Can Royal Dutch Shell's Shale Extraction Technique End 'Peak Oil' Paranoia? 27 comments
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This is hardly a new theory. According to the Chicken Littles of the world, we've been "about to run out of oil" for over thirty years. Obviously it hasn't happened yet. With the recent upswing in strife in the Middle East, however, the notion has gained in popularity.
The thing is, this theory is utterly false, and can be laid to rest with a single well-established fact: there is more oil in the Colorado shale fields than the entire Middle East had at its peak. The only reason we're still importing oil is that, at present, it is cheaper to do so than to extract it from shale. Until recently, getting oil out of shale has been a nasty and expensive business.
That's about to change, though, as engineers at Royal Dutch Shell (RDS.A) have applied for a patent on a new method of extracting shale oil cheaply and cleanly. (As an interesting side note, it is the largest patent application in U.S. history.) Amazingly, this method:
Is cleaner than conventional drilling Generates the highest grade of light-sweet crude oil, which burns cleaner than other varieties Becomes profitable with oil just north of $30 a barrel (which we've already blown past)
In other words, with Shell's new technique, it actually benefits the environment to switch to shale oil. I found this hard to believe at first, but seeing as I am a patent lawyer, I decided to pull the patent application to see for myself. When I saw the invention laid out on paper, I was convinced that it would work.
As with most great ideas, the basic concept is simple. In brief, engineers dig holes around the extraction area, into which they insert giant cooling rods. The water in the soil freezes, and forms an "ice-bowl," which traps the oil and prevents seepage. The center of the formation is then heated, causing the oil to bubble up through the rocks, from which it may then be extracted with ease. The ice-bowl prevents all the nasty chemicals released by this process from getting into the water table. This Wikipedia Article provides more details.
Shell has been granted rights to a small patch of shale field in Colorado to make an experimental run with its new method, and all present signs suggest it will be a success. Make no mistake, however. Even if Shell's idea is a disastrous failure, existing technologies can get oil out of the shale — it's just expensive. Other new extraction methods are also being tried by a number of companies. Here's a partial list:
Petrobras (PZE) Shell Frontier Oil and Gas Exxon Mobil (XOM) Chevron Shale Oil Company EGL Resources Milennium Synfuels Oil Shale Exploration, Inc.
The absolute worst case scenario I can fathom is that oil prices could get high enough to make existing shale extraction techniques economically feasible (some estimates put the break-even point at about $75 a barrel). At that point, we could tap our shale reserves and continue on, whether any of the new methods work or not, without any significant changes in infrastructure. Sure, gas would be more expensive, but probably no more-so than Europeans pay now. The economy may go through a rough patch during the transition, but the theory of a global economic meltdown over peak oil just isn't credible.
In fact, once shale production takes off, we could easily become the world's biggest exporter of oil, with China as our biggest customer. Strange as it may sound, it is quite possible that, within our lifetimes, Chinese government officials may take to fretting about their dependence on "Middle-Western" oil.
In short, don't buy into the peak oil paranoia. It is nothing more than a fairy tale, and is dangerous in that it distracts attention from the real impending crisis within our energy policy: global warming. It makes no sense to waste our time fretting about running out of oil when we in truth should be concentrating on figuring out how to curb our usage of it. After all, even if we were running out, wouldn't the best solution be the same?
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This article has 27 comments:
As for Mr. Whittaker, I sympathize with your position, but it's plain you didn't read my article in its entirety. I invite you to re-read the last paragraph of my article in particular.
I also sympathize with those who have noted that the "legitimate" peak oil theory is not so much that we will run out completely, but that production will stagnate while demand will continue to rise. I dispute that this scenario is inevitable, but it certainly is plausible. The trouble is that there has been a huge volume of writing recently characterizing peak oil in extreme terms, as described above.
In short, will there be economic woes, reminiscent of the 70s? Perhaps. But a complete global economic breakdown, resulting in war, famine, locusts, and seas of blood over $100-a-barrel oil? Give me a break.
