Sell at $115 bbl; Produce at $15 bbl; Profit of $100 bbl

...certain oil fields in places like Iraq and Saudi are still pulling oil up at a cost of about $10 per barrel.

This $100 oil malarkey is a function of an explicit cartel (OPEC), dangerously unregulated commodity oil trading in global investment banks and the background noise of those who think oil will soon be extinct. _IrishExaminer

Oil production costs vary wildly from one region of the world to another -- even from one adjacent oil field to another adjacent oil field. Profits for some producers are much higher than for others. Let's look at some comparisons of production costs:

The first table comes from the USEIA.
EIA:

Costs for Producing Crude Oil and Natural Gas, 2007–2009
2009 Dollars per Barrel of Oil Equivalent¹

	Lifting Costs	Finding Costs	Total Upstream Costs
United States – Average	$12.18	$21.58	$33.76
On-shore	$12.73	$18.65	$31.38
Off-shore	$10.09	$41.51	$51.60
All Other Countries –Average	$9.95	$15.13	$25.08
Canada	$12.69	$12.07	$24.76
Africa	$10.31	$35.01	$45.32
Middle East	$9.89	$6.99	$16.88
Central & South America	$6.21	$20.43	$26.64

¹5,618 cubic feet of natural gas equivalent to one barrel.

Source: Tables 10, 11 and 12, Performance Profiles of Major Energy Producers, 2009.

Last reviewed: November 1, 2012

The next table comes from the IEA:

Oilfields                   Estimated Production
 /source                        Costs ($ 2008)
 Mideast/N.Africa oilfields         6 -  28
 Other conventional oilfields       6 -  39
 CO2 enhanced oil recovery         30 -  80
 Deep/ultra-deep-water oilfields   32 -  65
 Enhanced oil recovery             32 -  82
 Arctic oilfields                  32 - 100
 Heavy oil/bitumen                 32 -  68
 Oil shales                        52 - 113
 Gas to liquids                    38 - 113
 Coal to liquids                   60 - 113
 
 Source: International Energy Agency World Energy Outlook 2008
 

Bakken oil & gas producer GEOI:

Net Oil and Gas Production, Average Price and Average Production Cost

The net quantities of oil and gas produced and sold by us for each of the three fiscal years ended December 31, the average sales price per unit sold and the average production cost per unit are presented below.

		Year Ended December 31,
		2008			2007			2006
Oil Production (MBbls)			743			392			184
Gas Production (MMcf)			2,962			1,648			577
Total Production (MBOE)*			1,236			667			280
Average sales price (net of hedging):
Oil per Bbl		$	82.42		$	67.20		$	54.61
Gas per Mcf		$	8.12		$	6.19		$	6.83
BOE		$	68.96		$	54.74		$	49.92
Production cost per BOE**		$	27.46		$	23.67		$	20.37

*	Barrels of oil equivalent have been calculated on the basis of six thousand cubic feet (Mcf) of natural gas equal to one barrel of oil equivalent (1 BOE).

Notice that as the price of oil goes up, the cost of production per barrel also goes up -- due to automatically increased tax rates. Also notice that the cost of production given by GEOI is much lower than the $60 to $80 per barrel prodution cost usually quoted for tight oil.

This graphic is a big picture comparison of different regions and countries. Better technologies for tight oil, oil sands, and other unconventional oil production, are pushing production costs down -- while prices seem to be stuck on an undulating plateau.

Clearly the Persian Gulf countries are sitting in the best seats in terms of watching the oil money flow in. Russia is not doing too badly either -- if not for corruption in high places, stripping away oil profits for wasteful personal consumption by cronies.

The best North American oil producers are enjoying a profitable season, and are happy for it. Even if oil prices drop to $60 a barrel, many of the North American producers will be able to keep producing long enough to wait out the slump, and catch the ride back up.

Peak Oil As You've Never Seen It

Stuart Staniford provides an evolving look at oil production numbers in The Bumpy Plateau Tilts Upward. Using EIA numbers, Stuart breaks liquid fuel production down into crude + condensate, natural gas liquids, refinery gain, and other liquids. The composite picture shows a slow rise in overall production, including a slow but definite 0.33% rate of rise in crude oil + condensate production.

Early Warning

The recent Exxon energy outlook to 2040 indicates that both oil demand and oil supply are likely to rise. The Exxon report accounts for most of the coming rise in oil production by advances in unconventional oil production.

By 2040, only about 55 percent of the world’s liquid supply will come from conventional crude oil production. The rest will be provided by deepwater, tight oil and NGLs, as well as oil sand and biofuels, as technology enables increased development of these resources. As we look to the future, energy sources considered “unconventional” today are rapidly becoming conventional, thanks to the technologies available to produce them, giving them an increasingly significant role in the global energy mix. _Exxon 2040 Outlook

The Exxon report significantly understates the coming of synthetic fuels, which are likely to achieve a significant (10%+) proportion of overall liquids by 2030. The report's demand estimates to 2040 are likely to be overstated, due to overly optimistic assumptions about global economic growth.

All the same, global population growth is likely to continue for decades, creating its own rise in demand for new liquid fuel supplies as long as a significant global economic collapse can be avoided.

In the face of global political / economic mismanagement, oil has become a type of global quasi-currency and repository of wealth in its own right. Oil prices have come to occupy a much greater role to the global economy, financial systems, and geopolitics, than as a mere price of fuel. This importance to multiple key global systems and institutions provides more price support to oil markets than might be assumed.

As long as the greater part of conventional oil reserves are held by oil dictatorships and their national oil companies, the free-market oil producers will have to settle for unconventionals such as deep sea oil, tight oil, natural gas liquids, and synthetic fuels such as GTL, CTL, BTL, bitumens, kerogens, and the like. This growing dependency on more expensive sources of liquid fuel is another reason for higher oil prices than would have otherwise been expected at this stage of development of the global hydrocarbon complement.

Nevertheless, the prolonged production plateau is likely to continue to rise along with population growth and consequent demand growth -- as long as price signals are allowed to operate in markets.

