The US Geological Survey said Tuesday that it found what could be the largest deposit of untapped oil ever discovered in America.
An estimated average of 20 billion barrels of oil and 1.6 billion barrels of natural gas liquids are available for the taking in the Wolfcamp shale, which is in the Midland Basin portion of Texas’ Permian Basin.
Based on a West Texas Intermediate crude oil price of $45 per barrel, those deposits are worth about $900 billion.
US oil exploration companies have flocked to the superrich Permian Basin in recent years and used shale-drilling technology to create an oil boom that simultaneously helped trigger a price crash two years ago. The count of active oil rigs fell with prices, but has risen over the past few months, mostly in the Permian. Bloomberg noted that the Wolfcamp, where this deposit was found, has been one of the primary targets of shale drillers.
“The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more,” Walter Guidroz, program coordinator for the USGS Energy Resources Program, said in a statement.
More than 3,000 horizontal oil wells have already been drilled and completed in the Midland Basin Wolfcamp section, according to the USGS. To get the oil, producers fracture, or “frack,” the earth below with a high-pressure liquid mixture to untap oil and gas from shale rock.
While that’s great news for Texas as well as the rest of the US, experts say it’s a slow process and we can’t recover all of it.
“We think there is approximately 20 billion barrels to be recovered in the Wolfcamp shale. Our task is to estimate what we think the volume of recoverable oil is in a unit like the Wolfcamp ” Chris Schenk, a member of the Wolfcamp Shale assessment team with the U.S. Geological Survey (USGS).
Morris Burns, a local oil expert and former president of the Permian Basin Petroleum Association, said this is a positive revelation for those in the oil industry but he said not to get too excited because the price of oil is still down.
“We are picking up a few rigs every now and then but we wont see it really take off until we that price in the $60 to $65 range,” said Burns.
The USGS said this is the largest estimate of continuous oil that they have ever assessed in the U.S. The oil is unconventional and more than likely would require hydraulic fracturing to tap into it.
“When we talk about that many millions of barrels of oil in the ground, that doesn’t mean we can recover it all. We recover in the neighborhood of 50 to 60 percent,” said Burns.”
No doubt they’ll be forced to deal with the EPA and the anti-frackers who blame fracking for the earthquakes in Oklahoma. New drilling might have to wait while the government studies that and makes a determination.
Even if they only recover half of it, that’s still $450 billion and countless new jobs, assuming we’re not forced to sit on it while we import oil. Just a couple of days ago, Saudi Arabia warned Donald Trump that the incoming US president will risk the health of his country’s economy if he acts on his election promises to block oil imports.
“In a sign of the difficulties Mr Trump faces over his campaign pledges to create “complete American energy independence” from “our foes and the oil cartels”, Saudi Arabia’s energy minister pointedly reminded the president-elect that the US “benefits more than anybody else from global free trade”, adding, “energy is the lifeblood of the global economy”.
“At his heart President-elect Trump will see the benefits and I think the oil industry will also be advising him accordingly that blocking trade in any product is not healthy,” Khalid al-Falih, who is also chairman of Aramco, the state-run oil company, told the Financial Times in Marrakesh, where he is leading Saudi Arabia’s delegation in UN climate talks.”
How will Trump react to a
threat warning from Saudi Arabia? That remains to be seen. Meanwhile, the roller coaster oil industry continues in West Texas.