Shale Oil, Is It The New Shale Gas?

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abarrelfull wrote on 14 Nov 2011 13:01
Tags: oil shale usa

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I have been trying to make sense of the various shale oil (or tight oil) plays in the USA and whether their development could have the kind of impact that we have seen in Shale Gas. The sheer number of stories about this newly available resource seem to be limitless. Yet the current share of Shale Oil in production figures is very limited.

Currently the USA is leading this game as it has with Shale Gas, but it is not alone. Developments are even being commented on by the mightly Opec:

Known shale oil resources cover several basins in the US (Bakken, Eagle Ford, Niobrara, Utica, Leonard Avalon, Woodford and Monterey), but also in other parts of the world (Beetaloo in Australia, Exshaw and Macasty in Canada, Paris in France and Vaca Muerta in Argentina). Due to the lack of data, estimates of oil in place and recoverable volumes from these formations are still the subject of huge uncertainties.

So far The Bakken Play and Eagle Ford are where all the action is. The Bakken is taking North Dakota into the Big League:

North Dakota is now the fourth largest oil producing state in the nation, behind Texas, Alaska, and California, and slated to overtake California next year.

Meanwhile in Texas:

The Eagle Ford field is producing more than 100,000 barrels a day and could reach 420,000 by 2015, according to Bentek Energy

Even more optimistic commentators are predicting that it will lead to a resumption of US crude exports:

The US could resume exporting some of its domestic crude oil production in 2012 when the output from Eagle Ford Shale in Texas ramps up. Eagle Ford shale crude’s gravity ranges from 42 API to 60 API with very low sulfur content, which in the US Gulf Coast refining terminology is considered a super light crude. But that’s the problem for US refiners: they aren’t built to process that type of crude. So the highest value for it may be outside the country.

This is almost certainly hyperbole, as the refineries of the East Coast are actively searching for new sources of light sweet crude. These new sources of domestic crude potentially fit the bill very well, for refineries that are old and unsophisticated. In fact, one mid west refiner is planning to process crude that is not yet being produced:

Oil produced from Ohio's Utica Shale may soon be processed into gasoline, as Marathon Petroleum Corp. is making plans to use the product in its refineries.

Marathon owns the Canton Refinery in Ohio, which currently processes a range of light sweet crudes.

Ironically the excess of success in the Shale Gas business has driven prices down and sent companies scrambling to drill for higher priced oil instead. Whilst it will no doubt take time, it seems that the question is not if, but when.