There are 89 billion barrels of oil still trapped inside America's oil wells. That's because the average oil well in America only gives up 30% of its black gold. This is oil that's vital to fueling our economy and it's just sitting down there.
To put this into perspective, if the U.S. could recover all its oil, our nation would rival Iraq and Iran as a top five holder of oil reserves in the world. This is why finding ways to recover more oil from already existing wells is almost as important as finding more sources of oil. In fact, according to a recent article in the Oil and Gas Financial Journal, Aaron Gatt Floridia from Schlumberger (NYSE:SLB) states that just a 5% bump in the global recovery factor from existing wells could lead to more oil reserves than "all future exploration activities." The article goes on to point out the importance of Enhance Oil Recovery (EOR) in meeting the world's future energy needs.
Bringing aging oil fields back to life
EOR techniques, such as injecting steam or carbon dioxide, enables oil companies like Denbury Resources (NYSE:DNR) and Anadarko Petroleum (NYSE:APC) to bring our aging wells back to life. Denbury Resources is a great example of a company specializing in this process as it has built its entire business around using carbon dioxide to recover more oil out of legacy fields. The company has built more than 1,100 miles of carbon dioxide pipelines to move the gas from naturally occurring sources to depleted oil wells. Denbury Resources believes that it will eventually recover over a billion barrels of oil from the wells it currently owns.
Anadarko Petroleum also has had great success in bringing a legacy field back to life. For example, its Salt Creek Field in Wyoming was first discovered in 1908 with an estimated billion barrels of oil originally in place. From its discovery through the 1960s the field produced 19.9% of its oil through primary recovery techniques. From there the field was flooded with water as part of a secondary EOR recovery method, which produced another 24.4% of its oil. Finally, in 2004 the first carbon dioxide floods began and to date another 9.9% of its oil has been recovered. It's estimated that the field should continue to produce for Anadarko Petroleum and its partner for nearly three more decades with just a slight decline rate of 7% each year.
Another company with extensive EOR experience is Occidental Petroleum (NYSE:OXY). In fact, its most profitable business is the Permian Basin production it gets from carbon dioxide. Overall, 60% of the oil Occidental Petroleum produces out of the Permian is because of carbon dioxide.
That being said, Occidental Petroleum also has a very robust set of opportunities in California using both steam floods and water floods. The company's plan this year is to spend 65% of its $1.5 billion budget dedicated to California on these two techniques. It's critical capital for unlocking more oil. For example, Occidental is running two large steam floods at the Kern Front and Lost Hills fields. So far these fields have only given up 130 million of the billion barrels of oil that's in place. Occidental believes these steam floods could unlock another 120 million barrels of oil equivalent, which would almost double the oil these fields have given up since being discovered.
The tech behind EOR
One of the keys to unlocking all of the oil still trapped is to find the right technique to unlock it. For example, the key to unlocking the heavy oil in California or Canada is usually steam. Using the wrong technique could lead to failure. This is where companies like Schlumberger or Core Laboratories (NYSE:CLB) can step in and assist energy companies in selecting the right EOR technique for the job.
Using specifically designed software to determine how best to develop a field can save a lot of the guess work. For example, Schlumberger can work with its customers to examine and create new methods of oil displacement and recovery. Core Laboratories takes this a step further as its entire business is dedicated to helping oil and gas companies optimize reservoir performance to maximize the recovery of each field. One example of this is its Reservoir Management segment, which enables Core Lab's customers to really see how the reservoirs are performing, which can be critical to the success of optimizing a field with an EOR project.
There is a stunning amount of oil still sitting in our nation's oil fields. Companies like Denbury Resources have built a business to get more of that oil out. It's just another reason why oil production isn't going to dry up anytime soon.
How you can profit from America's energy bonanza
Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool owns shares of Denbury Resources. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.