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Shale Galore: U.S. Oil Reserves Highest Since 1975

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Dan Murtaugh and Harry R. Weber, Business Week

Proved reserves of crude and lease condensate in the U.S. rose 9.3 percent in 2013 as drillers showed they could extract more oil than previously thought from shale formations in places like Texas and North Dakota.

U.S. Oil Reserves Highest Since at Least 1975 on Shale Boom

Floor hands make a pipe connection on the drill string on the Orion Perseus drilling rig near Encinal in Webb County, Texas. More than 95 percent of new reserves in 2013 came from shale formations like the Bakken in North Dakota and the Eagle Ford in Texas. Photographer: Eddie Seal/Bloomberg

Reserves increased 3.1 billion barrels to 36.5 billion, the Energy Information Administration said today in its annual U.S. Crude Oil and Natural Gas Proved Reserves report. It was the fifth year in a row that proved reserves increased. They also exceeded 36 billion barrels for the first time since 1975.

Proved reserves, or resources that can be recovered under existing economic and operating conditions, grew after U.S. oil output surged to the highest level in 31 years. Companies used horizontal drilling and hydraulic fracturing to extract oil from underground shale rock layers that sat untouched a decade ago.

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“We know there is oil,” Fadel Gheit, an analyst at Oppenheimer & Co., said in a telephone interview from New York. “We know it will exceed even the most optimistic forecasts. That’s the huge leap forward. You’re talking about potentially a 50 percent increase in proved reserves in the next three years.”

The government’s annual estimates of proved reserves are based on survey responses from 480 domestic operators of oil and gas wells, according to the EIA.

North Dakota

Companies discovered 5.5 billion barrels of newly recoverable oil in 2013. Revisions and other adjustments added another 300 million barrels to the reserve tally.

Crude and condensate reserves have grown 78 percent since 2008. While this year’s increase was the smallest in barrel terms since 2010, Gheit pointed out that the 2013 information is dated.

“We are closing 2014 and 2014 will be much higher additional reserves than 2013,” he said. “The EIA, although I like the information, we want to see what is tomorrow, not what is happening yesterday.”

EIA spokesman Jonathan Cogan said in a telephone interview from Washington that the agency would always prefer to have data available on a more timely basis. “It’s just a question of priorities and resources,” Cogan said.

More than 95 percent of new reserves in 2013 came from shale formations like the Bakken in North Dakota and the Eagle Ford in Texas. About 28 percent of all U.S. reserves are now made up of oil from such areas.

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