The Big Oil Find Facts

The USGS announced last week a very large oil reservoir in Texas and New Mexico. Located in the Permian basin the Mass Media picked it up and it is good news.

For quick background the USGS has been evaluating oil reservoirs for decades and has a pretty good reputation lacking political bias and scientific extremism. If there is a criticism to be made one could say they underestimate the totals. But in actuality, the USGS access to oil companies’ latest and greatest technology isn’t likely available. Thus the USGS work is pretty good, reliable and consistent. Pretty much what public policy making needs.

Perhaps the best headline is at Anthony Watts site, “Watts Up With That”. Written by Davis Middleton the posting titled ‘Peak Oil Postponed Again: “USGS Identifies Largest Continuous Oil and Gas Resource Potential Ever”… And it’s in the Permian Basin’ covers the topic quite well.

The reality is this isn’t a new discovery. Rather its a reassessment of a highly explored basin. Two rock formations in the last assessment, the Wolfcamp Shale and overlying Bone Spring Formation have now been deemed technically recoverable resources.

In short, hydraulic fracturing has now vastly changed the reality of oil reserves. There are some very big numbers in the USGS assessment. 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas and 20 billion barrels of natural gas liquids. At 9 million barrels a day of imports to the U.S. the reserve would be over 14 years of alternate supply.

In summary, the U.S. has immense energy reserves. Oil and natural gas reserves have been building for decades while much of the rest of the world has dwindled. This reality has a nearly total basis in technology, research and development – an enterprise that continues to get better. There are more basins that the USGS has yet to re evaluate, an effort that will continue for decades.

Lastly while technically recoverable, the economics have to work. Can an oil and gas company put a dollar in and wind up with more than a dollar? Probably soon in some locations and as the price of crude gradually works up, more and more will come on line.

Meanwhile, Mr. Middleton and his fellows in the comment section of the posting offer a great deal of excellent information to those of us looking for deeper understanding. These guys know their stuff. Its a few minutes well spent. Head on over!