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Estimating the future supply of shale oil: A Bakken case study

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  • Smith, James L.

Abstract

We propose a new way to estimate the supply curve of remaining shale oil reserves in the U.S. Our method applies the principle of “successive sampling without replacement” to derive from historical drilling data maximum likelihood estimates of the number and productivity of remaining drilling sites. Unlike existing techniques, this approach identifies the portion of “technically recoverable” resources that can be developed economically at alternative price levels. For example, we estimate that 50% of remaining technically recoverable resources located in the Bakken play—roughly 8 billion barrels—could be developed economically if the oil price remains near $50/barrel. (L71, Q35, Q41).

Suggested Citation

  • Smith, James L., 2018. "Estimating the future supply of shale oil: A Bakken case study," Energy Economics, Elsevier, vol. 69(C), pages 395-403.
    • Handle: RePEc:eee:eneeco:v:69:y:2018:i:c:p:395-403
    DOI: 10.1016/j.eneco.2017.11.026
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    References listed on IDEAS

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    1. Ryan Kellogg, 2011. "Learning by Drilling: Interfirm Learning and Relationship Persistence in the Texas Oilpatch," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(4), pages 1961-2004.
    2. Michael Redlinger & Ian Lange & Peter Maniloff, 2016. "Interfirm Learning Economies in Drilling and Environmental Safety," Working Papers 2016-10, Colorado School of Mines, Division of Economics and Business.
    3. Fitzgerald, Timothy, 2015. "Experiential Gains with a New Technology: An Empirical Investigation of Hydraulic Fracturing," Agricultural and Resource Economics Review, Cambridge University Press, vol. 44(2), pages 83-105, August.
    4. Smith, James L, 1980. "A Probabilistic Model of Oil Discovery," The Review of Economics and Statistics, MIT Press, vol. 62(4), pages 587-594, November.
    5. Smith, James L. & Lee, Thomas K., 2017. "The price elasticity of U.S. shale oil reserves," Energy Economics, Elsevier, vol. 67(C), pages 121-135.
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    Cited by:

    1. Sergei Sabanov & Abdullah Rasheed Qureshi & Zhaudir Dauitbay & Gulim Kurmangazy, 2023. "A Method for the Modified Estimation of Oil Shale Mineable Reserves for Shale Oil Projects: A Case Study," Energies, MDPI, vol. 16(16), pages 1-17, August.
    2. Durand-Lasserve, Olivier & Pierru, Axel, 2021. "Modeling world oil market questions: An economic perspective," Energy Policy, Elsevier, vol. 159(C).

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    More about this item

    Keywords

    Shale oil supply; Technical change; Sequential sampling; Exploration economics;
    All these keywords.

    JEL classification:

    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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