Shale oil: Overhyped?

Two weeks ago at a conference on fracking in Agoura, an industry analyst named Gordon Pickering told about 150 geologically sophisticated insiders that natural gas companies are seeing rapid rates of decline in production in the Bakken formation in North Dakota.

"It's requiring more and more drilling, and becoming increasingly energy intensive," he said. "The natural gas industry is becoming more like a manufacturing process than a typical oil and gas exploration. The decline rates can be managed by additional drilling. Decline rates in gas shale plays are very high, but companies can take advantage of that by drilling four or five wells per pad."

Last week in the Wall Street Journal, via Kevin Drum, news that Shell Oil had to take a $2 billion writedown because its shale oil production in the U.S. is not meeting expectations. To wit:

Royal Dutch Shell PLC on Thursday posted a 60% drop in
second-quarter profit, largely because the oil and natural-gas giant
wrote down the value of its North American shale assets by more than $2
billion after tax, highlighting the difficulties that energy companies
face in finding new oil they can pump at a profit.

….Shell cited disappointing drilling results at its North American shale assets, which it said turned out to contain less oil than it had hoped.
Even excluding the charge on those assets, Shell's earnings fell well
short of analysts' expectations as the company struggled with production
declines and rising costs.

Here in Ventura County, it's well-known that the oil fields are "distorted," such that geologists I have spoken to have expressed doubts that horizontal drilling — which is where fracking really pays off — will work. (Although other methods, such as acidizing, might still produce oil from tapped-out fields.) 

Here's a chart of the rich Ventura oil field area compiled by the California Division of Oil and Gas. 

Doesn't look simple, does it?  The Bakken field is flat and easily fracked by comparison. 

Published by Kit Stolz

I'm a freelance reporter and writer based in Ventura County.

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