Like most conservatives you have missed the point about peak oil. The lack of CHEAP oil is the problem. When the demand for oil (worldwide) exceeds the supply the price of oil (and everything else) will sky rocket. You talked about shale oil to replace pumped oil. The problem is that it will take 30 years for oil companies to replace the 85 million barrels of oil we use each day with shale oil (or any other alternative energy source). "Big Oil" will not allow any serious effort on the part of the government to develop sustainable alternatives. This means that your grand children are going to pay a terrible price (starvation and chaos) for your short sightedness. No matter what the price of oil one doesn’t have to be very smart to see that someday civilization is going to have to get along on this earth without carbon energy of any kind. If our country had a business plan (Big Oil has a plan) it would surly contain a section on the need for developing sustainable energy for the future.
Gale Whitaker
Check out the inflation adjusted price of oil and/or gasoline. You'll find that oil and gasoline are cheaper on an inflation adjusted basis than they were in the 70's and I doubt you could find that with any of the essential staples of life like milk, meat, eggs, bottled water (oops, not quite a staple!). Look at what was paid for all of these items in 1970 and what you pay now and calculate the rate of inflation. Then, do the same for oil and gasoline. you'll find oil is still relatively cheap.
But wait a minute! Wasn't it your hero Al Gore who wanted to add a tax to gasoline to stop consumption???? Well, the economic law of supply and demand has done that for him. AlBore's tax was designed to curtail consumption. Well, with prices up, you socialists should be applauding. Look how its going to reduce consumption!!
"it is the largest patent application in U.S. history" makes this entire article suspect.
SA editors, take note.
Saul Sterman
CrossProfit
Upon reading your article, I erroneously concluded that you were referring to a new filing. You are referring to the filing from January 2006 which is a continuation of the 2001 and 2002 patents. If I am not mistaken, this last filing was published in September 2006 and is a continuation of the 2002 (within 4 years) patent.
Pending patents are routinely published in their entirety prior to granting or dismissal, but not when they are filed. As a patent attorney you are aware of prior date and prior art considerations, non material amendments, reduce scope of claims etc. A patent may be filed in one country and within 12 months filed in the US where the date of the first filing is the cut off.
In a nutSHELL, this is a method of heat extraction (pun intended). Heat extraction itself is prior art.
Thousands of patents are granted every year but only a few are commercially viable.
I should have said 'when filed' not 'when pending', but this too is not the case.
Saul Sterman
CrossProfit
1) It recognisies the effects of consumption on supply rather than just dealing with the "mythical" shortage.
2) It puts reducing demand ahead of finding alertnatives.
The responses your article provoked are interesting as well, there are smart people out there, both have great points about supply vs demand and economic principles but they get so hung up on the politics.
I have read several times that Oil shales are going to save us.
A few points:
Although well written, much of your article was wrong. Peak Oil is not a theory, it is an observation. Many countries have passed their own Peaks in oil production. The US is one, it did so back in 1971. So has the UK, Norway, Indonesia (illogically it remains part of OPEC, even though it is a net importer), Australia and many others. In fact 30 countries out of the top 50 oil producers have passed Peak Oil.
Peak Oil is not the point when "oil runs out". In fact it is the opposite. It is the point in time when the most oil ever is produced.
Nobody knows when global Peak Oil will occur because a sizeable portion of the world’s top producers keep their data secret. It does them no good, but they seem to want to keep the arrangement. Saudi Arabia is the most important oil producing country that falls into this category. It is also the worlds most important oil producer.
Oil production has remained static since October 2004 at approximately 84 million barrels per day. Maintaining oil production means that new oil producing projects must be brought on line faster than older fields are depleting. This seems a simple enough concept, but lots of people have trouble understanding that point. For instance, Canterell in Mexico, the second biggest field in the world and the source of much of the oil imported into the US declined 20% in 2006. The North sea declined about 8%. Saudi Arabia declined 8%. Just these three production areas total over 1.5 million barrels per day in lost production with Saudi being the most important.
What this means is that if existing production is declining at 5% per year (a conservative number, considering Canterell) that means that the same amount of oil that is being produced now must be found again in new dicoveries and field overhauls to achieve the projected demand of 120 million barrels per day. This just is not going to happen.
More disturbingly, it looks like Saudi is at that point in it’s depletion curve when the decline is still accelerating. It could be 1m barrels down in 2007. Canterell, the North sea and all the others are also still declining as well. We will know later this year if Saudi is in permanent decline. If so global Peak Oil will already have happened and life will get interesting.
A million barrels a day is a lot of oil. There is no chance, absolutely none, that oil shale will produce that kind of production any time soon, if ever. Nether will any of the other imposters such as ethanol from corn. But that’s another story.
