Poster’s Note: I have a Mizzou buddy who is a partner at the local Smith Barney office here in KC. He IMed me on Friday to call my attention to this Wall Street Journal article. I thought I’d blog post my email response to him here. Here’s the WSJ article headline and link:
‘How North Dakota Became Saudi Arabia’
In all my years of reading the WSJournal, that’s the craziest headline and article I’ve ever read there. North Dakota ‘became’ the Saudi Arabia! Lets see were drilling down and across 20,000 feet for wells that produce less than 3,000 bls a day. Do the frigging math! Bakken produces 350,000 bls a day. By this guys own admission he says it’ll triple. Meanwhile the US consumes 19 mil bls a day and the world 86m. Its definitely the biggest U.S. play since Prud Bay and its a low flow, poor net energy trickle. You are an investment guy. Watch the hype. It reminds me of the hype behind the U.S. Gulf deepwater or Austin Chalk. Totally over blown. Where are they now? already peaked out.
The world is predominately supplied by giant (+500,000 bls/d) and super giant (+1,000,000 bls/d) fields. The average age on these are over 55 years. They are starting to deplete.
Reserve stats are dangerous. US reserves have gone up at late. We’ve got +$80 oil for 4 years now. Where’s the additional output? I love reading how regs are too restrictive while Bakken and other area drilling has more than tripled! Ha! Colo oil shale and Cand tar sands have massive Saudi type reserves. But u can’t do Colo because you spend more energy than u get. Canada will never exceed 4 mil bls a day- too much environmental carnage, water, carbon and energy needed.
Another mistake is to just take new output plays and accept these additional volumes. No, you need to net it against depletion elsewhere.
Here’s a good perspective on the big picture:
I wont even get into carbon issues. Yeah strawman about birds as the planet bakes.
In fact, go to the Oil Drum anytime you want good perspectives. Use their search box. ie ‘Bakken’
The $18 trillion royalty potential comment (greater than all U.S. debt) is the dumbest, wackiest comment I’ve ever read in the WSJ.
U.S. oil production peaked in 1970 Or in other words we pissed away half of our +100 million year hydrocarbon legacy into sub-$3 / bl oil. Now we’ll soon import it from Russia, the Mideast (& Al-Qaeda) and West Africa for $100. Your classic economics didn’t treat us very well on that one!
‘OPEC is losing their power and market share’ is the 2nd dumbest comment I’ve read in the WSJ. OPEC will rake in over $1 trillion in 2011. This will multiplier effect in their overseas economies instead of ours. Have you seen us beg Saudi Arabia for more oil output of late? Yeah. they’re losing power and market share. HA!
Good luck with all of this. If we can’t grow energy supplies, we can’t grow the economy. If Bakken is the best we can do- and it is- we are in trouble. We are.