Friday, December 7, 2007

Peak Oil? An Example Of How Technology "Discovers" More Oil

There is a lot of concern over the price of oil and gasoline. Everyone wants to end our dependence on "foreign oil". Others predict an imminent shortage of oil. Some want to replace oil altogether by using "bio-fuels", or "sustainable" alternatives. The following article illustrates how more oil in the United States, and soon, undoubtedly many other places, is being found and produced because of improvements in technology. It is an encouraging example. Unless of course you believe that global warming is caused by the burning of oil and gas.

Billions of barrels of oil found in Eastern Montana
Gazette State Bureau HELENA - The low point came when the things got so tight that Billings petroleum geologist Richard Findley flirted with the idea of taking a second job as a restaurant cook.He was working out of his basement, looking for oil in an Eastern Montana field almost nobody else wanted. Then, in 1996, he and his partner accidentally stumbled across a porous layer of dolomite 9,000 feet below ground at a site just a little west and north of Sidney.That serendipity turned out to be the largest on-shore oil discovery in the continental United States in better than 20 years. Today, the oil field Findley found - and the technology he helped develop to extract the oil - has made millionaires out of ordinary Montanans, has swollen state coffers and ushered in a new philosophy of oil prospecting worldwide."It's just been a fairy tale for a guy like me," Findley said.

About 15.7 million barrels of oil were pumped out of Montana in 2000. Five years later, production had more than doubled to almost 32.8 million barrels. The difference, said Tom Richmond, administrator of the State Board of Oil and Gas, is Elm Coulee, the field Findley found.Elm Coulee produced more oil in 2005 than the entire state combined produced just six years earlier. Elm Coulee has helped put Montana back on the map of oil production, said Dave Galt, head of the Montana Petroleum Association.

The story behind the discovery, Findley said, is being in the "right spot for the wrong reasons." But it's also the story of a man who, after years of struggle, found that a field most people thought was tapped out was, in fact, ripe for further tapping.The Williston Basin is a geologic formation beneath a good chunk of Eastern Montana, most of North Dakota, parts of South Dakota and the Canadian provinces of Saskatchewan and Manitoba. Within the basin is something called the Bakken Formation. The Bakken (rhymes with "talking") is a sandwich of two slabs of black shale surrounding a layer of limestone, siltstone, sandstone and dolomite, another kind of sedimentary rock.

The whole area was once part of a shallow inland sea, Findley said. The Williston Basin has seen some oil drilling for decades and geologists have long known that there is oil in the Bakken. But most drillers were focusing on the shale layers, and most early efforts were abandoned for a host of problems. Findley was aiming for another formation beneath the Bakken in the 1990s when he discovered something strange about the middle, dolomite layer.It was porous. If there are holes in the rock, there could be oil in the holes."It was a light bulb kind of thought and I thought, 'My gosh, the oil is in the middle member," Findley said. "When I saw that this was continuous for 50 miles, I called my partner (in Michigan) and I said, 'I think you'd better sit down. I think we found a giant oil field.' "

That Findley - or anyone else - was drilling for oil in the Bakken was somewhat unusual. Almost no one was drilling the field then, he said, and certainly not any major oil company."When we first started drilling this first well, the Bakken was a four-letter word," he said. "All the workers felt the Bakken was uneconomic."Even after Findley proved the area had oil - many billions of barrels of it - the Bakken had such a bad reputation, Findley jokes, that oil companies would hang up on him when he told them he found oil there.Eventually, he found a Dallas company called Lyco that believed enough in Findley's findings that it agreed to drill a well.

Getting oil out of the Bakken is not a matter of poking a hole in ground until you hit a soft spot full of oil. The oil in Elm Coulee is bound up in rocks, and that rock layer is wide but thin.It was Findley's idea to drill a well sideways - a technique called "horizontal drilling" in which prospectors drill down to the oil and then fan out their well thousands of feet to the side like the piping for an underground sprinkler. But horizontal drilling alone couldn't economically get the oil out of the ground. Findley also took his discovery to Halliburton, the industrial services giant, and engineers there figured out a way to both drill sideways and fracture the rock to release the oil.

Both horizontal drilling and fracturing had been done before, but never together, Findley said. Those combined technologies made Elm Coulee possible and are now being used in other fields across the globe. The technology has also changed the way engineers look at potential oil fields, Findley said, opening up oil-bearing rock formations to drilling that were never before thought economic.

