Oil, Oil, Everywhere . . .

[adios]

The article implies that if the price of oil is high enough all the oil anyone wants will be available for a long, long time which directly refutes the "production has peaked" claim. Also as technology advances, the price for producing a barrel of crude will decline as well. Canada is the larget importer of oil to the U.S. btw.

Another point made in the article:

But here's the catch: By simply opening up its spigots for a few years, Saudi Arabia could, in short order, force a complete write-off of the huge capital investments in Athabasca and Orinoco. Investing billions in tar-sand refineries is risky not because getting oil out of Alberta is especially difficult or expensive, but because getting oil out of Arabia is so easy and cheap.

Exactly and why the idea that diminishing consumption of oil by the U.S. will lead to less dependence on Mid East oil is so wrong. Also it's one of the reasons that the Saudi's maintain IMO a fair amount of excess production capacity.

To the naysayers that decry the profits oil companies make, why not just buy some of their stock and make some money off of that. I don't think $40-50 for a barrel of crude is priced into most of them at this point. Do your own research though.
Oil, Oil, Everywhere . . .

By PETER HUBER and MARK MILLS
January 27, 2005; Page A13

The price of oil remains high only because the cost of oil remains so low. We remain dependent on oil from the Mideast not because the planet is running out of buried hydrocarbons, but because extracting oil from the deserts of the Persian Gulf is so easy and cheap that it's risky to invest capital to extract somewhat more stubborn oil from far larger deposits in Alberta.

The market price of oil is indeed hovering up around $50-a-barrel on the spot market. But getting oil to the surface currently costs under $5 a barrel in Saudi Arabia, with the global average cost certainly under $15. And with technology already well in hand, the cost of sucking oil out of the planet we occupy simply will not rise above roughly $30 per barrel for the next 100 years at least.

The cost of oil comes down to the cost of finding, and then lifting or extracting. First, you have to decide where to dig. Exploration costs currently run under $3 per barrel in much of the Mideast, and below $7 for oil hidden deep under the ocean. But these costs have been falling, not rising, because imaging technology that lets geologists peer through miles of water and rock improves faster than supplies recede. Many lower-grade deposits require no new looking at all.

To pick just one example among many, finding costs are essentially zero for the 3.5 trillion barrels of oil that soak the clay in the Orinoco basin in Venezuela, and the Athabasca tar sands in Alberta, Canada. Yes, that's trillion -- over a century's worth of global supply, at the current 30-billion-barrel-a-year rate of consumption.

Then you have to get the oil out of the sand -- or the sand out of the oil. In the Mideast, current lifting costs run $1 to $2.50 per barrel at the very most; lifting costs in Iraq probably run closer to 50 cents, though OPEC strains not to publicize any such embarrassingly low numbers. For the most expensive offshore platforms in the North Sea, lifting costs (capital investment plus operating costs) currently run comfortably south of $15 per barrel. Tar sands, by contrast, are simply strip mined, like western coal, and that's very cheap -- but then you spend another $10, or maybe $15, separating the oil from the dirt. To do that, oil or gas extracted from the site itself is burned to heat water, which is then used to "crack" the bitumen from the clay; the bitumen is then chemically split to produce lighter petroleum.

In sum, it costs under $5 per barrel to pump oil out from under the sand in Iraq, and about $15 to melt it out of the sand in Alberta. So why don't we just learn to love hockey and shop Canadian? Conventional Canadian wells already supply us with more oil than Saudi Arabia, and the Canadian tar is now delivering, too. The $5 billion (U.S.) Athabasca Oil Sands Project that Shell and ChevronTexaco opened in Alberta last year is now pumping 155,000 barrels per day. And to our south, Venezuela's Orinoco Belt yields 500,000 barrels daily.

But here's the catch: By simply opening up its spigots for a few years, Saudi Arabia could, in short order, force a complete write-off of the huge capital investments in Athabasca and Orinoco. Investing billions in tar-sand refineries is risky not because getting oil out of Alberta is especially difficult or expensive, but because getting oil out of Arabia is so easy and cheap. Oil prices gyrate and occasionally spike -- both up and down -- not because oil is scarce, but because it's so abundant in places where good government is scarce. Investing $5 billion dollars over five years to build a new tar-sand refinery in Alberta is indeed risky when a second cousin of Osama bin Laden can knock $20 off the price of oil with an idle wave of his hand on any given day in Riyadh.

