These days broaching the topic of peak oil in public is likely to make you about as popular as a life insurance salesman, however should you venture to do so then if you are not met with blank stares the likely response will be "oh! haven't you heard of fraking?"
So without further ado I shall first delve into the topic of unconventional oil production (shale gas will be discussed in a future post) Generally speaking any main stream article that describes the "shale revolution" will tell you how innovative new technology has unlocked vast reserves of fossil fuel.
The first point to mention is that "fracking" is hardly a new technology in fact the very first well was fracked in the Hugoton gas field in Grant County, Kansas back in 1949 and it has been widely used since the 1970’s. Obviously there have been a number of refinements to the techniques used such as multistage fracs (previously only two stages were common) and wider use of horizontal drilling (a technology which is as old as oil exploration itself).
So why now is there suddenly such a huge push for oil shale & gas production? In a word it comes down to price. Whilst 2008 marks the highest historical price per barrel at around $150 it actually started the year well below $100. The highest yearly average price was recorded in 2012 (narrowly beating that of 2011).
Whilst estimates vary there appears to be a broad industry consensus from the likes of USGS, SPE and Bernstein Research for a breakeven price of around $80 - $90/Bbl which seems to support the idea that any rapid fall in price will bring the "shale revolution" to an untimely halt.
The other point most often made, namely the huge size of the reserves is indeed true, however it is important to understand that the geography of the tight oil plays is radically different from that of conventional oil fields.
Without getting too bogged down in endless technical details for our purposes there are two significant differences between the types of oil plays.
The first difference of mention is that rather than the resource being spread evenly throughout the play there are concentrated "sweet spots" that deliver very high production rates, these are drilled first and it is production figures from these wells that are touted to investors and often extrapolated across the whole play.
The 2nd important difference relevant to our discussion is the rapid depletion rates of individual wells. Whilst conventional wells might be expected to produce for decades before peaking, tight oil wells can be measured in terms of a few years or even months.
To cope with this rapid decline rate producers must drill more and more wells just to keep production flat. As of writing Bakken oil production has hit a record of 727,149 bbl/d, but to reach this level it had to add over 800 wells in the last six months alone.
To be sure tight oil production is a valuable addition to American domestic oil production, but it is in my opinion nowhere near the game changer that many suggest.