BP Makes Huge Oil Discovery in the Gulf

[BigRob]

Big oil find in the Gulf

BP Plc, Europe’s second-largest oil company, reported a “giant” discovery at the Tiber Prospect in the U.S. Gulf of Mexico that may contain more than 3 billion barrels, after drilling the world’s deepest exploration well.

With the oil estimates that the US government says are in the OCS, the United States in a matter of a few decades could turn into a net exporter of oil, if only we allowed it to be drilled.

Thankfully, this find is in an area that is able to be drilled.

 

[GenSeneca]

3,000,000,000 Total Barrels

Divided by,

US Crude Oil Imports - 9,783 ,000 barrels/day

Equals = 306.65 days worth of oil

Not saying its not worth getting. We should be getting that along with any other reserves we can find as well as building nuclear plants and expanding in all other areas of energy generation.

 

[Pidgey]

3 billion barrels OIP (Oil In Place). You have to multiply it by a factor to estimate the actual recoverable oil, which in that area is about 25% so about 750 million barrels of oil recoverable. That equals about what the US actually uses in a month and a half. Note the difference between the basis of that versus what GenSeneca posted: the quantity of oil IMPORTS per day.

Let's not go into the cost of of deep wells in deep water and the flow rate per well just now.

 

[BigRob]

3 billion barrels OIP (Oil In Place). You have to multiply it by a factor to estimate the actual recoverable oil, which in that area is about 25% so about 750 million barrels of oil recoverable. That equals about what the US actually uses in a month and a half. Note the difference between the basis of that versus what GenSeneca posted: the quantity of oil IMPORTS per day.

Let's not go into the cost of of deep wells in deep water and the flow rate per well just now.

BP, and the other players, put the recoverable estimate closer to 1 billion barrels. Of course there is the potential for more upside as well.

But 1 billion recoverable barrels is still worth (let us assume that oil will remain a constant $65/barrel which obviously it wont) around $65 billion dollars.

While certainly this discover won't make the US a net exporter, the US government in 2006 issued a report that stated the "quantity of undiscovered technically recoverable resources ranges from 66.6 to 115.3 billion barrels of oil and 326.4 to 565.9 trillion cubic feet of natural gas."

This is from the OCS area that is pretty much entirely off limits to drilling. Opening up that would go a long way towards making that prospect a reality, especially if we would push nuclear power as well domestically.

 

[Pidgey]

Yes, we have to learn to utilize the energy that's available, especially given the UDR of what's currently being produced and other geopolitical factors. In terms of what's going on in our own neighborhood (GOM), we lost more production in one year from Cantarell in the Gulf than the expected production of the proposed new Tiber field and the Taskida ADDED TO all the other BP production in the area.

It's actually a testament to the raw desperation and panic out there that they're even looking for oil 35,000 feet down.

 

[BigRob]

Yes, we have to learn to utilize the energy that's available, especially given the UDR of what's currently being produced and other geopolitical factors. In terms of what's going on in our own neighborhood (GOM), we lost more production in one year from Cantarell in the Gulf than the expected production of the proposed new Tiber field and the Taskida ADDED TO all the other BP production in the area.

Well, the Cantarell Oil Field was massive, but it was also running out, so it is not really surprising that production has declined lately. Also, within the last few years they have been doing nitrogen injection in the area, so again, I would expect to see sharper declines once the reserves run out.

It's actually a testament to the raw desperation and panic out there that they're even looking for oil 35,000 feet down.

I would say its a testament to the ingenuity and technical advances of civilization rather than "raw desperation."

 

[Pidgey]

The trouble with ingenuity and technical advances is that they sometimes cost more, which is the case here. It's the derivative of the cost of the energy down the road that will be the problem given the total current debt load.

 

[BigRob]

The trouble with ingenuity and technical advances is that they sometimes cost more, which is the case here.

As long as extracting the oil remains economically viable, it should not matter the cost of extraction on my view. If a private company wants to extract it and make money, more power to them. They are not going to open wells that they predict would not make money.

It's the derivative of the cost of the energy down the road that will be the problem given the total current debt load.

In theory, wouldn't more energy coming on line drive down the price, thus making the potential for increased debt due to it less of an issue?

