On November 15th, the United States Geological Survey (USGS) assessed that Texas’s Wolfcamp shale contains an estimated 20 billion barrels of oil, and 1.6 billion barrels of natural gas liquids. These figures elevate Wolfcamp to being the largest assessment of continuous oil discovered in US history—serving as yet another reminder that even areas that have already yielded billions of barrels of oil and gas are still capable of producing billions more. That said, the questions on everyone’s minds are “will discoveries like this continue to occur?” and “what does this mean for jobs and the economy?”
It’s important to point out that even the already-discovered and tapped O&G deposits tend to only give up 50-60% of the oil and gas that’s buried in earth. These low percentages are due primarily to technological limitations, so as time goes on, not only will our discovery and assessment practices improve, so too will our recovery ability increase to more effectively exhaust these deposits.
“Changes in technology and industry practices can have significant effects on what resources are technically recoverable,” said Walter Guidroz, program coordinator for the USGS Energy Resources Program. “That’s why we continue to perform resource assessments throughout the United States and the world.”
While it’s good to know we are growing more technically capable of both assessing and producing oil and gas from on and off-shore locations, the current economics simply fail to motivate most O&G companies from presently taking advantage of new discoveries like Wolfcamp. With the current price per barrel hovering around $46 USD/bbl, it’s just not fiscally attractive enough to pursue at this time.
The bottom line for hopeful US job seekers is that foreign entities are still putting a strain on domestic companies’ ability to expand. Like we saw from January of 2013 through July 2014, participating countries in OPEC failed to reach an agreement on production limits [to cap production and thereby protect unit price], and their insatiable quest for profits led to an ever-increasing rig count and production—an unchecked expansion vis-à-vis market demand. The result: $97 down to $45 USD/bbl.
The US rig count has been slowly trending upward (though last week, the count decreased by 1), but the price per barrel needs to rebound to Q2 2015 numbers before worker-demand increases. Morris Burns, a former president of the Permian Basin Petroleum Association noted, “We are picking up a few rigs every now and then but we won’t see it really take off until we [get] that price in the $60 to $65 range.”
We have more oil, and no motivation to go get it.