Chocolate mousse for a slimmed down world

When I was a teenager, my friends and I used to hang out at burger bars eating calorie-laden chocolate mousse desserts with no thought to our waistlines. I have never seen sand oil but I imagine it looks a bit like chocolate mousse.

While the days of chocolate dessert may be numbered in a more health conscious world, oil sands have become an essential ingredient on the energy menu as oil companies struggle to find new sources of energy supply to replace depleting reserves of crude oil and natural gas.

Since the first crude oil well was drilled in 1859, we have burned 900 billion barrels of the fossil fuel, roughly half of known available reserves estimated at 1.8 trillion barrels. With little chance of finding significant new reserves on this planet, we are fast approaching the half-way point when fields will start going into decline. As that happens, it becomes more expensive to extract the oil remaining in the ground.

We will need more energy to produce a barrel of crude oil, some say as much as six barrels will be needed to produce one barrel. Nobody can say for sure when we will reach a peak after which crude oil production will go into decline but most analysts agree it will be sometime in the middle of this century. Soaring demand from the fast growing economies of China and India has brought this date closer.

Oil sands, also known as tar oil, offers some hope of delaying this decline but they are by no means a solution to the world's energy woes. There are just not enough conventional fuel sources to guarantee that the world can produce enough food for the 11 billion people who are expected to be alive in 2040.

By 2025, world oil demand will rise to 120 million barrels per day (bpd) from around 84 million bpd currently. Some 90 per cent of the world's producing reservoirs are more than 20 years old and 70 per cent of them are more than 30 years old.

As pressure drops in a reservoir, you need to use enhanced recovery systems to bring the oil to the surface. At this point, countries that hold spare production capacity such as Saudi Arabia, the UAE and Kuwait, will be able to influence price because consumers will be competing for every available barrel.

High oil prices have made it more economic for oil companies to use enhanced recovery methods and other techniques to prolong the life of existing oilfields and to drill into fields previously deemed non-commercial. These techniques have been used with success in the North Sea but production there has gone into decline.

North Sea oil was developed in response to the 1973 oil shock, when oil prices soared and extracting oil from its inhospitable waters became economically viable. There are no known sources of crude oil that provide reserves as significant as the North Sea. The Caspian area is seen as a potential source of new supply but pipeline costs make it a more expensive option than, say, finding a new oilfield in Saudi Arabia or Iraq.

So it is back to oil sands, nature's chocolate mousse. There are an estimated 1.7 trillion barrels of oil sands around the world but the biggest deposits are to be found in Canada and Venezuela, two leading suppliers of crude oil to the United States. With crude oil prices at $50 per barrel, extracting oil sands has become economic.

Costly process

But oil sands are not exactly cheap to produce. It takes 2 million tonnes of oil sands to produce one barrel of crude oil. That's a lot of sand and gravel that needs to be shifted and the bitumen oil sands is a mixture of bitumen, a very thick oily substance, sand, water and clay. The sludge is converted into crude oil in a process that involves washing the mixture and skimming off the oil. Because bitumen makes up around 17 per cent of oil sands, it takes 2 million tonnes of oil sands to produce one barrel of oil.

Current production is around 1 million barrels per day but rising. By 2015, Canada may be able to produce 2 million bpd of crude oil, more than Iraq today. The process of mining oil sands is not exactly environmentally friendly either with thousands of tonnes of carbon dioxide, a greenhouse gas, released whenever the sands are shifted. But this and a technology known as gas-to-liquids (GTL), which uses natural gas to produce ultra-clean fuels, is very costly.

Qatar, which holds the third biggest natural gas reserves in the world after Russia and Iran, has bet on oil prices staying high enough to make its half dozen planned GTL projects commercially viable.

Oil companies are spending more money currently to prolong the life of conventional fuel sources than in renewable energy, which still occupies a very small percentage of the global energy mix. In the United States, renewable energy provides only 8 per cent of power generation. High oil prices may eventually slow demand but the race for the world's dwindling fossil fuels is just beginning.

Conservation is the only answer now if these resources are to be preserved for future generations. I may not eat chocolate mousse any more but I would not deprive my children of it.

The writer is Middle East editor of Platts, energy information division of the McGraw-Hill Companies. The opinions expressed in this column are those of the author and do not necessarily reflect those of Platts.