Peak Oil Matters

What would the New Year be if we didn’t have an offering of more half-truth, delusional nonsense about our fossil fuel status?

Amy Myers Jaffe (nice takedown here) wrote an article for Foreign Policy a while back, serving up another example from the playbook of denial nonsense. As I suggested in a series of posts at the end of 2011 [first one here], it’s high time we start recognizing the strategies of half-truths employed by those whose primary vested interest appears to be their own wallets much more so than the well-being of our nation. But this is a free country, and if nonsense is what you choose to spout, there are forums everywhere.

Just a sampling from that article of what continues to pass for the valuable exchange of information, with my commentary in the [ ] following:

Geologists have long known that the Americas are home to plentiful hydrocarbons trapped in hard-to-reach offshore deposits, on-land shale rock, oil sands, and heavy oil formations….The problem was always how to unlock them economically.
But since the early 2000s, the energy industry has largely solved that problem. With the help of horizontal drilling and other innovations, shale gas production in the United States has skyrocketed from virtually nothing to 15 to 20 percent of the U.S. natural gas supply in less than a decade. By 2040, it could account for more than half of it.

[Facts—damn them!—suggest that the energy industry hasn’t exactly “solved” the problem, and “could account” is not the assurance we should be counting on. Chris Nelder—damn him—took this proposition apart in a very nice post. Nelder had the audacity to use facts, calculations, statistics, reports and assorted other so-called evidence to rebut this now-familiar claim about our natural gas potential, when he could have played by the same rules and tossed in a few “might possibly’s” and “if only’s” … but no, he had to use actual information. I hate that!]

… analysts are predicting production of as much as 1.5 million barrels a day in the next few years from resources beneath the Great Plains and Texas alone — the equivalent of 8 percent of current U.S. oil consumption. The development raises the question of what else the U.S. energy industry might accomplish if prices remain high and technology continues to advance. Rising recovery rates from old wells, for example, could also stem previous declines. On top of all this, analysts expect an additional 1 to 2 million barrels a day from the Gulf of Mexico now that drilling is resuming. Peak oil? Not anytime soon.

[A couple of questions come to mind: Which analysts? Using what evidence? “predicting … as much as” means what, exactly? As for “what else the U.S. energy industry might accomplish if prices remain high and technology continues to advance”: I believe that “if prices remain high” is good for oil company executives and … that’s about it. So that’s not necessarily a good thing for most of us, but if “technology continues to advance”, why then, we might perhaps possibly have some potential good news in the future. Fantastic!]

The picture elsewhere in the Americas is similarly promising. Brazil is believed to have the capacity to pump 2 million barrels a day from “pre-salt” deepwater resources, deposits of crude found more than a mile below the surface of the Atlantic Ocean that until the last couple of years were technologically inaccessible. Similar gains are to be had in Canadian oil sands, where petroleum is extracted from tarry sediment in open     pits. And production of perhaps 3 million to 7 million barrels a day more is possible if U.S. in situ heavy oil, or kerogen, can be produced commercially, a process that involves heating rock to allow the oil contained within it to be pumped out in a liquid form. There is no question that such developments face environmental hurdles. But industry is starting to see that it must find ways to get over them, investing in nontoxic drilling fluids, less-invasive hydraulic-fracturing techniques, and new water-recycling processes, among other technologies, in hopes of shrinking the environmental impact of drilling. And like the U.S. oil industry, oil-thirsty China has also recognized the energy potential of the Americas, investing billions in Canada, the United States, and Latin America.

[Where in our planning for the future should we put “similarly promising”? As regards the second sentence about Brazil, who is doing this “believing” about that nation’s capacity? When might this happen? I didn’t note anything about the actual costs or process of extracting this crude “more than a mile below the surface” of the ocean … I’m assuming some facts might be available to instruct us as to what’s involved and what we     can expect? This nonsense—emphasis mine—speaks for itself: “And production of perhaps 3 million to 7 million barrels a day more is possible if U.S. in situ heavy oil, or kerogen, can be produced commercially, a process that involves heating rock to allow the oil contained within it to be pumped out in a liquid form.” Perhaps it’s possible if? This is the basis for the happy-talk about our fossil fuels? Seriously? I didn’t happen to catch any details about what’s involved in “heating rock.”     The facts would spoil all that optimism, and God forbid we be obliged to deal with reality….And that kerogen deal: they’ve been trying for a few decades now….]

