Onshore Oil Helps Fill Gap from Gulf

Onshore Oil Helps Fill Gap from Gulf

Monday, April 04, 2011
Houston Chronicle
by  Brett Clanton

A spill-related slowdown in the Gulf of Mexico could cut into oil production from the offshore basin for several years. But a number of emerging oil fields onshore, once thought out of reach, are helping the U.S. fill in the gap in the meantime.

Oil and gas companies, using techniques mastered in recent years to produce natural gas from shales and other dense rocks, are now having success extracting big quantities of oil from tight rock formations stretching from Texas to North Dakota.

Amid steadily high oil prices and a U.S. market saturated with low-price shale gas, they've had ample incentive to try.

In 2010, when an offshore disaster dominated the news, rising output from such fields -- including North Dakota's Bakken Shale and the Eagle Ford Shale play in South Texas -- quietly helped domestic crude oil production rise for the second year in a row, after years of declines.

Production also rose in the Gulf, where several new pro-jects ramped up output. (A federal moratorium on deep-water drilling, which lasted for five months after the Deepwater Horizon accident, did not apply to producing platforms.)

Bigger contributions from U.S. onshore fields arrive at a good time. Due largely to moratorium-related delays, oil production in the Gulf will fall by 240,000 barrels per day this year and another 200,000 barrels per day in 2012, the U.S. Energy Information Administration forecast last month. Higher production from onshore fields will help offset the declines.

"That's sort of the silver lining," said Bob Fryklund, vice president of research at IHS-Cambridge Energy Research Associates.

How long that disruption in the Gulf will last remains an open question. Though the deep-water moratorium was lifted in October, regulators so far have approved just nine permits for deep-water drilling activities that were covered by the ban. As a result, projects representing 400,000 barrels per day of production over the next five years are being pushed back from their original start dates, Fryklund said.

Rising output from onshore fields, however, could help keep total U.S. oil output flat or possibly higher in 2011 and over the next several years, he said.

Complex rock

Onshore fields, both old and new, are yielding more oil with the help of technology advances in drilling and production methods that have made complex rock formations more accessible and lowered development costs.

"Geologists have known that oil was there for years," said David Kirsch, industry analyst with PFC Energy. "It was just a question of how to get it out. It's a combination of project economics and technology coming together to make it viable."

The Bakken shale, for instance, could hold more than 4 billion barrels of undiscovered, technically recoverable oil -- a 25-fold increase over what could be recovered in 1995, according to the U.S. Geological Survey. Other emerging U.S. oil fields include the Granite Wash, from North Texas into Oklahoma .

In addition, advanced drilling and extraction methods are boosting production in mature fields such as the Permian Basin in West Texas.

Greg Garland, ConocoPhillips' senior vice president of exploration and production for the Americas, recently said the company's Permian properties increased output last year -- by 5,000 barrels per day -- for the first time since 1972. "Horizontal drilling, these advanced fracturing techniques, are literally breathing new life into some of these old fields," he said.

In 2009, domestic oil production rose for the first time since 1991 as increases from deep-water fields in the Gulf and tight oil plays onshore like the Bakken overshadowed declines elsewhere.

Output hit 5.36 million barrels a day, up from 4.95 million barrels a day the year before, according to Energy Department figures. Last year, the trend continued, with production climbing to 5.51 million barrels per day.

Reduced imports

The gains have helped reduce U.S. oil imports, though the nation remains a long way from energy independence as Americans consume more than 18 million barrels of petroleum products a day.

The Obama administration has cited the production gains in answer to oil companies' complaints over the past year that the drilling ban and permitting delays in the Gulf have brought the U.S. oil and gas industry to its knees.

But critics say the administration is unfairly taking credit for rising production and falling imports when offshore projects coming onstream now were launched before President Barack Obama took office. And onshore gains are chiefly due to tight rock oil plays located on private and state lands, not federal.