Without any doubt, crude oil is one of the most important resources we have ever discovered. Oil and the many products made from it have, literally, and figuratively, transformed the world beyond all recognition. However, as we are constantly reminded, crude oil is not in infinite supply. After all, it took millions of years to “brew.” Estimates vary, but if our current consumption continues apace, we may see a time in the near future when it is completely exhausted. But, are such claims true? Will we ever run out of oil?
It is necessary that before answering this question, we expand on the term “Proven Oil Reserve.” This is something we all come across. It is important to understand as it will help us honestly address whether oil will ever run out. Oil reserves that any given region can theoretically extract based on the infrastructure they have in place or plan to have in the near future are called “Proven Oil Reserves.” This is obviously dependent on the oil extraction methods and technology.
We cannot take today’s estimates of technically recoverable resources and estimate when we will “run out” because those estimates are based on today’s technology and known formations, not tomorrow’s.
It is important to note that any oil left in already tapped oil reserves is not necessarily useable. Very often termed “heavy” or “sour” oil, this stuff is pretty poor quality. It is also not always in a liquid form and can contain large amounts of contaminants like sulfur. Sulfur-rich oil is very complex and energy-intensive to process, which, obviously, increases the cost of bringing it to market. Sulfur is a big deal as it is very corrosive to steel, which is obviously not good news for things like refineries. Another such material is Bitumen. This is a very viscous (sticky) low-grade form of crude oil that can be distilled to make petroleum. It can also be used “as is” as a binder for many other things like asphalt, roofing products, damp-proofing, etc. Due to its stickiness, it is often compared with “cold molasses.” Many producers have greatly improved their technological capacity over the past few decades, which, by extension, has necessarily increased their proven reserves. Other technological developments like hydraulic fracturing (fracking), have also contributed to increasing the world’s proven reserves despite an increase in global consumption. Another more recent innovation is our ability to process and extract shale oil, more specifically a material called kerogen (a waxy mixture of hydrocarbon compounds). This tends to be found within shale deposits and needs to be heated to around 932 degrees Fahrenheit (500 degrees centigrade) to extract and process. This process converts the solid kerogen into something similar to oil. What’s more, there is an absolute glut of this stuff in places like the US.
According to some estimates, there are “trillions” of barrels of shale oil in the US alone. However, the actual energy return on energy invested (EROEI) to extract and refine shale oil is so poor that there has been no serious commercial exploitation of oil shale to date. Another important term to get to grips with is “technically recoverable resources,” or TRR for short. This is used to refer to those oil reserves that can be extracted using current methods and technology but may not be profitable to do so. In other words, the oil can be pulled out, but any company doing it will likely lose money doing so – making it pointless.
As it happens, according to the Energy Information Authority (EIA), the United States has somewhere in the region of 344 billion barrels of TRR oil. On the other hand, it has only 42 billion barrels of “proven” reserves. Technically recoverable oil is also liable to greatly fluctuate in quantity. Estimates of TRR are highly uncertain, particularly in emerging plays where relatively few wells have been drilled. Early estimates tend to vary and shift significantly over time because new geological information is gained through additional drilling, because long-term productivity is clarified for existing wells, and because the productivity of new wells increases with technology improvements and better management practices.
Technology and geologic knowledge increased faster than oil production. Hence, it increases estimates of technically recoverable resources through time. We cannot take today’s estimates of technically recoverable resources and estimate when we will “run out” because those estimates are based on today’s technology and known formations, not tomorrow’s. Like anything in life, we only know what we know. Potentially, there is an even larger amount of undiscovered technically recoverable resources, meaning resources the geological surveys predict are there. Undiscovered resources are those that are estimated to exist based on geology, geophysics, geochemistry, and our familiarity with similar basins and rock formations. They have not yet been proven to exist via drilling. Who knows there could be an effectively unlimited supply out there! We just don’t know it yet!
The writer is Chairman (Oil Marketing Association Pakistan).