The one consolation is that Arabia faces a quandary of its own. Once the offshore platform has been deployed in the North Sea, once the humongous crock pot is up and cooking in Alberta, its cost is sunk. The original investors may never recover their capital, but after it has been written off, somebody can go ahead and produce oil very profitably going forward. And capital costs are going to keep falling, because the cost of a tar-sand refinery depends on technology, and technology costs always fall. Bacteria, for example, have already been successfully bioengineered to crack heavy oil molecules to help clean up oil spills, and to mine low-grade copper; bugs could likewise end up trampling out the vintage where the Albertan oil is stored.

In the short term anything remains possible. Demand for oil grows daily in China and India, where good government is finally taking root, while much of the earth's most accessible oil lies under land controlled by feudal theocracies, kleptocrats, and fanatics. Day by day, just as it should, the market attempts to incorporate these two antithetical realities into the spot price of crude. But to suppose that those prices foreshadow the exhaustion of the planet itself is silly.

The cost of extracting oil from the earth has not gone up over the past century, it has held remarkably steady. Going forward, over the longer term, it may rise very gradually, but certainly not fast. The earth is far bigger than people think, the untapped deposits are huge, and the technologies for separating oil from planet keep getting better. U.S. oil policy should be to promote new capital investment in the United States, Canada, and other oil-producing countries that are politically stable, and promote stable government in those that aren't.

Messrs. Huber and Mills are co-authors of "The Bottomless Well: The Twilight Of Fuel, The Virtue Of Waste, And Why We Will Never Run Out Of Energy," just out from Basic Books

[sam h]

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the 3.5 trillion barrels of oil that soak the clay in the Orinoco basin in Venezuela, and the Athabasca tar sands in Alberta, Canada.

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I don't know much about oil reserves, but this seems pretty high. Is that a reliable statistic?

[CORed]

Yes, the supply of oil is infinite. How could anyone believe this isn't true?

[Il_Mostro]

Let me have a stab at this... if you are really interested I can go into more detail tomorrow.

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First, you have to decide where to dig. Exploration costs currently run under $3 per barrel in much of the Mideast, and below $7 for oil hidden deep under the ocean. But these costs have been falling, not rising, because imaging technology that lets geologists peer through miles of water and rock improves faster than supplies recede. Many lower-grade deposits require no new looking at all.

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If there are massive amounts of oil to be found, please tell me why discoveries peaked in the 1960:s and why no large fields has been discovered since 2002. I tend to belive the geologists here, and most of them are saying that there simply are no more mammoth fields to be found. By mammoth I mean fields big enough to make a difference, ie. on the scale of tens of billions of barrels at least.

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To pick just one example among many, finding costs are essentially zero for the 3.5 trillion barrels of oil that soak the clay in the Orinoco basin in Venezuela, and the Athabasca tar sands in Alberta, Canada. Yes, that's trillion

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He makes the ususal economist error here. Yes, there are enourmous amounts of oil in the form of tar sand and "oil" shale. However, it's not just size that matters, it's also a matter of extraction rates. Oil from tar sands cannot be extracted on any really meaningful scale, I don't remember the numbers of the top of my head, but I belive the projection is 2 million barrels per day in 2010 or so. Not a whole lot.
Also, the environmental costs of extractin tar sands are enourmous.

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over a century's worth of global supply, at the current 30-billion-barrel-a-year rate of consumption.

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True, but misleading. You have to look at growth as well. Unless you belive we are going into the new era where people understand that growth simply is not sustainable.

Now, get me right, I don't think we are seeing peak oil as we speak, it'll be a while longer. And when it comes it'll probably be in the form of a plateu for a while before starting to drop off. But this the writer of this article does not seem to have his facts straight, he makes all the classic mistakes.

[CORed]

I don't know much about tar sands, but, being from Colorado, I do know a little about oil shale. There is an enormous amount of hytrocarbons in the oil shale deposits of Colorado, Wyoming, and Utah, but, in order to mine it, extract it and refine it into a usable form, it takes nearly as much energy as you get when you burn the final product. The last oil shale "boom" in Colorado was fed by Carter's "synfuel" funding and went bust when the government funding dried up and the price of oil collapsed in the early '80's.

[wacki]

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the 3.5 trillion barrels of oil that soak the clay in the Orinoco basin in Venezuela, and the Athabasca tar sands in Alberta, Canada.

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I don't know much about oil reserves, but this seems pretty high. Is that a reliable statistic?

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It's actually around 6 trillion in the Northwest territories alone. As others have noted, getting oil from tar sands is a nasty business. Enormous amounts of water, oil, and gas are used to convert tar sands into usable oil. In order for us to use tar sands we have to have a near infinite supply of natural gas. This, of course, is very far from reality. The amount energy isn't 1:1 for shale oil production, it's betwen 4:1 and 9:1. For every barrel of gasoline we create, we use 4-9 Barrels worth of natural gas and conventional oil.* Needless to say, this is a complete nightmare from environmental standards.

