U.S. crude oil production growth projected to be led by light, sweet crude oil

[thackney]

U.S. crude oil production growth projected to be led by light, sweet crude oil
https://www.eia.gov/todayinenergy/detail.php?id=35692
APRIL 9, 2018



Recent growth in U.S. crude oil production has been primarily light, sweet crude oil, defined as having an API gravity of 35 or higher and sulfur content of 0.3% or less. These light, sweet crudes, which are produced from tight resource formations, accounted for up nearly 90% of the 3.1 million barrel per day (b/d) growth in production from 2010 to 2017. Light, sweet crude oil accounted for more than half (56%) of total domestic crude oil production in 2017, and in EIA’s Annual Energy Outlook 2018 (AEO2018) Reference case, this share grows to 60% by 2020 and to 70% by 2050.

U.S. supply of lighter crude oil from tight formations, such as the Bakken in North Dakota and the Wolfcamp and Eagle Ford in Texas, is projected in the Reference Case to continue to outpace that of medium and heavier crudes. Medium-gravity (API between 27 and 35) sour crudes, primarily Alaskan and Lower 48 states offshore production, accounted for about 30% of 2017 U.S. crude oil production and are projected to account for 18% of 2050 production in the AEO2018 Reference case.



In the Reference Case, EIA projects that more than 80% of U.S. crude oil production from 2017 through 2050 will occur in the Gulf Coast and Midwest regions (as defined by Petroleum Administration for Defense Districts 3 and 2, respectively). Most of the growth in light, sweet crude oil production is projected in the Gulf Coast, increasing from 3.1 million b/d in 2017 to 5.3 million b/d in 2050.

The Permian Basin has developed into one of the more active drilling regions in the United States because of its large geographic size, spanning 53 million acres across western Texas and southeastern New Mexico, and favorable geology, with many prolific tight oil formations such as the Wolfcamp, Spraberry, and Bonespring. The Midwest region is home to the Bakken formation in North Dakota, another significant source of light, sweet crude oil production.

The pace and duration of projected crude oil production increases are dependent on crude oil prices and the quality and amount of technically recoverable resources. Two AEO2018 sensitivity cases explore this uncertainty.

In the High Oil and Gas Resource and Technology case, tight oil production is higher than in the Reference case, so light, sweet crudes account for a greater share of domestic crude oil production, eventually reaching 76% of the total in 2050. In the AEO2018 Low Oil and Gas Resource and Technology case, the growth in tight oil production is lower than in the Reference case, but light, sweet crudes still account for most (56%) of the domestic crude oil production in 2050.

[thackney]

The API gravity of crude oil produced in the U.S. varies widely across states
https://www.eia.gov/todayinenergy/detail.php?id=30852

[IsailedawayfromFR]

So now we believe the EIA knows what it is talking about on its crude forecasting?

Just for the fun of it, I found its US crude projections from its 2008 report.

In it, the EIA projected that US production now would be somewhere between 5 to 6.8 mmbopd.
https://www.nrc.gov/docs/ML0932/ML093280292.pdf

It is currently almost twice that projection and rising, so so much for that projection.  Glad we did not rely upon it.

I do not believe it knows enough to make accurate projections of either price or volumes, and I certainly would not rely upon the robust continued projections for the domestic crude volumes for the next 30 years.

And I have my doubts on its ability to assess accurately technological advances and geological constraints.

Case in point on the former is the projected +50,000 wells left to drill in the Bakken, and on the latter is the 100 fold decrease to projected potential of the California Monterey it made just a few years ago.

[thackney]

So now we believe the EIA knows what it is talking about on its crude forecasting?

Just for the fun of it, I found its US crude projections from its 2008 report.

Do you know anyone that would have predicted the widespread success of shale oil production 10 year ago?

[Smokin Joe]

Do you know anyone that would have predicted the widespread success of shale oil production 10 year ago?

I know we'd been at it 8+ years in the Williston Basin 10 years ago, and had realized the Three Forks was every bit as good, just below the Bakken as the Middle Bakken, at least in places. Yes, I'd say there were quite a few folks who would. They were not government officials, but a bunch were literally banking on it.