 

[Pidgey]

How do you define "economic viability"? You do know the story of M. King Hubbert and when in 1956 he made his famous (within a small crowd, that is) proclamation about the eventual peak of production in the US... right? Did we peak because of economics, politics, geology or a perfect storm of all three? What, exactly, does it take for a well or collection of wells to "make money", ESPECIALLY when you've got an inflationary policy superimposed on a deflationary spiral?

You see, it's a far more complex question than you may have thought you asked because you're looking at the need to increase net energy supply in thermodynamic terms in order to service current debt loading due to "pulled forward" demand. If you run a historical on G.19 data from The Fed and adjust for population growth, you'd see an alarming and horrific exponential rise in consumer credit. What you're ultimately suggesting is that there will or would be enough increase in energy supply to ultimately pay off that debt, go into even more and keep paying and increasing ad nauseum. I'm sorry, but there DOES come a day...

 

[BigRob]

How do you define "economic viability"? You do know the story of M. King Hubbert and when in 1956 he made his famous (within a small crowd, that is) proclamation about the eventual peak of production in the US... right? Did we peak because of economics, politics, geology or a perfect storm of all three? What, exactly, does it take for a well or collection of wells to "make money", ESPECIALLY when you've got an inflationary policy superimposed on a deflationary spiral?

By economically viable I mean that the production from the area would cover the costs of overheard, and the generally the cost of doing business, like taxes, rig costs, etc...

As for "peak oil", I am of the opinion that we are not close to peaking at all.

And yes, the policies of the administration will have an effect, but I do not predict that the United States is going to be stuck in a period of inflationary policy with the addition of deflation. I think that is a short term instance that will not be the norm.

You see, it's a far more complex question than you may have thought you asked because you're looking at the need to increase net energy supply in thermodynamic terms in order to service current debt loading due to "pulled forward" demand. If you run a historical on G.19 data from The Fed and adjust for population growth, you'd see an alarming and horrific exponential rise in consumer credit. What you're ultimately suggesting is that there will or would be enough increase in energy supply to ultimately pay off that debt, go into even more and keep paying and increasing ad nauseum. I'm sorry, but there DOES come a day...

Certainly spending and credit needs to be curtailed, however taking the 2006 report on minerals in the OCS, we can generate the following numbers:

More or less splitting the difference in the report, we could assume 90 billion barrels of oil, and 450 trillion cubic feet of natural gas in the OCS. The monetary value of such resources is staggering.

While not to say that this alone solves our problem, we can develop alternative energies at the same time as we begin to extract the above resources and it could go a long way to helping pay down our debts through tax revenues etc. Certainly you are correct that the government would need limit its borrowing in the interim.

There will indeed come a day, but I do not think it will come in my lifetime if we use even a little common sense.

 

[Pidgey]

Based on what? Your wishes?

Have you EVER seen a graph of oil discoveries by year in America alongside an oil production plot? The US oil reserves discovery peak came before the production peak (1970/1971) by ~40 years. The world oil reserves discovery peak was in 1964. Regular conventional oil production DID peak in 2005/2006. Hmm...

 

[BigRob]

Based on what? Your wishes?

Have you EVER seen a graph of oil discoveries by year in America alongside an oil production plot? The US oil reserves discovery peak came before the production peak (1970/1971) by ~40 years. The world oil reserves discovery peak was in 1964. Regular conventional oil production DID peak in 2005/2006. Hmm...

A graph of oil production by years in America is worthless, because the American government bans drilling in many places that are full of oil. Further, many places that were not accessible in the 70's are now easily accessible with technology advances.

You continue to say we have hit "peak oil" and yet here we are finding huge pockets all the time.

If the price of oil continues to rise, alternative sources of oil like shale will become even more viable. Production has remained constant with demand to a great extent, with a few variations. I see no signs of that changing.

Simply because demand is met and no new production is immediately needed does not mean that there is no capacity to ever generate more production or that we are "running out of oil."

 

[Pidgey]

"Peak Oil" doesn't mean you're "running out of oil"--it means that actual production hits a peak. Did you want me to link you to the government's energy site so that you can see the production numbers for yourself? Admittedly, for a lot of the metrics they started including liquids that we used to flare and have changed the title to "All Liquids". In any case, total liquids production has edged back from its peak in 2008. Regular Conventional Oil peaked in 2005/2006 and nobody is disputing that.

