Yesterday, we covered the divisive topic of peak oil and examined the wide range of factors that have led to a rise in oil production rates.
Today, we are going to continue our coverage of the oil and gas industry by looking at new analysis from consulting firm Rystad Energy. Their data reveals the United States possesses more recoverable oil reserves than both Saudi Arabia and Russia. Interestingly, it also shows that more than fifty percent of remaining U.S. oil reserves are from unconventional shale oil.
It was only three years ago that the United States trailed behind Russia, Saudi Arabia and even neighbours Canada in Rystad’s estimates of recoverable oil. It begs the question, how have American oil reserves grown so dramatically in the intervening period?
The short answer is technological advancements. According to Rystad, more than half of the United States’ remaining reserves are unconventional shale oil sources. With horizontal drilling, it is now possible to squeeze oil and gas from shale formations, and increased productivity has cut the cost of extracting the oil.
The U.S. is now extracting oil from shale formations in North Dakota and the Permian Basin in Texas. Texas holds more than 60 million barrels of shale oil alone. To put this into context, the entire nation of Mexico has only 72 million barrels of oil.
However, fracking has drawn significant criticism from environmentalists, who have raised concerns over the possible adverse public health implications of hydraulic fracturing activity.
Rystad’s analysis includes proved reserves, probable reserves and recoverable oil in as-yet undiscovered oil fields. Here is how these are defined:
- Proved Reserves: Those that can be produced with reasonable certainty.
- Probable Reserves: Have about 50% certainty of being produced.
- New Discoveries: Fields where nothing has been found yet but where recoverable amounts of oil are likely to exist.
According to Rystad’s estimates, the United States sits fourth in the world for proved reserves, behind Saudi Arabia, Russia and Iran. It estimates total global oil reserves at 2092 billion barrels, or 70 times the current production rate of about 30 billion barrels of crude oil per year.
However, the study raises some serious concerns about the future of oil globally. The firm released a press release, in which it said:
“This data confirms that there is a relatively limited amount of recoverable oil left on the planet. With the global car-park possibly doubling from 1 billion to 2 billion cars over the next 30 years, it becomes very clear that oil alone cannot satisfy the growing need for individual transport.”
There is hope that the demand for electric cars may alleviate some of this demand. But they currently make up a small portion of global car sales and, in many countries, the infrastructure isn’t in place to support their requirements.
Despite these large reserves, the United States oil market has been severely affected by the recent drop in oil prices. Several oil companies have been forced to file for bankruptcy, and thousands of jobs have been lost. There was further bad news this week, as oil markets tumbled 4 percent on Wednesday.
The Energy Information Administration (EIA) says crude stockpiles fell less than expected last week, while gasoline stocks also unexpectedly rose. Analysts had predicted that low pump prices would boost gas usage during, what is usually, a busy summer driving season.
The International Energy Agency (IEA) has warned of a global oil glut, saying surging crude stocks have pushed floating storage to seven-year highs.
The decline in crude oil prices has affected the oil and gas market in a multitude of ways. One common trend we’ve seen in all of our blogs this week is the industry’s determination to develop and implement improved technologies that can increase productivity and reduce costs.
For more insights into the oil and gas industry, read our digital oilfield technology, the adoption of water-based fluids and more.
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