Guest post by David Middleton
GOP presidential candidate Mitt Romney recently released an outline of his plan to achieve “North American energy independence” by 2020. While the white paper (1) is short on specific details, it does contain quite a few good ideas and some supporting documentation. For anyone interested in a business plan approach to energy policy, it’s well worth reading. Rather than focus on the details of the plan, I thought it would be an interesting exercise to see if “North American energy independence by 2020” was even technically possible. If it’s not technically possible, then it’s not really relevant whether or not it would be economically advisable or politically achievable. Since North America already pretty well has the capacity to be energy independent in terms of coal, natural gas, uranium and electricity generation, I’m only going to look at oil and natural gas liquids.
So, without any further prologue, I’m going to jump right into some numbers.
Can we “get there from here”?
According to the American Petroleum Institute (2) the current estimate of undiscovered technically recoverable Federal resources (UTRR-Fed) of crude oil currently stands at 116.3 billion barrels.
The UTRR-Fed are concentrated in areas close to existing exploration and exploitation infrastructure. The Gulf of Mexico, Alaska and the Lower 48 States comprise 88% of the UTRR-Fed.
| Region | Offshore/Onshore | Billions of Barrels of Crude Oil | % | Cum. % |
| Gulf of Mexico | Offshore | 44.9 | 39% | 39% |
| Alaska | Offshore | 26.6 | 23% | 61% |
| Alaska | Onshore | 18.8 | 16% | 78% |
| Lower 48 | Onshore | 11.7 | 10% | 88% |
| Pacific | Offshore | 10.5 | 9% | 97% |
| Atlantic | Offshore | 3.8 | 3% | 100% |
| Total | 116.3 | 100% |
There is no reason that these potential resources could not be exploited within the next few decades if the U.S. government adopted regulatory policies geared toward exploitation.
If industry converted the UTRR-Fed into proved developed producing reserves of crude oil over the next 25 years, this is what might happen to U.S. domestic crude oil production:
I think that it is technically possible that US crude oil and natural gas liquid production could reach 14.4 million BOPD by 2028 and peak at 15.7 million BOPD by 2032. If U.S. demand remained in the 18-20 million BOPD range, the United States could come very close to being self-sufficient in crude oil. I also took the liberty of including 73 billion barrels of Green River Oil Shale production from 2022-2100 (more on this later).
Canada expects to double its oil production by 2030 (3). Assuming that Canada’s domestic consumption remains stable and the U.S. remains Canada’s primary export market, Canadian imports could also be expected to double by 2030. While Mexican oil production is currently in decline and Pemex is one of the most poorly managed national oil companies (NOC) in the world, Mexico has huge potential in the area of undiscovered resources (4). Mexico does have the potential to stabilize its current production levels. If Canada doubles its production by 2030 and continues to increase its production through the end of this century and Mexico stabilizes at roughly its current levels, this is what U.S. domestic production plus Canadian and Mexican imports might look like:
Based on these numbers, North American energy independence could be achieved by 2027.
116 billion barrels of ”undiscovered technically recoverable oil” is equal to about 16 years worth of current US consumption. However, past history shows us that gov’t agencies always grossly underestimate what the oil industry will find and produce. Alaska’s North Slope has already produced 16 billion barrels of petroleum liquids. Currently developed areas will ultimately produce a total of about 30 billion barrels. The government’s original forecast for the North Slope’s total production was 10 billion barrels. The current USGS estimate for undiscovered oil in the Bakken play of Montana & North Dakota is 25 times larger than the same agency’s 1995 estimate. In 1987, the MMS undiscovered resource estimate for the Gulf of Mexico was 9 billion barrels. Today it is 45 billion barrels (2).
The MMS increased the estimate of undiscovered oil in the Gulf of Mexico from 9 billion barrels in 1987 to the current 45 billion barrels because we discovered a helluva a lot more than 9 billion barrels in the Gulf over the last 20 years. Almost all of the large US fields discovered since 1988 were discovered in the deepwater of the Gulf of Mexico. In 1988, it was unclear whether or not the deepwater plays would prove to be economic.The largest field in the Gulf of Mexico, Shell’s Mars Field, was discovered in 1989. Prior to this discovery, no one thought that economically viable Miocene-aged or older reservoirs existed in deepwater. Mars has produced 1 billion barrels of oil and 1.25 TCF of natural gas since coming on line in 1996. It is currently producing over 100,000 barrels of oil per day. Dozens of Mars-class fields have been discovered over the last 20 years… Most of those have only barely come on line over the last 5 years.
