No. of Recommendations: 32
Even after a career in the industry, I have consistently underestimated the ability of the industry to find new reserves at attractive prices. This is due to technology advances. It continues. O&G is a high tech business.
This point can not be overstated. A common misperception is that oil is buried in little tanks in the ground, and after we have emptied them, it runs out. In the real world, oil extraction has behaved mathematically closer to an infinite supply than a finite supply. A resource pyramid explains this conundrum.
The original oil "wells" were seeps at the surface. This supply represents in infinitesimally small percent of the available oil, the tip of the pyramid. Lets go back and look at the origin of that oil.
Oil comes from organic matter in sedimentary rocks. Seventy-five percent of the earths surface is covered by sediments. They average 1% organic matter, which adds up to a heck of a big pile of hydrocarbon. In a small percentage of the rocks, the organic content is higher, with the extreme cases being oil shales and coals. In a few of those cases, pure liquid or gaseous hydrocarbons ooze out of those rocks. Most remains locally, some moves to the surface and is quickly broken down, some migrates into closed traps of rocks of 6-18% porosity and forms oil and gas fields. Some of those accumulations are accessible by drilling and have been located. We currently successfully extract an average of 30% of that hydrocarbon.
The oil business started at the fresh seeps, a rare occurrence. From there they drilled the structures which could be seen at the surface. Many more structures exist which can only be detected by seismic exploration, and those images have improved (compared a tv and an adding machine from the 1950's to what we have today). But the structures are only a very small part of the total hydrocarbon. The oil that did not migrate from the source rock is still sitting there in quantities far greater than the dribble that happened to end up in the traps. Horizontal drilling with multi-stage fracking has made some of that oil accessible.
At every stage of this evolution, the volume of producible oil and gas increases. Additionally, we get better at extracting it at every stage. The seeps are being produced in unprecedented volumes at the Canadian oil sands. The structures once gave up 20% of the oil in place now can provide as much as 80% through water floods, fracking, steam floods, CO2 injection etc. The horizontal shale production is evolving fast. A friend recently wrote me about a company drilling a 28,000 foot horizontal well in 48 hours, and said that much drilling would have taken a year when he started.
I used to give a talk comparing a mature, thoroughly explored American oil district to more lightly drilled international places. Over a hundred years ago oil companies would ask the local sheepherders where to find a good structure. The sheepherders, and later the geologists found a lot of them, the most famous of which caused the Teapot dome scandal. After they found and drilled all the surface features they assumed they had found all the oil, fired all the geologists, and declared it a dying region. Then the seismic crews came, found hidden structures, and a second boom ensued, ending with them find a lot more oil, and then firing all the geophysicists. The area was written off again, until after 40 some dry holes a geologist proved that most of the oil in the area was trapped very subtle stratigraphic traps, wedge-outs of porous sands. The horizontal fracked shale production is just starting.
Back in the 1970's the Saudi oil minister Yamani stated that the stone age didn't end due to lack of stones, and the petroleum age won't end due to lack of petroleum. Fifty years later, I see no reason to doubt him.