And then there’s this bit of almost-factual opinion from Robert Bradley, touting his very own Institute for Energy Research’s report on our energy “inventory.”

The first red flag is right there in the title of his Forbes piece: “America’s Massive Energy Potential Awaits, Mr. President”

As I noted in that above-referenced November 15 post of mine, “massive” and “vast” are straight from Page One of the right-wing handbook on misdirection and half-truths: use impressive (but unquantifiable) terms to bolster your claim … and hope readers aren’t curious enough to ask how much?

The real problem is that much of our resources are not being developed because of antiquated, heavy-handed government regulations. As a consequence, the American economy is being deprived of significant job creation and new investments….
The blame rests largely on unnecessary and onerous government regulations. Many offshore reserves are still blocked by outdated moratoriums no one is taking the time to reform. New permit applications are almost always subject to massive bureaucratic delays. Existing energy operations have to navigate labyrinthine — and costly — regulations. And regulators themselves are largely free to impose new controls on energy development with little to no congressional check.

This tiresome rant from the Right just isn’t adding much to the discussion any more. It’s a great red-meat sound bite, but devoid of any factual content, its benefits to our well-being are, well, non-existent. (But if you use “liberal”, “taxes,” and “regulations” in a sentence, you earn bonus points!)

Why are these regulations “unnecessary”? What “massive bureaucratic delays” (unique to this issue) and “labyrinthine [sure sounds awful!] — and costly — regulations” are involved? What might happen absent these socialist-liberal-Martian-tax-crazed regulations? “[R]egulators themselves are largely free to impose new controls on energy development with little to no congressional check.” Sounds awful! How about a “for instance” unique to this situation (with context, of course, which I realize violates a basic rule of the playbook)?

Seriously? “Regulations” are all that stand in the way of a limitless bonanza of energy resources for us? These johnny-one-note offerings suggest nothing more than a failure of both imagination and willingness to engage in meaningful and honest conversations.

I remain at a loss to understand why so many insist on tactics like these which have almost no relevance to legitimate, long-term solutions. Sure would be nice to toss some integrity into the mix now and then.

The author then offers this impressive-sounding collection of statements:

Total recoverable oil in North America exceeds 1.7 trillion barrels, which is more oil than the entire world has used over the last 150 years. And that amount alone could meet the energy needs of the United States for the next 250 years.
An estimated 1.4 trillion of those barrels are buried under American soil. For some perspective: the total proven reserves in Saudi Arabia is just about 260 billion barrels.
And even that 1.4 trillion figure might be an underestimation. Future technological innovation may well lead to improved detection techniques, helping us locate oil deposits currently uncovered. Or innovation could improve extraction techniques, enabling us to tap into reserves previously thought unreachable.

I can’t help myself [my emphasis]: “Future technological innovation may well lead to improved detection techniques, helping us locate oil deposits currently uncovered. Or innovation could improve extraction techniques….” Really? More Page One happy talk about all of the “could possibly perhaps” and “just might if” justifications (I use that term loosely). When do we declare a winner in the Happy Talk v. Facts competition?

I don’t recall seeing much in the way of an explanation or facts about all of these magical totals. Costs? Quality? Environmental concerns? Time factor? Return on energy investment? How about depletion from existing fields as a factor?

Robert Rapier offered a damning rebuttal to this author’s propositions, starting with a big hint in the title of his piece: Why Some Republican are Delusional About Oil and Energy Policy. (To be fair, he also offers criticisms of some of the positions offered by Democrats, and commends each party as well for certain other approaches.)

Like Mr. Nelder above, Mr. Rapier wasn’t content to just toss out a fact-free statement and end the discussion there. No, he had to go and conduct an investigation, and then analyze the facts offered above. Damn him! (Another hint Rapier offers comes from a sub-heading discussing the very same report prepared and cited by Robert Bradley: “Misleading Study Obfuscates Recoverable Reserves.”)

Rapier begins his analysis with this: “I find these sorts of reports highly misleading, for the following reason” and then quickly dismantles Mr. Bradley’s contentions in the next few paragraphs.

