May 15, 2011
More Oil Drilling In Alaska

A lesson: $100 per barrel oil is creates enough political pressure to open more oil fields for drilling in Alaska and offshore lower 48. The Alaska National Wildlife Refuge (ANWR) and Alaska's Pacific coasts are still to remain off-limits - for now.

President Obama will open Alaska's national petroleum reserve to new drilling, as part of a broad plan aimed at blunting criticism that he is not doing enough to address rising energy prices.

Environmentalist opposition to drilling in some areas has done us a favor by delaying the use of that oil until we really needed it. Of course, that wasn't their intent. But the practical result of their opposition to drilling was to prepare for Peak Oil.

With oil prices over $100 per barrel and prices going higher as the decade progresses additional sources brought into production 5 or 10 years from now will help much more than if they'd been developed 10 or 20 or 30 years ago. For a graphical view of how much oil production growth has slowed see figure 7 here in an article by Gail Tverberg. It shows in a single graph how growth in world oil production has gone thru a succession of down-shifts. That down-shifting has made economic growth progressively harder to achieve, especially in industrialized countries heavily reliant on oil.

As oil hits higher price points more restrictions on drilling will be lifted as the public becomes more concerned with their own living standards and jobs and less with distant places. $150 oil sustained for a couple of years will probably result in drilling in ANWR and any offshore areas that look promising.

I wish the environmentalists had been more successful because the amount of oil fields they've kept out of production is not enough to make the transition from oil slow enough to minimize the economic pain.

Share |      Randall Parker, 2011 May 15 09:52 PM  Energy Peak Oil Adaptations


Comments
Ronald Brak said at May 15, 2011 10:53 PM:

We will have to explain to the next generation that we drank their milkshake.

D. F. Linton said at May 16, 2011 5:19 AM:

A few years of $150 oil will neuter opposition to coal-to-liquid technology as well, regardless of water usage and CO2 production.

Bruce said at May 16, 2011 8:24 AM:

2010: "Barack Obama took the Republican slogan "drill, baby, drill" as his own today, opening up over 500,000 square miles of US coastal waters to oil and gas exploitation for the first time in over 20 years."

http://www.commondreams.org/headline/2010/03/31

Did anything change? No.

2011: "President Obama will open Alaska's national petroleum reserve to new drilling, as part of a broad plan aimed at blunting criticism that he is not doing enough to address rising energy prices."

Will anything change? No.

Bruce said at May 16, 2011 8:33 AM:

"American oil production is at its highest level since 2003."

http://www.politifact.com/virginia/statements/2011/may/11/jim-moran/jim-moran-says-us-oil-production-highest-level-03/

"North Dakota has the honor of being the fastest-growing state oil producer over the last few years, as it has seen oil production increase from less than 100,000 barrels per day in 2005 to the 348,367 barrels per day reported in February 2011.

This amazing growth has been powered by the development of the Bakken formation in the Williston Basin and other areas of the state. There are currently 172 rigs drilling in North Dakota with 95% of these rigs targeting the Bakken and Three Forks formation.

Although there is considerable debate on where oil production from the Bakken will peak, one might want to look at the capital plans of the pipeline companies. These operators are planning on increasing takeaway capacity in the area to one million barrels per day by 2015."

http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/05/11/investopedia51671.DTL

The South Plainsman said at May 16, 2011 11:51 AM:

Leasing and exploration can be authorized, but the drilling permits have to be issued. With agencies such as the EPA finding any excuse to stop drilling, Obama's new initiative is meaningless.

bbartlog said at May 16, 2011 5:36 PM:

@Bruce: yes, we are blessed still with the combination of engineering skill, rapid capital allocation, and untapped reserves that allow us to respond at least somewhat to increasing oil prices (or increasing world shortfalls, depending on your perspective). So for us there are upward bumps on the downward slope. The world's oil industry as a whole is not quite so lucky. Nor will we be able revisit our production peak of the early 1970s, even with all our advantages.

Anonymous said at May 16, 2011 6:43 PM:

I don't suppose Obama has a solution to the 6 month wait to get a frac crew in North Dakota.

Randall Parker said at May 16, 2011 7:53 PM:

D. F. Linton,

As living standards rise a well known effect is that people want more improvements in their environment. Having satisfied their basic needs and many wants they start desiring reallocations of resources toward cleaner air, cleaner water, more beautiful landscapes, and so on. They'd rather give up some of their accumulation of things for better experiences and health.

Well, take away some of that standard of living and I expect the trade-offs that people will make to sort of go back into a time machine. Desperate for jobs, hit by rising prices of food and other basics they'll act like people from the 1950s and earlier.

I expect Peak Oil will bring about those changes in attitudes as economic growth gives way to years of economic contraction.