The most significant play in the Gulf of Mexico, the Lower Tertiary, wasn’t even a figment of anyone’s imagination in 1988. These are massive discoveries – BP’s recently discovered Tiber Field on Keathly Canyon Block 102 is estimated to contain 3-6 billion barrels of recoverable oil. Several recently discovered fields are expected to come on line at more than 100,000 bbl/day. This play is still in its infancy.
Based on the gov’t’s track record, the estimated 116 billion barrels of undiscovered oil under Federal lands is more likely to be 680 billion barrels. That’s close to 100 years worth of current US consumption – And that’s just the undiscovered oil under Federal mineral leases.
When you factor in shale oil (kerogen) plays, the numbers become staggering. The Green River formation oil shale has more than 1 trillion barrels of recoverable oil just in the Piceance Basin of Colorado.
- There are at least 1.8 trillion barrels of undiscovered technically recoverable oil in just the Green River formation (DOE).
- Oil shale deposits like the Green River formation (technically a marl) are currently economic at sustained oil prices of $54/bbl, possibly as low as $35/bbl (DOE).
In my hypothetical production forecast, I projected Green River oil shale production to reach 15 million BOPD by 2096. Am I being overly optimistic in projecting more than 15 million barrels per day (BOPD) of production from oil shales by 2100? Shell estimates that they could be producing 500,000 barrels per day from the Picenance Basin with a very small footprint using an in situ recovery process (5):
Technical Viability and Commercial Readiness (pp 18-24)
Shell has tested its in-situ process at a very small scale on Shell’s private holdings in the Piceance Basin. The energy yield of the extracted liquid and gas is equal to that predicted by the standardized assay test.13 The heating energy required for this process equals about one-sixth the energy value of the extracted product. These tests have indicated that the process may be technically and economically viable.
This approach requires no subsurface mining and thus may be capable of achieving high resource recovery in the deepest and thickest portions of the U.S. oil shale resource. Most important, the Shell in-situ process can be implemented without the massive disturbance to land that would be caused by the only other method capable of high energy/resource recovery—namely, deep surface mining combined with surface retorting. The footprint of this approach is exceptionally small. When applied to the thickest oil shale deposits of the Piceance Basin, drilling in about 150 acres per year could support sustained production of a half-million barrels of oil per day and 500 billion cubic feet per year of natural gas.
[…]
Once oil shale development reaches the production growth stage, how fast and how large the industry grows will depend on the economic competitiveness of shale derived oil with other liquid fuels and on how the issues raised in Chapter Five are ultimately resolved. If long lead-time activities are started in the prior stage, the first follow-on commercial operations could begin production within four years. Counting from the start of the production growth stage and assuming that 200,000 barrels per day of increased production capacity can be added each year, total production would reach 1 million barrels per day in seven years, 2 million barrels per day in 12 years, and 3 million barrels in 17 years.
Assuming a 12-yr lead time to reach the production growth stage, it will take ~30 years to reach 3 million barrels per day. If production continued to grow at a rate of 1 million BOPD every 5 years… Oil shale production from just the Piceance Basin could reach 15 million BOPD by the end of this century.
The hydrocarbon characteristics of the the oil shales of the Green River formation in the Piceance Basin are superior to those of the Athabasca oil sands. The hydrocarbon areal density is about 13 times that of the Athabasca deposits. The Green River hydrocarbons are not technically “oil;” it’s a form of kerogen. But, for or refining purposes, it’s oil. It will be booked as oil, just like the Athabasca tar sand oil is. It’s a high-grade refinery feedstock…
Canada is currently producing ~ 1 million barrels of oil per day from Athabasca oil sand deposits. They expect to increase that to 2 million barrels per day over the next decade. The Green River oil shale deposits in the Piceance basin could easily outperform Athabasca within a decade and with a much smaller environmental footprint.
Athabasca oil sands are currently economically competitive with the OPEC basket. Green River formation oil shales are superior, by a wide margin, to Athabasca oil sands. The Green River oil shales would yield 100,000 bbl of 38° API sweet refinery feed per 160,000 tons of ore & overburden. Athabasca oil sands yield 100,000 bbl of 34° sweet refinery feed per 430,000 tons of ore & overburden. The unconventional oil is actually very light and very sweet; the OPEC Basket is actually heavier (32.7° API).
Athabasca is economically competitive now. Green River could be economically competitive now. The only obstacles to US energy security are environmental terrorists activists and the U.S. government.
