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Energy independence, or impending oil shocks?

Chris Nelder, Smartplanet
Gasoline is back over $4 a gallon here in California and U.S. crude is holding firm over $100 a barrel, even though domestic demand is off more than 8 percent from the 2005 peak on an annual basis, and a whopping 16 percent on a monthly peak-to-trough basis. And that can only mean one thing: We’re entering the silly season in oil punditry.

A deluge of recent articles have asserted that the U.S. is on its way to energy independence thanks to the miracle of shale oil, or “tight oil.” (Shale oil is actual crude oil produced from tight shale formations like the Bakken. Tight oil is a broader term including shale oil and natural gas liquids produced from shale gas plays. Horizontal drilling and “fracking” are used in both kinds of shale production.) None of them, however, have demonstrated how we would get there.

An amateurish report from Citigroup last week entitled “Resurging North American Oil Production and the Death of the Peak Oil Hypothesis,” garnered the most attention, perhaps because it claimed that the U.S. could achieve energy independence this decade. Here’s what they called their “back-of-the-envelope” calculation:

U.S. crude and product imports are now about 11 million barrels a day, with about 3 million barrels a day of product exports. This leaves import reliance at 8 million barrels a day. If shale oil grows by 2 million barrels a day, which we think is conservative, and California adds its 1 million barrels a day to the Gulf of Mexico’s 2 million barrels a day, we reduce import reliance to 3 million barrels a day. Canadian production is expected to rise by 1.6 million barrels a day by 2020, and much of this will effectively be stranded in North America, and there is the potential to cut demand both through conservation and a shift in transportation demand to natural gas by at least 1 million barrels a day and by some calculations by 2 million barrels a day.


Naturally, most of the subsequent coverage of the report just repeated and amplified these extremely dubious claims under headlines blaring the dawn of our new energy independence, but a few energy journalists offered more balanced and skeptical views, notably Steve LeVine in Foreign Policy, Brad Plumer in the Washington Post, and James Herron in the Wall Street Journal.

But as ever, the task of digging up the hard data and examining these claims closely fell to yours truly…
(22 February 2012)
Related post – Hofmeister vs Patzek debate

Oil: In perpetuity no more

Dahr Jamail, AlJazeera
Given that oil plays such a critical role in the world’s economy, one would deduce it would be important to know how much is left. Otherwise, the world’s stock markets would be exposed to fossil fuels, which would pose a grave risk to investors facing down a so-called carbon bubble, which could potentially dwarf the housing bubble and current debt crisis.

But acquiring accurate figures on the oil reserves of many of the member states of the Organisation of the Petroleum Exporting Countries (OPEC) is currently impossible, as this remains one of their most highly guarded state secrets…

According to Hughes, this occurred at roughly the same time these countries changed how they set their production quotas.

“Since then, using Saudi [Arabia] as an example, their reported reserves have been flatlined since 1988, so they’ve not changed their reserves at all, but they produced 96 billion barrels of oil between 1980 and 2010.”…

The mirage of unconventional oil
Both Hughes and Whipple, along with other energy experts, believe several OPEC countries are intentionally underreporting their reserves – a situation that will, sooner or later, lead to an economic crash…

OPEC also claims: “Technology continues to blur the distinction between conventional and non-conventional oil, of which there is also abundance, as well as with other fossil fuels. We expect the world’s URR [ultimately recoverable resources] to continue to increase in the future. Therefore, the real issue is not reserve availability, but timely deliverability.”

BP refers to URR as “an estimate of the total amount of oil that will ever be recovered and produced”, hence the Canadian tar sands are included.

The tar sands have become infamous due to how dirty the oil is and how energy-intensive it is to extract, along with the massive environmental devastation required in the process of extraction.

Scientific and environmental critics of tar sand extraction also argue that oil companies’ glowing forecasts of how much oil is there, along with how long it will take to extract are fantastic, in a literal sense of the term.

Hughes, whose expertise includes 32 years with the Geological Survey of Canada as both a scientist and research manager, calls the forecasts “exuberant”…
(21 February 2012)

Saudi Aramco to Re-Open Oldest Field to Tap Heavy Oil, EIU

Wael Mahdi, Bloomberg
Saudi Arabian Oil Co. plans to re- open the Gulf kingdom’s oldest oil field and produce there for the first time in 30 years as the company boosts output of heavy crude, the Economist Intelligence Unit said.

The state-owned producer, known as Saudi Aramco, may revive a plan from 2008 to restore production at the mothballed Dammam field, the EIU said in a report. Dammam contains some 500 million barrels of oil and may yield as much as 100,000 barrels a day of Arabian Heavy crude, according to the report.

“Dammam field including Dammam Well 7 can operate easily with current technology and Saudi Aramco conducted a 3-D seismic survey over the entire area almost 10 years ago,” Sadad al- Husseini said today by e-mail. Al-Husseini was executive vice president for exploration and development at Saudi Aramco.

Dammam field today is surrounded by metropolitan areas and Husseini said if the field is re-activated, he’s sure Saudi Aramco will do it “in the most modern, environmentally sensitive and professional manner that least affects the adjacent community.”

Aramco, the world’s largest oil exporter, is considering redeveloping the onshore field in response to “tight market conditions,” the London-based researcher said in the report issued yesterday. It shut Dammam, and several small fields, in the early 1980s due to low demand. Officials at Aramco’s headquarters in Dhahran, Saudi Arabia, didn’t answer phone calls seeking comment today, the first day of the Saudi weekend.
(16 February 2012)