A look at the ongoing oil production plateau by the Total Chairman and CEO

Global Oil Production Booming; Demand is Softening

Oil prices have remained remarkably stable over the past few years, considering the impressive price boom and bust of 2007 - 2008 - 2009. Peak oil doomers have been particularly disappointed at the failure of their predictions of near-term global collapse -- made so gleefully in the heady days when it was still possible for a halfway intelligent person to believe that oil production had permanently peaked in 2005. But the real world still holds a lot of surprises for people who believe they understand its energy complement -- or even its climate, for that matter.

The reason for the oil price softness is slowly but surely being revealed. Oil and gas production is booming globally but particularly in the US to the point where just last month, the International Energy Agency projected that “extraordinary growth in oil and natural gas output in the United States will mean that … the United States becomes a net exporter of natural gas by 2020 and is almost self-sufficient in energy, in net terms, by 2035.”

According to the EIA, the average cost of production is lowest in the Middle East at around $US17 a barrel, with a global average around $US25 a barrel. This suggests the low will be a little above that, barring a demand free-fall. In the US, the cost of production is in the mid $US30 range, all of which suggests a level as low as $US40 is possible.

Add to that the tepid growth phase of the global economy and price trends should be down. _BusinessSpectator

There is a lot more oil to be discovered, particularly around the great underexplored areas of the planet. Even the Persian Gulf is underexplored compared to North America, by a factor of roughly 1,000.

“We see an easing of oil prices [in 2013] as demand remains weak,” explained Peter Kiernan, lead energy analyst for the Economist Intelligence Unit, adding that even fast-growing emerging markets and non-OECD nations will experience a poor economic performance next year.

...A “shale revolution” in the U.S. promises to change the market landscape. “U.S. production of shale gas has exploded with a nearly 50% annual increase between 2007 and 2011,” a report by the National Intelligence Council noted, while shale oil production, still in its infancy, could bring anywhere from 5 to 15 million barrels per day by 2020 at a break-even price as low as $44 to $68 per barrel. “By 2020, the U.S. could emerge as a major energy exporter,” the report added. _Oil 2013

This is bad news all around for aging peak oil doomers, who sit wanking in their circular echo chambers.

It is also bad news for many supporters of US President Obama. Obama has backed dozens of failed or failing big green energy startups at taxpayer expense, to please green political backers and to enrich the bank accounts of campaign bundlers and other crony supporters.

Obama favours intermittent unreliables, but it is the hydrocarbons and nuclear power -- both of which Obama dislikes -- that deliver reliable energy, power, and fuels. Obama was the accidental beneficiary of an unplanned US shale boom. But he is happy to take the credit for an economic boom that only happened because his EPA was too slow to kill it before it bloomed.

And now that the US oil & gas boom is proceeding ahead, despite Obama, the UK and the EU may be next. And don't forget China. If Australia can dump its foolish green "energy suicides", it might wish to join the global party.

US Oil Demand Dropping; Oil Production Rising

At the same time that US oil consumption is dropping:

...2012 is on pace to have the lowest monthly average oil consumption since 1996 despite sixteen years of sometimes uneven population, vehicle travel and GDP growth. For the first six months of 2012, US oil demand averaged 18.52 million barrels per day (mb/d), a decline of 11 percent from the 2004 peak of 20.8mb/d. _EnergyPolicyInfo

US oil production is rising:

U.S. production of oil and other liquid hydrocarbons is on track to rise 7 percent this year to an average of 10.9 million barrels per day. Energy experts say that within just a few years, the United States could top the Saudis. _WSJ

US imports from Canada are around 2.5 mbpd and rising. That means that North American oil is providing roughly 73% of US oil consumption.

Once the Keystone XL and other pipeline infrastructure are built and operating, the numbers should improve even further -- even while US exports of hydrocarbon fuels continue to rise.

More on how unconventional oil & gas are revolutionising the US energy future

Energy is the lifeblood of an industrial economy. Recent US and EU government policies of energy starvation have been counterproductive, based upon ideology rather than upon societal needs or empirically demonstrable scientific facts.

It is time to put an end to political dilettantes and unelected bureaucrats playing ideological games with the energy futures of entire civilisations.

Enhanced Oil Recovery: Every Additional 1% of Oil Recovered Replaces 3 Years Global Oil Consumption

Today, the average global oil & gas recovery rate is around 22% [Oil & Gas Journal 11/2007] and yet certain areas of the world, such as the Norwegian Continental Shelf, have increased their recovery rates to closer to 50%. Furthermore, each additional 1% of oil recovered replaces three years of global oil consumption [Oil & Gas Journal, ibid]. _Extending the Boundaries of Oil & Gas Recovery

The best place to find more oil is in an old oil well. Enhanced oil recovery methods are squeezing more and more oil out of the rock -- and the technology keeps getting better.

University of Pittsburgh engineers are developing a way to "thicken CO2" to make it a more effective agent of enhanced oil recovery. Their technique could reduce or eliminate the use of water injection, and speed up the recovery process:

"An affordable CO2 thickener would represent a transformational advance in enhanced oil recovery," said Enick. "More than 90 percent of CO2 injection projects in the U.S. employ the WAG method to hinder the fingering of the CO2. However, if a thickener could be identified that could increase the viscosity of the CO2 to a value comparable to that of the oil in the underground layers of rock, then the fingering would be inhibited, the need to inject water would be eliminated, and more oil would be recovered more quickly using less CO2."

"It's clear there exists a very wide market for this type of CO2 thickener," said Beckman. "It's been long recognized as a game-changing transformative technology because it has the potential to increase oil recovery while eliminating water injection altogether." _esciencenews

It should be obvious that if roughly 75% of oil in wells has remained underground, that old oil wells can remain very valuable properties indeed.

And if new methods of EOR can eliminate the need for H2O injection while using "thickened CO2" injections instead, a number of problems may be solved with a single startling innovation.

