Sands are shifting for oil supply; Expert says we should be ready for big jump in price

[Dogmudgeon]

There are many interesting observations in this article, especially about the development of the Athabascan oilsands.

The world continues to run rapidly out of oil and natural gas, which points to dramatically higher prices in a handful of years.

That was the message from Henry Groppe, a lanky Texan who advises oil companies and investors around the world about the world of prices. His firm, Groppe, Long & Littell, is based in Houston and was founded after he did stints as a chemical engineer for Saudi Arabia's Aramco, Dow Chemical, Monsanto and Texaco.

"The fundamentals always prevail, which is that the minute you start producing, you are depleting your resource," he told an audience of investors last week at a conference sponsored by Calgary's Pengrowth Energy Trust.

...

Oil production worldwide peaked months ago, but figures and prices don't reflect that yet because the production of liquids stripped from natural gas has been filling the gap, he said.

...

Canada's oilsands is the only bright spot on the production side, along with Venezuela and Kazakhstan. He estimates that Canadian oil exports will go from one million barrels a day now to 2.5 million by 2015.

But industry players say this may be understated if prices continue higher and could hit as much as five million barrels a day by 2020 out of Alberta and Saskatchewan.

...

Ethanol is a break-even proposition because it takes as much energy input to make ethanol as it produces. Coal to liquids is another costly energy unit, requiring inputs equivalent to 60% of the energy produced. Gas to liquids requires 45% input while oilsands is at 25%.

Governments must subsidize ethanol production, which is based on corn in North America. Ethanol represents roughly 10% of transportation fuels in the U.S. and are mandated to go higher.

"This also has a huge impact on agricultural prices for food," he said.

(more at Canada.com National Post)

--p!

[durtee librul]

1. Awwgeez, don't tell lil boots...

he'll want to invade Kazakhstan. (sp)

[IDemo]

2. Couple of disagreements with the article

Concerning the future of Canadian oilsands production (and maybe GliderGuider will help me out here), they are already showing signs of a slowdown in natural gas production, which is the fundamental heating fuel used to extract oil from sand. That, as well as the devastation wreaked upon groundwater supplies used in the process, makes me very doubtful that we will ever see 5Mbpd.

And, on ethanol being "a break-even proposition because it takes as much energy input to make ethanol as it produces", I'll go instead with the GREET study (Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation) from the Argonne National Laboratory:

According to GREET's (PDF) calculations, the fossil energy input per unit of ethanol is lower— 0.78 million British thermal units (Btu) of fossil energy consumed for each 1 million Btu of ethanol delivered—compared to 1.23 million Btu of fossil energy consumed for each 1 million Btu of gasoline delivered (see Figure 1).

Some confusion arises because a portion of the total (not fossil or petroleum) energy input in the ethanol cycle is the “free” solar energy that ends up in the corn. Since the solar energy is free, renewable, and environmentally benign, it should not be taken into account in the energy balance calculations.

While the total (includes solar) energy needed to produce a unit of ethanol is more than the total energy needed to produce a unit of gasoline, ethanol is superior when calculating either (1) the amount of fossil energy needed or (2) the amount of petroleum energy needed.

I'm not a big fan of ethanol as it stands (corn-based), because of the soil depletion and natural gas inputs required, but taken strictly on its energy ratio, it is positive, not zero or negative (Pimentel, et al).

[GliderGuider]

3. Anyone who expects to see 5 mbpd out of the tar sands should send me the name of their drug dealer.

They would appear to be smoking some really good shit.

Canada has a national treasure in the person of David Hughes. He's been working on energy issues for thirty years with the Geological Survey of Canada. His understanding of the global and national oil and gas picture is extraordinary. He presented two excellent talks at ASPO-USA in Boston, one on the oil sands (PDF) and one on natural gas (PDF).

These comments come from the one on oil sands:

- Oil from the oil sands is very energy intensive – Forecast four- to five-fold growth to 2025 will
require between 1.6 and 2.3 bcf/day of natural gas, which is approximately equivalent to the planned
maximum capacity of the MacKenzie Valley pipeline of 1.9 bcf/day, or about one-fifth of forecast Canadian
domestic consumption.

- Expansion of capacity is limited by natural gas supply and natural gas price, which could
destroy economics if there are shortfalls in supply, barring widespread application of non-thermal
processes, or switching to alternative fuels.

- Expansion of capacity is limited by water supply (1need average of 1-2 barrels of make-up water
for every barrel of oil, depending on recovery method and technology), let alone future expansion unless
technologies to reduce water consumption and/or further recycle water can be employed.

- Expansion of bitumen export capacity may also be limited by projected shortfalls of
condensate/light crude diluent for blending which are forecast to occur in the 2004-2006 timeframe
(National Energy Board, 2003), requiring other alternatives such as synthetic crude or conventional light oil.

And the following:

Summary

Reported huge reserves of unconventional oil are comforting
to some but largely meaningless as a means to offset declines in
conventional oil production because of the difficulty in growing
deliverability.

- Huge cost overruns in Canada’s oil sands suggest maximum
outputs of less than 2.5 MMbbls/day with the announced $90
billion of investment unless much of the bitumen is exported
without upgrading, in which case it could reach 2.8
MMbbls/day by 2020 – this is the most optimistic case.

- Issues surrounding inputs for oil sands production including
natural gas, water, diluents, capital, pipelines and politics add
additional uncertainties to meeting forecast outputs.

- Long term oil sands production forecasts for the 2015-2025
timeframe are not achieveable unless these issues are resolved.

From Hughes' presentation on natural gas we learn that the number of wells drilled annually in Canada has doubled since 2000 while gas production has stayed flat. Annual first-year decline rates in gas wells has gone from 26% in 1990 to 39% in 2001, and the number is probably higher today.

And lastly, here's a personal (but fact-based) fact-based opinion: crop based biofuels have the potential to wreck the world if they are used inappropriately. Given humanity's rather poor history of using technologies appropriately, I think crop-based biofuels should be resisted by every environmentalist who is capable of running a pocket calculator without adult supervision.

[Systematic Chaos]

4. Love that last paragraph.

I think crop-based biofuels should be resisted by every environmentalist who is capable of running a pocket calculator without adult supervision.

:rofl:

[Javaman]

5. the link has gone south nt

[GliderGuider]

6. Here's a good link:

http://www.canada.com/nationalpost/financialpost/story.html?id=b9a3434b-0bad-46ff-bf62-1b422cc09257

[Eugene]

7. There's a glitch in your link. This one should work...

Sands are shifting for oil supply
http://www.canada.com/nationalpost/financialpost/story.html?id=b9a3434b-0bad-46ff-bf62-1b422cc09257