He then concludes:

The truth is that it will always take too much energy to produce some of those oil resources, placing some of them forever out of reach. But, the magical thinking from many Republicans here is that the oil is there if the political will is there for taking it. The danger in this kind of thinking is exactly the same as the danger in thinking we can smoothly transition to renewables: It diminishes the urgency of our energy predicament. After all, if people believe that renewables will save us, or that more drilling will save us — we are going to put off making the tough decisions that could really save us in the long run.

All of us—conservatives, liberals, whatevers—would do well to heed his advice.

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In a recent post (here), I indicated that there were two more recent articles unseriously attempting to persuade readers that all is well in oil-production world. I’ll discuss the second piece today. (There are always more, of course, but these two jumped out at me as “better” examples of misguided attempts to deny that we have any fossil fuel resource problems.)

This Fortune magazine piece describes with near-breathless delight the apparent findings of not just one or two or four, but six “huge” oil fields! The existence of these fields is not exactly new news, but no matter. The good news touted here, however, is that we’re “awash in petroleum.” Such good news!

Let’s jump right in [emphasis added is mine]:

“There are many oil reserves around the globe that remain untapped, and explorers continue to discover new fields deep beneath the earth’s surface. Depending on how the controversy surrounding the Arctic National Wildlife Refuge turns out, the U.S. could exploit oil reserves in the area, despite potentially grave environmental consequences.”

“Depending”; “could” … along with “might potentially”, “if” “could be possible”, and an array of similar, carefully-worded utterly-lacking-in-certainty phrases are the apparent stock in trade for those denying those annoying facts about declining world oil production.

Kind of like the “job-killing”, “death panel”-laden health care legislation … these buzz word continuously repeated (without bothering to explain any of the actual facts that the rest of us deal with here on Planet Earth) sooner or later take on a life of their own. Soon enough “could exploit oil reserves” to the many non-discriminating readers simply becomes “lots of easily-accessed oil just waiting for someone to stick a straw in and pump it all out and so-what-the-hell-are-you-all-waiting-for?”

“Depending on how” the “controversy” (?) pans out in the Arctic means … what? Mentioning just the political controversy (my assumption as to the reference) over which nation can lay claim to any possible resources in the Arctic ignores a whole lotta other issues like finding it; getting to it; producing it! Hello! We’re talking about the possibility of finding and extracting fossil fuel resources in the Arctic! The place that’s very, very cold and has a lot of very, very thick ice on top of … everything … most of the time!

Realistically, full production is several decades away, and the total isn’t likely to meet even 5% of our needs. “Cheap, easy, soon” are words one will never hear when discussing the “potential” oil in the Arctic. Damned facts….

And what’s with the “despite potentially grave environmental consequences”? That actually sounds vaguely serious. Perhaps reporter Shelley DuBois might have lingered for just a moment on that phrase and explained … anything about it? “Grave” and “consequences” in the same sentence rarely lead to good things. But hell, if that’s just going to slow down the process of skipping past facts, then by all means, ignore away!

“Elsewhere there are even more reserves, but they’re often in places that are either geologically or politically difficult to access. Some of them come with dangerous security risks to drilling.”

Well that’s a relief! Still reeling from the whole “grave consequences” thing, for a moment I thought there might be some more problems. But since there’s no explanation, I guess not! That was a close one … whew!

This piece then provides brief statements about these 6 “huge” oil fields. [NOTE: all statistics to follow are taken from this Fortune article unless indicated otherwise.] I’ll touch on just a few points.

Mexico’s Chicontepec Basin has 10 billion “estimated” barrels of recoverable crude oil. Wonderful … that’s four month’s worth of world demand, and all from a country whose oil production has tanked in recent years. Hard to imagine a lot of money has been poured into the infrastructure during this decline, so one should wonder about the capacity to extract the fossil fuels, but let’s give Mexico the benefit of the doubt.

Mentioning the recent decline in production in passing at least counts for something, even if there is no tie-in to how this off-setting depletion in existing fields might diminish the attractive estimates from Chicontepec Basin. I guess there’s not much to be concerned about.