“Peak Oil,” if it exists, won’t be reached for hundreds of years if the U.S. government would just get out of the way. About 80% of the most prospective Green River deposits are under Federal leases. The Obama administration effectively blocked exploitation of the Green River oil shale earlier this year.
Does Policy Matter?
Bad policy certainly matters. “One bipartisan policy tradition is to deny Americans the use of our own resources” (6):
The Obama administration’s energy policy has been disastrous as it relates to oil production. While it is true that U.S. domestic oil production has been rising over the last few years, all of the growth has come from onshore plays in Texas and North Dakota:
Some of the Texas (less than 1%) and North Dakota (~11%) production is from Federal leases. I downloaded the onshore Federal lease production data for Texas and North Dakota from Office of Natural Resource Revenue (ONRR) and subtracted the minuscule Federal lease production from the State and private lease production in those two States. I added that to theFederal Gulf of Mexico production (the GOM is the Big Kahuna of Federal lease oil production):
All of the net growth in US domestic oil production since 2009 has come from State and private leases in Texas and North Dakota.
Since President Obama took office, Federal lease oil production in the GOM, TX and ND has declined by 79 million barrels per year; while State and private lease production in TX & ND has grown by 205 million barrels per year. The decline in Gulf of Mexico has occurred during a period of high oil prices and is directly attributable to the unlawful drilling moratorium and “permitorium” imposed in the wake of the Macondo blowout and oil spill. Drilling permits that once took 30 days to be approved now take more than 300 days. Even relatively simple things like the approval of development plan (DOCD) revisions are being drawn out to nearly 300 days. The average delays for independent oil companies are currently 1.4 years on the shelf and almost 2 years in deepwater (7):
Between the “permitorium” and high product prices, many of the best, most capable drilling rigs have been moved overseas. Once we manage to get permits approved, the delays in obtaining a rig can be almost as long as the permit delays were. In this “dynamic regulatory environment,” wells can’t be drilled quickly enough to compensate for decline rates, much less to increase production.
References:
(1) Romney for President, Inc. 2012. “The Romney Plan for a Stronger Middle Class: Energy Independence.”
(2) American Petroleum Institute. 2012. “Energizing America: Facts for Addressing Energy Policy.”
(3) CBC News. 2012. Canadian oil production to double by 2030, industry predicts.
(4) Talwani, Manik. 2011. “Oil and Gas in Mexico: Geology, Production Rates and Reserves.” James Baker III Institute for Public Policy.
(5) Bartis, James T. 2005. “Oil shale development in the United States : prospects and policy issues.” RAND Corporation.
(6) Ford, Harold. 2011. “Washington vs. Energy Security.” The Wall Street Journal.
(7) Quest Offshore. 2o11. “The State of the Offshore U.S. Oil and Gas Industry.”
EIA. US Crude Oil & Petroleum Liquids Consumption
EIA. US Natural Gas Plant Liquids Production
EIA. US Crude Oil and Natural Gas Condensate Production
Fossil is a fine idea, but to be honest, we should be using thorium or a thorium/hybrid reactor. If it wasn’t for the massive environuts back 30 years ago, we’d be much further along in nuclear technologies than we are now. The article in itself though isn’t bad, one thing to remember. We could have been there today. If we started it 10 years ago, when they said “we wouldn’t be there for 10 years.”
Just as I thought… a bunch of isolationists. How wrong can a plan be! Imagine, ending payments to the sources funding most of the terrorist movements worldwide? Wouldn’t it better that we reach out to them instead and show them we mean them no harm?
/s
David:
Thankyou for an excellent summary. I write in hope of encouraging people to read it all instead of ‘skimming’. It deserves a through read by everybody.
Richard
It is not technically possible. Pease read my book, Gaia’s Limits. In addition to setting out the facts, it provides a lot of references to other sources. Mitt should know better; I am disappointed in an old classmate and colleague.
Hello Dave and thanks. As a fellow geologist (mining and natural gas consulting industry) I appreciate the level of detail and scope of knowledge you provide here. If it is OK with you, I would like to cite/reference some of this material on my blog which I keep mostly for my students’ benefit but I occasionally post a link to it here.
Thanks
Tom
Thanks for the great, factual info.
For a political history of the fight over opening up offshore drilling in Virginia (one of Romney’s proposals) see my article here:
http://www.examiner.com/article/republican-2012-energy-plan-promotes-virginia-offshore-drilling-banned-by-obama
yoshisen says:
August 30, 2012 at 12:08 pm
I am also a big fan of thorium potential, but it will not replace most of the current uses of oil, which is the subject of David’s post. Oil goes into plastics, fertilizers, and a bunch of other stuff in addition to supplying the best liquid fuels for transportation. What thorium reactors would replace is coal and natural gas for electrical power, plus give us a way to dispose of waste from current uranium reactors. We have plenty of coal and natural gas, so even developing thorium reactors won’t give us a capability we can’t already meet, just the expectation of a lower cost.
