June 06, 2010
Gulf Oil Spill Makes Alberta Tar Sands Look Good

What does Peak Oil look like? The world's so desperate for oil that a big oil spill in the Gulf of Mexico makes the oil in the Alberta tar sands look like an environmentally superior choice.

"In North America there are really only two places where you can see meaningful supply growth, one being in the deepwater Gulf of Mexico, and the other being the oil sands," said Mark Frieson, an energy analyst with Versant Partners Inc. in Calgary. "We know what's happening with [the Gulf], and I think that has some potential positive implications for the oil-sands industry here in Alberta.

For example, BP is going to develop an Alberta oil sands (really tar sands) project that has 10 times the reserves as BP was drilling for with the Deepwater Horizon. No worry a blow-out.

These are the alternatives we are down to. You might think we can shift our purchases of oil to the Middle East as a way to get oil that is extracted with minimal environmental hazard. But no. Saudi Arabia is drilling heavily offshore in the Persian Gulf and plenty of rigs are busy offshore in the Persian Gulf. The US oil exploration drilling moratorium will free up offshore rigs to move to a number of other offshore regions including the Persian Gulf, Australia, Brazil, and quite possibly New Zealand. Some GOM (Gulf of Mexico) rigs will probably end up offshore of Nigeria. Nigeria's oil spills are large but ignored.

Why so much offshore activity? World onshore conventional oil production has peaked. Peak Oil has already happened for onshore conventional. We are left with frantic offshore drilling in deep water using rigs such as the Deepwater Horizon that cost $600+ million each to build. The US GOM is not the biggest user of deepwater rigs. Most of the deepwater rigs are operating off Brazil's coast. Deepwater Brazil is one of the great hopes for slowing the rate of world oil production decline.

Share |      Randall Parker, 2010 June 06 09:49 AM  Energy Fossil Fuels


Comments
Nick G said at June 6, 2010 12:05 PM:

AFAIK, US onshore production bottomed out a couple of years ago, and is growing. I'm fascinated by the Bakken area, which has 4B bbls that are economic, but 400B are there, if we can get to them. That's a $30T incentive to develop better drilling methods...

Chris T said at June 6, 2010 3:51 PM:

We will never get off oil if it doesn't become more expensive. If gas had stayed at $1.50 a gallon forever, there would never be an incentive to do anything.

Megasaurus said at June 6, 2010 5:45 PM:

Shallow offshore oil can be easier to go after in some regions than inland oil, if the land areas are remote with very poor access. Sea access is easy for a lot of countries because that's where most of their assets are.

They've barely begun to explore Saudi Arabia for oil. Millions of wells drilled in North America vs a few thousand or so exploratary well sin KSA.

Peak oil true believers have been predicting the peak since about the year 1900, and every few years thereafter.

Fat Man said at June 6, 2010 8:35 PM:

It is fun to contemplate the alternatives to offshore drilling, but, I do not think the United States has any real choice. The country is bankrupt and its finances are deteriorating at a high rate of speed. The solution is that we must spend less, particularly borrowed money, and produce and save more.

Producing oil is production of a high value product, and we have to do it. I would not advocate doing it with out due regard to safety. But the idea that some places in this country are off limits has to go. I think we should be drilling not only in the Gulf off LA, but off Florida and California too, as well as in Alaska.

Paul D. said at June 7, 2010 12:11 PM:

These are the alternatives we are down to.

Synthetic fuels from coal are always an option.

DocSmith said at June 7, 2010 1:35 PM:

Alberta, who has always considered America to be a friend, recently gave the US the middle finger when it made a deal to sell a major part of the Oil Sands production to China. Albertans have grown weary of the tree hugging Yankees who come and tell us how we ought to live our lives and weep and wail over the alleged environmental damage in the Fort McMurray area. Pictures do show a terrible image, but it's a distorted view. Not that the American media would ever distort facts..... We are having a good laugh right now at your expense. You think we are environmentally irresponsible? give us a call when you've got the Gulf of MExico cleaned up.

AD said at June 7, 2010 2:20 PM:

Doc: We'll have the Gulf all cleaned up about the same time that a Canadian team wins the Stanley Cup (Heh!)

