Interesting feature piece from the WSJ on the end of so called easy oil – that is oil of usable quality that simply gushed out of the ground.
No one suggests that the Gulf nations are running out of oil. Heavy oil, although difficult to pump, is abundant. The Middle East alone is believed to hold some 78 billion barrels of heavy oil that is currently recoverable, more than three-and-a-half times the U.S.’s total reserves.
The U.S. Geological Survey estimates there are some three trillion barrels of heavy oil in the world, about 100 years of global consumption at current levels. The catch: Only a fraction of it—about 400 billion barrels—can be recovered using existing technology. New techniques like the ones being tried in Wafra could unlock more.
When people talk about how we’re ‘running out of oil,’ they’re not counting the heavy oil,” says Amy Myers Jaffe, who runs the Energy Forum at Rice University’s Baker Institute for Public Policy in Houston. “There’s a huge amount of resource there…It’s just a question of developing the technology.”To get to Wafra’s thick oil, workers are injecting steam into the ground to heat the oil and make it less viscous, allowing it to flow to the surface. The technique is tricky, expensive and unproven in the type of rock that holds Wafra’s oil.
The key point of the article I think is summed up as follows –
An even bigger challenge is getting the two crucial elements for generating steam: water and a source of energy to boil it. Most successful steam projects are in places with easy access to relatively pure water and a cheap fuel source, usually natural gas. Saudi Arabia and Kuwait have little of either.
With no fresh-water sources in the Arabian desert, Chevron has been forced to use salt water found in the same underground reservoirs as the oil. That water is full of contaminants that must be removed before it can be boiled and injected into the ground.
Finding the energy to boil the water will be even tougher. Chevron could use oil instead of natural gas—literally burning oil to produce oil—but that would burn profits, too. So the company likely will be forced to import natural gas from overseas, an expensive process that involves chilling it to turn it into a liquid, then shipping it thousands of miles.
Some experts are shaking their heads.
“They’re in trouble,” says Robert Toronyi, a retired Chevron engineer who now serves as chief operating officer for Quantum Reservoir Impact, a Houston-based consulting firm. He says the project is so challenging that it will be hard for Chevron to turn much of a profit.
Whilst these are interesting big picture styles of articles at the end of the day you can only trade what you see not what you think you will see.