Big Money Investments In Oil Production Infrastructure

From MENA to Russia to South America and more, up to a trillion dollars or more are due to be spent on oil production infrastructure. These new expenditures are a good indication that oil producers expect the current high prices for oil to last for at least a decade.

Saudi Arabia tops the list with committed investments of $165 billion, mostly generated by Saudi Arabian Oil Co. and Saudi Basic Industries Corp. (SABIC), followed by the U.A.E. that plans to invest $107 billion in the period, the lender known as Apicorp said in an e-mailed report.

Algeria overtook Qatar and Iran as the third-biggest investor, with $71 billion of potential spending, largely the result of catch-up investment. Iran’s energy spending program has been put at $68 billion. _Bloomberg

Russia's Soviet-era infrastructure is badly in need of upgrading.

Russia's state oil company Rosneft plans to spend $18 billion on its refinery infrastructure over the next three years, a report said Saturday after the company's chief met with investors.

The oil company unveiled a $25 billion programme to modernise its Soviet-era refineries, Interfax news agency reported, quoting data given by Rosneft president Igor Sechin to investors in London. _ET

This will not be nearly enough spending to bring Russian oil production into the 21st century. Sooner or later, Russia will have to invite international oil companies and oil services companies into the country. And Russia will have to provide guarantees that this time it will not steal (nationalise) the internationl companies' assets, once the oil starts flowing.

Venezuela elections are taking place, and both presidential candidates are promising to ramp up spending on the nation's oil production infrastructure.

Chávez has said Venezuela should look to the country's Faja oil belt and promised to invest $130bn in the region to double national oil production to six billion barrels a day, pushing Venezuela past Iran as the world's second-biggest producer. The money is needed to upgrade wells, processing plants, refineries, docks, roads and housing. Dire maintenance has plagued the industry, most recently with a huge fire at the Amuay refinery. _Guardian

Cynical voters might ask Chavez what kept him from making those investments before the election, but then they would probably disappear shortly thereafter.

Argentina and Colombia are moving ahead to expand unconventional petroleum production. Brazil is continuing to develop its huge offshore deposits, despite a number of setbacks.

In North America, spending is ramping up for unconventional oil & gas production and transportation infrastructure. New pipelines, new LNG terminals, and other new facilities are likely to allow continued increases in North American oil & gas production.

Spending on Asian infrastructure is also likely to pick up, as the Chinese begin to climb the technology curve for production of oil in the China Seas, and unconventional gas onshore. Several other Asian countries are beginning to explore and develop significant unconventional oil & gas deposits, as well.

Sooner or later, a number of European nations will reject green energy starvationism, and strike paydirt in their quest for homegrown petroleum deposits. Until they do, they will be forced to pay more than they should for Russian gas and for crude oil.

Oil prices are currently higher than they should be, but given the state of global oil markets, dollar devaluation, and petro-politics, there is no guarantee that oil prices can sustainably drop more than roughly $10 a barrel below current prices -- without triggering subsequent market shortages.

Other sources of petrochemicals and hydrocarbon fuels which will compete with oil & gas producers, include coal to liquids, gas to liquids, biomass to liquids, and microbial fuels.

We have been inundated with peak oil doom theories for at least 150 years, and as long as doom grifters can make money from the gullible, we will continue to see such scams -- such as Canada's own Jeff Rubin.

But the Earth's complement of energy has barely been tapped. Doing so successfully is a matter of human ingenuity. Doomers and their true believers do not hold human ingenuity in high esteem or expectation.

More realistic folks should probably allow for the unexpected.

More: Some analysts estimate global oil & gas investments to total near $500 billion:

The oil and gas sector is extending its lead over renewables by investing about $490-billion this year globally and another US$491-billion in 2013, the highest on record, according to Wood Mackenzie data. _The Province

The two year investment total of 2012 and 2013 comes quite close to the $1 trillion mark. International and national oil companies are not sinking that amount of money into the future of their enterprises for no reason. They are clearly planning to be involved in the global energy scene for decades to come.

Rapid Buildup in North American Oil Production Expected

Global capacity for production of liquid hydrocarbon fuels is immense -- far beyond what was imagined by Hubbert or any of his peak oil cohorts. To produce most of those hydrocarbons, humans will need to create improved technologies from scalable high temperature nuclear reactors to improved mining and drilling robots to improved exploration technologies.

But even with today's technologies, oil production could be rapidly geared up -- if the economic need and the political will were both present. Here is a look at what might happen in the near future with North American oil production (h/t Brian Wang):

Technological breakthroughs are freeing up oceans of black gold from plays in the United States and Canada. Couple that with rising production from Alberta’s oil sands and North American markets are flush in domestic oil, which is leading many giddy Americans to think they are on the cusp of achieving a treasured goal: energy independence. CIBC World Markets Inc. agrees with that view and says that North American oil production can grow by 800,000 to 900,000 barrels per day (bpd) annually through 2016. And the production growth will come from the onshore, offshore and the oil sands. _Alberta Oil Mag

Political will is every bit as important as technological advances. Policies of energy starvation under European, US, Australian, Japanese, and other governments tend to slow down energy exploration and production in those countries. Political corruption and policies of neglect of oil production technologies tends to slow down production in Russia, Venezuela, Iran, and many oil producing African nations.

The largest conventional oil deposits of the world lie under countries that restrict access by international oilcos -- which has the effect of artificially dampening oil production in those countries. In other areas, political and social turmoil lead to sabotage, kidnappings of oil personnel, hijacking of oil shipments, theft of oil, and several other ways in which oil delivery to international markets is artificially reduced and suppressed.

The effect of all of this suppression of production is additional elevation of oil prices, beyond other artifactual influences on oil prices.

These artificially high oil prices make it more economical for North American producers to expand production in unconventional and marginal oil fields. As long as oil prices stay high, expect to see a ramping up of unconventional oil & gas production in the more politically stable parts of the world.

If Robots Can Mine the Rocks of Planet Mars, Why Not Use Robots on Earth to Mine Oil, Coal, Minerals

The oil industry wants to bring robotic automation to the oil field, for safer, more precise, and eventually more economical operations.