Dr J. said at June 7, 2010 2:27 PM:

Oil sands, not Tar Sands, is the accurate (and agenda-neutral) phrase. There is probably as much recoverable oil here as in Saudi -- and we are easier to get along with: democratic, capitalist and we don't support America's enemies. What's not to like? A strategic imperative for the USA is energy resources -- all kinds -- and in easy inexpensive reach. Fine. That's why most of the oil and gas pipes from the refineries and upgraders near Edmonton flow south to Chicago and Oklahoma and to Houston. The surface mining aspect, despite the relentless hype, is a small footprint. We in Alberta are keen to increase our trade with Asia, as "DocSmith" says. We are increasing production, naturellement. We are a trading nation. They want our trade. Despite the political hype (and the idealism about alternative energy sources), so too does the USA.

Zelsdorf Ragshaft III said at June 7, 2010 2:43 PM:

Chris T. said we will never get off oil while it is at such a low price. I have to wonder why you wish to cripple the ecomomy further when we have all the oil we will need for years? There is no technology available right now to replace fossil fuels. The fantasies espoused by the left that we need to get off fossil fuel would be to doom millions to starvation. My solution is for those on the left to sacrifice themselves for the greater good of humanity. How about it Chris? You ready to live in a teepee?

Jeff said at June 7, 2010 3:01 PM:

Future Pundit ???? anyone who writes Peak Oil with a straight face is hardly a pundit, much less someone with a vision of the future. Wishful Pundit maybe ... TITLT ... too ignorant to listen too ...

Chris T said at June 7, 2010 3:32 PM:

Wow, I'm about as pro-civilization and technology as one can get and not much of an environmentalist. But according to Ragshaft I'm an extreme left-wing green nut for not wanting to base most of the global economy solely on a finite energy source prone to supply disruptions and one that is often located in regions ruled by despots.

I am hardly against fossil fuels (I advocated rather strongly for natural gas in another thread), but would like to see our transportation fuel portfolio diversified. Guess what my preferred mechanism is? Price signals in the free market.

J said at June 7, 2010 4:02 PM:

"The US oil exploration drilling moratorium will free up offshore rigs to move to a number of other offshore regions including the Persian Gulf, Australia, Brazil, and quite possibly New Zealand"

Are you sure they won't stay in the gulf, just move out of US jurisdiction? I'm sure there are difficulties involved, but there's obviously oil there; the idea that it won't eventually be developed is fantasy. In the meantime, we're turning the Florida drilling operation to Cuba and Russia. I'm sure we'll have just as much success collecting damages for spills from them as we did from Pemex after Ixtoc1.

David W. Lincoln said at June 7, 2010 5:01 PM:

I am curious, does the term, "oily dirt" have less credibility than "dirty oil"? For the oil sands start with the mining
of that dirt, and then processed so that Americans can have oil. Given there are second guessers amongst them is part of the territory.

Blackie said at June 7, 2010 5:54 PM:

Peak Oil has been predicted since we discovered oil. It hasn't happened. It is only a generally accepted THEORY on what made oil (compressed biomass). Again, that is a theory, not a fact, no one really knows for sure how oil is made by the earth. Higher oil prices only make it more profitable for oil companies to find more oil. Higher oil doesn't necessarily lead to some new energy source. (http://www.cbsnews.com/video/watch/?id=4653109n&tag=related;photovideo) Then consider how much these two fields will yield as we talk about Peak Oil (they aren't even on line yet). Then there's Iraq. Iraq oil reserves when fully developed will rival those of Saudi Arabia. (http://www.fas.org/sgp/crs/mideast/RS21626.pdf) Just think, another Saudi Arabia of oil. And this does not include the Oil Sands, ANWR, or the California Coast, to name a few. We still, contrary to popular belief and tons of money (http://www.fas.org/sgp/crs/misc/RL34645.pdf), haven't found anything that rivals oil for how cheap it costs and what it provides. For those upset on the recent BP oil spill, consider that there are 634 Quadrillion (15 zero's) of water in the gulf (EPA data) and so far the spill has leaked roughly 40 million gallons. Do the math and you will find that for every 8 BILLION gallons of water, you will find one gallon of oil.