The difference between Government reports and people working in the field where the rubber meets the road, is that we have more information. If you want to know if a trend is going to be successful, watch where the money goes after the first couple of wells. By the time the government reports come out, it's a done deal.

I must note also that the EIA crashed crude prices under Clinton (iirc, 1999), by failing to take into account Asian crude oil demand and reporting a huge coming glut in oil.  It took the drilling end of the industry a year to recover from that one (just in time for the election, too!--something about election years and years ending in '9'...)

[IsailedawayfromFR]

Do you know anyone that would have predicted the widespread success of shale oil production 10 year ago?

That is the entire point I was making in a nutshell.

No one can predict, other than to predict your prediction is incorrect.

The main lesson to learn is to NOT base your wellbeing on any of those predictions.

[IsailedawayfromFR]

I know we'd been at it 8+ years in the Williston Basin 10 years ago, and had realized the Three Forks was every bit as good, just below the Bakken as the Middle Bakken, at least in places. Yes, I'd say there were quite a few folks who would. They were not government officials, but a bunch were literally banking on it.

The difference between Government reports and people working in the field where the rubber meets the road, is that we have more information. If you want to know if a trend is going to be successful, watch where the money goes after the first couple of wells. By the time the government reports come out, it's a done deal.

I must note also that the EIA crashed crude prices under Clinton (iirc, 1999), by failing to take into account Asian crude oil demand and reporting a huge coming glut in oil.  It took the drilling end of the industry a year to recover from that one (just in time for the election, too!--something about election years and years ending in '9'...)

There's the geological advice that is needed for more accurate predictions.  I will say though, @Smokin Joe , that based upon this engineer's study, the Three Forks will never yield basin-wide what the Bakken formation will yield.

My broader assessment in study of the entire US unconventionals with lots of geologic input, which I have repeated often,  is that basins like the Williston that provide the type of wide-spread geology from which blanket liquids-rich unconventionals will emerge, are uncommon .

The variables to produce the proper amount of fraccability, formation maturity, gas and liquids characteristics, overpressure, etc.  are just simply not present in very many places like the unique Bakken.

Consequently, I believe as does EOG's past CEO Mark Papa that growth from liquids-rich formations will slow considerably this upcoming decade and we will be unable to continue our current production levels beyond that, as the EIA report suggests.

[Smokin Joe]

There's the geological advice that is needed for more accurate predictions.  I will say though, @Smokin Joe , that based upon this engineer's study, the Three Forks will never yield basin-wide what the Bakken formation will yield.

My broader assessment in study of the entire US unconventionals with lots of geologic input, which I have repeated often,  is that basins like the Williston that provide the type of wide-spread geology from which blanket liquids-rich unconventionals will emerge, are uncommon .

The variables to produce the proper amount of fraccability, formation maturity, gas and liquids characteristics, overpressure, etc.  are just simply not present in very many places like the unique Bakken.

Consequently, I believe as does EOG's past CEO Mark Papa that growth from liquids-rich formations will slow considerably this upcoming decade and we will be unable to continue our current production levels beyond that, as the EIA report suggests.

While I agree that the geological scenarios necessary to produce formations like the Bakken are rare, if not unique, I believe there are other situations in which relatively tight formations with considerable hydrocarbons present exist, and can be produced using current technology.
Considering the Bakken does not outcrop anywhere, we have to turn to subsurface (wellbore, geophysical) data to find them.
I think we have to look at some better up front data gathering and analysis methods to maximize yield from those formations, but that technology exists and is deployable on wellsite, just more expensive than standard mudlogging and other methods. Using that, however to isolate the compartments in reservoir formations with good/better/best Sw's and hydrocarbon profiles will take a lot of previously unproducible formations over the line, if the fracs are planned using that information.

Reexamining some of those accumulations previously written off as nonproductive may produce those targets.
I know of one fairly large one if anyone is interested. (not in North Dakota)

As for the Three Forks, I agree, it will not be as ubiquitous at the Bakken, but geologically, the Middle Bakken is sandwiched between excellent source rocks where both shales are present. The Three Forks is below that, and the upper bench will do well in a larger area than the next one down, etc. The areas where any production will be pulled from the lower two benches are few. Even within the Bakken, there are localized hot spots and areas where the reservoir, for whatever reason seems uncharged relative to neighboring areas. Such are the variables we don't completely understand, because even now we have an incomplete picture of what is going on ten thousand feet down.

