Just because there's plenty of unconventional oil out there – from tar sands to oil shale – doesn't mean it's economically feasible to use it.
In the old days, that is before 2010, the oil industry used to regale the public with tales of plenty that revolved around what is commonly called "conventional oil." Conventional oil refers to oil in a liquid state occurring naturally and coming from a well on land or water. It's what most people think of when they think of oil. And, this category of oil is relatively easy to extract and refine using longstanding conventional techniques. The industry assured us that there was plenty of conventional oil in the Middle East, Russia and elsewhere to supply us for decades to come.
Then in its 2010 World Energy Outlook, the International Energy Agency announced that the peak in the rate of production of conventional oil had already arrived, probably in 2006. There was some good news, however. Production of so-called "unconventional oil" would grow considerably over the coming decades and allow total oil production to rise. This unconventional oil includes oil derived from the Canadian tar sands, from heavy oil deposits in Venezuela and elsewhere, and from so-called oil shale. It also includes oil products obtained from coal through coal-to-liquids technology and those obtained from natural gas using gas-to-liquids technology. Some people include tight oil (often mistakenly referred to as shale oil) as part of the unconventional mix, though once out of the ground it is typically refined in the same way as conventional oil.
Signal qualities of unconventional oil are that it is expensive and difficult to extract and refine. This has so far meant that in most cases only high oil prices can justify its extraction. And, this means that it is going to be hard for unconventional oil to make up for the decline in the rate of conventional oil production. And, rate is the key metric. As I am obliged to remind people again and again, it is the rate of oil production which matters much more than the size of the resource. The global economy is entirely dependent on continuous flows of energy and raw materials. Oil is absolutely central because it provides one-third of the world's energy and more than 80 percent of its transportation fuel. Very few things of consequence move in the world economy without the assistance of oil.
When we think of conventional oil, we can picture gushers which are evidence of highly pressurized underground reservoirs that send oil to the surface without any pumping. Nowadays, blowout preventers have eliminated gushers except in the case of an accident such as the BP Gulf of Mexico oil spill. As oil is produced from a well, the pressure declines and eventually the remaining oil must be pumped to the surface. The general category for this type of oil is light sweet crude. "Light" means it flows and flows quite readily. "Sweet" means it contains little sulfur, and this makes it compatible with conventional refineries which are designed to process low-sulfur oils. (Sulfur, you may recall, is routinely removed from motor fuels to help prevent acid rain which occurs when sulfur from vehicle exhaust and other sources mixes with moisture in the atmosphere to form sulfuric acid.)
Now, unconventional oil can be entirely different. Tar sands, for example, are a mixture of sand and bitumen, a thick, gooey hydrocarbon that is often used to make asphalt. The bitumen is separated from the sand using hot water. Essentially, the bitumen moves to the top and is skimmed off. This is obviously water-intensive; but it is also energy-intensive since the sands must first be mined and transported to a separation facility. Then, enormous separators filled with water heated using natural gas start the separation process. That process is repeated to get up to 90 percent of the bitumen out of the sand.
But we don't yet have oil. The bitumen must be put through another energy-intensive "upgrading" process that typically strips the hydrogen off natural gas molecules and makes them available to the bitumen under great pressure and heat using the proper catalysts. Finally, the sulfur must be removed. Then, and only then, do you get something that resembles what we call oil. In fact, it is referred to as syncrude--short for synthetic crude--because it is not naturally occurring and must be manufactured.
As you might intuit, ramping up tar sands production has been easier said than done. Energy writer Chris Nelder noted the gap between projected and actual production: "Let's remember that tar sands production was projected to grow from 1 mbpd [million barrels per day] in 2006 to 2.8 mbpd in 2012, but actual production is currently just 1.6 mbpd," he wrote citing a Canadian Association of Petroleum Producers forecast from 2006. Promises of 5 mbpd by 2030 ought to be taken with a grain of salt. And, 5 mbpd needs to be put in the context of a world thataccording to the U.S. Energy Information Administration (EIA) is projected in 2030 to consume 108 mbpd of so-called "total liquids" (which include not only oil, but biofuels and natural gas plant liquids such propane and butane.) I have my doubts that we will reach either 5 mbpd from tar sands production or 108 mbpd in worldwide production of liquid fuels given the difficulties of producing unconventional oil.
Perhaps the most egregious exaggerations are saved for deposits of so-called oil shale. I say "so-called" in this case because oil shale is neither shale, nor does it contain oil. The designation was created to attract investors. Oil shale is, in fact, organic marlstone containing kerogen, a waxy hydrocarbon. Like tar sands, it must be extensively processed to yield what we call oil.
Writers and analysts abound who will cite astronomical figures for oil contained in America's oil shale deposits which are found in Colorado, Wyoming and Utah. An article in The New American claims that there are 3 trillion barrels of oil contained in the oil shale of those three states, nearly twice the known reserves of oil worldwide. Of course, it isn't oil; it's kerogen, which the author doesn't appear to understand. The article cites testimony from a representative of the General Accountability Office, the nonpartisan research arm of the U.S. Congress. The witness says half that number may be "recoverable." As I am obliged time and again to remind people, recoverable isn't the same as economically recoverable. It is possible to recover rocks from the Moon. But we would never think of transporting rocks from the Moon to the Earth to make roadway aggregates.
So, just how much oil from oil shale is currently available for purchase on world markets? The answer is none. There are some pilot projects which produce small quantities for research purposes, but that is all. Here it is important to review the difference between "resources" and "reserves." The writer of the articles above refers to 3 trillion barrels of reserves. But, reserves are what can be produced at today's prices from known fields using existing technology. By that definition the oil reserves of America's oil shale fields are exactly zero.
Resources, on the other hand, refer to the amount of something thought to be in the ground based on rather sketchy evidence. By that definition there is still no oil contained in America's oil shale. What's thought to be there are 3 trillion barrels of kerogen imbedded in rock, which, as I said, must go through extensive processing before it can become oil. Since the early 1980s oil companies have tried to commercialize the production of oil from this kerogen-rich rock, but have so far been unsuccessful. So complex and difficult is the task of extracting and processing kerogen that the EIA has estimated that even under its high oil price scenario, the United States will produce no more than 140,000 barrels per day of oil from oil shale by 2030. That's a drop in the bucket compared to the country's projected needs of about 15 million barrels per day.