arctic_front said at June 7, 2010 9:56 PM:

good one, Blackie... Gloom, doom, and the end of the world.. that's all the greens can muster. It makes a mess, so it must be bad. Back prior to WWII, they discovered oil oozing out of the ground and into the MacKenzie River in Canada's North West Territories. At the same time they were building the Alaska Highway, they built a 4" pipeline from Norman Wells, where the oil was bubbling out of the ground, to a safe mid-point along the Highway. Prior to the 'discovery'of this oil.. where did it all go before Man, namely the U.S. Army, tapped into it to supply the work crews building the highway? It ran into the MacKenzie River un-aided and probably for a few millennium and then from the river directly unto the Arctic Ocean. This happened for who know's how long and the ecosystem of the Arctic Ocean and polar bears were unhurt. Oil is a natural product of the planet. It exists with or without man. The Oil sands in Ft McMurray Alberta are just a oil deposit like any other except just close to the surface.
i've worked up there, I've seen the big-azz hole in the ground they are making. It's huge, its an eye-sore as well. But they can turn that part of the land into a really nice lake or meadow when they are done with it. Reclamation is a legal requirement of such a project. Yes, in about 200 yrs from now, when they have mined all the bitumen available in the oil-sand areas, we can smooth it all off and have a beautiful lake for all of the current residents to enjoy with their boats. The end of the world will not come about because of oil...or in spite of it.

Time for people to grow up.. BP had a terrible accident. We all know this. Will there be others? Yes. Are we able to replace petrolium in any meaningful way just yet? No.

We are gonna need oil for many decades to come. Suck it up. drill, Baby, drill. Personally, the entire western world should take all the oil away from the Arabs as a punishment for 9/11 and terrorism in general. Send them back to live in tents and ride camels.

Randall Parker said at June 7, 2010 10:19 PM:

Blackie,

In 1956 petroleum geologist W. King Hubbert of Shell Oil predicted US oil production peak about 15 years later and it happened right on schedule.

In the late 1990s petroleum geologists Colin Campbell and Ken Deffeyes both predicted peaks in the 2000s. Deffeyes said 2009 at the latest. Well, 2005 has so far been the full year peak in world production and July 2008 has been the single month peak. We have yet to surpass either of those peak points. We are now on what the peak oil theorists call the Bumpy Plateau where production fluctuates within a range before going downward.

US oil discovery peaked in the 1930s. All the technological advance since then hasn't changed that fact. World oil discovery peaked in the 1960s. All the high prices in recent years have left the world discovery rate in recent years at about a third of the current world rate of oil production.

Jeff,

I've read books by petroleum geologists. How about you?

Joe said at June 8, 2010 10:07 AM:

Drilling moved offshore for political reasons, not geologic reasons. In Utah, known reserves aren't being exploited due largely to the environmental lobby. And that's not even factoring in the oil shale of Utah/Colorado. Known global oil reserves are massive; far more so than the advocates of peak oil care to admit (and are largely too ignorant to acknowledge.)

On the other hand, if the economy is about to go to hell due to peak oil, where's the push for nuclear reactors? The latest generation--i.e. Pebble Bed--are extremely safe. Peak oil or not, oil has so many great uses besides just being burned that its irresponsible to not go with nuclear.

Nick G said at June 8, 2010 10:50 AM:

All the high prices in recent years have left the world discovery rate in recent years at about a third of the current world rate of oil production.

Randall, it seems to me that oil production may be be on a plateau, or fall very, very slowly, for quite a while. Discovery rates are important, but they don't completely determine production. Take the Bakken, for example: we've known about it for quite a while, but if improved drilling techniques allow us to convert the 400B bbls of resource into reserves, in the same way that unconventional gas has been exploited recently...

Hubbert also predicted in the 1970's that natural gas production in the US would fall off a cliff in the 80's. His track record really isn't perfect. He would have been the first to tell us that his methods were practical rules of thumb (heuristics) based on his experience. He wouldn't have claimed omniscience.

In Utah, known reserves aren't being exploited due largely to the environmental lobby.

