Thoughts on Energy Today: A shift of Hubbert’s Peak

A few years ago if you would have told me that North America could be energy independent I would have laughed at you, and at the time I would have been right to do so, but things are changing. The estimated recoverable oil in the Bakken/Three Forks alone is probably going to be over 20 billion barrels before the field is totally developed, and that is not counting several other formations that are currently not considered as targets but have great potential. (Bakken reserves have been evaluated by the USGS twice, and is likely due for a third based on industry success 1995 → 151 million 2008 →3.65 billion barrels)

Much to the dismay of the green movement our country is not moving toward renewable-energy sources, and I don’t expect it will anytime soon. Let me explain my reasoning.

Oil companies are in the business of making money, and they are good at it. In the 1940s-1970s they targeted the cheapest oil in the world which just happened to be on-shore oil in the US. Once primary recovery was depleted in traditional oil fields the major companies moved on to greener pastures, and that basic model was in place for more than 40 years. In the 1980s oil prices got high enough to justify developing technology. (i.e. horizontal drilling and fracking). Increased worldwide drilling and political moves caused prices to fall, and new technologies were put on hold until they were needed. In the late 1990s and early 2000s the two technologies were combined which started a new oil boom. By the late 2000s, the boom was in full swing and America was starting to import less foreign oil for the first time in more than 30 years. We are now seeing Hubbert’s Peak be rethought by those who have industry knowledge.

A few years ago this graph represented reality

Now we have seen a significant production increase in domestic production (source)

Hubbert knew that new technologies would be discovered, but he had no way of factoring in the vast amount of hydrocarbons that were not thought of as resources in his time. Many people continue to blindly follow Hubbert’s theory, but I think we are going to see a fundamental shift in thinking over the next few years. Why? Although oil is oil and gas is gas, we might as well be comparing the switch from wale oil to hydrocarbons.

The line of thinking that we hit peak hydrocarbon production sometime between 2005 and 2008 is rampant among most of the general public, and even people who think they understand energy. (including myself less than a year ago) However, the realization that I am coming to is that the technology being developed today may be able to inflate hydrocarbon energy production well beyond anything seen in the past. (For several decades)

North Dakota’s oil production is expected to hit nearly 1 million barrels a day before the Bakken is totally developed. (Far more than current infrastructure can handle [unofficial I have heard 2 million bbls a day could be possible]) Current daily oil production in ND is around 423,000 barrels, and that number increases by 8000+ barrels every day. Monthly total production increase has been around 250,000 barrels, and I expect that will number will grow even faster if next winter is closer to average than last year. (Unless oil drops below $60ish a barrel)

Why are we talking about North Dakota, and who cares?

North Dakota is not horribly special. There are other basins in the United States, and Canada that have similar formations to the Bakken, and while the Bakken gets all the press it only accounted for 11% of North Dakota’s oil production in 2010. Other formations are currently being explored using technology that is being perfected in North Dakota. I don’t expect any other formations to see quite as much influence from the technology as the Bakken, but the Williston Basin is slated to see development for more than 20 years. (The approximate time it will take to fully develop the Bakken play.) During that time many other oil plays will develop in other geologic formations, and neighboring basins and around the world.

North Dakota’s Bakken Formation will likely be used as a model for many other formations in North America and around world. We will potentially see a huge increase in liquid fuel development even though there are a lot of other options. Liquid hydrocarbons have the most infrastructure and are more profitable than any other energy source.

This post is getting long and by now I have lost a few readers, so I’ll wrap it up with this: Hubbert was not wrong he just didn’t have enough information at his disposal. He made his calculations assuming drilling practices of his time. You often hear people make the statement that we are not going to find anymore large oil fields, and geographically those people are likely correct, but re-evaluation of existing resources is going to play a big role in the future. As an example we will fall back to the Bakken which as stated before is not as special as some people make it out to be. The estimated recoverable reserves have officially grown by about 25 fold since the 1990s, and industry leaders are projecting numbers that would make the total number grow more than 100 fold. While the Bakken is somewhat unique other formations that have been largely ignored will also share the same fate once oil companies have time to re-evaluate them as a resource.

Someone beside Hubbert may have a chase to calculate and name a new peak for liquid hydrocarbon production. I think that we are seeing the very beginning of something that will shape the growth of the world for the next few decades.

Things I will leave until another day unless you ask:

Other potential Bakken like formations

The Science: How does this really work? An explanation as to what has changed.

Computing advancements improving modeling and drilling

Potential tertiary recovery techniques that will be utilized for shale formations around the world (Green movement might like this one seriously)

Natural Gas (in some sense will be even bigger than oil in the future)

Political motivation for US deflating reserves (I am currently convinced this is happening)

Political motivation for Arabic countries to inflate reserve estimates. (Known)

If this post makes you angry, you should realize that I’m not a pro-oil nut. For day to day activities, I would like to see local communities make a push to be energy independent. (This includes electric vehicles.) The truth of the matter is that only a functioning government with a well-thought-out energy plan has the ability and power to make sweeping changes to energy development. However, I feel that in our current economic environment, it is more important that we produce energy as cheaply and efficiently as we can. We now have access to enough oil and natural gas to last for several decades, but renewable sources still have a window of high-energy prices, which is beneficial to their development.