In the last three years there has been a major revolution in the technology of extracting oil and gas from where it lies trapped below the surface of the earth or seabed. Until quite recently the exploration for oil and gas has been the search for pockets of oil and gas trapped below the surface and drilling a pipe down to open a passageway for that oil and gas to rise to the surface where it can be loaded aboard giant tankers, pumped into oil or gas pipelines, or refrigerated into liquefied natural gas or liquefied petroleum. The technology has concentrated on producing equipment which can go ever deeper below the surface to reach these oil and gas concentrations. A substantial part of oil recovery is from deep sea wells.
However, there are other deposits of oil and gas which are not part of pools of oil or gas. There are a number of formations which are "continuous" oil accumulation; i.e. the oil resource is dispersed throughout a geologic formation rather than existing as discrete, localized occurrences. There is a substantial amount of oil and gas trapped in shale below a hard crust of rock not very far below the surface... In recent years there has been the development of a technology which can access these shale oil deposits and deliver the entrapped oil and gas to the surface. These technologies include “horizontal oil well drilling” and “hydraulic fractioning or “fracking”. “The first new technology is horizontal drilling, which allows one vertical well to tap widely into a whole layer of oil or gas. The second is hydraulic fracturing, or "fracking," which involves pumping mixtures of water and chemicals into certain rock formations, particularly shale rock. This breaks up the shale to release the oil and gas that had been trapped in the rock. This "fracking" is a game-changer, unleashing our access to oil and gas that were hitherto out of reach.”[1]Most of these are on dry land and do not require deep sea wells or pumping stations.
There have been massive finds of “continuous” formations of oil and gas in the continental U.S. Two of the biggest are the formations known as the Williston Basin (more commonly referred to as the Bakken Formation) and the Barrett Formation. The Bakken is the largest domestic oil discovery since Alaska's Prudhoe Bay, and, on its own, has the potential to eliminate all American dependence on foreign oil. The Energy Information Administration (EIA) estimates its potential at 503 billion barrels. The Bakken is located in the western two-thirds of North Dakota; western South Dakota; and extreme eastern Montana (and parts of Manitoba). It encompasses some 25,000 square miles in North Dakota, Montana, Saskatchewan and Manitoba. About two-thirds of the acreage is in western North Dakota, where the oil is trapped in a thin layer of dense rock nearly two miles beneath the surface. Companies use pressurized fluid and sand to break pores in the rock and prop them open to recover the oil.[2]
Perhaps even bigger than the Bakken Formation is the Green River Formation of Colorado, Utah and Wyoming which “holds the equivalent of 800 billion barrels of recoverable oil—as much as the U.S. would use in 110 years, at current consumption levels, and three times the proven oil reserves of Saudi Arabia,” according to a Nov. 13 press release from the Bureau of Land Management. “More than 70 percent of the Formation, including the richest and thickest oil shale deposits, lies under federally managed lands,” the release said. The federal government has a critical role in determining the future of the U.S. oil shale reserve, and it has quietly taken steps to support oil companies in accessing this resource. The oil produced in both the Bakken and Green River formation is a light, sweet crude.
In short these two formations make available, within the borders of the US, more oil than all the other proven reserves on earth. Here are the official estimates:
- 8-times as much oil as Saudi Arabia
- 18-times as much oil as Iraq
- 21-times as much oil as Kuwait
- 22-times as much oil as Iran
- 500-times as much oil as Yemen[3]
This is very impressive but it doesn’t take into account similar massive gas formations which have also been found. With the ability to perform horizontal drilling and the fracking of the substructures a massive volume of natural gas has been discovered and has become commercially viable With the tremendous success of the Barnett, Fayetteville and Woodford shales in the United States, the gas shale resource base will play a major role in the future natural gas production on which the nation will depend. Already the Barnett Shale gas play in Texas produces 6 percent of all natural gas produced in the Lower 48 states. Recent announcements of emerging plays in Appalachia, Northern Louisiana, British Columbia, and South Texas indicate the widespread potential of shale gas resources across North America. Each of these shale gas basins is different and each has a unique set of exploration criteria and operational challenges.[4]
The Potential Gas Committee assessment of the nation’s gas resources in June 2009 indicates that the United States possesses a resource base of 1,836 Tcf of natural gas. When combining these results with the Department of Energy’s latest determination of proved gas reserves, 238 Tcf (trillion cubic feet) as of year-end 2007, the United States has a future supply of natural gas of over 2,000 Tcf. At current consumption rates, this is enough natural gas to supply the nation for the next hundred years. This is an increase of more than 35% when compared to the Committee’s 2006 assessment. This increase is largely attributable to increased supplies from unconventional gas plays, specifically from shale gas development. These numbers are increasing as technology improves.