[IsailedawayfromFR]

While I agree that the geological scenarios necessary to produce formations like the Bakken are rare, if not unique, I believe there are other situations in which relatively tight formations with considerable hydrocarbons present exist, and can be produced using current technology.
Considering the Bakken does not outcrop anywhere, we have to turn to subsurface (wellbore, geophysical) data to find them.
I think we have to look at some better up front data gathering and analysis methods to maximize yield from those formations, but that technology exists and is deployable on wellsite, just more expensive than standard mudlogging and other methods. Using that, however to isolate the compartments in reservoir formations with good/better/best Sw's and hydrocarbon profiles will take a lot of previously unproducible formations over the line, if the fracs are planned using that information.

Reexamining some of those accumulations previously written off as nonproductive may produce those targets.
I know of one fairly large one if anyone is interested. (not in North Dakota)

As for the Three Forks, I agree, it will not be as ubiquitous at the Bakken, but geologically, the Middle Bakken is sandwiched between excellent source rocks where both shales are present. The Three Forks is below that, and the upper bench will do well in a larger area than the next one down, etc. The areas where any production will be pulled from the lower two benches are few. Even within the Bakken, there are localized hot spots and areas where the reservoir, for whatever reason seems uncharged relative to neighboring areas. Such are the variables we don't completely understand, because even now we have an incomplete picture of what is going on ten thousand feet down.

I do not doubt that for a second.  It is the materiality of the play which I am talking about.  The Bakken is almost a basin-wide play with ultimately tens of thousands of wells, certainly with variability, but enough blanket conditions to produce reasonable certainty to make good wells wherever one drills.  I think most basins do not fit that description, with the Niobrara a glaring example.  The Eagleford makes it happen by the prodigious gas volumes produced, unlike the Bakken.  And the Permian is, for the most part, not an unconventional play at all, but simply redrilling a basin drilled with vertical wells to now be horizontal.

We will make good unconventional wells in almost any basin one points to; however, the propensity for that to be repeatable over a large area is suspect in this engineer's mind.  And that would be the only way to continue the expansive nature of making oil wells for 30 years at current trends in unconventional plays.

I do hope you smart geologists can find basins that contradict me, particularly by finding those natural fractures which I believe are the heart of making unconventional plays work, buttressed by some smarter-than-me engineers that can fine tune the completions to maximize a basin-wide area of economic oil wells.

I just have doubts after many years of watching industry take on new challenges.

[Smokin Joe]

I do not doubt that for a second.  It is the materiality of the play which I am talking about.  The Bakken is almost a basin-wide play with ultimately tens of thousands of wells, certainly with variability, but enough blanket conditions to produce reasonable certainty to make good wells wherever one drills.  I think most basins do not fit that description, with the Niobrara a glaring example.  The Eagleford makes it happen by the prodigious gas volumes produced, unlike the Bakken.  And the Permian is, for the most part, not an unconventional play at all, but simply redrilling a basin drilled with vertical wells to now be horizontal.

We will make good unconventional wells in almost any basin one points to; however, the propensity for that to be repeatable over a large area is suspect in this engineer's mind.  And that would be the only way to continue the expansive nature of making oil wells for 30 years at current trends in unconventional plays.

I do hope you smart geologists can find basins that contradict me, particularly by finding those natural fractures which I believe are the heart of making unconventional plays work, buttressed by some smarter-than-me engineers that can fine tune the completions to maximize a basin-wide area of economic oil wells.

I just have doubts after many years of watching industry take on new challenges.

New technology/methodology goes through phases.

1 That effer is out of his mind.

2 (smaller company) That might just work, let's try it.

3 (larger company) I heard (smaller company) got some good results from this, let's try it, too.

4 Majors come in and buy up smaller companies and act like they invented it.

New field areas are much the same. Leases in the Elm Coulee field were going for under a buck an acre in State sales (on state land, on bid) until the word got out, for 5K an acre in North Dakota in just six years. Much of the state land had had a vertical well drilled in it (or two) and was proven to be nonproductive in more conventional zones. As for the Bakken? well, you always got a show there, but you probably wouldn't be able to produce it, unless there were fractures....