The big kahuna in this article is Venezuela’s Orinoco Basin, “a huge chunk of reserves inland, in a stretch of about 20,000 square miles” that is estimated to hold more than 500 billion barrels of oil. Very impressive to be sure. In fact, a 2006 article from petroleumworld.com suggested reserves of more than a trillion barrels, although only about 25% – 30% was then deemed recoverable. I have seen similar figures elsewhere, but I’ll go with Fortune’s figures for this discussion. (About a year ago, I wrote a post devoted to Venezuela and issues relating to its oil production capabilities. You can get more info’ here.)

What the 2006 article was thoughtful enough to provide (perhaps space limitations precluded Fortune from supplying this innocuous fact) is an explanation that producing Venezuela’s “heavy oil” is … well, what you might imagine producing heavy oil to be like:

“Coaxing marketable oil out of the extra-heavy sludge and coal-like deposits of the Orinoco is extremely expensive, labor- intensive, and has required both the technological muscle and cash of Big Oil.”

There goes any possibility of “cheap, easy, soon”! And let’s keep in mind that that country’s leader, Hugo Chavez, is not what anyone would consider to be a fan of ours. We should not expect lots of oil favors from him. As the author of this Fortune article states: “U.S. relations with Venezuela have been tense.” Relations between loony Tea Party extremists and far left bloggers here have been similarly “tense.” I’m not seeing much in the way of better scenarios any time soon.

“The country estimates a substantial jump in production from the area, claiming that the Orinoco will add another 400,000 barrels per day to its production by 2016.
“There’s some debate over whether they’ll make that goal — and even over how much oil Venezuela currently produces. Venezuela claims that its national oil company Petróleos de Venezuela SA produces 2.96 million barrels per day. U.S. estimates are generally lower, around 2.09 million barrels per day.”

Let’s give Venezuela the benefit of the doubt, round up to 3 million barrels per day, and then tack on 400,000 more per day. My math says that’s 3.4 million barrels per day, or almost 1.25 billion barrels per year. Very impressive. Gonna take a while to squeeze out 500-plus billion barrels at that rate (completely ignoring the fact that a one-third recovery is a good ballpark figure for production from most fields.) Of course, this assumes (I can do that, too) infrastructure and investment/economic/production considerations remain supportive, and that those pesky “extra-heavy sludge” factors don’t prove too daunting. I’m sure someone will invent something soon to take care of that—ideally at very low cost, easily utilized, and one that restores the oil fields and basins to pristine environmental conditions in no time at all.

The next source of magic are Brazil’s Santos and Campos Basins, estimated to hold “up to” 123 billion barrels of crude oil. Certainly not a pittance!

But like Jeremy Bowden’s article which I discussed last week, curious facts about the efforts to produce these fields popped up in the DuBois article:

“East of Rio de Janiero, Brazil’s Santos and Campos Basins contain tremendous oil reserves in something called a pre-salt layer. The oil and other petrochemicals are trapped under about two miles of salt and rock layers, which starts about a mile deep in the Atlantic Ocean.”

So … a few hundred bucks worth of investment, coupla weeks off the coast of sunny Brazil, a little bit of work here and there, and presto, we have 123 billion barrels of oil, right? (I’m just supplying “facts” about production … the Fortune article didn’t get around to that. Perhaps, however, I underestimate the challenge? Ya’ think?)

The other 3 fields mentioned in this article are first, an estimated 45-100 billion barrels superfield in Iraq—a real hot-bed of civility, sound infrastructure, solid government, and all the economic wherewithal any oil producer might need, right? And let’s just ignore this little bump in the road:

“The problem with Iraqi oil production is in the refining process. Right now there aren’t enough refineries with capacity to process so much crude. There’s also a paucity of fresh water in the region–a key resource for petrochemical processing.”

The “refining process” is the only problem? Seriously? All by itself that’s an enormous challenge and one not likely to be successfully resolved any time soon. And fresh water in the desert to fix that other problem will come from … ? Sure hope none of the Iraqi citizens get to those limited supplies of water before the oil companies do. They might drink it, or something!

DuBois then discusses the (estimated) 11 billion barrel offshore Kashagan field in Kazakhstan. Slight issue, easily resolved I’m sure:

“Offshore Kazakhstan is tricky to develop. The oil is sulphurous, and it’s combined with a high quantity of high-pressure natural gas. Also, drilling platforms have to be incredibly sturdy to weather the harsh conditions in the Caspian Sea.”

