Unconventional oil: Think of the volumes, not the quality

For decades, doomsayers have wailed that we are running out of oil, and economists have replied smugly that price rises would always bring forth extra supply. A new report from the consultancy, Wood Mackenzie, suggests that both may be right and that will lead to some difficult choices.

Wood Mackenzie’s report identifies 3,600bn barrels of unconventional reserves such as oil shales and sands. This is a colossal figure: current global oil consumption is about 30bn barrels a year. Better, these reserves are widely dispersed, with large resources near consumers in North America and China. They offer reassurance against the depletion of conventional oil and against instability in the Middle East.

The good news ends there, however
The report makes it clear that these reserves might be needed much sooner than many industry experts had expected. Demand continues to blossom and, while new oil is always being discovered, many of today’s largest fields are in decline. As soon as 2020, conventional production could reach a plateau, leaving unconventional reserves to take up the slack.

If the report is correct – a big if – then it is worrying. Unconventional oil is expensive to exploit. The technology is unproven for all but a few early projects, and engineers are scarce. Unconventional oil production is also an environmentally damaging mining operation that uses a lot of energy and water to produce low-quality crudes.

Financial Times