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Beyond the shale: It’s game on for waterlogged oil deposits

There's life beyond shale for U.S. oil production. The revolutionary techniques used to extract crude from rock formations have already put America on track to overtake the output from Saudi Arabia by 2017. Now, an extra 16 billion barrels are potentially within reach in residual oil zones. These water-flooded wells promise to keep the domestic output momentum going.

Energy forecasters are in perpetual revision mode when it comes to the U.S. outlook. Since 2008, the country's crude output has soared by about a third, making it the fastest growing producer outside the Organization of the Petroleum Exporting Countries. Even official projections from just months ago now look pessimistic. Within five years, the International Energy Agency reckons the United States will be the world's top producer. The turnaround is largely thanks to the controversial but effective processes of fracking – hydraulic fracturing and horizontal drilling.

More appears to be in store. Oil trapped in naturally waterlogged deposits, once thought to be out of reach, can now increasingly be extracted economically. The crude in these areas could match America's vast shale reserves, according to estimates by consultancy IHS CERA and the U.S. Department of Energy. If so, residual oil zones would eventually boost U.S. oil output by an additional three million barrels a day, an increase of more than 35 per cent from current levels of around 7.8 million. That would meet about a third of the extra global demand anticipated by the International Energy Agency for 2035.

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Like shale drilling five years ago, it's early days for extracting oil from water. It's currently only profitable with crude selling for at least $100 (U.S.) a barrel. Companies using the processes, such as Occidental Petroleum, also depend on the availability and price of carbon dioxide. Despite the hurdles, early signals for residual oil zones suggest there's yet another chapter to be written about America's oil renaissance.

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