*Referring to CO2 emissions.

[MtSmalls]

Lets not forget that the oil, once extracted from the sands is not high grade oil. It is the dregs of the barrel and probably usable only for industrial lubrication, and not to be 'distilled' for high grade fuels.

As opposed to 'light, sweet crude' that comes from Arabia which has a high percentage of distillates (jet fuel, gasoline etc), or even the slightly more sour West Texas Intermediate....

[wacki]

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Lets not forget that the oil, once extracted from the sands is not high grade oil. It is the dregs of the barrel and probably usable only for industrial lubrication, and not to be 'distilled' for high grade fuels.

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True, gasoline can't be distilled directly from it, but it can be treated chemically to create gasoline. This requires more energy. My facts and figures were based on simply extracting the sludge oil and not breaking the heavy carbon chains into their lighter counterparts. This form of oil collection will also tear apart large areas of earth. Also, if tar sands replace regular oil, the plants will require a wastewater pond the size of Lake Ontario.

In an article written in 1998, or seven years ago:
"Since opening its operation in 1978 one company, Syncrude, has excavated 1.5 billion tons of so-called overburden, the 20 meters deep layer of muskeg, gravel and shale that sit atop the actual oil sands. More soil has been excavated by Syncrude than from the construction of the Great Pyramid of Cheops, the Great Wall of China, the Suez Canal and the 10 biggest dams in the world combined. Syncrude has possibly created the largest surface mine in the world."



For every barrel of oil recovered, two and a half barrels of liquid waste are pumped into the huge ponds. The massive Syncrude pond, which measures 22 kilometers (14 miles) in circumference (25 sq. km.), has six meters (20 feet) of murky water on top of a 40-meter-thick (133 feet) pudding of sand, silt, clay and unrecovered oil.

http://dieoff.com/page143.htm

So, I have no doubt that we will not run out of oil. If we decide to use tar sands, Canada and even some states in the US will become some very nasty places to live. Also, I can't begin to calculate what the more than 9 fold increase in carbon emissions will do to the planet. This is why we need technology and we need to start developing it now. If we develop fusion and artificial carbon sinks this planet might be able to deal with even tar sand oil production. But without technology development, our grandchildren are screwed.

[wacki]

Adios, where did you find this article? These guys left out a lot of important information.

[MMMMMM]

So, Wacki, what do you think about this:

"Syntroleum Corporation is in the business of monetizing remote and/or stranded natural gas. It is the developer, user and licensor of the Syntroleum Process, a proprietary process for converting natural gas (or synthesis gas from coal) into synthetic liquid hydrocarbons - a process general known as gas-to-liquids (GTL) technology. We employ our technology to form joint ventures and acquire equity in oil and gas development projects where GTL is critical to a project's success. We also license the Syntroleum Process to others. Syntroleum's unique capabilities enable us to offer attractive solutions for natural gas reserves (including flared gas) that are not economic to produce using traditional methods.

The Syntroleum Process produces synthetic liquid hydrocarbons, also known as synthetic crude oil, that are virtually free of contaminants that are normally found in products made from conventional crude oil. These synthetic liquid hydrocarbons can be further processed into higher margin products through conventional refining techniques, including Syntroleum's proprietary Synfining Process. These products include:

* Ultra-clean liquid fuels for use in internal combustion engines and fuel cells;
* Specialty products such as synthetic lubricants, process oils, waxes, etc.

Costs to produce these products using GTL technology are increasingly competitive with conventional process technologies. Moreover, the ultra-clean properties of GTL fuels meet or exceed the new and proposed environmental requirements that will soon go into effect for the U.S. and Europe.

Key advantages to the Syntroleum Process include its use of air in the conversion process, which is economically competitive and inherently safer than the requirement for pure oxygen in other GTL technologies; and Syntroleum's proprietary catalysts, which enhance conversion efficiency of the catalytic reaction. These features help to reduce capital and operating costs of plants, and permit smaller plant sizes, including mobile plants that can be mounted on barges for offshore service. Research indicates that the Syntroleum Process can be economically applied in plant sizes from less than 20,000 to over 100,000 barrels per day.

It is generally accepted that, if converted to liquid, there are enough known stranded natural gas reserves in the world to produce more than 250 billion barrels of synthetic crude oil. To put that in perspective, that would be equivalent to finding another Saudi Arabia."

http://www.syntroleum.com/about-general.asp