Oil Reserves Part II: Unconventional Oil Reserves

So I came across Bill Kovarik's website the other day claiming that the media and other analysts were focused too much on relying on statistics that use proven oil reserve figures and how using these figures is myopic, wrong, and even dangerous. Here are a few quotes from the site:

"Unconventional resources, such as extra heavy oils, tar sands, gas in tight sands, and coal bed methane are not considered [in the USGS 2000 assessment] but they must, nonetheless, be recognized as being present in very large quantities.... The two major sources of unconventional oil ... are the extra heavy oil in the Orinoco province of Venezuela and the ... tar sands in the Western Canada Basin. Taken together, these resource occurrences, in the Western Hemisphere, are approximately equal to the Identified Reserves of conventional crude oil accredited to the Middle East."

"To these estimated quantities of conventional oil must also be added the potential for oil resources from unconventional habitats. These are geographically extensive and include the tar sands of the Province of Alberta in Canada, the heavy oil belt of the Orinoco region of Venezuela and the oil shales of the United States, Brazil, India and Malagasy etc. High production costs and low oil prices have hitherto inhibited the inclusion of unconventional oil resources in the world oil resource figures. Now, developing production technologies, coupled with the very much higher market value of oil, convert large quantites of unconventional oil into an effective resource. The volume of this addition to the ultimate oil resource base is a minium of two trillion (2 x 10 to the 12th) barrels (see WEC-CCR) and a maximum of unknown dimensions, given that, to date, there has been no formal search for unconventional oil and no systematic evaluation of its occurrence on a world wide basis."

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What Is An Unconventional Oil Reserve?

"Unconventional" petroleum reserves include:

Heavy oils, which can be pumped and refined just like conventional petroleum except that they are thicker and have more sulfur and heavy metal contamination, necessitating more extensive refining. Venezuela's Orinoco heavy oil belt is the best known example of this kind of unconventional reserve. Estimated reserves: 1.2 trillion barrels.

Tar Sands, which can be recovered via surface mining or in-situ collection techniques. Again, this is more expensive than lifting conventional petroleum but not prohibitively so. Canada's Athabasca Tar Sands is the best known example of this kind of unconventional reserve. Estimated reserves: 1.8 trillion barrels.

Oil Shale requires extensive processing and consumes large amounts of water. Still, reserves far exceed supplies of conventional oil.

I agree with Bill to the extent that in the future, the world will need to diversify its energy base, as our reliance on oil (actually fossil fuels in general) is unsustainable. That diversification will include a variety of the unconventional oil sources he mentions. But I think Bill is missing the point. You can't just shrug off the fact that these unconventional sources can't be classified as "proven" by oil companies and world governments. It is currently uneconomical/unprofitable to obtain oil from these sources and if investors don't see a return on their money, they're not going to invest. The most profitable oil is sweet crude because it's easy to get, the refining capacity to convert sweet crude to gasoline exists, and everybody in the world wants it. Where's the majority of the remaining sweet crude? The Middle East. If you're reading this Bill, it's dangerous NOT to heavily factor in the Middle East when describing the world's remaining oil supplies.

The other point Bill seems to be missing is that Peak Oil is not about running out of oil. It's about running out of cheap oil. Yes, the supplies of uncoventional oil reserves might be plentiful but think about it...if developing these sources is uneconomical right now, the only way these reserves can be developed if oil prices rise considerably and it becomes worth Exxon's time (for example) to mine for the oil. But if oil prices rise that high, what average consumer in the world is going be able to afford the gas/energy/petroleum byproducts produced from this process? What will the high prices do to the US and global economy?

The other point Bill missed (It's obvious that I think Bill has missed the bigger piture here) is that current infrastructure in place to mine these unconventional oil reserves is dependendent on guess what? Oil and natural gas. Miners need equipment that guzzle gasoline, which will be more expensive in the future.



Refining facilities need fossil fuels to remove sulfur and other contaminents. A large amount of natural gas (which is also in limited supply) generated heat is required to process tar sands:

The tar-sands process also uses huge and growing amounts of natural gas -- at a time of soaring gas prices and when gas resources in the Western Canada Sedimentary Basin are starting to decline. So efforts to ramp up tar-sand operations is raising concerns that the natural gas from the MacKenzie Delta in the Arctic region, which is slated to come to U.S. markets, instead could end up being used for tar sands production.

Between 2 to 6 barrels of freshwater are used to process one barrel of oil from tar sands:

Environmentalists contend that tar sands processing requires anywhere from four to six barrels of water for every barrel of oil. But Annisley said Shell uses two barrels of fresh river water for every barrel of oil...There are no industry-wide figures for how much water the companies use, though Woynillowicz contends that at peak production, the sites will use 350 million cubic meters of water a year -- roughly the amount of water used by a city of 2 million.

And if you were wondering, yes we need freshwater and yes, it's also in limited supply. I won't even start on the environmental damage this process causes...

Ok, so I'm picking on Bill to make a point, so we all don't miss the big picture and allow ourselves to be misled by the media or political figures looking around the corner for the next re-election. Our society has grown from 2 billion to 6 billion (and counting) based on the foundation of cheap oil. The solution our oil shortage/energy crisis does not involve jumping on the next limited natural resource and using it to our heart's desire, until it inevitably runs out. There's no free ride.

Unconventional oil sources are just as problematic as other alternative energy sources. New alternative energy require decades of investment and even then, alternatives will not be enough to satisfy the world's projected demand for energy. We're already behind in the game and we don't have decades. We have to immediately focus on long-term thinking and change our way of life and energy policy to become a more energy efficient society that values energy conservation, not mindless oil consumption. Anything less...would be uncivilized.

Click here for Oil Reserves Part I: Who Has Them and Who's Lying?