The Americas, Not the Middle East, Will Be the World Capital of Energy

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For half a century, the global energy supply's center of gravity has been the Middle East. This fact has had self-evidently enormous implications for the world we live in -- and it's about to change.

By the 2020s, the capital of energy will likely have shifted back to the Western Hemisphere, where it was prior to the ascendancy of Middle Eastern megasuppliers such as Saudi Arabia and Kuwait in the 1960s. The reasons for this shift are partly technological and partly political. Geologists have long known that the Americas are home to plentiful hydrocarbons trapped in hard-to-reach offshore deposits, on-land shale rock, oil sands, and heavy oil formations. The U.S. endowment of unconventional oil is more than 2 trillion barrels, with another 2.4 trillion in Canada and 2 trillion-plus in South America -- compared with conventional Middle Eastern and North African oil resources of 1.2 trillion. The problem was always how to unlock them economically.

But since the early 2000s, the energy industry has largely solved that problem. With the help of horizontal drilling and other innovations, shale gas production in the United States has skyrocketed from virtually nothing to 15 to 20 percent of the U.S. natural gas supply in less than a decade. By 2040, it could account for more than half of it. This tremendous change in volume has turned the conversation in the U.S. natural gas industry on its head; where Americans once fretted about meeting the country's natural gas needs, they now worry about finding potential buyers for the country's surplus.

Meanwhile, onshore oil production in the United States, condemned to predictions of inexorable decline by analysts for two decades, is about to stage an unexpected comeback. Oil production from shale rock, a technically complex process of squeezing hydrocarbons from sedimentary deposits, is just beginning. But analysts are predicting production of as much as 1.5 million barrels a day in the next few years from resources beneath the Great Plains and Texas alone -- the equivalent of 8 percent of current U.S. oil consumption. The development raises the question of what else the U.S. energy industry might accomplish if prices remain high and technology continues to advance. Rising recovery rates from old wells, for example, could also stem previous declines. On top of all this, analysts expect an additional 1 to 2 million barrels a day from the Gulf of Mexico now that drilling is resuming. Peak oil? Not anytime soon.

The picture elsewhere in the Americas is similarly promising. Brazil is believed to have the capacity to pump 2 million barrels a day from "pre-salt" deepwater resources, deposits of crude found more than a mile below the surface of the Atlantic Ocean that until the last couple of years were technologically inaccessible. Similar gains are to be had in Canadian oil sands, where petroleum is extracted from tarry sediment in open pits. And production of perhaps 3 million to 7 million barrels a day more is possible if U.S. in situ heavy oil, or kerogen, can be produced commercially, a process that involves heating rock to allow the oil contained within it to be pumped out in a liquid form. There is no question that such developments face environmental hurdles. But industry is starting to see that it must find ways to get over them, investing in nontoxic drilling fluids, less-invasive hydraulic-fracturing techniques, and new water-recycling processes, among other technologies, in hopes of shrinking the environmental impact of drilling. And like the U.S. oil industry, oil-thirsty China has also recognized the energy potential of the Americas, investing billions in Canada, the United States, and Latin America.

The revolution-swept Middle East and North Africa, meanwhile, will soon be facing up to an inconvenient truth about their own fossil-fuel legacy: Changes of government in the region have historically led to long and steep declines in oil production. Libya's oil output has never recovered to the 3.5 million barrels a day it was producing when Col. Muammar al-Qaddafi overthrew King Idris in 1969; instead it has been stuck at under 2 million barrels a day for three decades and is now close to zero. Iran produced more than 6 million barrels a day in the times of the shah, but saw oil production fall precipitously below 2 million barrels a day in the aftermath of the 1979 Islamic Revolution. It failed to recover significantly during the 1980s and has only crept back to 4 million in recent years. Iraq's production has also suffered during its many years of turmoil and now sits at 2.7 million barrels a day, lower than the 3.5 million it produced before Saddam Hussein came to power.

The Arab Spring stands to complicate matters even further: A 1979-style disruption in Middle Eastern oil exports is hardly out of the question, nor are work stoppages or strikes by oil workers caught up in the region's political zeitgeist. All in all, upwards of 21 million barrels a day of Arab oil production are at stake -- about a quarter of global demand. The boom in the Americas, meanwhile, should be food for thought for the Middle East's remaining autocrats: It means they may not be able to count on ever-rising oil prices to calm restive populations.

This hydrocarbon-driven reordering of geopolitics is already taking place. The petropower of Iran, Russia, and Venezuela has faltered on the back of plentiful American natural gas supply: A surplus of resources in the Americas is sending other foreign suppliers scrambling to line up buyers in Europe and Asia, making it more difficult for such exporters to assert themselves via heavy-handed energy "diplomacy." The U.S. energy industry may also be able to provide the technical assistance necessary for Europe and China to tap unconventional resources of their own, scuttling their need to kowtow to Moscow or the Persian Gulf. So watch this space: America may be back in the energy leadership saddle again.

http://www.foreignpolicy.com/articles/2011/08/15/the_americas_not_the_middle_east_will_be_the_world_capital_of_energy

[mawilson 2,133]

Hydro-fuckin-carbon. Nothing better than that in the future?