Bruce,

The population of the United States has grown about 8% since 2003. So oil production has to go up just to stand still in per capita terms.

1 million barrels per day in ND: We need more than that to compensate for rising Asian demand. The imported oil is becoming more expensive. So we need to use less of it.

ErikZ said at May 16, 2011 8:23 PM:

There will be a peak oil, but it won't matter.

We're perfectly able to produce our own gas/diesel/etc in a factory, Hydrocarbons are not that complicated. We've made genetically engineered algae that turns sunlight, water and CO2 into gas:

http://thetechjournal.com/science/genetically-modified-algae-could-produce-the-fuel-of-the-future.xhtml

As long as the sun shines, we have all the fuel we'll need.

Bruce said at May 16, 2011 8:37 PM:

bbartlog, Randall, my guess is that the Bakken is not unique. There will be shale oil discoveries. There is also deep oil to find, like Brazil is doing. And if there was a pro-US President in power, oil shale is possible.

But really, oil is there to be found. Maybe really deep.

I agree that NG should replace oil where possible. The plastics industry is doing it. Shale Gas and oil are great for the US economy. And any countries not contaminated by green anti-capitalists.

Some Guy said at May 16, 2011 9:59 PM:

Agreeing w/ Bruce. I thought the 2011 Obama announcement was, like the first, an indication of willingness to allow drilling where oil isn't. However, speaking as someone w/ about 90% of his portfolio in Bakken companies, I gotta say, take another look at what they're doing w/ shale extraction in South Texas (Eagle Ford), West Texas (Lubbock area), and even East Texas. Nowhere near the hype the Bakken gets, but apparently a lot of unconventional holes are being dug in them parts, and unlike ND, Texas has the infrastructure (pipelines, knowhow, world class gentlemen's clubs to keep fracking crews happy), even if they're not getting a Brigham-sized 5000k bpd at first flow (as Brigham Exploration did in the Eastern Montana Bakken recently.)

Wouldn't surprise me if they're sorta keeping things quiet down there, until more acreage is sewn up. But folks in TX knows what's whut. Probably a lot of fun negotiations.

Sadly, far as I can tell, most of these unconventional plays are in the hands of oil "majors," with only a few publicly traded small firms on scene. And to date, none of those smaller firms are table-pounding buys in the manner that, say, a Kodiak Oil & Gas was a couple years ago.

/But it's early.

ArtD0dger said at May 17, 2011 12:18 AM:
Environmentalist opposition to drilling in some areas has done us a favor by delaying the use of that oil until we really needed it. Of course, that wasn't their intent. But the practical result of their opposition to drilling was to prepare for Peak Oil.

This is a superficially appealing idea because we all know that we must eventually transition away from fossil energy sources, and this may indeed be a painful process involving conservation of dwindling resources. However, the notion that political dictates could out-perform a free market in such an optimization problem is not borne out by experience. The notion that such superior political optimization could happen unintentionally is doubly dubious.

drjohn said at May 17, 2011 4:24 AM:

No drilling is going to happen while Obama is President. His EPA will stop it and he'll wring his hands in dismay.

Woozle said at May 17, 2011 4:44 AM:

What happened to the information that US oil reserves could only supply about 5% of our needs? Was that somehow inaccurate, or did we suddenly discover more, or what?

I still don't understand how anyone can still be saying "drill baby drill" non-sarcastically, after everything that has happened (unless the above factoid is inaccurate).

Coal in any form is also going to be a steep sell for me -- I don't care how expensive oil gets.

SF said at May 17, 2011 8:08 AM:

Bruce, the Bakken isn't a new discovery. It has been known for maybe 60 years. High oil prices and improved technology finally made it economical to produce. This makes me doubt that there are other Bakkens out there just waiting to be discovered. The Green River shale keragen is a huge resource, but it is not really oil and will probably never be developed. By the time humans apply enough pressure and heat to make it into usable oil, we have put more energy into the process than we get back out.

bbartlog said at May 17, 2011 8:45 AM:

5% of our needs sounds low (where did you hear that?). Currently we produce something like 6mbbl/day and consume 21mbbl/day, so it looks rather more like 30%. I believe that number will go up as we can probably manage to boost production to 7mbbl/day while cutting consumption to 19-20mbbl in the near future (so then we're at 35%+). Of course that's hardly all the way to any kind of solution but it will still help. Maybe your 5% figure is something more like 'drilling proven reserves can only close 5% of the gap between current shortfall and self-sufficiency'?

Bruce said at May 17, 2011 11:28 AM:

SF, the thing about the Bakken is that production took off because of fracking. The smart people are going back and reviewing every shale deposit that was an old discovery but unprofitable -- and checking to see whether frakking makes it economical.