One of the ramifications of Peak Oil is that the discovery, production and refinement of oil will start getting exponentially more costly. This is exactly what we're seeing. To give you an idea of the quantities of oil we used to find, the world peak discovery year was about 1964. During that bracketing decade, we found about 475 billion barrels of oil in place. These days, we're finding more like 75-100 billion barrels per decade, and they're rather less desirable. World consumption is close to 30 billion barrels per year. Do the math.

GDP, by the way, rose in lock-step with oil production, as did population.

 

[BigRob]

"Peak Oil" doesn't mean you're "running out of oil"--it means that actual production hits a peak. Did you want me to link you to the government's energy site so that you can see the production numbers for yourself? Admittedly, for a lot of the metrics they started including liquids that we used to flare and have changed the title to "All Liquids". In any case, total liquids production has edged back from its peak in 2008. Regular Conventional Oil peaked in 2005/2006 and nobody is disputing that.

In what way is that "peak" tied to demand the price of oil? And is it not plausible to assume that as technology makes it easier and easier to extract oil for new fields that the production could again be increased past the previous "peak?"

One of the ramifications of Peak Oil is that the discovery, production and refinement of oil will start getting exponentially more costly. This is exactly what we're seeing. To give you an idea of the quantities of oil we used to find, the world peak discovery year was about 1964. During that bracketing decade, we found about 475 billion barrels of oil in place. These days, we're finding more like 75-100 billion barrels per decade, and they're rather less desirable. World consumption is close to 30 billion barrels per year. Do the math.

GDP, by the way, rose in lock-step with oil production, as did population.

Getting more costly sure, but as we develop news ways to do it, it will in theory drive the prices down at least to an extent right?

So maybe we have peaked in the short term, but some new discoveries could bring it back up.

 

[Pidgey]

We're getting more efficient at well placement, yes, and this does cut costs. As far as secondary and tertiary recovery, that's another story. In general, we only get about a quarter to a fifth of the oil out of the oil-bearing rock. You can start really pushing recovery costs up when you start pumping significant amounts of gas or saltwater down there to try push remaining oil out. One thing that works is CO2 as it's soluble in oil and "swells" the droplets and thins their viscosity, allowing them to be pushed better. The economics of these things are rather worse than you might think, though, as they consume immense amounts of energy to perform.

I suppose that it's a common misconception that engineering a better mousetrap is all it takes to make the economics of pulling oil out of rocks work. It does to a point--but it takes real energy to push a highly viscous fluid through those same rocks and that can be a horrific drain on the economics of the endeavor. We've even gone so far as to set fire to a portion of the field and pump air down there to keep the fire burning to provide heat, CO2 and pressure. Fire inside rock, of course, isn't anything like what you'd normally imagine it to be. Imagine trying to control that for a huge area underground... Take Gwahar, for instance, ...almost a couple hundred miles long and about 25 miles wide, 1,300 feet thick. At its peak, it was providing about 5.5 million barrels per day. It's watering out now and they're cycling A LOT of water through it trying to get out the last drops. Chances are it's going to go bigtime due to the nature of the recovery methods used. We'll lose about 4.5 mbpd production within the space of a year or two.

No, the real problem IS that the actual effort to get the remaining stuff out of the ground requires REAL energy. When your production base is in decline and, worse, requires exponentially greater energy inputs to MAINTAIN said production AND your economy REQUIRES exponentially greater energy inputs to pay off EXPONENTIALLY INCREASING debt... well, h*ll... you're in real trouble, plain and simple.

Crap, you don't think that silly little price spike in energy costs last year was a complete fluke, didja'? The forward predictions of Peak Oil theorists very presciently predicted years ago that that's exactly what would happen, including the demand destruction that would ultimately and paradoxically drop the price to such lows for awhile. Horrific volatility. Nobody, and I mean nobody, wants to see this come true. And if you disregard what the optimistic pundits are saying and focus on the arcane data, predictions and geopolitical posturings of the major players, you'll see the handwriting on the wall.