Engineers foresee a day when fully automated rigs roll onto a job site using satellite coordinates, erect 14-story-tall steel reinforcements on their own, drill a well, then pack up and move to the next site. “You’re seeing a new track in the industry emerging,” says Eric van Oort, a former Royal Dutch Shell executive who’s leading a new graduate-level engineering program focused on automated drilling at the University of Texas at Austin. “This is going to blossom.” _BW Robots the Future of Oil Industry

The technology is being developed for both onshore and offshore drilling -- including very deep sea drilling. Up-front costs for such systems will be significant, particularly in the beginning. But over the long haul, automation is likely to bring significant savings to the oil industry, just as it has to so many other industries before it.

The theory behind automating oil exploration is derived not only taking humans out of dangerous work inherent in oil and gas drilling, but eliminating as much as possible the potential for human error. The BP Oil disaster was caused when a drilling rig opened a pocket of methane, according to a BBC story. A smart drill bit would presumably be able to avoid such pockets. If a disaster like BP happens with a robotic oil rig, there would be few if any human casualties. _Texas Looks to Robotic Oil Rigs

Deep sea oil robots are particularly intriguing, operating at depths of midnight darkness, freezing cold, and crushing pressures.

These new robotic rigs would be used for production and exploratory purposes. They have been designed to operate on the ocean floor, for safe exploration of ultra-deep water and also for exploring the arctic regions that are inaccessible by traditional rigs. Seabed Rig AS has created highly intelligent robots, which are controlled by software, coded by Energid Technologies, a Cambridge Massachusetts firm. According to Neil Tardella, Energid’s COO, the software had been developed for the National Science Foundation and NASA for controlling complex robots, and this was then used to construct the most intelligent robotic rig. _azorobotics

Engineers have been devising robotics systems to replace humans in dangerous mining environments -- such as coal mines -- for decades now. As the technology improves, the possibility of removing humans from hazardous work areas and replacing them with robots becomes more feasible.

Deep sea mining for minerals and gas hydrates represent other areas ripe for the application of robotics. The field is still in its infancy, and it is likely that most applications of robotics in energy-related enterprises have yet to be conceived.

Ample North American Supplies of Oil & Gas Offer Choice

"It is not a question of do we want more oil and gas? It's where do we want to get it?," he [the API's Martin Durbin] said. _Platts

US oil & gas reserves continue to grow at a rapid rate, even while US oil & gas production has skyrocketed. New technologies of exploration, discovery, and production, have revolutionised North American production of oil & gas. It has become a question of which assets concentrate on first.

Despite the relatively rapid depletion rate of tight oil & gas, for example, the massive supplies of this resource should keep production rates growing for decades. And the huge undersea deposits of oil & gas in the Gulf of Mexico and off North America's East, West, and North coasts, have barely been explored -- much less tapped.

And silently, in the background, the massive potential for conversion of unconventional hydrocarbons into high quality liquid fuels and chemicals, is being perfected and slowly becoming more economical.

The final coup de grace to peak oil doom will be the development of scalable, factory-produced high temperature gas cooled nuclear reactors -- which will expedite the cheap production of liquid fuels, high value chemicals, fertilisers, polymers, and much more, from a wide range cheap and abundant feedstocks.

When asked if such increased access to oil and gas resources could lead to more American jobs, 90% of those polled agreed or somewhat agreed, and by affiliation that was 95% of Republicans agreeing, 91% of independents and 85% of Democrats. The telephone poll of 1,016 registered voters in the U.S. was taken August 9-12 by pollster Harris Interactive. (The poll results details are here.

....proved reserves in the US of crude oil and lease condensate were 25.2 billion barrels at the end of 2010, up 13%, or the largest annual increase since 1977, and reaching the highest total level since 1991, according to Energy Information Administration data. Wet natural gas proved reserves rose 11.9% year-on-year to 317.6 Tcf at the end of 2010. On August 14, the US Geological Survey released new estimates for potential additions to domestic oil and gas reserves from reserve growth in discovered, conventional accumulations, with a total of 32 billion barrels for crude, 291 Tcf for gas, and 10 billion barrels of natural gas liquids.

... there will be more production.... Take the total US production of crude oil and natural gas liquids. For 2010, it was 7.5 million b/d, and for 2020, it could be 9.6 million b/d (reference), 8.8 million b/d (low EUR), 10.3 million b/d (high EUR) or 11.6 million (high TRR). _Platts

Even the high predictions will likely prove too low, should Obama be defeated in November. The US private sector -- including the US energy industry -- has been held stagnant by a malignant uncertainty generated by the anti-business attitudes of Obama and virtually everyone in his administration.

In an atmosphere of greater clarity, with more straightforward and less corrupt rules of doing business, US business and energy are likely to revive in dramatic fashion.

Residual Oil Zones -- Up to 100 Billion Barrels Oil in US

Billions of barrels of oil that could increase domestic supply, help reduce imports, and improve US energy security may be potentially recoverable from residual oil zones, according to initial findings from a study supported by the US Department of Energy’s Office of Fossil Energy.

Residual oil zones, called ROZs, are areas of immobile oil found below the oil-water contact of a reservoir. ROZs are similar to reservoirs in the mature stage of “waterflooding,” in which water has been injected into a formation to sweep oil toward a production well.

In the case of ROZs, the reservoir has essentially been waterflooded by nature and requires enhanced oil recovery (EOR) technologies, such as CO2 flooding, to produce the residual oil.

DOE estimated in 2006 that ROZs could contain 100 billion bbl of the 1.124 trillion bbl of technically recoverable oil in place in US reservoirs (OGJ, Mar. 13, 2006, p. 30). _OGJ_via_Peakoil.com

The actual amount of ultimately recoverable oil in the US is likely to be far higher than the official 1.124 trillion bbl of technically recoverable oil estimated by the US DOE. But that is the way it always seems to be: there always seems to be much more oil & gas in the long run than was first estimated.