I remain convinced that necessity is the mother of invention. That the oil is there is not in dispute. It's only a matter of how quickly and cheaply it can be extracted, and if oil prices continue to rise, we will eventually reach the point where even the nasty, expensive traditional extraction methods become commercially viable.
But again, I think our energies are better directed to finding alternatives to petroleum than to worrying about running out.
The issue is thermodynamics. Oil in and of itself is not the issue. It is the net energy contribution to society that oil represents that is important. And there isn't much net energy in oil shale. Or tar sands. Or corn ethanol. Or anything else.
And that really is a problem.
That is why people are concerned about Peak Oil. Not about running out, because we will never "run out". There will always be oil in the ground. We just will not be able to get it to flow fast enough, and the net energy available to society will decrease.
Kerogen, by the way, is a higly pure and high-grade form of petroleum. It does require some processing, but Its soluble portion is known as bitumen, which is much more clean-burning than other forms of petroleum, and considered to be of an even higher grade than light sweet crude.
What Matthew Simmons calls "turning gold into lead."
However...where this article really displayes its adolescent rant characteristics is in its complete misunderstanding of Peak oil. Peak Oil IS a theory..but it also happens to be one strongly bolstered by the observations of several decades. I've heard Simmons, Campbell, Hubbert and others characterized in many ways but paranoid hardly fits. These were/are button down types steeped in the physical/business side of oil. People may not like what they have to say..or their conclusions...but if you're putting real money in front of your opinions mine go with those guys.
The Energy Watch report on global coal reserves just published debunks the "200 year supply of coal" fiction that will supposedly provide a cushion if conventional energy sources fail us. A global peak is predicted in about 15 years, based on updated reserves data and usage. Anthracite production peaked decades ago in the US, bituminous is peaking now and so we are dipping into lower grade western coal. We are aready in a net BTU decline with regard to coal production.
Ethanol is a trough feeding the big ones. It has no possibility of making a significant dent in our energy deficit. See Bunanol.com for an alternative that is absent the disadvantages of ethanol.
When gasoline passes $7 per gallon as it has in Turkey, who will we blame? Whether or not our life style is negotiable will not be something we get to vote on. Change is coming and we are not going to like it.
Wake up, Jack.
I remain amused that I have alternately been called a socialist and a right-wing reactionary in response to the same article. Any time I manage to anger both Democrats and Republicans, I figure I must be doing something right.
Nuclear offshore? On a boat, or maybe a platform? This is a scary thought. I personally would rather have it in my back yard.
Hydrogen will not flow down any pipeline, at least not far. Being the smallest atom on the periodic table it is extremely adept at escaping. That's not all. It reacts with many metals, making them brittle and weak. There is no end point distribution network. Most hydrogen today is made from natural gas, but that is "peaking" too. So, as the comment alludes, the only other option is nuclear derived hydrogen from seawater. "Pure" hydrogen is made from water today for applications that require it, but it is very expensive.
Finally, I presume this article refers to keeping the wheels of transport turning. Hydrogen could be just about be made to work for cars (very expensively). But cars typically move loads measured as a fraction of their overall mass. Trucks, which actually power the economy, routinely carry loads several times their own mass. This is where the laws of thermodynamics bite hard. Moving all that stuff takes energy - lots of it. Diesel contains a huge amount of energy in an easy to use compact liquid form. If you wanted to use hydrogen in your heavier goods trucks you would need a tank that could easily take up half the payload space and mass of the truck. Not because the hydrogen weighs a lot, it doesn't. It is the tank itself that needs to be specially strengthened. Aircraft? Forget it.
On the doomer front. I personally do not go with the doomer scenario either. Oil production has remained flat since October 2004, since when the US, China, India and a few other countries have all increased their imports. More disturbingly oil exporting countries are rapidly increasing their own oil consumption, often by subsidizing it very heavily. They are exporting less. The result is that poorer people and poorer countries are importing much less and many have already dropped out of the oil age. The Wall Street Journal recently carried a story about hospitals in Guinea that cannot afford diesel for their standby generators. With regular power cuts (thanks to global warming - dams and hydro power are down) maternity wards are forced to remove premature babies from incubators when the power goes off, so they put the baby on the mothers tummy. Some die.
That is peak oil. All you need do is connect the dots.
