AAPG Annual Convention and Exhibition

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The New Oil World of the 21st Century


In contrast to the 20th century, which was dominated by conventional production, the first third of the 21st century will see a dramatic shift to unconventional and deep-water production. (>400 meter water depth) While new trends have developed since 2000, a close examination of geological, operational, economic and political factors indicates the possibility that some of these trends may change in the coming years. Conventional production peaked in 2005 at 68 million barrels of oil per day (MMBOD) and has since steadily declined at about 1% per year. However, from the present until 2030, while the rate of decline in the rest of the world continues, the overall production rate from three basins, the Arabian, West Siberian and Caspian will hold steady and even increase. By 2030, almost two thirds of the world's conventional production will come from these basins which hold about ¾ of the world conventional reserves. The overall proportion of conventional production during 2000-2030 is predicted to drop from 86% to 56% of total non-renewable oil production. The remainder of the non-renewable oil production will come from four sources: deep-water, heavy oil, shale oil and natural gas liquids. Deep-water exploration and production is mainly limited to the basins bordering the Atlantic Margin for a number of geologic reasons; distribution of high quality source rocks and continuous subsidence and sediment deposition. Approximately ¾ of the deep water oil predicted to be discovered within the Atlantic Margin will be found in four mega-provinces mainly due to two differentiating factors, the presence of salt and major river systems. Ultimate deep-water reserves are estimated at 160 billion barrels with peak production between 11 and 12 MMBOD coming in the 2020-2030 decade. Heavy oil production (heavier than 15 degree API) is focused in two basins, Alberta and Orinoco, containing 85% of the world's in place heavy oil. Production has doubled from 2 to 4 MMBOD since 2000 and is predicted to reach 7 MMBOD in 2030. The limit on production, particularly in Canada is not reserves, but rather water and power resources and infrastructure and environmental constraints. While heavy oil in Venezuela is superior in oil and reservoir quality to Canada, production is held at a lower level due to non-technical factors and if this changes, the growth potential for Venezuelan heavy oil production is considerable. Shale oil has had a major impact on US production, predicted to reach 3.3 MMBOD by 2015, or 5 MMBOD when taking into account NGL production from hydraulic fracking from gas prone shales. A significant point of controversy is how long this growth can continue and be sustained due to the sharp productivity decline in the wells. Due to lack of attractive fiscal terms, infrastructure, water resources and environmental concerns, significant production outside the US and Canada is not expected before 2020. The most likely new play outside the US and Canada for significant shale oil production is the Bazhenov of the West Siberian basin, where most of the non-technical elements are also present. Natural gas liquid (NGL) production is tied to gas production and will steadily rise from about 7.7 MMBOD in 2000 to about 17 MMBOD in 2030 as gas production increases. The rise from the current level of 12 MMBOD will come mainly from three sources: wet gas production from hydraulic fracking to assist in making shale gas production economic, the shift in gas production in Russia from the dry gas to wet gas production areas in West Siberia and as a by-product of the shift to gas production in the Middle East as a power source. The peaking of conventional production in 2005 combined with surging demand resulted in an oil price spike and a quadrupling of oil prices (in 2012 dollars) from $25 to $100/bbl. The new price has supported the rise in the more expensive deep-water and unconventional production. The $100/bbl. price is a windfall for the producers of conventional oil, particularly in the Arabian, Siberian and Caspian Basins, as they hold an ever increasing share of this production. It is highly unlikely that the price of oil will drop significantly below the current level for more than a very short time, as the conventional producers need $100 oil to balance their budgets and producers of all unconventional and deep-water sources need close to $100 oil to make a profit. This equilibrium should continue until around 2020 when the plateau in the level of deep-water production coupled with the continued decline in conventional production may result in the next price squeeze. To avoid another price increase, a more rapid rise in heavy and/or shale oil production would be needed, pushing away any environmental constraints or objections or a reduction in the rate of oil demand increase facilitated by a shift to utilization of natural gas.