Question for David: 61% of near-term recoverable reserves are in the Gulf and offshore Alaska. What do we do about vulnerability to hurricane disruption in the Gulf? How difficult are operations and what are the disruption risks for Alaska offshore?
Nice post. This is exactly the stuff I wish our politicians would talk about. (I know; I’m dreaming).
No issue with feeding our nuke capabilities, but realistically, oil is the mobile energy platform. We could halve the price of oil and have gasoline around $2. How would that fix be. No more engineering cars into crash deathtraps on the alter of CAFE standards, limited middle east issues, we could back the allies who we have a reason politically to back with out regard for the oli sheiks.
Rud, very dangerous comment – and almost universally false. It can probably be done, and it might even be easier than we think. But we do know, that if we don’t look, we will never know.
Energy independence has been sought since 1973 oil shock. WUWT is the website for good weather info. http://www.peakoil.net is the website for good info on oil supplies . You might be interested in their viewpoint. Their main point is that while we have good reserves in the ground, the rate at which they can be extracted is insufficient to meet future demand
David, there’s one not-so-small flaw in your presentation. By rejecting the Keystone XL pipeline approval, the Obama administration has demonstrated it is not a reliable trade partner in energy, at least where Canada is concerned. TransCanada Pipelines has incurred significant losses over this decision by the current administration.
As a result, the Canadian federal government has declared that completion of the Northern Gateway pipeline to be a national policy priority. This pipeline when completed will move Alberta oilsands production to the Pacific coast for export to Asia. This will have two noticeable effects. First, Canadian oil is sold to the United States at a discount because it is locked in geographically. Completion of Northern Gateway will mean that the US will now have to pay world prices for Canadian oil.
Second, it is reasonable to expect that some significant portion of Canadian oil will be going to Asia and not to the United States. It therefore may be unreasonable to suppose that all of the increase in Canadian production will go south. It must be further recognized that there has been large and growing investment by China in Canadian oilsands projects. Right now, we have a situation where a Chinese state corporation is making a takeover bid for Nexen.
In short, while you may be correct that NA energy independence is theoretically possible, policy decisions by the Obama administration have already essentially foreclosed some of it. What is not understood in the United States is how deeply hostile the Obama administration decision was to Canada. Particularly following as it did on exclusion of Canadian companies from stimulus spending where Canadian governments placed no such exclusion on US companies from participating in Canadian stimulus spending.
In short, many conservative Canadians such as I now question whether or not the US can be taken either at its word or in supposedly binding agreements where trade is concerned. Thanks to Obama, you brought this on yourselves.
BTW, I’m not necessarily a fan of various “independence” policies: our industry is dependent on a bunch of materials we must import from abroad: bauxite (aluminum), chromium, copper to name a few. As long as there are rational markets and stable trading partners, there is nothing wrong with being dependent on imports. The US is exceptionally blessed with natural resources and we have managed to feed much of our industry with domestic production — probably more than any other nation. Japan on the other hand is very resource poor and must import nearly everything; yet they manage to run a modern industrial economy.
Oil is an exception because the internal market has been hijacked by a cartel, so increasing domestic production benefits all oil-consuming economies. Given the nature of most members in the oil cartel, achieving relative oil independence should be a national security priority anyway.
Not only is there plenty of coal for electricity generation, there’s also plenty for oil production:
http://www.worldcoal.org/coal/uses-of-coal/coal-to-liquids/
Strategically, I can see the position that we should use up “theirs” first (finite resource); but realistically we’re talking about the centuries down the road. We could use up half of theirs and then ours becomes obsolete. I think we should shoot for more than just energy independence but rather for being an energy exporter ASAP, while it’s still worth something.
” “Peak Oil,” if it exists, won’t be reached for hundreds of years if … ” is a pointed question IF, in fact, oil is abiotic.
Not often mentioned are the economic factors of purchasing our own oil and natural gas (from ourselves – is that somehow incestuous?) combined with the royalties and resulting income and payroll taxes paid to our own treasury, Enough to erase deficits? Probably not, but a good start has to be using our own natural resources.
curt lampkin:
Your post at August 30, 2012 at 12:53 pm is completely wrong.
