By Shashank Bengali | McClatchy Newspapers
May 7, 2010
WASHINGTON — To meet the world’s boundless thirst for oil, drillers are searching in the sand and mud of remote western Canada, the tough shale rock of North Dakota and more than a mile under the seas off the southern U.S. coast, where a drilling accident has sent millions of gallons of crude spewing into the Gulf of Mexico.
Why are we going nearly to the ends of the earth and the bottom of the seas for oil?
The answer, say many experts, is that we’re consuming as much oil as we ever have but the era of “easy oil” is in our rearview mirror and receding fast.
Production from onshore oilfields in the U.S. has been declining since the 1970s, and near-shore production along the Gulf of Mexico peaked more than a decade ago. Many of the richest remaining conventional deposits are in places that are politically unstable, such as Iraq and Nigeria, or hostile to Western oil companies, such as Sudan, Venezuela and the Middle East.
While Americans remain tethered to a petro-driven economy and surging demand from China and other emerging markets is driving up global demand, the quest for new sources requires more money and technological wizardry than ever before. As anyone tracking the massive gulf spill can attest, it brings greater risks as well.
“No one goes and tries to drill in a mile of water if they can think of somewhere easier to do it,” said Chris Skrebowski, a former strategist for British Petroleum who now runs a London consultancy that studies oil depletion.
“The easy stuff that you have access to . . . is already spoken for. All that’s left is the frontiers, which are necessarily more technically challenging.”
Just as the space program pushed its horizons farther and farther away in the last century, occasionally suffering devastating setbacks, the 21st-century search for oil is testing the limits of science and the environment. It also confronts the Obama administration and Congress with a policy problem to which there’s no easy solution.
Weaning the U.S. off oil has never been politically convenient, and it’s even less so with the nation slowly climbing out of a deep recession. The most promising approaches include sharply higher gasoline taxes and mileage standards and increased use of nuclear power, wind, solar energy or geothermal power — all of which have their own drawbacks.
Pushing ahead with unconventional drilling in the wake of a major spill could seem risky, but putting the brakes on exploration would worsen what analysts warn is an impending oil price crunch as world demand increases and production slows.
“An oil spill here or there hasn’t gotten in the way of oil extraction anywhere,” said Peter Maass, the author of the 2009 book, “Crude World: The Violent Twilight of Oil.” “We want our oil, and we’re pretty much willing to pay any price for it.”
During the past decade, Americans have curbed per capita oil consumption slightly. Overall U.S. demand is roughly the same as it was in 2000, when the population was about 7 percent smaller, according to official statistics. However, with China and India together adding more than 1.2 million cars each month, according to figures from the Organization for Economic Cooperation and Development, there’s more global competition for oil than ever before.
The U.S. still imports more than half the oil it consumes, and energy companies are racing to shore up the dwindling supply from conventional sources.
Before the Deepwater Horizon offshore rig exploded and sank late last month in the waters off Louisiana, drilling in ultra-deep water, usually described as water depths greater than 5,000 feet, was widely regarded as a vital part of future U.S. oil production. President Barack Obama has said he’ll wait for a 30-day review of the oil spill to decide whether to proceed with new offshore drilling.
“It was certainly seen as one of the most promising of the . . . new unconventional sources,” said Elliott Gue, the editor of the Energy Strategist, an investor newsletter. “It’s also very expensive.”
In 2008, BP paid $34 million for the rights to the 5,700-acre site off the Louisiana coast, outbidding nine other firms, according to the U.S. Interior Department’s Minerals Management Service. Experts estimate that the Macondo exploration well that’s now spilling oil into the gulf from 18,000 feet below the seafloor — which itself is 5,000 feet below the water’s surface — cost BP $100 million to build.
“They’re in this high-tech atmosphere where a lot of things have to work right and work perfect,” said Gary Taylor of Platts Oilgram News, an industry publication. “That is the kind of risk that’s probably out there with deepwater exploration, but the resources there are large, so potentially there’s money to be made.”
Other major new horizons include the claylike tar sands of northern Alberta, in Canada, and in dense shale rock formations scattered across the U.S. Tapping each of these sources is freighted with costs and complications that would have been unthinkable in the oil industry a decade ago.
Large shale formations such as Bakken in North Dakota and Barnett in Texas are thought to contain the light sweet crude that’s highly prized by oil companies. However, environmental groups have questioned whether the technique used to release the oil from the rock — deploying a mix of water, sand and chemicals to create cracks in the shale — could contaminate groundwater sources.
Extracting oil from the Canadian sands, meanwhile, requires chopping down vast swaths of forest, steam-heating the earth to release the crude, and then refining it — a process that scientists say produces three to five times the greenhouse-gas emissions of conventional oil refining. Canadian environmental groups also say the process has contaminated the nearby Athabasca River and destroyed wildlife habitats.
“For the people living in Alberta, it’s a catastrophe,” said Kjell Aleklett, the president of the Association for the Study of Peak Oil and Gas, a group of scientists who believe that the world’s oil stores are running out.
“The only thing the politicians can do. . . is to deal with an issue when a catastrophe happens. Now is the moment for politicians to sit down and look into” weaning the world off of oil, Aleklett said.
However, many say the economic forces driving unconventional oil production are too strong. The Obama administration has said BP is responsible for the spill and will pay for the cleanup. Tighter safety standards on offshore drilling are likely to follow.
Except none of this will force Americans to use less oil.
“If you want to drill less, you have to significantly decrease your demand for the stuff,” said Maass, the author. “Patting ourselves on the back for fining BP, increasing safety standards, making more areas off-limits to drilling — it doesn’t get at the fundamental problem . . . which is our high consumption of oil.”