Bakken, Permian, or Cardium? Where is all this oil coming from?
New production from brittle, oil-bearing rocks in North America – otherwise known as light, tight oil – has been impressive. Yet that's not all. A wider glance at the world of oil reveals a lot more new barrels coming to market. Other regions are busy pumping up capacity too – for instance, the Canadian oil sands and Iraq are notable for their scale.
Process differences are also important to highlight. Pulverizing subterranean rocks with fracking equipment isn't the only way to deliver another million barrels a day. Mining and steaming bitumen in northern Alberta works too. Drilling good ol' vertical wells into virgin Middle Eastern geology is proving to add a lot of capacity in Iraq.
Our feature chart this week shows towers of growth for 11 regions in three countries: the United States, Canada and Iraq. Each tower represents average oil output spanning 2005 to 2013 (the current year is estimated). The number at the top of each tower diarizes the change in output over the nine-year period.
Across all its oil fields, the United States is currently pumping a total 7.2 million barrels a day (MMB/d), up a remarkable 2.0 in less than a decade. The Eagle Ford play in Texas is the most impressive, rocketing up 1.0 MMB/d in just over three years. And who ever thought North Dakota would be an oil superpower? The Williston Basin, which spans the Flickertail State, has seen a capacity spike of 800,000 B/d.
Tack on another half-million in the Texas Permian Basin and you can see why many pundits in the Lower 48 are calling for energy independence, and the demise of OPEC.
Such prophecies are hasty, although that's not to say the legendary cartel isn't nervous about more barrels coming out of the ground. Most OPEC members are more worried about elephant fields being drilled in Iraq than they are by the distant din of fracking operations in the U.S. Despite ongoing violence, the days when Iraq's oil production was impaired by weapons of mass destruction and civil war appear to be over – at least that's what the country's production chart shows. A steep and steady rise of 1.3 MMB/d has brought Iraq's production above pre-2003-attack levels.
Canada's oil sands, although stigmatized by environmental groups for several years, have not experienced any deceleration. In fact, barrels are being filled faster than ever by mining and SAGD (steam-assisted gravity drainage) operations. A quick flip through a microeconomics text should dull anyone's surprise at the momentum behind the oil sands. Since 2005, $160-billion has been invested into the region resulting in operations that now have massive economies of scale. The sunk cost of infrastructure in the region, combined with years of well-oiled learning curves, now ensures that every new barrel coming to market costs less than one in the past.
Alberta's light and medium oil production, although not towering as high as other regions, is still in its nascent stage of growth. A mere 100,000 B/d higher than 2005 doesn't look impressive, but today's volumes are 40-per-cent above where they bottomed out in 2010. At first blush, conventional heavy oil plays in Canada look to be declining, or at least unexciting; however the data from the past couple of years suggest a levelling out and even possibly a recovery of mojo.
The same can be said of Alaska's North Slope and the San Joaquin basin. And big offshore discoveries, combined with new deepwater technologies, are likely to revive the trajectory of Gulf of Mexico plays too.
All this production growth, plus more towering output we haven't shown from places like West Africa and South America, is a far cry from the tight supply era circa 2006. There is a lot of innovation happening in oil fields around the world, but the catalyst for all this expanding oil output has less to do with technology and more to do with triple-digit oil prices.
Clearly, the supply response we're seeing tells us that projects in almost every region can engineer returns above $100/B, regardless of development method. Yet if every producing region continues to ramp up its production by whatever means suits them best, then at some point we are going to find out that the notion of energy independence is very much a function of price – and that some regions will be more independent than others.