That same inertia will be present in any new play, anywhere.

(From the little I have seen of the Permian Basin, those are compartmented reservoirs, and horizontal drilling will open them up. Being able to recognize which compartments are best, where fractures are, and how to design the fracs to utilize that information is likely key to best production. That technology exists, but it isn't cheap.

[IsailedawayfromFR]

New technology/methodology goes through phases.

1 That effer is out of his mind.

2 (smaller company) That might just work, let's try it.

3 (larger company) I heard (smaller company) got some good results from this, let's try it, too.

4 Majors come in and buy up smaller companies and act like they invented it.

New field areas are much the same. Leases in the Elm Coulee field were going for under a buck an acre in State sales (on state land, on bid) until the word got out, for 5K an acre in North Dakota in just six years. Much of the state land had had a vertical well drilled in it (or two) and was proven to be nonproductive in more conventional zones. As for the Bakken? well, you always got a show there, but you probably wouldn't be able to produce it, unless there were fractures....

That same inertia will be present in any new play, anywhere.

(From the little I have seen of the Permian Basin, those are compartmented reservoirs, and horizontal drilling will open them up. Being able to recognize which compartments are best, where fractures are, and how to design the fracs to utilize that information is likely key to best production. That technology exists, but it isn't cheap.

Agreed, I have vocalized #1 many times during my tenure.  I have only once been with a smaller company though it was one of the most pleasant experiences I can recall.

[Bigun]

@Smokin Joe @IsailedawayfromFR

Fellow can learn a lot just sitting back and enjoying the conversation between you two.

[IsailedawayfromFR]

@Smokin Joe @IsailedawayfromFR

Fellow can learn a lot just sitting back and enjoying the conversation between you two.

thanks.  It does take acumen for a scientist and engineer to communicate.

[Smokin Joe]

thanks.  It does take acumen for a scientist and engineer to communicate.

Thanks, @Bigun .
@IsailedawayfromFR
I have worked with quite a few engineers I could work with (and done splendidly), (and a very few I couldn't although those are a small minority).

I will refrain from characterizations of the latter, because those are case specific.

Decades of practice don't hurt, either..

The understanding that while knowledge for knowledge's sake is nice and all that, it doesn't pay the bills unless a way can be found to apply it helps. That, and a few fundamentals about how things work don't hurt, either. I have roughnecked and worked as a core hand, and when I broke out, an old Penrod toolpusher took me under his wing. I'd go over to his shack and read the IADC manual and ask questions--some dumb, some dumber, but I learned a few things. I am ever in that man's debt for his patience.

Otherwise, we're professionals, and we have a common mission (finding and getting oil and gas out of the ground, and doing it at a profit.)

[Bigun]

Thanks, @Bigun .
@IsailedawayfromFR
I have worked with quite a few engineers I could work with (and done splendidly), (and a very few I couldn't although those are a small minority).

I will refrain from characterizations of the latter, because those are case specific.

Decades of practice don't hurt, either..

The understanding that while knowledge for knowledge's sake is nice and all that, it doesn't pay the bills unless a way can be found to apply it helps. That, and a few fundamentals about how things work don't hurt, either. I have roughnecked and worked as a core hand, and when I broke out, an old Penrod toolpusher took me under his wing. I'd go over to his shack and read the IADC manual and ask questions--some dumb, some dumber, but I learned a few things. I am ever in that man's debt for his patience.

Otherwise, we're professionals, and we have a common mission (finding and getting oil and gas out of the ground, and doing it at a profit.)

@Smokin Joe

My guy was a Chem E at Dow.  Knew everything that was ever written in a book about chemistry but couldn't figure out which way to turn a valve to get it open to save his life.  We worked very well together mainly because of his willingness to answer all of my endless stream of stupid questions.   That time I spent with him served me very well for the rest of my working career.

[IsailedawayfromFR]

@Smokin Joe

My guy was a Chem E at Dow.  Knew everything that was ever written in a book about chemistry but couldn't figure out which way to turn a valve to get it open to save his life.  We worked very well together mainly because of his willingness to answer all of my endless stream of stupid questions.   That time I spent with him served me very well for the rest of my working career.

