Texas, North Dakota tell happier shale tales than California

HOUSTON — Two weeks after government officials all but demolished California’s shale-oil reserve estimate, Houston oil analysts offered a more optimistic view of plays in Texas and North Dakota.

Oil producers eventually could drain 21 billion barrels of crude out of the Bakken Shale in North Dakota — nearly three times the government’s estimate of recoverable reserves in the region, Wood Mackenzie analyst Jonathan Garrett said during a media briefing by the energy research firm this week in Houston.

Another analyst, Cody Rice, presented Wood Mackenzie’s assessment of the Eagle Ford Shale in South Texas, where it projects this year’s drilling expenditures will be $27 billion — $4 billion higher than estimated previously.

The U.S. Energy Information Administration said last month that about 600 million barrels of oil can be tapped from California’s Monterey Shale formation — a big dip from a previous estimate of 13.7 billion barrels of recoverable oil.

But the government’s forecast that the Bakken has 7.4 billion barrels of light sweet crude is far too low, Garrett said, because it assumes oil companies will cluster their wells in the same density as they do now through the decade.

Posing a question: How do yoga revenues compare with Eagle Ford costs?

Wood Mackenzie believes technology advances will enable North Dakota operators to extract more oil from the region through a process called down-spacing, in which companies pack oil wells closer together on their acreage and target oil deeper within the reservoirs.

It makes more financial sense for a company to drill deeper into its own acreage than to snap up more pricey land, Garrett said.

U.S. analysts once believed the Bakken held only 151 million barrels of recoverable oil. That was in 1995, long before the shale boom. Now, operators are overcoming technological hurdles to make deeper oil pay zones commercially viable, and to boost the ultimate amount of oil they can recover from the shale plays.

The growth in North Dakota is part of the reason North American oil company reserves have nearly doubled from 2007 to 2013 to 130 billion barrels, according to the Wood Mackenzie analysis.

It projects U.S. daily oil production will rise to nearly 9 million barrels in 2020, a threefold increase from 2010.

In discussing the Eagle Ford, Rice said oil companies will drill 3,000 wells with the $27 billion they spend in the South Texas play this year.

Wood Mackenzie recently boosted its projection of the Eagle Ford’s 2020 daily output to 2 million barrels, a 23 percent increase and nearly as much as Alaska’s prolific North Slope pumped at its 1980s peak.

Operators, Rice said, would have to spend another $157 billion before they exhaust the region – and that doesn’t account for the possibility of deeper oil finds, increasing natural gas prices and technology advances.

“Production has grown dramatically,” Rice added, “and we expect production to continue growing.”


Also on FuelFix:

Report: Bakken oil output to soar as spending hits $15B