UTPB will further delineate the presence and size of ROZ areas in the Permian basin of Texas and New Mexico using geophysical well logs and well test data, core and fluid samples, and water chemistry data. Researchers will also determine if 3D seismic can be used to identify the higher-quality portions of the ROZ resource to assist small oil producers in the Permian basin and other US ROZ basins.

According to OGJ’s 2012 worldwide EOR survey, US CO2-EOR production is 350,000 b/d of oil (OGJ, Apr. 2, 2012, p. 57). Nine industry ROZ CO2-EOR pilot projects in the Permian basin of Texas account for 10,000 b/d of oil. Results and findings from DOE-supported research should help to increase recovery from this domestic resource and create American jobs, the Office of Fossil Energy said. _OGJ _ via _ PO.com

Advanced methods of oil recovery are being developed every day, increasing yields, reducing ultimate costs, and pushing back peak oil doom with every new innovation.

Once the widespread use of cheap high quality heat from scalable and site-based high temperature gas cooled reactors (HTGRs) becomes available, I would not want to be known as a peak oil doomer in public. Oh the humiliation!

Schlumberger Invests $1 Billion Yearly in R & D

Schlumberger invests roughly $1 billion a year in research and development, a level it maintained even during the slump after the 2008 financial crisis. That is as much as the mighty ExxonMobil spends; as a share of sales, five times more. The big OFS companies now probably file more patent applications than the oil majors, whose technological skills are largely interpretive. _Economist

Innovations in directional drilling, advanced hydraulic fracturing, and increasing ability to drill more deeply into more types of terrain, are advancing the art of oil production worldwide. The companies which are pushing these technologies the most quickly are largely to be thanked for the revolutions in production across North America -- and in the deep ocean.

Oilfield services (OFS) firms such as Schlumberger are the unsung workhorses of the oil industry. They do most of the heavy lifting involved in finding and extracting oil and gas. They are far less well-known than the oil firms that hire them, but immensely lucrative. Schlumberger, with headquarters in Paris and Houston, earned profits of $5 billion on revenues of $40 billion last year. Its market capitalisation has risen fourfold in the past decade, to $91 billion. That is bigger than several international oil companies, including ENI ($82 billion), Statoil ($75 billion) and Conoco-Philips ($71 billion).

With the price of oil so high, firms are scrambling to pump it out of ever more remote and costly crevices. Over the past decade the oil industry’s annual spending on exploration and production has increased fourfold in nominal terms, while oil production is up by only 12%. The big services companies, which invest heavily in technology (see chart), have been growing by around 10% a year. According to McKinsey, a consultancy, OFS companies grossed around $750 billion last year.

The oil business is likely to grow even more dependent on brainy OFS firms. Global production from mature oilfields is falling by between 2% and 6% a year. In the North Sea it has declined by 6% a year on average since 1999. With global demand for oil growing by 1-2% a year, there are persistent fears of a supply shock. Hence the current high oil prices: even after a 20% fall in recent months, Brent Crude is now around $100 a barrel. Oil firms are searching harder in more remote places, such as the Arctic and the deep seas off Brazil. Operating in such places will require yet more snazzy technology.

Schlumberger is planning more of what it is best at: pushing the technological boundaries of extracting the black stuff. It has recently been busy making acquisitions—including of Smith International, an American drill-bit company, for $11.3 billion—which have given it know-how in most segments of exploration and production. It now hopes to re-engineer the entire process.

The prize of increased efficiencies—delivered in barrels of money, not oil—could be vast. A big deepwater drilling rig costs half a million dollars a day to rent, and can take three months to drill a complicated well. Any OFS company that can shave a few days off that time will be in the money. Drilling is thrilling, and getting more so. _Economist

Investment into innovative oil production and recovery technologies is one of the reasons why peak oil has been pushed back many decades past the time that peak oilers began to predict it. While cultists are chanting "EROEI - EROEI . . ." in darkened cloisters, more ambitious men and women are busy at work, solving problems.

It is a difference in philosophy and outlook, between the doomers, and those who have important things to do.

Maugeri: Global Crude Production Capacity Up to 110 mmbd by 2020

Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption. This could lead to a glut of overproduction and a steep dip in oil prices.

Based on original, bottom-up, field-by-field analysis of most oil exploration and development projects in the world, this paper suggests that an unrestricted, additional production (the level of production targeted by each single project, according to its schedule, unadjusted for risk) of more than 49 million barrels per day of oil (crude oil and natural gas liquids, or NGLs) is targeted for 2020, the equivalent of more than half the current world production capacity of 93 mbd.

After adjusting this substantial figure considering the risk factors affecting the actual accomplishment of the projects on a country-by-country basis, the additional production that could come by 2020 is about 29 mbd. Factoring in depletion rates of currently producing oilfields and their “reserve growth” (the estimated increases in crude oil, natural gas, and natural gas liquids that could be added to existing reserves through extension, revision, improved recovery efficiency, and the discovery of new pools or reservoirs), the net additional production capacity by 2020 could be 17.6 mbd, yielding a world oil production capacity of 110.6 mbd by that date – as shown in Figure 1. This would represent the most significant increase in any decade since the 1980s. _Belfer Center _ Maugeri: Oil the Next Revolution from Executive Summary

Oil The Next Revolution _ Maugeri PDF
In the Maugeri PDF report linked above, oil analyst Leonardo Maugeri details where the expected new oil production capacity will be developed, and how much increase in production capacity should be expected.

OTNR _ Maugeri PDF
Above you can see the projected country-by-country increase in production capacity, per Maugeri. The report suggests that oil prices may have been pushed above supply and demand fundamentals recently and prior to the 2008 price peak, due to what are essentially non-market forces.

There is a definite risk of an oil price collapse, says the report, should the global economic situation worsen -- particularly should a severe recession hit China. Such a price collapse is defined as oil below $50 /bbl.

Maugeri expects that if such an oil price collapse occurred, that market forces would self-correct within 2 years, with minimal damage to long term oil production.

