An energy-craving country obsessed by fear of oil from the Middle East should welcome prospects for a new 7-8 million b/d from North America. Not the US. Not as long as congressional leaders remain blind to how they boost oil prices when they limit supply.
Without question, the Middle East will dominate supply of conventional oil for the next several decades. Important supplementary production will grow from countries of the former Soviet Union and Africa. Notwithstanding exceptions such as Brazil, future growth in conventional oil production will occur mainly in the Eastern Hemisphere.
Unconventional oil
On the other side of the planet, production nevertheless can grow. But the Western Hemisphere’s potential is mainly unconventional oil—heavy fluid hydrocarbons dependent on large inputs of energy for production and processing. While output now is relatively low, it is growing from resources of enticing scale.
Production exceeds 1 million b/d and will approach 4 million b/d by 2020 from 170 billion bbl of reserves of bitumen and heavy oil in Alberta. Venezuela has capacity to produce 580,000 b/d of synthetic crude from its huge resource of extra-heavy crude. And the US has more than 2 trillion bbl of shale oil in place and resources of heavy oil for which development is advanced in California and just beginning elsewhere.
Political leaders who motivate energy policy with panic over Middle Eastern oil should at least want to know how much oil supply might be possible from the massive unconventional resources of Canada and the US. Instead, congressional luminaries are foreclosing the potential.
Last December, Congress voted to deny funding for federal oil shale lease sales approved in the Energy Policy Act of 2005. On Mar. 13, the Senate passed an outright moratorium on oil shale leasing (OGJ, Mar. 24, 2008, p. 34). Unlike bitumen and heavy oil in Alberta, production of shale oil isn’t commercial; by refusing to allow access to the resource, Congress keeps it that way. It ensures that technology never advances and that no part of a huge domestic resource can be developed.
Last year, a study required by the 2005 energy bill said the US might be able to produce 2.5 million b/d of shale oil by 2035 (OGJ, Nov. 5, 2007, p. 20). The study further envisioned production in that year of 530,000 b/d from US tar sands and 750,000 b/d of heavy oil, up from the current 2,700 b/d in California. Achieving those levels of production, representing together nearly 40% of the recent import rate for crude oil, would require government help such as price floors and a $5/bbl production tax credit until investment payout, the study said.
Congress, however, is in no mood to support anything related to oil. In fact, its Energy Independence and Security Act of 2007 explicitly limits US imports of oil from unconventional sources. According to Sec. 526, “No federal agency shall enter into a contract for procurement of an alternative or synthetic fuel, including a fuel produced from nonconventional petroleum sources...unless the contract specifies that the life-cycle greenhouse gas emissions associated with the production and combustion of the fuel supplied under the contract must, on an ongoing basis, be less than or equal to such emissions from conventional petroleum sources.”
Intentional limit
Congress mainly wanted this provision to prevent the US Air Force from developing liquid fuels from coal. But after the Canadian ambassador voiced concern that an “expansive interpretation” might crimp oil exports to the US from Canada, the author of the measure said his handiwork applies to oil sands, too. Because of greenhouse gas emissions, said Rep. Henry A. Waxman (D-Calif.), “It is important to ensure that the federal government does not subsidize or otherwise support the expanded use of these fuels through government purchasing decisions.”
An elective body that professes concern about oil from sources deemed hostile to US interests thus precludes assessment of a huge, secure, domestic resource while acting to limit imports from a friendly neighbor. This is colossal self-contradiction, the continuation of which will become colossally costly to energy users.