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
Yup.
All will be repaired when Obama is fired this November.
Mr.MIddleton,
In your article I didn’t see reference to refinery capacity. Shouldn’t that be both a subject of concern, as well as a high priority? If memory serves, the US hasn’t built any new refinery capacity since 1974. Also, many of the problems from Katrina came from damaged refineries, as opposed to lack of crude.
Given an increase in domestic oil production, I would expect a need for more refinery capacity as well.
David Middleton
Thanks for the evidence. On Hubbert and “Peak Oil”, it is important to clarify that EACH geographic region shows a “Hubbert” type curve for EACH type of hydrocarbon. Thus “multi-cycle” Hubbert analyses to cover combined regions and types. e.g. see Fig 15 in Exponential growth, energetic Hubbert cycles, and the advancement of technology Tad Patzek, 2008.
Recovering Athabasca oil sands requires about 3 bbl of water converted to steam for each bbl of heavy oil recovered. Then 30% of that must be discarded as coke.
A major challenge is the steadily declining Energy Return On Energy Invested (EROEI or EROI). See Charles Hall.
Oilsands and especially oil shale require much more energy and cost to produce (LOWER EROI) than conventional crude oil. Consequently they require much higher prices to justify production.
Conventional crude oil has an average EROI of about 18. Oil shale (kerogen) only has an EROI of about 1.8 to 2.1. That is less than the minimum of 3:1 needed for society to function per Charles Hall analysis. Green River Oil Shale further requires a 1,000 MW power plant running for 3 years and freezing a curtain of water around the heated zone to prevent ground water contamination.
Better ways to extract, convert or synthesize fuels have to be discovered with higher EROI. (grain ethanol with EROI ~ 1 is insufficient.)
“Peak Oil,” if it exists, won’t be reached for hundreds of years if … ” is a pointed question IF, in fact, oil is abiotic.” I believe in abiotic oil because it makes thermodynamic sense. However, even if oil is abiotic, you still have peak oil. It just means that old calcs for the peak oil date are invalid, and peak oil comes later than previously thought.
How can we predict national energy inependence dates without showing an upward-sloping demand curve? Surely our demand is not static?
Thanks for the post.
Just listened to the Romney speech. His best line – and well-delivered:
From Gail’s post, it looks like Romney may try to be a “healer” too.
Excellent article, and many good points in the comments. Thanks, all.
Indeed David Hagen, please take EROE into account.
Is it really worthwhile to invest a billion barrels of oil to squeeze 1.8 billion barrels of oil out of tarsand or shale?
I think I’d rather walk or ride my bike.
From page 20:
“First Solar Inc. is warning that a construction delay threatens to undo its sale of a large solar power plant planned for Los Angeles County to power producer Exelon Corp. The company said in a filing with the Securities and Exchange Commission on Thursday that it has been unable to resolve a construction permit issue at the 230-megawatt Antelope Valley Solar Ranch One plant. That is blocking the distribution of funds from a $646 million federal loan guarantee to help pay for the construction of the project.”
And on page 19 the paper complains that the Federal Gov has only spent 11.9 billion in tax dollars for R&D. Romney supports spending 20 billion in R&D for “energy” and “car technology.”
And what is this language about the Federal Gov’t leveling the playing field (pg 19)? This is exactly the type of language that leaves room for mandates and emissions reductions agreements. He set up RGGI and Romneycare, and is clearly leaving room for energy in health mandates in what he is now saying.
David
Thanks for the clearly thought out presentation. It is pretty obvious to most of us old oil men that ‘governments’ are the biggest hinderance to efficient production and cheaper energy (whether oil, gas, shale, nuclear, hydro, etc).
Ciao,
John
Shell Oil Shale Results
Tucker said the 1,700 barrels of extracted oil came from a plot that was 30 feet by 40 feet at the surface, and roughly 1,800 feet deep, on Shell property.
http://www.postindependent.com/article/20120302/VALLEYNEWS/120309979
Question: what does the above convert to in USG/Ton?