Findley was born and raised in Corpus Christi, Texas. He was, by his own admission, "a beach bum" all his young life. Shortly before Findley was to graduate from high school, his dad asked him what he wanted to do with his life. Findley said he had no idea.Before World War II broke out, Findley's father had studied geology at Texas A&M. He suggested his son might enjoy the same."I asked, 'What's geology?' " Findley recalled.He went to Texas A&M, studied geology and became interested in the oil business. In 1975, he graduated with a master's degree in petroleum geology and took a job with an oil company in Denver working along the Rockies."But I realized I wanted to be an independent oil man," he said.

In 1978, Findley moved to Billings and took a job with Patrick Petroleum. Five years later, he started his own business, Prospector Oil Inc."Not realizing that I'd spend the next 20 years doing survival," he said. "But we did survive. My wife and I kept asking ourselves, 'I just didn't know how long we could survive in this business.' I did a lot of stupid things to stay independent in Billings."He worked out of his home, taking on consulting work to pay the bills. Findley never did take on a second job, although he once asked his neighbor, a restaurant owner, if he needed any extra help in the kitchen."There were a lot of lean times," he said. "(But) you just never knew each day, you could wake up and this is the day that you'd find a big oil field."

Findley's discovery has had huge effects. In Richland County, home to Elm Coulee, residents with oil royalties have literally been made millionaires.The state coffers are also thick with oil cash. In 1995, taxes on oil brought about $13 million into the state's checking account, said Terry Johnson, a principal financial analyst for the Montana legislature. Last year, that number had swollen to $92.7 million, and that's just tax on the oil. Oil companies also are paying more in state corporate income tax, Johnson said. Oil field workers and Richland County residents with oil royalties are paying more in individual income tax. Additionally, if any of the oil is drilled on state-owned lands, the royalties go in to a special account to support state schools. If the oil is drilled on federal lands, the state gets half the royalty."It's a pretty significant factor in state revenues," Johnson said.

The boom has been so big that the pipeline carrying Montana and North Dakota crude to Midwestern markets is at capacity and the largest company drilling in Elm Coulee has temporarily closed some wells because they have no way to sell it. The effects are especially stark in Sidney, the Richland County seat and closest town to Elm Coulee. While houses in much of the United States sit on the market for months, Sidney has a shortage, said Nick Jones, owner of Nick Jones Real Estate in Sidney. It's harder to find employees, said Gary Schoepp, owner of Action Auto, Sidney's Chrysler Dodge dealer. However, both Schoepp and Jones said that Sidney, which enjoyed a wild oil boom in the early 1980s, seems much more circumspect about the whole thing this time around.

Things have changed for the oil industry, too. A 2006 U.S. Department of Energy paper on the Bakken Formation ended by saying that new technology, like the kind Findley and Halliburton pioneered, means oil can be extracted from deposits previously dismissed as uneconomic. And things have changed for Findley, too. Suddenly finding himself the man of the hour, he has taken calls from oil prospectors around the world and traveled widely to provide expertise on potential new discoveries. He moved his office out of his basement in 1995 and now has an office in downtown Billings, although the office is still himself and his secretary.

He and his wife recently remodeled their home. They now have an indoor grill with a large fan to vent the smoke outside to accommodate Findley's love of cooking, especially barbecue."I have achieved my dream," he said. "I feel that I am independent today."For all the hubbub, Findley said renovating his home is the only way he and his wife, Lyn, plan on changing their lifestyle. The rest of the money Findley made from his discovery is going into an estate for the Findleys' children, 26-year-old Ben, who is pursuing a career in Seattle, and Leah, who just started her first year at Carroll College in Helena.

Findley also sounds a cautionary note. To state lawmakers, he says, don't get used to oil tax revenues. Oil wells run dry and with it, tax dollars. And to the users of oil, he encourages conservation and other kinds of energy, including nuclear energy. "We do have a lot of oil left to find," he said. "But our demand worldwide is increasing so rapidly, at some point our supply is going to flatten out." Findley worries about a crisis, where demand for oil, especially foreign oil, is significantly greater than the supply." At that point, it is going to be too late," he said. "We need to start today to do everything we can to decrease our dependence on foreign sources of oil."
Published on Monday, December 03, 2007.Last modified on 12/3/2007 at 1:52 pmCopyright © The Billings Gazette, a division of Lee Enterprises.



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