'Substantial' Untapped Reserves Left in Niobrara Shale

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--There is a "substantial" amount of undiscovered oil and gas resources in the Niobrara shale formation spread out over three western states, the U.S. government said Wednesday.

The U.S. Geological Survey (USGS) has been tapped with assessing the domestic reserve potential since the Arab oil embargo on the United States in the 1970s. In a survey of the Niobrara foundation, spread out over parts of Wyoming, Colorado and Utah, the agency found there were 703 million barrels of oil and 5.8 trillion cubic feet of natural gas categorized as undiscovered reserves.

That's enough crude oil to satisfy domestic demand for a month, and enough natural gas for two months, the USGS assessment found.

"USGS energy assessments typically focus on undiscovered resources -- areas where science tells us there may be a resource that industry hasn't discovered yet," said Sarah Ryker, the acting director of the USGS. "In this case, our assessment found substantial oil and gas resources."

The U.S. Energy Information Administration (EIA), the data arm of the Department of Energy, estimates that Niobrara produced around a half-million barrels of crude oil per day on average and 2.9 billion cubic feet per day in natural gas during the first quarter. Both levels are somewhat elevated from year-ago levels.

This is the second regional study from the USGS so far this year. An assessment of the Mowry petroleum system, which consists of sandstone and shale plays in the Rocky Mountain states, found it could hold 473 million barrels of oil and 27 trillion cubic feet of natural gas as undiscovered and technically recoverable reserves.

The system has yielded 7.3 trillion cubic feet of natural gas and 90 million barrels of oil since exploration began in the 1950s. For just natural gas, that would meet 90 days of domestic demand, the USGS said.

The Mowry system is part of a prehistoric, shallow-water ocean that covered most of the Rocky Mountain region. It's situated just west of the Niobrara shale basin.

The EIA in a monthly market report for June, however, reported that it expected overall U.S. crude oil production to decline slightly by next year. Total domestic crude oil production hit a record high of 13.5 million BBL/d during the second quarter, but that's expected to decline to 13.3 million BBL/d by the end of next year.

The EIA blamed a lower-for-longer outlook for crude oil prices and a decline in upstream activity for the expected downturn. Operators may be pressed for cash given the outlook for crude oil prices. EIA found West Texas Intermediate, the U.S. benchmark for the price of crude oil, averaged $76.60 per barrel last year and it should average $62.33 per barrel this year.

Based on recent surveys from the Federal Reserve Bank of Dallas, that's below the point at which many shale drillers can make a profit.

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