/"Chart 63 says they have known reserves for 150 years."/
Exxon Mobile has energy reserves for many years, that is true, but that
doesn't mean they can maintain current production rates for that number of
years. Production rate is what is important, not reserves. The production of
oil is like a huge river constantly flowing to supply the power, energy per
unit time, required to run the "labor saving" devices, like trucks and
bulldozers, that enable our standard of living. The required flow is
determined by the global population and "standard of living". Increasing
either requires an increase in oil production, the flow of the river.
A number like "150 years of reserves" usually is based on the current
standard of living and global population, i.e. current usage rates, but
these are both increasing exponentially as "undeveloped" countries become
more developed, particularly China and India. Some people say that the
population growth rate in the undeveloped countries is the problem, but
around 20 people in a country with higher birth rates like Pakistan or
Nigera use about as much oil as 1 person in the U.S., so actually our
smaller population growth rate has a larger effect on oil consumption.
/"He said that a mile down there's oil under every state in the union. They
just haven't developed a good way to get it and it costs over a million
dollars to drill that deep."/
Oil companies have been drilling much more than a mile below the sea floor
in deep water in the GoM (Gulf of Mexico) for many years, which is much more
difficult and expensive than drilling that depth on land. Those wells cost
hundreds of millions. Why would they incur that extra cost if they could
just drill to the same depth on land for much lower cost? Also, Exxon Mobil
has had record spending on exploration for the past 5 years or so, but their
new discoveries have been way down. They recently cut back on exploration
for new oil fields for that reason, and have put more emphasis on natural
gas. Why would that be the case if oil is so plentiful under the continental
U.S.?
/"The Bakkan field in North Dakota, for example, contains up to 500 billion
barrels of oil, more than twice the known oil deposits of Saudi Arabia."/
It is well know that most of the "sweet spots", those offering higher
production rates, in the Bakken have already been drilled. The "decline
rate" (rate of production decline) in the Bakken is very high, with
production from a well dropping by over 90% in 3 years on average. After 3
years most of those wells are "stripper wells" producing on the order of 10
barrels per day. That, and the higher cost of fracking, is why production
of "tight oil" is much more expensive than from conventional wells, many
more wells have to be sunk to produce a given volume of oil. Production
from these wells is not at all like conventional oil wells, and will be less
attractive as they are forced to move to drilling in the less "sweet" spots
of the fields.
/"The oil under the sands of Saudi Arabia is far easier, and therefore less
costly, to extract than the oil pocketed under rock beneath North Dakota."/
You have to drill through rock to reach all oil deposits, but conventional
oil fields are typically in much more porous rock under salt domes which
hold it in place. There is no need to "frac", fracture, the oil-containing
rock. Just drilling down through the dome to penetrate the porous
oil-containing rock is all that is required since the oil flows much more
freely through that more porous rock due to the pressure on it from the rock
above - producing the "gushers" of east Texas long ago. That is why "tight
oil" is more expensive to produce. In response to low oil prices producers
have found a number of ways to reduce costs, such as fracking multiple lines
from a given drilling platform, but except for in the sweetest spots it is
still more expensive to produce than conventional oil.
Also keep in mind that typically less than 50% of OIP (oil in place) is
recovered, even with EOR (enhanced oil recovery) techniques such as water or
CO2 injection in conventional oil fields, so there will always be oil left
in the ground, but that oil won't do us any good. Some have gone as high as
70% but that is not the norm. Companies have revisited older fields to
squeeze more oil out with EOR techniques depending on the market price of
oil. A bit like re-mining the "dumps" of old gold mines to extract a bit
more when gold prices are high enough to make it economic.
/"Most of the oil fields under the North American continent were discovered
long ago. The Bakkan field, for example, was discovered back in 1951. The
reason why we import oil from South America and the Middle East instead of
producing our own right here is a matter of cost."/
Most of the known oil fields in the WORLD were discovered long ago ( see
e.g. Hubbert’s Peak, The Impending World Oil Shortage by Kenneth S. Deffeyes
who worked as a petroleum engineer at Exxon for many years). Most of the
fields in the middle east were discovered prior to 1950. Saudia Arabia's
largest field has been producing for over half a century. Yes, the reason we
import oil is oil is "fungible", meaning it sells on a global market and is
readily traded on exchanges. Price is set on the margin, i.e., it is set by
the cost to produce the last (highest cost) required barrel to meet demand.
Currently demand can be met mostly with much lower cost conventional oil and
the more productive (so lower cost) "non-conventional" wells.
Production of oil peaked due to demand destruction by the high oil prices
in the years leading up to the Great Recession in 2008. Those higher prices
made production of unconventional oil such as ‘tight oil” in the Bakken
economic to produce, so the rush to N. Dakota began. That increased U.S.
production for a while, but was made uneconomic by OPEC refusing to reduce
their production to stop a decrease in oil prices due to the increased
production. They have a competitive advantage in that their production
costs from their conventional oil fields is much lower than those for tight
oil or bitumen ("tar sands" in Canada). Those latter sources have become
less economic so they have decreased production.
A couple other things to keep in mind: EROEI (energy return on energy
invested) of unconventional oil is lower than that of conventional oil,
meaning it requires more energy to produce a given amount of unconventional
oil compare to conventional, not only more dollars. That means the net
energy available from a given volume of produced oil for supporting a given
standard of living is less. As we "work our way up the tree" picking higher
hanging fruit, more expensive to produce oil, the current U.S. energy use
per capita will no longer be supportable. Alternative energy sources are
even worse in this regard (lower EROEI), so unless we discover some new
unbounded lower cost, higher EROI energy source our energy use per capita
will be forced to decline. In that case increasing energy efficiency is the
only way to maintain our standard of living.
The other is that global oil consumption is around 30 billion barrels per
year, or about 80 million barrels per day in round numbers. The U.S. use has
varied the past decade between about 18 and 20 million barrels per day. So
a 500 billion barrel source (meaning a field that can produce 500 billion
barrels, not OIP, or Resources), could supply global demand for about 17
years. But global population growth is around 2% so the doubling time is
around 35 years. Then 35 years from now, all other things equal, we will
require twice as much oil production, 60 billion barrels per year, or put
another way, that 500 billion barrels would only supply demand for about 8-9
years. Of course everything else will very likely not remain equal. I
think we could manage the transition to lower EROI energy sources without
large sacrifices in standard of living if we make the correct choices such
as greatly improving our efficiency in the use of energy. We have some
time to make the transition as we are not on the verge of “running out of
oil”, but as Vaclav Smil has detailed, historically it has taken around 50
years to make a transition to a new energy source for a number of reasons.
One is the required change in infrastructure, another is the change is
driven by market forces, i.e. it has to be economic. Climate change is a
good example. It is a dire threat, but so far economics has largely trumped
concern for that threat.
As demand for oil increases and gets close to outstripping supply, prices
will increase. That will make it even more difficult to finance the changes
necessary to transition to other sources.
For those interested, currently the U.S. gets very little oil from Saudi
Arabia. We get most of ours from domestic sources, Canada, and Mexico.
--
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