OTNR _ Maugeri PDF (from summary)


Video Source

Worrying About a Collapse of Oil Prices

North American oil executives are becoming concerned that the same type of price collapse that occurred in the natural gas sector may also occur in the crude oil sector due to significant improvements in oil production technology.

Oil fundamentals today are showing very similar characteristics to natural gas a few years ago: A rapid increase in productive capacity; weak domestic consumption that can’t absorb the rising output; old takeaway infrastructure (for example, pipelines) that is not adapting quickly enough to match new sources of supply with shifting demand; and a fenced-in continental marketplace that inhibits exports to higher-value global markets.

Rapid production growth, the number one antagonist, continues to astound with every new data point received. From North Dakota to Alberta, Saskatchewan to Oklahoma, new light oil barrels from horizontally-fracked wells keep flowing in greater quantities every month. If there is one chart that turns this story into Technicolor, it’s Figure 1, the long-term production profile for Texas. _Globe&Mail

CAPP 2010 . . . Updated 2012 CAPP PDF

Canada is projecting sustained growth in oil production over at least the next 2 decades, largely due to growth of in situ oil sands production.

And as you can see below, Texas has reversed its long decline in oil production, and expects production to continue to grow for the near-term and intermediate-term.

Image Source

Texas is now growing its rate of oil output by 35,000 B/d, every month, for an annualized growth rate of 425,000 B/d per year! To put this in perspective, that’s the equivalent of one-third of Libya’s oil production developed and brought to market in 12 months. It’s also close to China’s incremental consumption in 2011 (505,000 B/d).

Here in Alberta, the production of light, tight oil, or LTO, is now up by 175,000 B/d relative to what would have been expected without the new technologies. Putting this in perspective, Alberta has built the equivalent capacity of a big oil sands project in less than 18 months – complete with an upgrader to light oil! _Globe&Mail

To say nothing of North Dakota and the Gulf of Mexico!

Carbon Sciences is showing progress in its unique "dry reforming catalytic technology" which makes economic use of otherwise useless high CO2 natural gas deposits. By using CO2 in the reforming of methane to syngas, Carbon Sciences opens up large deposits of otherwise stranded gas which would be impossible to make economic use of otherwise.

Carbon Sciences' technology allows for a wide range of uses for these newly available gas deposits, including GTL (gas to liquids), high value chemicals production, etc.

Widening the economic uses of natural gas -- both stranded and otherwise -- also puts downward pressure on oil prices, although few analysts or journalists up until now have taken the trouble to point out that important fact.

More: The Coming Oil Crash

Even More:The Most Dysfunctional US Energy Department in History?

An Extra 600 Billion Barrels of Recoverable Oil from Just One Technology?

The quickest and cheapest way to find "new" oil is to look in old oilfields. As better technologies for recovery of oil from existing fields mature, new billions and hundreds of billions of barrels of oil suddenly become recoverable.

The potential prize of improving ultimate oil recovery with pulsed injection is considerable. A 1% increase in recovery equals 2 billion barrels of additional reserves globally; a 5% increase in recovery-a conservative increase thought to be achievable-would produce an extra 300 to 600 billion barrels. Ultimately, the use of pulsed injection can result in enhanced oil recovery from a field of between 5 and 10 percent depending on reservoir conditions.

...Since their first application in 1998, Wavefront's pulsed injection processes-which create a pulsating injection stream with typically 20 to 40 pulses per minute, at speeds of up to 100 meters per second-are administered via tools that it leases to oil companies for use on their wells. The company reports that it has consistently delivered successful results for optimized oil well stimulation and secondary oil recovery. In some cases, its technology has reportedly increased the production of individual wells by greater than 300%. To date, its pulsed injection system for oil recovery-which the company markets under the name Powerwave-has been used in more than two dozen fields in Canada and the U.S. The company has also recently implemented its process in major oil production operations around the world, including Argentina and the Middle East.

In a recent quarter, Wavefront secured four key contracts for Powerwave totaling 24 tools: A six-tool contract with the largest oil production company in the Sultanate of Oman; contracts with Pluspetrol in Argentina and Clayton Williams in Texas; and an 11-tool, three-field contract with a major Calgary-based oil producer. _AOLEnergy

This is just one aspect of "spare capacity" and "new replacement reserves" which are not considered by the famous oil depletion graphs which are bandied about by the peak oil punkocracy. There are many other aspects -- some technological, some geological, some geo-political -- which are studiously avoided by peak oil true believers.

That is why those who want to see beyond currently published numbers reflecting the status of oil markets, must avoid any taint of ideological thinking, superstitious thinking, or quasi-religious thinking such as peak oil.

Iraqi Oil Production Rises Higher than Anytime Since 1979

Iraq's oil production has risen above 3 million barrels per day for the first time in more than three decades, it announced on Monday, and said it will sharply increase exports with a major new floating oil terminal beginning operations in three days.

"While I am talking to you today, the Iraqi oil production has exceeded 3 million barrels per day," Deputy Prime Minister Hussein al-Shahristani told a conference in Baghdad. _Reuters

Iraq's oil production "peaked" in 1979. The peak was a form of "peak oil," but it was a "political peak oil." Expect to see many more examples of "political peaks" which will be exceeded in the future, when political conditions change.

Besides Iraq, in the future we should expect the same phenomenon in several oil dependent nations such as Iran, Venezuela, Mexico, Russia, and a number of African oil-producing countries. These nations neglect their production technologies and oilfield maintenance very badly. The incompetence of their national oil production executive and engineering administration would be grounds for immediate termination en masse, if not for the endemic corruption built into all of those country's governments from top to bottom.

Saudi Arabia has the capacity to exceed prior peaks, but the leaders of the kingdom understand that an oversupply of oil on world markets is their deadliest enemy. They will do anything to prevent such an oversupply from occurring again, if they have any control over the matter.