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Hydro-fuckin-carbon. Nothing better than that in the future?

Something wrong with hydrocarbons?

[scandal 951]

Iran produced more than 6 million barrels a day in the times of the shah, but saw oil production fall precipitously below 2 million barrels a day in the aftermath of the 1979 Islamic Revolution. It failed to recover significantly during the 1980s and has only crept back to 4 million in recent years.

Um, yeah, they were in a war of survival (Iran-Iraq) in the 80s. No duh. That they have recovered in recent years is testament that even current despot MidEast regimes still know how to pump the black stuff.

Peak oil? Not anytime soon.

I'm no petroleum geologist to comment on yes-peak-oil or no-peak-oil. But I gather this is hardly a settled question in that community. For every new unconventional source of supply the no-peak crowd points to, there is increasing demand (particularly China) and dwindling proven conventional reserves that the yes-peak crowd cites. The truth lies somewhere out there.

The boom in the Americas, meanwhile, should be food for thought for the Middle East's remaining autocrats: It means they may not be able to count on ever-rising oil prices to calm restive populations.

Ah, but note the paradox there? Because those unconventional sources the article cites (shale, mile-deep Brazilian offshore, etc.) are only economically viable at the higher oil prices we've seen in the past decade or so. Oil back at $40 means Fort MacMurray becomes a ghost town again. So if the unconventional supplies require high prices, it means the sheiks aren't quite out of business yet.

[Usui Takumi 1,562]

Um, yeah, they were in a war of survival (Iran-Iraq) in the 80s. No duh. That they have recovered in recent years is testament that even current despot MidEast regimes still know how to pump the black stuff.

I'm no petroleum geologist to comment on yes-peak-oil or no-peak-oil. But I gather this is hardly a settled question in that community. For every new unconventional source of supply the no-peak crowd points to, there is increasing demand (particularly China) and dwindling proven conventional reserves that the yes-peak crowd cites. The truth lies somewhere out there.

Ah, but note the paradox there? Because those unconventional sources the article cites (shale, mile-deep Brazilian offshore, etc.) are only economically viable at the higher oil prices we've seen in the past decade or so. Oil back at $40 means Fort MacMurray becomes a ghost town again. So if the unconventional supplies require high prices, it means the sheiks aren't quite out of business yet.

Peak oil is unpredictable. In theory if oil prices were to steadily rise and remain above say 100 USD without jumping to 130s-200s before crashing over the next few years, then we might be able to get enough other systems online and pumping etc. But logically that means that a large percentage of extra oil needs to hit the market fairly soon. If we are stuck with say 102 or 103% of the current supply for 3 years or more then peak oil could be very real. It will probably just take a 4-5% difference in supply and demand to crash everything.

Edited August 16, 2011 by Sousuke

[Usui Takumi 1,562]

By the Peak oil is not a theory, its an event that will occur. Bringing more oil onto the table only delays it.

[lostinblue 1,989]

Governor Pat Quinn signed legislation to build coal gasification plant in Illinois

7:39 PM, Aug 2, 2011 Brandie Piper FILED UNDER

Headlines

Illinois News

Mt. Vernon, IL (KSDK) - Illinois Governor Pat Quinn signed legislation Tuesday that will help develop a coal gasification facility in southern Illinois. The creation of the state-of-the-art facility is said to create 1,650 jobs and reduce carbon emissions by around 90 percent.

"We must continue to do everything we can to strengthen the state's ongoing economic recovery through projects that create jobs while safeguarding the environment and protecting consumers," said Quinn.

Senate Bill 2169 provides the framework for Power Holdings LLC to build the $2.3 billion facility in Jefferson County. It will convert coal to pipeline-quality synthesis natural gas. Customers will be protected by the new law because it will utilize a pricing formula to prevent volatile swings in the cost of heating homes with natural gas.

An active air quality permit from the Illinois Environmental Protection Agency has already been issued to Power Holdings, and they expect use at least four million tons of Illinois coal per year.

The legislation takes effect immediately, and has been modified from a previous bill that was considered earlier this year, which included input from the Governor, the Citizens Utility Board, and other stakeholders.

Power Holdings will need to prove to state regulators that construction and carbon sequestration costs, as well as operating expenses are reasonable through annual reports and reviews. Pricing based on these costs will be guaranteed for 10 years.

KSDK

http://www.ksdk.com/news/article/269960/3/Coal-gasification-facility-to-be-built-in-southern-Illinois