What is Bulk density of Oil Shale?. Obviously it must vary with organic content
Lacking a good number I just guessed a SG of 2.4 from table here
http://www.edumine.com/xtoolkit/tables/sgtables.htm
30*40*1800=2.16Million ft3
Water Density 62.37lb/ft3 at 60degf
Assumed (guessed) bulk density oil shale at 2.4 Specific Gravity
2.16Million ft3*62.37*2.4/2000= 161,663 Ton
1700Bbl*42= 71,400USG
Yield= 71,400USG/161663 Ton= 0.44USG/Ton
What am I missing?
cheers
brent
From an economic perspective, the way to optimise wealth (in the US or anywhere else) is to produce and sell the things you can generate most cheaply and efficiently, and buy the ones you can’t. ‘Energy independence’ is conceptually just as dumb as ‘food independence’ or any of the other bogeymen used to scare the populace – unless you subscribe to the notion (like the greenies) that we should impoverish ourselves for some abstract purpose.
David Middleton’s excellent analysis demonstrates that there is plenty of oil around, and that quite a bit of it is probably economically viable to extract at current prices. That doesn’t mean it would be viable if the retail price of gas was $2 per gallon.
In an energy-hungry world, the best thing for the US – or any other country – is to be a profitable energy exporter. As David points out, there are practical problems with leaving it in the ground in fields that are currently being worked. Further, since nobody knows what the price will be in 20 years, it is very risky to ration production and exports just in case. You may well be giving up a bird in the hand for one that will be gone in 20 years, if alternative fuel sources become viable competitors.
Drill, baby, drill!
cassandraclub:
At August 30, 2012 at 11:32 pm you say
That is your choice and nobody is stopping you from making it. The problem is that people like you insist everybody should walk or ride their bikes, too.
The greatest evils in history have all been caused by people who proclaim,
“I know what makes me smile and everybody will be made to smile like me”.
Richard
Interesting post.
Any policy that gets away from the ”I hate oil Obamaism” will be good for America.
Excellent article David – very informative – thank you.
Regarding the success of the Athabasca oilsands, please see http://www.OilsandsExpert.com
Regards, Allan
Here is a related post from Aug 22 – I agree with you:
http://wattsupwiththat.com/2012/08/22/dc-circuit-tosses-out-epas-cross-state-pollution-rule/#comment-1063249
Cheap abundant energy enabled the building of America.
America once again has the huge competitive advantage of cheap abundant energy.
You CAN rebuild your economy AND your manufacturing sector based on this cheap abundant energy.
However, you will have to counter the powerful forces that view this economic rebirth as a disaster for the environment*.
For example (and see below):
”Isn’t the only hope for the planet that the industrialized civilizations collapse? Isn’t it our responsibility to bring that about?” – Maurice Strong, Founder of the UN Environmental Program
For the record, I don’t agree with this position, and I have a strong predictive track record in energy and the environment.
In comparison, the “forces of darkness” have a long history of failed predictions, and a pathological predisposition towards catastrophism and philosophical incompetence.
In contrast, I view the possible economic demise of America as the real disaster for humanity.
Despite its flaws, America is still the greatest hope for human rights in the world today.
I wish all of you a pleasant evening.
– Allan MacRae
************
* Source:
http://www.green-agenda.com
Excerpts:
“Complex technology of any sort is an assault on
human dignity. It would be little short of disastrous for us to
discover a source of clean, cheap, abundant energy,
because of what we might do with it.”
– Amory Lovins, Rocky Mountain Institute
“The prospect of cheap fusion energy is the
worst thing that could happen to the planet.”
– Jeremy Rifkin,
Greenhouse Crisis Foundation
“Giving society cheap, abundant energy would be the
equivalent of giving an idiot child a machine gun.”
– Prof Paul Ehrlich, Stanford University
Assuming the oil is as estimated, energy independence by 2020 is very unlikely. Between permitting, equipment construction and deployment and all the other silly necessities it is just not going to happen. It is well past time to start developing our own resources, whether we can meet some arbitrary time frame. We’ve been hearing that all the drilling just isn’t going to help because the results are 5-10 years in the future for about 4 decades. It is well past time we got started on this.
It was mentioned that the very old oil fields can be made to produce by pumping CO2 down the wells. Common sense in light of recent knowledge would be to re-drill them down to the next layer of oil. There was never on earth enough life to explain the amount of oil and gas buried deep and bubbling to the surface all over the world.
It has been found that oil exists much deeper in the earth than science allows, it has also been noted that the chemical complexity of oil can not be traced to a plant or animal origin. Burying by the billions of tons of a product that floats on water in myriad places around the world varying in depths of up to 10,000ft in solid rock is a feat worthy of hudini. Carbon it would seem is a ubiquitous product of the earth, if it was not, diamonds would not exist, and diamonds for some reason are not called fossils. Our wonderful planet is an alchemists dream.