Alaska: http://www.adn.com/2011/03/03/1734504/shale-oil-potential-on-north-slope.html

"he's convinced there's enough oil in Slope shale rock to halt the decline in product being sent down the trans-Alaska pipeline. "It's transformative for the state, in our opinion ... staggering," he said. Duncan said he looked all over the world for shale oil prospects and settled on Alaska as his best bet."

Texas: http://www.reuters.com/article/2011/05/03/us-pipeline-eagle-ford-idUSTRE7420PA20110503

"Eagle Ford output has risen from nil two years ago to 71,000 barrels of oil per day, and will leap fivefold by 2015, according to energy consultancy Bentek."

New Brunswick: http://www.businessinsider.com/atlantic-canada-next-hotspot-for-shale-oil-2011-4

Bruce said at May 17, 2011 11:36 AM:

As opposed to shale oil, the Israeli's may be tapping into oil shale.

"If successful, in a few years IEI could start producing 50,000 barrels of oil a day, or 20% of Israel's consumption, for 30 years,"

http://www.ynetnews.com/articles/0,7340,L-4061436,00.html

Bruce said at May 17, 2011 11:43 AM:

Tar Sands in Utah: "The Bureau of Land Management says Utah has an estimated 12 to 19 billion barrels of oil buried in its tar sands, mostly in the eastern part of the state, though not all of that would be accessible."

http://finance.yahoo.com/news/Debate-stirred-over-1st-major-apf-3988950833.html?x=0

Phos said at May 18, 2011 7:42 AM:

My father-in-law is a logger for Schlumberger in west Texas. His view is, "You don't run out of oil. You run out of $30/barrel oil. Then you run out of $40/barrel oil." A lot of exploratory holes were capped because they were uneconomical to produce at the oil price at the time.

At $100/barrel a lot of those wells can be uncapped.

I was at a Job Fair in west Texas last week and a company that manufactures frac-sand was hiring.

LarryD said at May 18, 2011 1:33 PM:

ErikZ, look up "insolation". Multiply by the efficiency of photosynthesis, and the amount of fuel needed each year.

Now, tell us how many square miles of algae ponds/reactors we're going to need. And how much it's going to cost. Show your work.

Woozle said at May 18, 2011 3:59 PM:
At $100/barrel a lot of those wells can be uncapped.

I was at a Job Fair in west Texas last week and a company that manufactures frac-sand was hiring.

This is also known as "scraping the bottom of the barrel". Does anyone here disagree that this is what we are doing now?
Paul D. said at May 18, 2011 4:12 PM:

This is also known as "scraping the bottom of the barrel". Does anyone here disagree that this is what we are doing now?

We are nowhere near the bottom of the barrel.

Bruce said at May 18, 2011 4:29 PM:

The bottom of the barrel is filled with 3 or 4 trillion barrels of kerogen (oil shale) and 3 - 4 billion barrels of bitumen (tar sands oil)

And then there is all the oil yet to be discovered. And huge shale layers all over the world that produces NG which can be turned into a very clean form of diesel.

And then there is all the methane hydrates.

And then there is 1000 years of coal.

Conventional oil (proven reserves) is only 1.3 trillion barrels.


Paul D. said at May 18, 2011 6:10 PM:

Bruce: and beyond that is the organic matter in ordinary shales, and then reduced metal species (ferrous iron) in ordinary rocks.

The ultimate limit is set by the finite quantity of atmospheric oxygen with which to react the Earth's reduced materials.

Bruce said at May 18, 2011 8:02 PM:

Splitting H2O into Oxygen and hydrogen will probably come sooner rather than later. Certainly well before we run out of methane hydrates.

And we might be able to turn a huge chunk of coal into methane.

"GILLETTE, Wyo. - New scientific research has a pair of energy companies betting that the future of the U.S. natural gas industry lies in persuading microorganisms to treat old coal deposits like all-you-can-eat buffets.

Coal, researchers have found, is full of microbes that consume the fossil fuel and break it down into methane gas. Two companies want to take advantage of this naturally occurring phenomenon on a large scale to create vast amounts of natural gas in energy-rich places like Wyoming.

"Once you figure out the recipe that feeds the bugs and gets them reactivated, it's pretty simple," said Bob Cavnar, CEO of Luca Technologies.

Luca and Ciris Energy have begun experimenting with using this type of microbe-friendly formula in gas wells drilled into coal deposits years ago. The companies have been spiking the wells with substances including calcium, magnesium, phosphate and glycerol, which encourage the microorganisms to reproduce, feed and release the coveted methane gas.

The hope is to get old and nearly tapped-out coal-bed methane wells to double or perhaps triple gas production.

