onlooker wrote:Okay, I admit I get in over my head when I get into these technical detailed conversations related to Oil. But Tanada, would you not admit that the real ramping up of heavy oil and shale/fracking occurred 2005 and afterwards. I mean in comparison to levels of production before. And one has to inquire the reason. Which is to say that economics is the decisive factor but that stems from the EROEI as energy is priced like any other commodity. So, the EROEI was more favorable to exploit conventional reserves before these unconventional, LTO, Heavy oil, Shale/fracking etc. Just curious your opinion T.
The reason why heavy oil production has been ramping up faster since 2005 is pretty much the reason this website exists. Demand for oil on a world wide basis boomed in the 1990's and has continued to boom since 1991 when the Coalition Kuwaiti Invasion threw Iraq out. China started rapid, as in doubling its economy every 4-5 years rapid, economic growth especially dated from the Clinton Administration negotiating most favored nation trading status encouraging American manufacturing to off shore production to China. This started slowly in the 1980's but by the end of the 1990's it was a virtual Juggernaut with more and more companies moving facilities to China as fast as the power grid and other infrastructure could support constructing factories there. At its peak China was adding over 1 GWe generation capacity EVERY WEEK to its grid to supply all this mass influx of manufacturing capacity.
Along about 2005 we hit a tipping point where world 'conventional' sourced oil alone could not meet world demand. However we had already been exploiting 'unconventional' reservoirs like 'tar sands' and to a much lesser extent immature kerogen containing shale and slates in places like Canada for the former and Estonia for the latter. The technology to grow Canadian heavy all production was well known and proven by 2005 having been progressively improved from the 1970's onward so adding Canadian heavy oil production was a 'no brainer' as it were.
At the same time unfortunately Chavez in Venezuela was doing a lot of the wrong things in terms of his oil production infrastructure and the dream of rapidly expanding Venezuelan Heavy oil production ran into one problem after another. At the same time his mismanagement was so bad VZ was struggling to increase its conventional production with moderate success at first to sell into the rapidly rising prices in the world market.
Against this backdrop the USA and elsewhere started straining everything to produce more conventional oil once world benchmark crude passed $35/bbl because at those prices going back and redrilling old fields was an economic winner. There was a miniature conventional oil boom across the USA from 2005-08 with thousands of old small deposits suddenly became economically exploitable. If you look carefully at the EIA data for 2005,2006,2007 you will see the very long term decline which had been happening since Alaska peaked actually stopped and started a slight increase because of the boom in reworking old deposits across the USA. Then we had the price peak in 2008 followed by the crash which reversed within six months and we settled into a new high price band at or over $80/bbl between 2008 and 2010.
While all that was going on in the Oil World the 'natural gas crisis' hit in the winter of 2004-05 when American natural gas shot up to $11/MBTU. That gave great incentive for gas drillers to try out their new expensive slickwater fracking ideas in the slow producing natural gas shale beds that had been exploited for a century or longer with simple vertical wells originally just left alone, then later fracked with chemical explosives and in the 1960's even tested with fission explosive fracking under the Atoms for Peace/Project Plowshare experiments. The slickwater fracking of these deep beds for natural Gas was so incredibly successful prices dropped almost overnight and by 2006 Natural gas was selling for under $2/MBTU. When Oil hit $147/bbl in summer 2008 people in the oil and gas industry decided to try out fracking in 'wet' gas regions and set off the boom in LTO entering the market. By the end of 2009 light Tight Oil was starting to have a significant impact, the USA was increasing total production for the first time since Alaska peaked out in 1988. World oil prices had recovered by then creating all the incentive necessary for the 2010-2014 fracking boom that succeeded in reducing American imports even faster than China/India were increasing demand. In fall 2014 OPEC decided to crash prices to punish America but this backfired hurting them a lot worse than it hurt the USA. In mid 2016 they gave up and started gradually cutting production to increase world oil prices. Last week they decided to keep doing that.
So SURE, production from unconventional sources has boomed since 2005, no argument there. However where we differ is economic drivers completely describe each and every step of the process which took place, which zero need to fall back on the EROEI theory as to why this took place.
To be clear I have never bought into the EROEI theory because the models do not have a set of standards to be used. this means modeler A can include the energy used to manufacture the well casing and operate the drilling equipment while Modeler B might include the energy cost of manufacturing the drill rig and modeler C might include the energy costs of manufacturing all the vehicles used by both the drilling operation and the employees who did the labor while modeler D includes the energy cost of building all the roads used in that region and modeler E includes even more embedded energy from some other place I did not mention. This causes two massive intrinsic problems, first you can not compare model runs from different sources because they use different standard inputs and secondly any modeler anywhere can 'tweak' their inputs to get whatever answer they want to get.
Out here in the real world I first ran into this issue dealing with models from activists opposed to nuclear power plants. See they developed models to demonstrate nuclear power was not only uneconomic in the present but that it would never be economic under any circumstances. They did this by tweaking the models through changing the values for the variables until they got the answer they wanted. For example most of the Uranium mined in the USA is procured through a process called in situ leaching. Two wells are drilled, the first one injects a mildly acidic liquid that flows through the uranium ore bed deep underground and the second well extracts the liquid which has dissolved uranium in it by the time it has passed through the formation to the collection well. this process is relatively speaking dirt cheap. But all the modelers opposed to nuclear power insisted on using the costs associated with a hard rock mine where people use explosives and massive machines to pull rock to the surface, crush it into powder and then leach the Uranium out in a big processing plant. That method was used in the 1940's but is increasingly rare in use today, especially in countries like the USA with advanced drilling techniques. They play the same game with every other step in the process from ore extraction all the way to waste disposal.
Learning about the way activists manipulated nuclear energy models made me automatically suspicious of any advocate for or against any technology. Nearly all of them play with the model until it gives them the answer they want to get before they even started working on it. In the energy industry you can see this with the people opposed to ethanol fuel who insist on using only corn as a biofuel input completely ignoring things like Sugar Cane use in Brazil or use of Potato or Yam as starch sources because all three of them have massively larger output for energy input compared to corn ethanol. You also see it when you get energy output models for things like Natural Gas to Diesel conversion plants or Coal to Diesel plants like those the South Africans have been hugely successful with since the 1970's. Here is a hint, when you take Methane from cheap Natural Gas and run in through a modified Fischer–Tropsch process you can manufacture clean sulfur free diesel fuel for about $1/gallon. The more expensive the gas the more expensive the fuel, but the real cost is in building the processing equipment and maintaining it. This lets you play games by saying the equipment only lasts (for example, not real numbers) 7 years before needing to be replaced when in the real world it lasts 28 years before needing to be replaced. that lets you quadruple the projected price without actually proving a darn thing.
It turns out every EROEI study I have ever looked at is just like that. There are literally an unlimited number of inputs you can choose to use and there are no set numbers for any one of those inputs, which lets the modeler adjust things to their hearts content and makes the model totally useless.