I would hope that any new nuclear power plants are constructed with ‘walkaway-safe’ designs rather than designs that require continuous active management in order to not melt down.
theBuckWheat:
Please explain the relevance – if any – to this thread of your post at August 31, 2012 at 5:26 am
Richard
Rud Istvan says:
August 30, 2012 at 12:23 pm
It is not technically possible.
==============
Look at history. Every accomplishment was called “impossible” right up until the day someone figured out how to do it.
wayne Job says:
August 31, 2012 at 5:00 am
It has been found that oil exists much deeper in the earth than science allows, it has also been noted that the chemical complexity of oil can not be traced to a plant or animal origin.
================
limestone + water + heat + pressure + iron = hydrocarbons
Bill Parsons says:
August 30, 2012 at 10:49 pm
How can we predict national energy independence dates without showing an upward-sloping demand curve? Surely our demand is not static?
We used 80 quads in 1979 and we were up to 98 quads by 2010, about 0,7% annual increase over 30 years. We hit 94 quads in 1997. So our last 12 or 13 years of energy consumption growth was about half the 30 year average.
Friends:
Can those using this thread to promote ideas of abiotic oil please explain the relevance – if any – of their pet theory to the subject of this thread.
Richard
Allan MacRae says:
August 31, 2012 at 4:06 am
cassandraclub says:
August 30, 2012 at 11:32 pm
Indeed David Hagen, please take EROE into account.
Is it really worthwhile to invest a billion barrels of oil to squeeze 1.8 billion barrels of oil out of tarsand or shale?
I think I’d rather walk or ride my bike.
=============
US policies are certainly headed in that direction. The semi trailers that currently deliver most of the goods in the country replaced by millions of peasants on bicycles carrying small loads each. Similar to China before they began to industrialize.
What have the oil-sands done for Canada? Before the National Energy Program killed oil exploration in Canada 40 years ago, our dollar was trading above the US dollar. The Canadian dollar then entered a long period of decline, in which Canadian’s were told this was somehow “good” for us. Governments ran up large deficits.
Today thanks in large part to oil exports made possible by the oil sands, the Canadian dollar has recovered, governments are running surpluses (the real green), and there are LOTS of JOBS.
I’ll try to keep this short. First of all Romney doesn’t seem to have a coherent energy plan, just a collection of favors to various vested interests. Nothing new about that. The same has been true of every president since Carter. Carter actually had a fairly coherent plan, but it depended a lot on conservation and was largely (not entirely) scuttled by subsequent administrations in favor of “free market” approaches that haven’t worked all that well. I think that one can safely assume that Romney would not achieve energy independence by 2020. Or 2120 for that matter.
Is energy independence by 2020 feasible? Possibly, but it would probably require a command economy style 7 year plan dictating exactly what resources were to be developed when and making sure that the drilling rigs, “refineries”, materials, etc were available when and where needed. I think that I can safely predict that’s not going to happen.
Is energy independence by 2027 possible? That’s a much longer timeframe, and I think it’s possible, although I disagree substantially with David Middleton on the details. Some examples: It’s all well and good that there is probably a decent amount of oil in the Arctic. As things currently stand, it needs to flow to civilization through a 2mbpd bottleneck (the trans-Alaska pipeline) that has only 1.3mpbd excess capacity. I’m guessing that it would take a decade at least to build a larger pipeline, storage facilities for more oil, or ice capable tankers and a suitable port in an area that is iced in much of the year. Likewise Canada — expanding tar sand production is not impossible, but there isn’t that much additional water available from the current source — the Athabasca River. And the problem of disposing of large amounts of contaminated water is non-trivial. Solvable? Yes. But solving the problems will take a lot of time.
As for Green River oil shales. People have been trying to bring the Green River Kerogen deposits to market for a century with basically no success. The problem is somewhat akin to trying to extract candle wax from the pores of a brick. Not that it forever impossible to do so, but I’d wait for proven technology that has a positive economic return before I counted that bunch of unhatched chickens. OTOH, I suspect that if world oil prices stay high (and I can’t think why overall, they won’t) Coal to Liquid might well be a lot easier and cheaper. CTL is proven technology (South Africa has used it for decades). It’s not so clear that the economics are there.