Can super basins save the planet?
IHS Markit, the international industry analysis firm, estimates the world will need to replace production of more than 14.5 billion barrels of oil equivalent annually by the year 2040.
The shortfall will come from natural declines in currently producing fields.
“We need to replace about 40 million barrels of new oil production a day. How are we going to get there?” said Pete Stark, executive director of upstream research for IHS Markit in Englewood, Colo.
Where will all the hydrocarbons come from?
A traditional answer would be, “From new oil fields discovered through exploration.”
And that’s an excellent answer.
But probably wrong.
Worldwide exploration results have slumped badly in recent years. A period is imminent during which we’ll see very few newly discovered major oil fields coming online.
So major oil discoveries won’t prop up worldwide production totals in the 2020s, and won’t lead to additional exploration opportunities in the 2030s. There just haven’t been many big, new oil fields found lately.
“The frontier exploration picture for the past half-dozen years has been getting worse and worse,” Stark said. “It looks like last year may have seen the lowest level of conventional discoveries since 1952.”
If conventional exploration efforts aren’t helping much, you might think the new oil will come from a worldwide increase in unconventional resources production. That’s another insightful guess. And, again, probably wrong.
“Poland had a big (unconventional shale) effort going on several years ago. And everybody backed away. There’s been an effort going on in South Africa,” but it was slowed by popular opposition to hydraulic fracturing, Stark noted.
For whatever reasons, unconventional play development has not spread outside the United States and Canada the way many expected. The one significant exception has been the Neuquen basin in Argentina, where the Vaca Muerta shale is a target for both unconventional oil and natural gas.
The Permian Prototype
How can the world replace 40 million barrels of oil production a day?
Stark said he and an IHS Markit colleague, Bob Fryklund, were pondering that question when their attention focused on burgeoning activity in the Permian Basin.
“When we looked at the future opportunities in the world, we looked at the future of unconventional development. We looked at enhanced recovery,” Stark recalled.
“Then we looked at the Permian Basin, left for dead a decade ago. And – Eureka! Let’s look at super basins as being a whole new paradigm,” he said.
Stark and Fryklund applied a Permian Basin yardstick to mature basins around the world, looking for areas that had produced at least 5 billion boe to date with at least another 5 billion boe production potential remaining.
Then they tightened up their criteria, requiring a mature basin to have several characteristics to earn the “super basin” designation:
- Productive capacity and additional production potential.
- Two or more source rocks and/or petroleum systems with stacked pay.
- Adequate oil and gas infrastructure in place.
- Favorable – or at least nonrestrictive – laws and regulations in place.
- A developed and accessible service and supply sector.
- Ready access to markets.
In the end, they identified 25 basins around the world that qualified as super basins. And startlingly, they calculated remaining recoverable oil from mature basins at 859 billion barrels.
“What we realized is that horizontal drilling technologies can be applied to any producing basin. It doesn’t have to be 5 billion (additional boe production potential)”, Stark said. “The horizontal technologies are exportable around the world, and you don’t have to have extensive fracturing infrastructure in place.”
The industry’s typical recovery factor is around 34 percent of hydrocarbons in place, he noted. Move that to 44 percent and “you get 600 billion barrels of additional supply,” Stark noted.
“We’ve had a remarkable improvement in productivity from horizontal wells. How much further can we go? Are we in the second inning of a nine-inning ball game, or are we in the eighth inning?” he said.
Already in the United States, Stark said unconventional development techniques have improved recovery by 10 percent, and “if we move that up to 20 percent – well, gosh, can we produce another 10 million or more barrels a day?”
“We’ve identified more than 400 different oil-producing reservoirs in the U.S. that have had horizontal wells drilled into them. Many have not had further development because of the dramatic price decline in recent years,” he observed.
Tapping into the additional production potential of super basins by using unconventional development techniques is a recent concept, but there’s a growing belief that it will be critically important to the oil industry in coming decades.
In evidence of that, AAPG and IHS Markit are teaming up to host the Global Super Basins Leadership Conference on March 27-29, 2018, at the Hilton Americas Hotel in Houston.
The conference is the first of three major steps AAPG will take to give its members the tools they need to understand super basins and related emerging realities in the industry, said Charles Sternbach, AAPG president and president of Star Creek Energy Co. in Houston.
Second will be a series of AAPG Bulletin papers on the geology, fields, key formations and key plays in specific basins, “so people can go back to these papers again and again as new concepts evolve,” said Sternbach.
Third, the 2018 AAPG Annual Conference and Exhibition in Salt Lake City will include a special forum on super basins.
Development in mature basins and known producing formations doesn’t mean exploration geologists are going away, according to Sternbach. The world will still need a base supply of conventionally discovered oil.
“I’m asked all the time, ‘Is there going to be more oil in new places or more oil in old places?’ My answer is, ‘Both,’” he said.
Sternbach thinks super basins will be so important to future production that he makes them the first of three critical-issue “S’s” for the oil industry:
- Super Basins
“What we’re realizing is that a lot of the energy is back in the old basins. We’re going back to the basins that keep on giving,” he said.
“Changing out coal for clean-burning natural gas freed by hydraulic fracturing is a major environmental upgrade,” Sternbach noted.
“The geopolitical aspects of these things are very important, and not as often talked about,” he said.
The Best Choice
Whether or not the world’s mature basins can produce another 859 billion barrels remains to be seen. If nothing else, the number is an attention-grabber, Sternbach said.
“Yes, it’s an astounding number,” he observed. “It’s a startling number because it points out what’s accessible if everyone adopts these practices.”
To meet the coming challenge of production replacement, he said, the industry has to focus on four E’s: energy, environment, economy and education.
The educational process will be especially important in explaining the benefits of unconventional development technology, including hydraulic fracturing, he said.
Sternback noted that several countries in Europe and some others have already rejected unconventional development.
“It’s a cultural choice they choose to make. To me, everybody has to make their own energy choices,” Sternbach said. “We want the whole world to know what the best practices are in these super basins, so people can make the best choice.”