Commentary, 11/12 2012

Published Dec 3, 2012
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Cover 11/12 2012

Unconventional Standard

As we prepared this issue for press, the International Energy Agency (IEA) – an autonomous body within the (OECD) framework – released the 2012 issue of the World Energy Outlook. The WEO is always of interest – and it always contains focal points that stand out, piquing the interest of the public at large.

And this year’s Outlook is no exception.

According to projections made by the IEA, oil production in the United States will overtake that of Saudi Arabia by 2020, with not only the possible result the country achieving its goal of energy self-sufficiency, but of turning the country in to a net oil exporter.

Such predictions should not be discounted. The IEA pointed to a “Golden Age” for gas, citing the growth in production from US shale gas areas and now, the US is considering new LNG terminals – for export rather than imports.

Just as when Norway’s oil and gas industry was buoyed in 2011 by the size of the Johan Sverdrup field discovered in a “mature” region – along with the far North Skrugard and Havis discoveries – these projections hold the promise of keeping the industry for many years to come.

But unlike the new, large reservoirs discovered on the NCS, the new oil reserves projected for the US are found in the country’s vast shale deposits.

Our traditional, conventional mind-set is that oil and gas are found in reservoirs – pools of oil or balloons of gas – that we can tap and extract. But revolution in the US is the result of applying technologies – tools that have been long in development – to extract resources from seemingly stone.

It’ not new inventions that have made this possible, but technologies that have been evolving over decades to improve oil recovery. The convergence of two innovative technologies in particular – horizontal drilling and hydraulic fracturing – have made all the difference.

Horizontal drilling, the result of innovations that began with slanted drilling in the 1930s – which was developed as the industry began to realise that a reservoir might not lie directly under a drilling rig. Over the decades, improvements in downhole monitoring have increased horizontal drilling speed and dependability.

First used in 1947, hydraulic fracturing to propagate fractures through a layer of rock ranks high among the increased recovery technologies developed by the industry. And in 1998, the technique called horizontal slickwater fracturing, which made shale gas extraction economical, was first used in the Texas’ Barnett Shale area.

As the extraction of shale gas developed, so too did discoveries of shale oil/tight oil. So now, rather than thinking about pools or balloons, we need to expand the reservoir metaphor to include something a little more solid – like a sponge or a wafer.

The positive news of the last couple of years ensures energy security, but also raises issues with carbon emissions.

As Ola Borten Moe, the Norwegian Minister of Petroleum and Energy, emphasised during this year’s Autumn Conference, “We need to move forward on renewables, we need to move forward on CCS and energy efficiency.”

And the Minister added that fossil fuels are here to stay – that our energy supply must be redundant. Fossil fuels will long be necessary to take up the slack for intermittent renewables.

While Dr. Fatih Birol, the IEA’s Chief Economist, was not surprised at the public’s interest in the projection for US oil production, he felt that one important point was not receiving enough attention – energy efficiency.

Energy efficiency will go a long way to increase global energy security and sustainability, while making more energy available to those who now live without.

Technology is key. Technology has made the latest oil and gas revolution possible, and technology will be path toward to more reliable renewable energy sources, further reductions in carbon emissions and more efficient use of our energy resources.

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