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Energy Bridges

Energy Bridges

Energy bridges are new technologies and fuel sources that can help us make the transition from the oil age to a post-oil era. We cannot simply one day decide to end all fossil fuel use because the world as we know is hardwired to run on fossil fuels. Food is grown and transported with petroleum, while global shipping and air links enable international commerce to function very efficiently. Even the great technological revolution wrought by the Internet is underwritten by access to secure and affordable energy�much of it from fossil fuels.
Yet, we cannot sit by and passively watch global oil production peak and then inexorably decline. Oil price shocks triggered by shortages would cause massive economic and social dislocations and would be great tragedies for humanity.
To forestall these events, we must search for energy sources that can tide us over until we find new ways to heat our homes, power transportation systems, and run our factories. Our oil addiction cannot be broken overnight. We must wean ourselves off of oil to the extent possible with existing resources and new technologies for producing and using them.
Unconventional oil in the form of tar sands, bitumen deposits, and oil shale is one beam of the energy bridge. Liquefied natural gas forms another. The gas to liquids process by which natural gas is made into gasoline and diesel fuel (GTL) is the third girder of the energy bridge.
All of these technologies are currently economically competitive and can make a dent in global oil usage if brought on line immediately. The coming era of �peak oil� makes our ability to find new energy sources one of the major challenges humanity faces in the 21st century.

Peak Oil

�Peak oil� means that oil production rises rapidly, plateaus, and then drops off. What this means is that at some point between now and 2020, the world�s oil production will likely peak and then enter a slow, but relentless decline. Oil reserves will not dry up the day after production peaks, but current world production of 85 million barrels per day might total only 75 million barrels per day 10 years down the road.
If oil production fell by 10 million barrels per day over a 10-year period in the future, consumers could face $200/barrel oil and $6/gallon gasoline. Oil thirsty importers like the US and China might go to war for oil. The global transportation and shipping system would grind to a halt and along with it, the global economy. For these reasons, all major energy consuming countries must aggressively pursue a strategy that uses energy bridges as a stepping-stone to new technologies and energy sources.

Tar Sands/Oil Shale/Bitumen

With today�s high oil prices, a new player has come onto the world oil stage��non-conventional oil.�
�Non-conventional oil� means bitumen deposits, oil shale, and tar sands that cannot be pumped the way conventional crude oil can. They must be either mined and processed, or heated underground and the oil pumped out. Bitumen consists of tar that is recovered by drilling wells in the deposit and injecting steam to liquefy the tarry bitumen so that it can be pumped to the surface. The process is technically difficult and more expensive than conventional crude oil production. Nonetheless, production costs for tar sands oil have fallen to around $15 per barrel, making them a viable fuel source at today�s $50+ per barrel prices. Similarly, Shell Oil has found a way to extract oil from oil shale that is competitive at world prices of $30/barrel.

Why We Need Non-conventional Oil

World oil demand is growing strongly and by 2030, the International Energy Agency forecasts oil demand of up to 120 million barrels per day. Today, the world consumes about 85 million barrels per day and producers are just barely able to meet this demand. Three years ago, the OPEC countries had spare production capacity of 6 million barrels per day that could be brought online in times of emergency to keep prices down. This spare capacity is down to 2 million barrels per day�nearly all in Saudi Arabia--and in coming years demand growth rates will severely test producers� capacity to bring enough new oil online.
Bringing new oil supplies from tar sands and oil shale online is a vital enterprise because the world�s remaining conventional crude oil reserves are estimated at roughly 1 trillion barrels (~32 years worth of supply at current oil consumption rates). Counting oil shale and oil sands, the US Department of Energy estimates that North America�s non-conventional oil reserves .

are estimated at roughly 1 trillion barrels (~32 years worth of supply at current oil consumption rates). Counting oil shale and oil sands, the US Department of Energy estimates that North

America�s non-conventional oil reserves total nearly four trillion barrels.

to view the table click on it .

Production from oil shale and tar sands will be critical in keeping oil prices in an affordable range and in keeping the world economy on track. The consequences of delayed non-conventional oil development could include oil supply shortfalls that could trigger global economic collapse, oil wars, and massive famines.

CARE�s Positio

CARE supports the development of oil shale and tar sands as responsible energy sources. These raw fuels represent what is currently the best possible solution to the greatest challenge facing the world today. World oil consumption has been rapidly expanding and with the developing economies of India, China and other nations it is unlikely to level off, let alone slow down. At the same time we may be reaching the peak of world oil production. The largest oil fields are being depleted and new �elephant� fields are not being discovered. Ideally, mankind needs to transition to a primary transportation energy source that is not derived from fossil fuels. However, it is currently unclear what that resource may be. Whatever it is, oil shale and tar sands may become the energy bridge between the present and the future. Affordable transportation fuels are critically important to our economy, national security and perhaps even our survival. There are significant drawbacks to oil shale and tar sands (they require large amounts of natural gas, intense/heavy impacts to land surface, generate air pollution and large amounts of carbon dioxide that may contribute to global warming), however the inability to provide adequate transportation fuels to our nation would wreak unimaginable devastation on Americans as well as the environment.