Within a short period of time the US will be self-sufficient in oil and natural gas. Rather than build the planned LNG receiving trains for the import of gas, the U.S. will begin building liquefaction plants and trains for the export of natural gas to the rest of the world. U.S. energy costs will shrink and remain stable. The use of generating clean energy using gas will greatly improve the emission of carbon dioxide. It will also improve the efficiencies of renewable energy sources as a back-up to solar and wind-power stations which stop or slow down when the wind drops and the sun sets. These developments will have a major effect on world trade and development.
The greatest impact is likely to be on Russia. Russia has moved itself into a dominant position, via Gazprom, in supplying gas to Europe. It has been able to exploit its abundance of supply to bully the Ukraine, Belorussia and others. It has compelled many to accede to its demands for the location of key pipelines. However, it needs a massive capital investment to complete its largest project, the Stokhman fields and to modernise its existing structure. Russia will find it very hard to attract such a capital inflow as its virtual monopoly will be broken. It s business plan envisioned exports of gas to the US. That is very unlikely to happen now. Indeed the US may become its competitor. This is equally true for Iran which has been ramping up its gas production for an export bonanza. That will not happen. Europe will have the opportunity to use the technology on its own shale formations and buy any additional requirements from the US. The Chinese have some shale formations and may acquire the technology to exploit them more fully. The energy equations are changing and the political equations will change as well.
This will also have a dramatic effect on Africa. As US oil import dependence diminishes countries like Nigeria will find themselves in a bind. There is no reason to suppose that they will necessarily have to reduce production but the declining US imports and the increase in US exports of refined products and LNG will have a very negative effect on OPEC. Someone will have to cut production or prices will inevitably drop. Angola, Africa’s biggest, or second biggest, exporter, has been busy diversifying its economy to expand its production of metals, diamonds as well as investing in increased food production. Nigeria has wasted every opportunity. Nigeria is immensely endowed with mineral wealth but has never exploited it. The Extractive Industries Panel found large reserves of precious stones, uranium, tin, bauxite, coal and other ores which lay undeveloped because of the greed and short-sightedness of it ruling political elite. The agricultural production is unable to feed the country. It is particularly ironic that most of this mineral wealth is in the North and the Middle Belt, the two regions which have been sucking the wealth of the South-South into its pockets to feed their largely unemployed citizens. Had they exploited the wealth beneath their feet instead of coveting the wealth of their neighbours it would be a far different country.
Elsewhere in Africa there are better prospects. The opportunity to have a less expensive and improve energy supply in South Africa can unleash the manufacturing capability of that nation. The factories already exist. The raw materials are there. This will be a major boost to South Africa. Zimbabwe as well, may be able to use this supply of fuel and petrochemical products to restore its agricultural production to become, once again, the breadbasket of Africa. It already has the factories and the mineral wealth. The impact on many of the other countries in Africa will be marginal. This is not because they lack the resources but because they lack the political and economic institutions to make them work.
There is a new wind blowing and it may do a lot of people a lot of good.
[1] Martin Walker, “Russia’s Fracked Future”, UPI 1/2/10.
2. “Government Says Huge Oilfield in N.D and Montana”, AP 10/4/08.
[3] Stansberry Report Online, “U. S. Oil Discovery- Largest Reserve in the World!” 20/4/06
[4] “ API, “Facts About Shale Gas” 1/2/10
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