Yet we in the rich west (actually I live in Australia, nearly as far east as you can go) haven't really noticed. Gas is a little more expensive, stock markets are up, everybody is predicting growth. But as the gap between supply and demand ($25 per barrel demand) grows, the price will trend upwards. Geopolitical events might make it very volatile, up and down, but the trend will remain firmly up. More and more people will join those who already have dropped out of the oil age. Our economies might move into recession, but oil won't be blamed. Cyclical factors, debt levels, structural adjustment, any old economics nonsense will be dreamt up, rather than admitting the problem is oil, or the lack of it.
Ironically, the US, being one of the richest countries on earth, may be the last to feel it. Strange how justice works.
The reason that I accused you of being a conservative is that most conservatives are believers in the status quo (or they believe that God will solve all problems) and they refuse consider any future events unless they might affect the profit of their company at the end of the next quarter.
There is a prevalent attitude that civilization is on a never ending ascent to nirvana. History tells us that this is not the case. An example is the plague (as in bubonic) events of the past that killed millions of citizens. The events that occurred prior to the plagues may be a very close analog to the looming peak oil crisis. Imagine you are a politician in the 14th century. You look around town at the filth and the vermin. You think to yourself, “what a stinky mess, I think I will take my girl friend to my estate. We can have a little party and I can forget about my wife and the rats”. (Does this scenario sound like a modern day event in DC?) Then the plague strikes and civilization is changed forever because of ignorance and lack of attention. Please read “Collapse by Jerad Diamond. You will learn that down through history these events have played out for human societies time and again. This doomsday script has been the norm for humans, and it is our script as well. Professor Diamond says that eventually we will Burn up the oil and coal and the gas and the trees and then we will fade away and the earth will get back to the business of evolution without humans to mess things up.
Do you think there is any chance that the government and industry could work together to solve this problem? I believe that our system is so rife with greed and the never-ending struggle for political power that there is no chance. Big oil has congress in the palm of its hand. It is not going to let anything like a human die off get in the way of making hundreds of millions of dollars per year pumping oil out of the ground so that industry can burn it and pollute the atmosphere.
In the latest edition of “Business Week” (Apr. 23 p. 44) there is an article titled “THE RACE TO BUILD REALLY CHEAP CARS”. The author states euphorically that industry has found a way to build cars and sell them to the folks in India and China for $2500 a pop. Just think how fast we can exhaust the earth’s oil reserves when there 2 billion more drivers pouring gasoline into their cars.
I believe that global warming is real and that it is going to cause a catastrophe no matter what we do to try to solve the problem. The global warming mess won't become really terrible for several years. On the other hand if an extremist manages blow up the port of Dhahran (Saudi Arabia) this weekend the world could find itself without energy in very short order. The U.S. has a sizeable oil reserve (SPR). If the oil stops flowing from Saudi Arabia do you think that China is going to sit idly by without oil while the U.S. uses up the oil in the SPR. I think not. I think they will stop buying our bonds until we share our SPR. Will this lead to war with China? It might. Please read “The Long Emergency” by James Howard Kunstler. He has researched the peak oil question thoroughly.
You say you do not believe the world as we know it is going to end. Maybe. All sorts of credible organisations tell us that our lifestyle is unsustainable. I am doing a Masters degree in Sustainability. I can tell you without any shadow of a doubt that they are right. Whether it be energy, water, soil, food production, global warming, aquifer depletion, population growth, biodiversity loss, rapidly spreading desease, ice sheet melting, dissappearing bees (mainly in the US, but Europe now as well) we are in very deep trouble.
Any one of these things would cause massive problems. Fact is, they are all happening together. The next 10-20 years are going to be very interesting as humans adjust to the these problems. The human population today is 6.7bn. Various agencies predict populations of 8-9bn in 2050. What is your prediction?
Mine is 2-6bn.
What really bugs me about many of the "drill here drill now" campaigners is that they seem to pay only lip service to alternatives but get so worked up about finding the last few relatively small and expensive sources of regular oil. I'm not disputing that we may need these to transition... I am not 100% against drilling...
... but while you are shouting DRILL DRILL DRILL, why not also DEMAND ALTERNATIVES TO OIL WITH THE SAME VOLUME PITCH?
Whether now or later, we will be forced to stop using oil. I say, bite the bullet and do it NOW. If the peak in oil comes much later, we'll be ready with a comfortable margin. If it is as soon as many analysts predict, we may just save our economy from a major disaster.