Unconventional oil is proving costly

By Drs. Robert & Sonia Vogl
President and Vice President, Illinois Renewable Energy Association

The World Energy Outlook of 2010 concluded that global production of conventional oil reached its peak in 2006 and is unlikely to reach the 70 million barrels per day level again. Flat production of conventional oil was not seen as producing an immediate shortage of fuel for vehicles, as unconventional oil supplies were considered to fill the gap and to steadily rise, enabling overall global production to reach 99 million barrels per day by 2025.

Unconventional oil sources include deep-ocean drilling, tar sands production and oil shale. These new sources are roundly hailed as providing a promising energy future for the United States. What is ignored in the rosy scenarios is that conventional sources of energy continue to decline, thus increasing our reliance on unconventional sources.

Unconventional sources are more costly to produce, pose greater environmental risks and increase competitive pressures for access to them.

Contributing to the rising cost of energy is the average energy returned on energy invested in securing it. About 80 years ago, for every barrel of oil used in processing oil, 100 barrels would be produced. Today, the return is only 20 barrels of oil for each barrel used in securing conventional oil.

The return for the unconventional sources now growing in importance is closer to five barrels for each barrel of oil used in securing it. It takes a tremendous amount of energy to drill 5 miles under the ocean floor and pump the crude oil to a refinery for processing. It is also a very costly process involving billions of dollars per well.

While securing shale oil is less costly than deep-ocean drilling, Tom Whipple estimates the average cost of a shale well is three times that of a conventional oil well.

A shale oil well is drilled down to 11,000 feet and then drilled another 10,000 feet horizontally before “fracking” takes place. Fracking involves running up to 15 massive pumps to inject water and chemicals into the well. The multiple steps involved consume energy, dramatically reducing the energy returned on the process.

Whipple reminds us that fracked wells don’t produce oil very long. While a new well may start producing 1,000 barrels per day, production usually falls 65 percent the first year, 35 percent the second year and 15 percent the third year. In January of this year, the Bakken oil wells in North Dakota produced 546,000 barrels of oil from 6,617 wells, for an average production of only 82 barrels of oil per well.

While other oil shale deposits in the United States are estimated to contain 24 billion barrels of oil, the output is equivalent to nine months of current global consumption. EIA forecasts estimate that the United States will produce around 6.5 million barrels per day, which is about one-third of our current demand.

According to calculations by Paul Kando, energy equivalent to one barrel of oil invested in the tar sands of Canada produces only two barrels of net useful energy.

The trends are clear: increased reliance on unconventional sources of oil is a costly, environmentally risky strategy. Buses, light rail, train, bike and walking paths would be a wise community investment.

Drs. Robert and Sonia Vogl are founders and officers of the Illinois Renewable Energy Association (IREA) and coordinate the annual Renewable Energy and Sustainable Lifestyle Fair. E-mail sonia@essex1.com.

From the March 28-April 3, 2012, issue