I had a guy in mgt that was a pure reservoir hand that watched me as a wee lad in the field stutter and lack confidence during field management presentations. He later offered questions on how the fluid-thing in the ground works, and he and I went back and forth on discussing reservoir characteristics in depth and I learned tremendously in visualizing how that flow really does happen, and differently over time with pressure differentials and differing fluids.

Learned a lot, and he later offered me a job that caused me to get thrown into the fire in the early days of the North Sea, where a single choke change could yield an extra thousands of bopd. 

We argued profusely, which helped gauge the strength of my beliefs.

His nickname was Wild Bill and he looked the part.

[Smokin Joe]

I had a guy in mgt that was a pure reservoir hand that watched me as a wee lad in the field stutter and lack confidence during field management presentations. He later offered questions on how the fluid-thing in the ground works, and he and I went back and forth on discussing reservoir characteristics in depth and I learned tremendously in visualizing how that flow really does happen, and differently over time with pressure differentials and differing fluids.

Learned a lot, and he later offered me a job that caused me to get thrown into the fire in the early days of the North Sea, where a single choke change could yield an extra thousands of bopd. 

We argued profusely, which helped gauge the strength of my beliefs.

His nickname was Wild Bill and he looked the part.

Y;all know it's up to us to pass that on.... Just saying.  ^-^

[IsailedawayfromFR]

Y;all know it's up to us to pass that on.... Just saying.  ^-^

I've done my best, I can swear to that.

As an example, I took a young accountant working in the field and taught her something new about oil operations and reservoirs every day, sometimes drawing on the blackboard.

That was 20 years ago.  She is now the Comptroller of a Fortune 500 company. 

Another time I had a shout-out from booths while walking through SPE a few years ago.  It was a guy manning a booth on Geophysical Consulting who had recognized me from our North Sea days in the early 80s and had not seen me in over 30 years.
He had worked for me as a young engineer having a unique joint degree in engineering and geophysics and I had encouraged him to take up the Geophysics part as he would be a stronger professional than as an engineer.  He told me he had taken the advice and gone off and developed a consultant company that was extremely successful.

I always liked the younger reservoir engineers and baited them into discussions to gauge their mettle.  Rarely did that not produce improved understanding, mostly for them, but sometimes I was surprised for me.  The latter has kept me humbled.

[Bigun]

Y;all know it's up to us to pass that on.... Just saying.  ^-^

What is it they say about leading horses to water...?

I've worked hard to try and help all the young up and comers I could my whole life.

[Smokin Joe]

What is it they say about leading horses to water...?

I've worked hard to try and help all the young up and comers I could my whole life.

There are some folks I have encouraged to find an industry that is a better fit. There are others I have taught all I could, and others I just gave an opportunity and got out of the way (they were off to the races).

[thackney]

What is it they say about leading horses to water...?

I've worked hard to try and help all the young up and comers I could my whole life.

This hangs at the stables where my daughter trains:

[IsailedawayfromFR]

Do you know anyone that would have predicted the widespread success of shale oil production 10 year ago?

I stumbled across this article which was an assessment of EIA's ability to forecast.

The main item of interest is within the graph below and the statement within article  https://oilandgas-investments.com/2017/top-stories/how-accurate-is-the-eia-data-on-oil-we-did-a-study/
 conclusion is…the EIA has never over-estimated weekly crude oil production as much as they are right now. Look at this chart:

Figure 1: Six-Month Rolling Average of Crude Oil Production Revisions

[thackney]

So on average, the EIA under-estimates the oil growth.

[IsailedawayfromFR]

So on average, the EIA under-estimates the oil growth.

like all statistics, one can pick out the data that supports your argument. The author's conclusion was that more recently, the EIA had a serious overestimation.

[Smokin Joe]

So on average, the EIA under-estimates the oil growth.

I wonder if any of that comes from the very conservative estimates of reserves in new plays by the USGS? I know that for a while (first decade this century) reserve estimates in the Bakken were continually being bumped by significant jumps. But the EIA overestimating production would tend to suppress prices and growth, which makes little sense, except to suppress product prices.