How Non-Conventional Oil is Produced

Tar Sands

Tar sands consist of deposits of sand in which sand grains are covered with asphalt-like bitumen. It is thought to have formed in areas where deep crude oil deposits migrated upwards into shallow sandstone formations where the lighter crude oil components were then eaten by microorganisms, leaving the tarry bitumen behind. Tar sand lying near the surface is strip mined, crushed, and processed to separate the bitumen. The bitumen is then converted to synthetic crude oil by heating it under pressure, adding hydrogen, and removing sulfur and nitrogen.

Oil Shale

Oil shale is shale rock laden with a waxy hydrocarbon known as kerogen. Outside of Australia, oil shale is not yet being developed on a large commercial scale but reserves in the Western Hemisphere are huge, with an estimated 800 billion barrels of recoverable shale oil in Wyoming, Colorado, and Utah alone.

Colorado and Utah experienced a brief oil shale boom during the last bout of high oil prices, but the market collapsed in 1982 when conventional oil prices fell, and thousands were laid off when companies� shut down their oil shale projects. Now, most observers feel that the world oil market has fundamentally changed and that long-term prices will not fall below $40/barrel. The old oil shale extraction methods require prices of $70-95/barrel to be competitive, but a new process developed by Shell Oil is said to be profitable at prices of $30/barrel. As technology improves, the production cost may fall even further.

Oil shale can be strip mined, crushed, and then heated in a furnace to drive out kerogen, which can then be collected and refined. This process is known as �retorting.� Or, the shale can retorted �in situ� in a process known as �in situ conversion.�

Here�s how it works. First, wells are drilled into the oil shale deposit. Second, to protect groundwater, wells are drilled around the perimeter of the site, water is injected, refrigerants are pumped through to freeze it, and presto, one has an impermeable, non-toxic barrier to anything from drilling that might contaminate groundwater. Third, heaters are lowered down the wells to cook the oil and natural gas out of the shale. Finally, oil and natural gas are pumped out until the site runs dry, then the operator plugs the wells and moves to the next site.

Shell Oil, which developed this process, says that its produced oil will be competitive at world oil prices of $30/barrel. The US Department of Energy believes that by 2020, the US can produce 2 million barrels per day of shale oil, with an ultimate long-term potential to produce up to 10 million barrels per day�nearly half of our current oil usage. Read an artice about Shell's Mahogany Research Project in CARE's February 2007 Newsletter.

Facts

Non-conventional oil (NCO) takes 3 forms: extra heavy crude oil/bitumen, oil sands, and oil shale
The Green River Basin in Colorado, Wyoming, and Utah has oil shale deposits that contain up to 800 billion barrels of recoverable oil�3 times the size of Saudi Arabia�s oil reserves
This is enough oil to meet 25% of America�s current oil demand for 400 years to come
Venezuela also has large heavy oil reserves in the Orinoco Belt (300 billion barrels recoverable)
The Western Hemisphere alone contains more than 1 trillion barrels of recoverable unconventional oil. This is at least 35 years worth of oil at current global consumption rates.
The US DOE believes that Western oil shale deposits can ultimately support production of up to 10 million barrels per day

Pros

Most tar sands and oil shale reserves are found in the US and Canada
Most non-conventional oil production will come from stable countries that do not belong to a cartel. This will help stabilize world oil prices by removing the �fear premium� and the incentives it gives speculators.
Canada is a stable and friendly oil supplier
Non-conventional oil can reduce America�s overseas oil import dependence
Non-conventional oil from oil shale, bitumen, and tar sands is basically compatible with existing pipeline and refinery infrastructure
May turn back the clock on �Peak Oil�
oil sands and oil shale can be an �energy bridge� to the post-oil era

Cons

Production cannot be ramped up as quickly as conventional oil production can. There will be no �swing suppliers� that can turn the taps on and off in response to global market shocks. This may mean that consumers must maintain larger oil stockpiles�like the US Strategic Petroleum Reserve (SPR)
Possible high environmental impact of tar sands strip mining, potential environmental impact of oil shale development still not fully understood
Oil sands production requires huge amounts of increasingly valuable natural gas
Oil sands operations emit large amounts of carbon dioxide, which could constrain future tar sands development

The Future

Most oil market experts agree that we will soon enter an era of �peak oil� in which oil production worldwide will plateau and then inexorably decline. This does not mean that conventional oil supplies will run out tomorrow, but it does mean that energy consumers the world over will be forced to turn to replacement energy sources in coming decades. One of these will be non-conventional oil, with its technically challenging, but huge and largely untapped reserves.

Useful Websites

Alberta Department of Energy

Syncrude Canada Ltd.

Suncor Energy.