Canada is likely to expand oil production considerably, as long as it has a government that recognises the importance of energy production to a national and provincial economy. US total oil & gas production is likely to rise above prior peaks, when the energy starvationists in the Congress and the White House are removed from power. Brazil is likely to expand its production for some time to come. And so on.

The best place to look for new oil is where you have already produced old oil. That is likely to be true for some time to come, via improved production methods.

And when that fails there are trillions and tens of trillions of barrels of oil equivalent from unconventionals, waiting for human ingenuity to catch up to human needs.

Massive Iraqi Oil Reserves Due to Come Online In 7 Years

Production has rebounded from just over 1 million barrels per day after the invasion to nearly 3 million today. Baghdad's 11 international oil contracts promise to deliver a total of more than 13 million barrels per day within seven years -- a figure that would make Iraq the largest oil producer, ever. _FP

By some reckonings, Iraq has the world's largest oil reserves, with massive oil fields that have barely been touched. And since Iraq -- like so much of the Persian Gulf region -- has been so under-explored in comparison with North America, other giant oil fields could lie waiting to be discovered.

But is the world ready for another 10 million barrels of oil per day, every day? Probably not.

In October 2009, Shahristani signed a deal -- without parliamentary approval -- with oil giant BP to rehabilitate the Rumaila oil field. Then came ExxonMobil, with a contract for the 8.7 billion-barrel West Qurna Phase 1 field. Those two fields hold more proven oil reserves than the entire United States has, and if the terms of just those massive contracts are met, Iraq will reach more than half of Saudi Arabia's current production before the end of this decade.

...if Iraq's fields were to increase production any further right now, the oil would have nowhere to go. There aren't enough pipelines, storage tanks, refineries, and export terminals. Iraq is building many of these facilities, but probably not fast enough for the production rates that the state is now contractually obliged to support.

Nor is it clear whether world markets could stand so much new supply. If Iraq were actually able to increase production to the unprecedented height of 13 million barrels per day within seven years, the price of oil would likely drop just as steeply. _FP

Demand for oil in the developed world has been declining for years now. Demand for oil in emerging markets has been artificially boosted by subsidies and ill-conceived stimulus programs -- particularly in China. It is unclear how much longer such artificial demand can be sustained.

If you somehow pump out another 10 mmbd onto the market, some very bad things could happen to profits for oil producers such as Russia and OPEC. Perhaps that is why wealthy factions inside Saudi Arabia have been helping to finance Sunni Muslim terrorists to disrupt oil production in Iraq and elsewhere in Shia and non-Sunni Arab dominated areas. Too much oil production can be bad for an oil dictator's profits.

An Estimated 3 - 5 Trillion Barrels of Oil Equivalent in the Continental US -- Not Counting the 3 Trillion BOE in Oil Shales

It is generally best to suppress our wilder instincts toward optimism, so as to prevent painful disappointments in the future. On the other hand, if we are not careful we are likely to vastly underestimate our possibilities, and live much smaller lives than was absolutely necessary. There are times when we need to go crazy-optimistic, in order to try to define the upper bounds of what is possible.

For oil & gas reserves in the continental US, new production capacities have already proven a lot of doomers wrong. I've got a feeling that -- if Americans can get rid of their current destructive leadership of energy starvation -- that US hydrocarbon has just gotten started.

California's Monterey Shale is estimated to contain 500 billion barrels of oil equivalent in place. Estimates for North Dakota's oil shales fall into a similar range (PDF) for oil equivalent in place. But the continental US is underlain with hydrocarbon-bearing shales at various depths and ages. Add the estimates all together, and you might just reach the trillions of barrels, in oil equivalent. Certainly current estimates of economical production below 50 billion barrels are almost certain to be proved wrong, in time.

My estimate of oil in place in the continental US is from about 3 trillion to 5 trillion barrels of oil not including the 3 trillion barrels of oil shale. See this shale play website for a partial list of Shale oil plays and basins in the US. I know this seems very high, but it was only a few short years ago that we were going to need to import huge amounts of liquefied natural gas to meet our demand for natural gas, and now we have a glut of natural gas in the market place because of all the shale natural gas.

We should be able to produce at least 150 billion barrels of oil to maybe 1.0 trillion barrels of oil if the majority of these plays can be water flooded and CO2 injected as in the Canadian Bakken. I used 5% for the low estimate of 3 trillion barrels and 20% of the high estimate 5 trillion barrels figuring they could do some water flood and CO2 tertiary treatment to a large part of this land. For this oil to be recovered, it will require that the oil price stays above $70 a barrel so the economics are in place to fully develop these areas. _SeekingAlpha

The truth is, there will be no need to develop even a fraction of these many barrels of oil equivalent in place, if the energy starvationists would simply get out of the way, and allow human ingenuity to devise safer and more advanced means of utilising non-combustion, nuclear energy technologies. For that to happen, the merry band of energy starvationists in the US White House will require jettisoning, in favour of a more rational group of government administrators.

H/T Brian Wang

Suddenly An Extra 300 Billion Barrels of Crude Oil Is Available

Due to much higher prices for oil these days, an extra 300 billion barrels of conventional crude proved reserves have become available. Where can this oil be found? The same place the old oil was found -- in previously produced oil wells. As the price of oil rices, it becomes economical to return to old wells to retrieve some of the roughly 65% to 70% of the oil which was left in place, using advanced recovery techniques.

Currently when oil companies drill into an oil reserve they recover an average of 35 percent of the oil available. Shell estimates that there are many as 300 billion barrels and maybe more available by applying new techniques to old wells.

The so-called Enhanced Oil Recovery (EOR) techniques play on the physics of how oil is trapped in the rocks. Often the residual oil is thick and viscous and so won't flow to reservoirs. This can be recovered by heating the ground around it to make the oil less viscous, pushing it out using gases such as CO2 or injecting chemicals such as soap. Sometimes the oil can be pushed out by injecting steam or water with reduced salinity. The water is created through desalination, nanofilteration and reverse osmosis and helps to loosen oil that is stuck to rock. It can help retrieve an additional 10-15 percent of oil.