Joe - do you have more info on this?

theBuckWheat said at June 8, 2010 5:46 PM:

"Peak Oil" is a meaningless concept except to people addicted to worry. We don't buy oil to drive our cars, we buy gasoline made from oil. Gasoline and all other hydrocarbon-based vehicle fuels can be made from other sources of hydrocarbons. The Germans ran their WW II army on fuel made from coal. Conversion technology is well understood and has a break-even cost around the present world price for crude oil.

If gasoline made from petroleum rises in price above gasoline made from other sources, natural market forces will cause production to switch, that is unless government intrudes and distorts the decsion-making process.

The only thing that has peaked is the availability of inexpensive supplies of crude oil. But never fear, we are almost literally awash in hydrocarbons that can be converted.

Should anyone doubt that, they only have to Google "USGS methane hydrates" to find a short report that opens with:

"The worldwide amounts of carbon bound in gas hydrates is conservatively estimated to total twice the amount of carbon to be found in all known fossil fuels on Earth."

link: http://marine.usgs.gov/fact-sheets/gas-hydrates/title.html

Fabius Maximillian said at June 9, 2010 9:22 AM:

Randall Parker's innocent devotion to the Hubbert doctrine is most touching. Not realistic, but touching. Randall is in danger of becoming a laughing stock among actual futurists due to his true believing adherence to dogmas of peak oil and human caused climate catastrophe.

Reading a book by a petroleum geologist qualifies a person as an expert in peak oil almost as much as sleeping in a Holiday Inn Express.

Randall Parker said at June 9, 2010 6:06 PM:

Fabius Maximillian,

So pray tell, what sort of expertise should we defer to on the question of future oil production? Petroleum geologists aren't the guys to listen to?

Randall Parker said at June 9, 2010 7:38 PM:

Fabius Maximillian,

Perhaps instead we should listen to oil company CEOs? COP CEO James Mulva says the world will never see 100 million per day oil. So at around 86 million per day we are near peak. Christophe de Margerie of Total says similar things.

Becoming a laughing stock: How come high oil prices haven't boosted oil production? Oil production used to go up every year. It hit a ceiling in 2005 as Ken Deffeyes predicted. Read his 2001 book. Events are unfolding in a way much closer to his expectations than to the Panglossian predictions of CERA and other cornucopians.

LL said at June 10, 2010 8:01 AM:

My comments on PEAK oil:

I do believe we will be hitting peak oil soon...

Now having said this, it seems to me that there is a confusion about how much oil that can be extracted with no contraints on politics, technology and cost versus that can be drilled with those contraints in place.

With all the contraints in place we are probably nearing the point where we are peaking with regard to the oil being extracted. That doesnt mean we will run out per se, it just means that it will get costlier and alternatives sources of energy.

Without these contraints however I dont think we are any where near the point where we have peaked in terms of oil extraction. If the US Oil companies had full access to Saudi Arabia, Iran, Iraq, the rest of the middle east, Nigeria, the protected lands In Alaska et al.... No limits to the cost of extraction for Canadian Tar sands, Shale oil and deep sea drilling we can go well above 110 million barrels per day easily.

Of course just because it CAN be done doesnt mean it will be done.

Realistically will all the contraints in place the peak is closer to 90Million barrels per day. Why are we only at 86 then? A couple of reasons...the Fear of the boom and bust cycle keeps oil companies from drilling too much....oil was around $10/barrel just a decase ago! Also the recession had a big impact.

What we will see is drilled oil will flat line around 86-90 Million barrels per day for several years. The cheaply available oil will be slowly replaced by the more exotic sources such as Canadian and Shale oil. In addition alternatives will start to flourish. Liquid Hydrocarbon demand will continue to increase with alternatives such and Coal to Liquids, Biofuels etc.

Oil will never go away but the diversification of energy sources will increase as the price of OIL increases. Since most of the cheap oil is already spoken for oil will probably have a price floor. Once the floor gets above the profit point of an alternative fuel, that fuel will flourish.

We will continue to consume more energy but that energy will come from a Mix of sources not just oil.

We will see continued oil extraction of all sources, lots more Nuclear, Coal and Coal to Liquids, BioFuels, Natural Gas, Solar and Wind Farms


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