There could be a lot more oil and gas out there than we thought. But it’s going to cost a whole lot to extract it.
The Department of Energy’s Energy Information Administration has upgraded its estimates of global oil reserves by 11% after scouring 41 countries and finding a lot more “technically recoverable” shale oil and shale gas than it did the last time it filed a similar report, in 2011.
Since then, the EIA’s shale gas estimates alone have jumped by 10% and its estimate of gas reserves has soared by 47%. The U.S., China and Argentina are largely responsible for the upticks in shale oil and gas numbers, while Russia’s shale oil stockpile and Algeria’s shale gas resources also place them among the EIA’s top four potential producers in each category.
Note the use of “potential” there. As we noted in November — just after Superstorm Sandy slammed into the East Coast, wrecked refineries and caused a supply shortage that led to gasoline rationing and military assistance — the idea of peak oil remains far more frightening than it appears.
While the EIA’s numbers are promising, they’ll ward off peak oil only if extraction technology catches up to the potential of that latent supply. M. King Hubbert created the first peak oil model in 1956 and predicted U.S. oil production would peak between 1965 and 1971. Globally, he believed oil production would peak in 1995, which clearly didn’t happen.
Even if oil hasn’t peaked, it’s starting to feel as if it has. Exxon Mobil said in 2005 that “all the easy oil and gas in the world has pretty much been found.” Meanwhile, former Shell chairman Lord Ron Oxburgh warned in 2008 that “any new or unconventional oil is going to be expensive.”
The Bakken Shale Formation sitting beneath North Dakota, Montana and Canada’s Saskatchewan and Manitoba provinces, for example, has been estimated to contain anywhere from 4 billion to 150 billion barrels of oil, though current extraction methods provide access to less than 10% of it. Oil sands just beneath Edmonton in Canada’s Alberta province hold an estimated 175 billion barrels making it the third-largest oil reserve in the world. But it’s going to spend much of the near future untapped.
The problem is that even extraction methods like fracking are in their crudest stages and don’t come close to being adequate for most oil sand extraction. The oil in those shales isn’t easy to separate from the sand and water surrounding it and leaves huge waste pools in its wake. That mess costs money, and it’s only going to get messier as those oil numbers surge.