I’m not seeing “cheap, easy, soon” there, either. Also not seeing any facts to explain how those challenges might be handled—easily, cheaply, or soon.

And finally, the jaw-dropping, whopping 1.8 billion barrel (estimated, of course) Jubilee field off the coast of Ghana. That is, Jubilee “could ultimately produce” [my emphasis] that much oil. Pigs could fly, and we all could win the lottery tonight, too. But 1.8 billion barrels of oil is 1.8 billion barrels, enough to satisfy world demand for damn near … 3 whole weeks!

We’re well past the time when we need those in the know about the oil industry to speak the truth and only the truth. We who are not in the know need to better understand the facts and consider the sources of information supplied, and of perhaps greater importance: what’s not being explained. Motivations for disseminating various levels of information can be complicated.

Might not be a bad idea for our leaders to consider this strategy of telling the truth and offering us a heads-up, too.

Our work is cut out for us—all of us.

This morning, I came across an interesting online article from The Wall Street Journal.

The paper is reporting that Venezuela’s energy and oil minister is meeting in China with government and oil industry official there. The main topics of discussion will be a joint-venture refinery project and more Chinese government investment in the Venezuelan oil reserves. I discussed the heavy oil resources of Venezuela in yesterday’s post. (here)

In that post, I also noted that one of many geopolitical issues we need to be mindful of is that foreign oil producers are no longer falling all over themselves to seek relations with the United States, nor are they always anxious to make us their primary customer. Venezuela’s President, Hugo Chavez, is a notorious anti-American.

China and Venezuela have already entered into a number of oil and energy-related agreements, and other countries are also working out oil agreements with Chavez’s government (Italy being only the most recent one.)

Another recent article notes that Russia and Venezuela are likewise engaging in trade talks and oil cooperation.

Tellingly, after referencing several recent China-Venezuela oil deals, the Journal’s article notes that:

“These moves stem from Venezuelan efforts to fund development of its huge oil reserves and diversify sales away from its traditional main market, the U.S., including by boosting sales to China to 1 million barrels per day.”

Our blind dependence on foreign oil and a naïve assumption that going forward we will continue to import all the oil we need may crash head-first into political realities where those assumptions are by no means a given. Those realities carry with them real consequences, too.

Sources:

http://online.wsj.com/article/SB10001424052748704022804575040431689856008.html?mod=googlenews_wsj – Venezuela, China in Oil Talks By SIMON HALL

http://news.xinhuanet.com/english2010/world/2010-02/01/c_13158157.htm – Russia, Venezuela step up oil cooperation

Once more I’d like to detour away from my next planned post and discuss a news item that received a fair amount of media attention last week: the United States Geological Survey’s (USGS) assessment that Venezuela’s Orinoco Oil Belt now contains a bit more than 500 billion barrels of “technically recoverable” oil.

There’s certainly no question that if this report is true, the opinion enhances Venezuela’s status as a major player in the international oil market. (According to the Energy Information Agency—citing the Oil and Gas Journal—Venezuela had 99.0 billion barrels of proven oil reserves in 2009. That’s the largest amount in South America.)

The EIA reported that as recently as two years ago, the United States received more of Venezuela’s petroleum exports than any other nation. That amount continues to decline annually. (According to the EIA, we import more than a million barrels of crude oil and petroleum products from Venezuela per day.)

As is almost always the case, however, things are not as simple as they appear.

Unlike the light sweet crude oil produced by the U.S. and the light oil which has made Saudi Arabia such a force, the Orinoco oil is “heavy oil” found in oil sands—similar in characteristics to the tar sands bitumen found in Alberta, Canada. (See my prior post here.) The Venezuela oil is thus much harder to extract and refine, making it more costly. Significant investments of time and money are required to provide adequate refinery capabilities. Needless to say, extracting this heavy oil is a much more energy-and time-intensive effort than is the process for extracting the more familiar light crude. It is not anyone’s answer in the next few years.

Lead researcher and USGS geologist Chris Schenk admitted that their report is not asserting that the “technically recoverable” oil is in fact “economically recoverable.” That’s a significant distinction, and one that needs to be emphasized. All the presumed underground reserves in the world won’t mean much if it makes no sense to invest the time, effort, and money to try and extract them.