Of note is your assertion saying of the ‘peak oil’ nonsense;
Nonsense! If the extraction rate is insufficient then drill more wells.
Richard
Please feel free to do so.
@cgh,
Maintaining our status as Canada’s #1 petroleum export market should be one of our gov’t’s top priorities.
@curt lampkin,
That was almost as funny as The Onion… LOL!!!
I’m with Jem. Get rid of CAFE standards and let’s produce. NG cars are a proper alternative and gas and cheap diesel below $2/gal . Too many want to control the populace with mass tansit projects. Let people drive all they want to and wherever they want to. Fly too. There is so much untapped petroleum available it’s not funny. And I left out coal too. Nukes and clean coal should be a great part of the solution ahead. Cheap and redundant electricity for all and cheap gas for 30 years would go a long way to turning this country around. IMO.
I agree with JEM…
cgh says:
August 30, 2012 at 12:53 pm
Oh come on. Anyone who lives under a popularly elected government knows that good and bad governments both come and go. The Obama administration is just a four year slice of our government history; like the weather four years does not establish a trend.
Canada should base long-term major decisions on long-term experience and expectations. Anyway you slice it, transportation costs to the US will always be lower than to Asia. We’ve lived side by side for almost 200 years without getting into a war (against each other that is). One administration on either side of the border making bad decisions does not equal the weight of all else that has gone before.
Besides, when the next mini ice-age comes, I expect a lot of Canadians are going to want to move south to escape the polar bears.
“What do we do about vulnerability to hurricane disruption in the Gulf?”
I’m sure you noticed that a Hurricane just came across the gulf with almost zero impact on actual production. (the price moves up and down were due to futures traders gambling on expectations, a 2nd derivative type of play) The offshore platforms are engineered very well, and remember that much of the equipment is now subsurface, meaning it isn’t vulnerable to surface disruptions like hurricanes. The threat of weather on offshore production is vastly overstated, probably because (as mentioned above) a lot of futures traders make a lot of money by overstating it.
@John West,
There is no “strategy” in the notion that “we should use up ‘theirs’ first”… AKA “It’s not going anywhere. Let’s leave the oil in the ground till we need it.”
The “it’s not going anywhere” strategy will turn “35 to 36 billion barrels of oil and 137 trillion cubic feet of natural gas” into “9 to 10 billion barrels of oil” and no gas and lead to the North Slope being shut in by 2025, stranding “about 1 billion barrels of oil.”
“Drill baby, drill” will extend “the productive life of the Alaska North Slope… well beyond 2050” and recover 25 to 27 billion barrels of oil and 137 trillion cubic feet of gas that would otherwise have to be imported.
David:
It was not explicit in your analysis, but did you consider the oil production by using CO2 (Ha!) to recover oil from “played out” oil fields? DOE is actively encouraging the capture of CO2 from coal plants and using it for EOR, not to sequester it. It has been suggested that even some of the oldest oil wells in Pennsylvania and Ohio could start producing again using CO2 enhancement. The oil available from this is estimated to be 60 to 100% of the oil originally extracted from those wells. Of course the oil has to be expensive enough to cover the cost of capturing the CO2 but that is part of the argument against “peak oil.” There is plenty of it out there once we become smart enough to get it and/or it becomes worth it to pay the price.
David, I agree, but the US government has fouled that nest fairly thoroughly over the past four years.
Richard, about your peak oil comment, it’s indeed the case that there’s a lot of mythology about the supposed peak oil hypothesis. But there’s one aspect of it that does need to be considered. Fuel doesn’t become obsolete because the supply runs out; it becomes obsolete when it no longer has sufficient density to meet current needs. The problem with petroleum will be the same as the problem with wood in the 13th century. Specifically the transport infrastructure. There is a finite limit to how many tankers can move through the Straits of Hormuz or how many pipelines can be built. At some point the marginal costs of building new infrastructure forces the adoption of new fuel sources that are less costly and can still meet the scale of the overall demand.
For example, in 1970, a large proportion of US electricity supply, and some of Canada’s, was being met by bunker oil. However, virtually all of the new electricity supply over the subsequent three decades was met primarily by nuclear power, with the last of the new nuclear plants coming into service in the mid 1990s. A large part of the advantage of nuclear power is the much smaller infrastructure required to deliver kWh to the demand point.
Now most of the new supply is being supplied from gas. But there’s a limit to this, not in the number of holes than can be drilled but in the amount of infrastructure required to process and move it. In short, over the long term, as we become increasingly urbanized, it’s all about energy density. Which is why the renewables fail so dismally.