These sorts of techniques weren't cost effective in the 1990s when the cost per barrel fell to as low as $17 (£10.90). Brock explains: "These are more expensive barrels. They could be two to three times what a conventional barrel costs to extract." Now, however, oil prices are high (over $100 (£64) per barrel) so it makes economic sense to spend more money trying to retrieve oil, especially when there is existing infrastructure. _Wired

Year to year, global proved oil reserves have continued to rise. A significant part of this increase is due to improved methods of oil recovery from existing wells.

Advanced nuclear reactors will allow even more thorough recovery of oil from old wells, using the process heat. The same source of heat will allow for cheaper and cleaner production of oil from oil sands and oil shales.

As plentiful high temperature process heat from modular nuclear reactors becomes more widely available for use in oil production and refining, the EROEI for both enhanced oil recovery and the production of unconventional liquid hydrocarbons will shoot upward into profitable territory for the long-term future.

Solar Steam Used for Enhanced Oil Recovery in California

Chevron, the second-largest U.S. oil company, began extracting crude oil from a Southern California field using steam produced by a 29-megawatt solar- thermal power plant.

BrightSource Energy's system uses mirrors to focus sunlight on a boiler at Chevron's Coalinga enhanced oil recovery project, the Oakland-based solar company said in a statement after extraction began Monday.

..."This technology has the potential to augment gas-powered steam generation and may provide an additional resource in areas of the world where natural gas is expensive or not readily available," Chevron Technology Ventures President Desmond King said Monday in a company statement. The project generates about the same amount of steam as one gas-fired steam generator, Chevron said. _MercuryNews

Video via GigaOm

Enhanced oil recovery sends a liquid or gas (in this case, steam) into an oil reservoir, thereby lowering the oil's viscosity and allowing more oil to be pumped out. The global market for EOR, according to SBI, is estimated at nearly $62.5 billion (for barrels of crude oil) for 2009. BCC Research estimates the global market for EOR technologies as $4.7 billion in 2009, due to grow to $16.3 billion in 2014.

EOR using CO2 is also being considered as a method to sequester carbon in the ground.

Chevron’s Coalinga field started pumping in the 1890s and, like many of the world's oil fields, is experiencing a decline in oil production. EOR can reverse this trend. The steam used at the Coalinga field and most EOR sites is usually generated by burning natural gas in a gas-fired steam generator. Typical sizes for those generators units are 23 MMBTU/hr or 62.5 MMBTU/hr -- and they are used in large numbers.

So although this is a relatively small-scale project, it proves the concept at scale and does so without the prospect of future fuel costs. Solar EOR doesn't exactly save the planet, but it can increase domestic oil production and keep jobs in the U.S.

The Coalinga site sits on 100 acres and uses 3,822 heliostats that are focused on a boiler sitting on top of a 327-foot-tall solar tower. _GreenTechMedia

Solar heat and steam production are generally quite expensive, and would typically only be used if cheap fuels such as natural gas were unavailable. But solar steam should be considered as an alternative, for steam needs in particular situations.

The amount of oil potentially recoverable via EOR measures in the billions of barrels.

Energy Renaissance as Supplies Grow and Demand Drops

“[Peak Oil] was once supposed to arrive by Thanksgiving 2005,” the newspaper [WSJ] said. “Then the ‘unbridgeable supply-demand gap' was expected ‘after 2007.' Then it was to arrive in 2011.”


The peak prediction is now sometime between this year and 2020. By next week that could change to 2025. Dire predictions about an oil shortage following an elusive peak have consistently been wrong. Between 2007 and 2009, 1.6 barrels of oil were added to the reserves column for every barrel of oil actually produced.


Oil is being produced in great quantities today in places where only a trickle was flowing a few years ago. Locating tomorrow's oil boomtown is as hard as accurately predicting when the production summit will be reached.

_Newsok

At the same time that the US has increased production it has reduced demand. Peak oil demand in the US was reached in 2005. “We will not see that peak reached again,” said Burkhard, who further explained, “The great recession had a negative impact on oil consumption, but it is not connected to the fall in demand.” That has been brought about by higher fuel economy standards and carbon regulations that were imposed under President Bush in 2007.

...“The decline in demand is a global trend,” said Burkhard. _EnergyRenaissance

Demand for oil is reducing for a number of reasons, including improved efficiency, a growing use of substitutions, and a prolonged depression in the global economy due to uncontrolled government debt and a declining demographic in most advanced economic nations.

But supply is still growing -- thanks to oil prices that have been held high by OPEC policies, energy starvation policies in the advanced world, and a speculative premium based upon many factors -- including corruption in global markets.

Here are more reasons for the growing supplies:

...the demise of oil was greatly exaggerated, even in a state where oil production peaked years ago. Someone forgot to tell energy firms that oil was no longer noteworthy — or profitable.

Oil sands, linked to the controversial Keystone XL pipeline project that would go through Cushing, make Canada the world's second-largest storehouse for oil in reserve. Producing the bitumen crude is made possible by technology and made profitable by higher oil prices.

SandRidge Energy, a five-year-old Oklahoma City firm with its roots in west Texas natural gas wells, told its employees recently that “Oil is our future.” Larger state energy firms known primarily as gas producers have also shifted more resources to oil. That's where the money is.

The Wall Street Journal noted Sept. 17 that the summit point for oil has been quite elastic. “It was once supposed to arrive by Thanksgiving 2005,” the newspaper said. “Then the ‘unbridgeable supply-demand gap' was expected ‘after 2007.' Then it was to arrive in 2011.”

The peak prediction is now sometime between this year and 2020. By next week that could change to 2025. Dire predictions about an oil shortage following an elusive peak have consistently been wrong. Between 2007 and 2009, 1.6 barrels of oil were added to the reserves column for every barrel of oil actually produced.

Oil is being produced in great quantities today in places where only a trickle was flowing a few years ago. Locating tomorrow's oil boomtown is as hard as accurately predicting when the production summit will be reached. _newsok