Jim Letourneau's Blog

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Enhanced Oil Recovery Investing

For the last several months, I’ve been researching opportunities in enhanced oil recovery or EOR. My rationale for investigating this sector is simple.

On average, two thirds of the world’s discovered oil resources remain trapped in the ground.

While US politicians debate the merits of drilling offshore, they are missing this rather obvious source of homegrown energy.

In the latest CPSG Reservoir, Andrew Miall points out that the best estimates of possible reserve estimates for the Arctic National Wildlife Refuge (ANWR) range from 3-31.5 billion barrels. At a consumption rate of 20 million barrels/day (current US consumption) – this amounts to a supply ranging from 171 days to 4.3 years.

The Energy Information Administration (EIA) estimates that technically recoverable undiscovered oil resources that are unavailable for leasing and development (ie. not the Gulf of Mexico) are 18.17 billion barrels. This would add 2-3 more years of oil supply.

Compare this to the 210 billion barrels that are believed to be recoverable using enhanced oil recovery techniques where permits and infrastructure already exist. There is no exploration risk involved in the development of these American assets. This “under the radar” source oil is going to be getting much more attention in the near future.

Check out our newsleter for some investment ideas related to this theme.