US Article on oil SANDS/SHALETake a chance on unconventional oil
Daniel Tedder - For the Journal-Constitution
Thursday, September 29, 2005
If the Bush administration and Congress want to focus federal energy policies more sensibly, a good place to begin is by spurring development of vast deposits of so-called "unconventional" oil in North America.
In the coming years, the availability of oil is expected to be challenged by terrorism in the Middle East, increasing world demand, and a continuing decline in U.S. oil production, especially on Alaska's North Slope. Consequently, more and more of our gasoline and other petroleum products will be made from unconventional oil that can't be extracted using traditional methods.
Here in the United States, there is an estimated 2 trillion barrels of shale oil under the soil in Colorado, Wyoming and Utah --- roughly 60 percent of the world's known deposits. Production is under way, and the Pentagon currently purchases 300,000 barrels a day. But this is production at a relatively small scale, backed by government research.
If more economical and environmentally acceptable ways could be found to extract oil from shale, America would become the world's single biggest oil source, exceeding Saudi Arabia's proven reserves of 261 billion barrels.
With world oil prices at the $60-a-barrel level, Canada's oil-bearing tar sands, a tantalizingly plentiful but hard-to-produce resource, is also drawing attention from oil companies. An estimated 1.8 trillion barrels of low-grade oil is in the Alberta tar sands, within reach of U.S. markets. Together with oil shale, the successful development of Canadian tar sands would extend world oil supplies well into the future.
But tapping unconventional sources of oil requires enormous investment. Since 1996, U.S. and Canadian companies have reportedly invested $23 billion in tar sands oil, and plan to spend an additional $37 billion to more than double production from 1 million barrels a day now to 2.5 million barrels by 2010 --- no small undertaking, considering that the United States currently imports about 2.4 million barrels a day from Saudi Arabia.
Major development of new oil deposits --- even oil in frontier areas on the U.S. Outer Continental Shelf, let alone unconventional oil shale and tar sands --- is far from certain, however. Many producers and investors are wary about making any future commitments given the inflammatory calls by some politicians for reviving the windfall profits tax. That tax --- which was imposed in 1980 after a spike in gasoline prices --- drained $79 billion in industry revenues that could have been used to invest in oil production, a blunder that carried serious economic penalties and led to a reduction in domestic oil production of 1.6 billion barrels.
This time around, that's not a mistake we want to repeat. The National Petroleum Council estimates that producers will have to invest a total of almost $1.2 trillion through 2025 to finance energy development in the United States and Canada. Investments of that enormous magnitude require long-term fiscal stability.
A decade from now, U.S. refineries producing gasoline from oil shale and tar sands may yield valuable public benefits --- insurance against terrorist attacks, exorbitant price increases, or calamitous shortages in the event of another devastating hurricane or oil embargo. If unconventional oil holds down dependence on Middle East oil and improves U.S. energy security, it may well be a bargain for years to come.
> Daniel W. Tedder is an associate professor at Georgia Tech's school of chemical and biomolecular engineering.