The USGS nonetheless estimates that a stunning 40 – 45% of that resource will be ultimately recoverable. One prominent geologist (and a former board member of Petroleos de Venezuela SA—Venezuela’s state oil company) is already on record as doubting anywhere near that amount can be recovered, and stated that much of what might actually be recoverable would in fact be too expensive to produce.

Merely stating that 40% or 45% is recoverable is not the answer. Those who dispute Peak Oil may fervently wish that merely uttering that remote possibility is enough to curtail discussions on the topic, but the optimism of “possibility” is insufficient in and of itself. The reality is that like with most other oil reserves, final production levels will be nowhere near that high a percentage. If experts already on record are correct, Venezuela simply does not have production capabilities or financial resources needed to meet that projection.

Aside from the political turmoil normally associated with President Hugo Chavez’s regime, Venezuela is suffering the effects of a poor investment environment. Rolling blackouts, drought, a high murder and crime rate and the social upheavals those factors spawn are all contributing to serious oil production challenges—among other political and economic difficulties.

Thousands of highly qualified oil company employees were fired by Chavez several years ago and many have left the country, so the state oil company is suffering a severe shortage of qualified personnel. Any outside oil company successfully bidding on these reserves will be called up to expend tens of billions of dollars to create infrastructure in the drilling/mining regions while simultaneously being obliged to deal with the political, industrial, and social problems unfolding in that nation. There is no easy or quick solution on the horizon.

Oil production has declined by about one-third in the last five years in that country, and exports continue their drop month after month. In the midst of its ongoing power crisis, Venezuela is being called upon to produce more energy in an economic climate that is hardly conducive to producing more of anything. (Many stores, malls, and businesses have been resorting to generators in order to stay in business, and the country’s infrastructure is in seemingly perpetual decline.)

And let’s not forget one key political factor about Venezuela and its oil production: it is no fan of the United States. By most accounts Chavez is pursuing agreements with other nations in no small part because it means less Venezuelan oil for America. The million or so barrels of Venezuelan oil we receive daily are amounts Chavez is no doubt hoping soon find their way elsewhere. That’s not an insignificant shortfall to make up. With Mexican production also crashing, we need to recognize the likelihood that past supplies of foreign oil are not guaranteed for the future. We receive an average of a couple of million barrels of oil every day from those two nations. If they are unavailable to us in just a few years, that’s an enormous energy hit for us to take.

Does all this mean we’re facing a catastrophe tomorrow? Of course not. But the problems within Venezuela and its precarious relationship with our nation are factors we must consider in any long-range energy planning or expectations about supply. Peak Oil is indeed about much more than just geologically-premised declining rates of production.

The sooner we pay attention to these vital issues and plan accordingly, the less disruption to our ways of life we’ll be obliged to endure.

Sources:

http://scitizen.com/future-energies/venezuela-may-yield-twice-as-much-oil-as-was-thought-_a-14-3350.html – Venezuela May Yield Twice as Much Oil as was Thought. 25 Jan, 2010

http://www.frumforum.com/chavez-strike-out – January 2010

http://www.frumforum.com/lights-out-in-chavez-land – January 2010

http://www.energybulletin.net/node/51298 – January 2010

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=332210&t=01003417101430356940 – Revisiting the 4 Horsemen of the Oil Boom – January 2010

http://english.eluniversal.com/2010/01/25/en_eco_esp_energy-crisis-threat_25A3336133.shtml – Energy crisis threatens Venezuelan exports of fuel oil and diesel. Energy

http://www.ogj.com/index/article-display/4235916720/articles/oil-gas-journal/exploration-development-2/reserves/2010/01/usgs-pegs_orinoco.html – USGS pegs Orinoco’s recoverable figure at 513 billion bbl. Jan 22, 2010. Alan Petzet. OGJ Chief Editor-Exploration

http://ca.news.finance.yahoo.com/s/22012010/2/biz-finance-venezuela-s-orinoco-area-holds-vast-supply-crude.html – Venezuela’s Orinoco area holds vast supply of crude, US Geological Survey says. Fri Jan 22 By Ian James, The Associated Press

http://www.aspousa.org/index.php/2010/01/top-ten-peak-oil-stories-of-2009/ – Top Ten Peak Oil Stories of 2009 By Tom Whipple • January 4, 2010