The process works on a smaller scale, said Michael Urynowicz, a researcher at the University of Wyoming who has studied using microbes to turn coal into methane."


http://www.tulsaworld.com/news/article.aspx?subjectid=49&articleid=20110419_49_E4_CUTLIN584478

Paul D. said at May 19, 2011 1:07 PM:

Splitting H2O into Oxygen and hydrogen will probably come sooner rather than later. Certainly well before we run out of methane hydrates.

So, what powers this water splitting? You're just another person saying we'll move away from fossil fuels.

And we might be able to turn a huge chunk of coal into methane.

Not just coal! Some shale methane is biogenic, btw (see the Antrim Shale in Michigan). And since gassy shales often have many times the carbon in solid form as they do in gas, I can see existing shale gas plays being turned into long term biomethane plays.

Coal can also be exploited by in-situ gasification, which is a thermochemical rather than biological process. This has been proposed for exploitation of deep or offshore coal deposits.

cancer_man said at May 21, 2011 9:59 AM:

Randall writes about "peak oil" to get hits.

look at the commet number for this post and the last one.

Woozle said at May 21, 2011 5:04 PM:
The bottom of the barrel is filled with 3 or 4 trillion barrels of kerogen (oil shale) and 3 - 4 billion barrels of bitumen (tar sands oil)
Source for these numbers, please?

How much is it estimated that we will have to spend, per barrel, to reach all of those reserves?

Bruce said at May 22, 2011 10:33 AM:

http://en.wikipedia.org/wiki/Oil_sands

"Between them, the Canadian and Venezuelan deposits contain about 3.6 trillion barrels of recoverable oil"

Syncrude: "Based on our production assumption, this translates into approximately $37 per barrel of operating costs, similar to our outlook for 2010."

http://www.marketwire.com/press-release/canadian-oil-sands-provides-2011-budget-tsx-cos.un-1363317.htm

---

http://en.wikipedia.org/wiki/Oil_shale#Reserves

"2.8 to 3.3 trillion barrels"

"Relik said his company could produce high-quality oil on a large scale at a cost of $35-$40 a barrel."

http://www.ynetnews.com/articles/0,7340,L-4061436,00.html


Engineer-Poet said at May 24, 2011 11:22 AM:
However, the notion that political dictates could out-perform a free market in such an optimization problem is not borne out by experience. The notion that such superior political optimization could happen unintentionally is doubly dubious.
I think it may have happened unintentionally, for the Saudis.  They had been the swing producer since the early 70's, instead of flooding the market with all they could pump.  This resulted in prices being higher, demand growth being lower, and peak production occurring later than it otherwise would have.

This isn't as good as it could have been for us, but it was fortuitous nonetheless.  The USA generated 16.8% of its electricity from oil in 1977; by the start of the latest runup in oil prices in 2005, this was down to 3% and in 2009 it was 0.98%.  Can you imagine what kind of trouble we'd have been in if we were facing an electric-generation crisis as well as a motor-fuel price crisis?  But we fixed that, because high prices and policy combined to get the grid switched mostly to other things.

Now we need to do it with vehicles.  I've said it before, and I'll say it again:  what the USA needs is $5/gallon gasoline (preferably with sub-$80 crude).

Phillep Harding said at May 24, 2011 5:40 PM:

Note to Mr Parker regarding cleaning up the environment: The people blocking drilling on the North Slope will, in all probability, never travel north of the Brooks Range, unless in an oil guzzling jet as it follows a great circle route to the ski resorts (or Global Climate Change meetings) in Europe. I'd love to drop the lot out on the North Slope muskeg, without bug repellent.

Randall Parker said at May 24, 2011 10:08 PM:

E-P,

Unless the popping China property bubble causes another worldwide recession I'm thinking we'll hit $5 per gallon in 2012 or 2013.

What I want to know:

- How fast will battery costs go down?

- How much will the price premium for CNG cars shrink?

- How much natural gas is extractable from natural gas shales and at what costs?

In other words, will technologies do much to cushion the blow from declining world oil production?

Engineer-Poet said at May 27, 2011 8:41 PM:

Dunno about the rest, but I see 80 cubic foot SCUBA tanks going for around $200 retail, quantity one.  Figuring that a dual-fuel car could use CNG the way a PHEV uses electricity, a couple of tanks could take care of the median daily commute for perhaps $500 in cost for the vehicle.  Add something for the compressor at home (or maybe a bunch of cars could share one compressor if they refill daily at work).

If CNG is $1/GGe and the car gets 30 MPG/MPGe, replacing 1.5 gallons/day 300 days/yr saves around $1300/yr at today's prices.  I'm not sure what the issues are with methane and emissions controls, but that looks extremely attractive to me.

Whether the NG system could expand fast enough to provide that cushion... aye, there's the rub.  I'm skeptical.  If all it does is extend the price-rationing now "enjoyed" by oil consumers to NG, we'll rue the day.

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