Petroleum Alchemy: Gas-to-Liquids

In the past, large gas deposits that were too far from markets to justify pipeline construction simply sat �stranded� after their discovery, sometimes for decades. Now, a process known as �gas to liquids� (GTL) can make this gas into gasoline, diesel, and motor oil.

How GTL is Made

Natural gas, steam, and oxygen are heated together, yielding synthesis gas (carbon monoxide and hydrogen). The synthesis gas is then sent to a reactor where it bubbles up through a catalyst and becomes a wax. Hydrogen is then added to the wax, turning it into gasoline, diesel fuel, or motor oil.
GTL production is based on an old idea. During World War II, Germany was cut off from overseas oil supplies that it relied upon to make gasoline and other fuels. In response, German chemists used the Fischer-Tropsch process to make fuels. Coal from Germany�s rich reserves was gasified, made into synthesis gas (a mixture of carbon monoxide and hydrogen), and then mixed with a catalyst, which created liquid fuel. South Africa employed a similar process to make motor fuels during the Apartheid era oil embargo.
Today, huge gas fields in remote places like Qatar and Iran are ideal candidates for GTL projects. Insert graphic

CARE's Position

CARE supports GTL as a responsible energy source that will allow energy companies to make stranded and otherwise worthless gas into badly needed motor fuels. GTL produced fuels cause less pollution than traditional fuels from crude oil. Moreover, mankind needs to transition to a primary transportation energy source that is not derived from fossil fuels. It is currently unclear what that resource may be. Whatever it is, GTL derived fuels may part of the energy bridge between the present and the future. Affordable transportation fuels are critically important to our economy, national security and perhaps even our survival. Using GTL-made fuels can help reduce global oil demand and can serve as an �energy bridge� as mankind works to move beyond oil and find new ways to power our transportation systems.

GTL Facts

GTL technology allows owners of remote gas reserves a way to bring their gas to market and increase the world energy supply
Huge gas deposits in the Middle East and Africa that lie far from markets are ideal candidates for GTL
Advances in GTL technology have made it competitive as long as oil prices stay above $20/barrel
The European Union�s campaign to tighten air quality standards will create high demand for low sulfur diesel, like that produced by GTL
Qatar and Iran have the world�s highest GTL potential due to their massive and remote gas fields
International energy companies in Qatar are planning GTL plants that can make 130,000 barrels per day of motor fuel each
Russia could use GTL to develop remote gas resources in Siberia
Russian use of GTL motor fuels could also decrease domestic oil demand and allow the country to export more oil
Alaska�s North Slope gas fields could be candidates for GTL development if pipeline plans fall through

GTL Pros

GTL produced diesel fuel is nearly sulfur free and has a higher cetane number than diesel from crude oil (this is an �octane number� for diesel fuel). This makes engines run more quietly and with less smoke.
GTL allows stranded, otherwise worthless gas to be turned into useful fuels and lubricants
GTL products are compatible with existing tankers, pipelines, and storage facilities
Engines running on GTL fuels pollute less
Greater global use of GTL-made gasoline and diesel could slow down oil demand

GTL Cons

GTL fuels will be imported and will increase our reliance on foreign energy
GTL plants are expensive to build�Sasol�s recently announced Oryx GTL plant in Qatar will cost $950 million to build
Most large gas deposits are found in unstable areas like the Middle East
GTL products will sell at a premium in the US because they will have to be transported from the Middle East and other distant areas

Useful GTL Links

Ivanhoe Energy
ExxonMobil

Liquefied Natural Gas

Natural gas is a clean burning and valuable fuel, but it is very difficult to ship over long distances, because unlike crude oil, it cannot simply be pumped and loaded directly onto a tanker ship. Because of this, the world�s natural gas markets were isolated from one another for most of the past 100 years. Now the rise of LNG is creating a global market. Supplies from Russia, Qatar, and other distant gas producers can now be sold throughout the world, benefiting consumers everywhere.

Qatar Oil Reserves to be Depleted

Qatar Oil Reserves to be Depleted in 15 Years2007-10-10 - By Luke Burgess

BALTIMORE, MD--Even though it is the smallest of the OPEC producers, Qatar remains a vital cog in the global crude oil supply/demand balance. In return, the tiny peninsula country stakes up trillions of hydrocarbon dollars every year. But many of Qatar's oil fields are old and largely depleted. Some estimate that the country's entire oil reserves will be almost completely depleted in 15 years. Fortunately, Qatar has a back up plan. But the means are going cost them . . . big time.

With a population of roughly 900,000, Qatar currently produces over 800,000 barrels of crude per day. Interestingly, this means that there are .889 barrels of oil produced every day per citizen. In comparison, the United States produces .017 barrels per day (bbls/d) per citizen, Canada pumps out .098 bbls/d per citizen, and Saudi Arabia, the king of all world oil production, produces .269 bbls/d per citizen.Qatar's crude production has risen steadily since the 1980s. And even though the country produces out less than a million barrels of crude per day, Qatar has managed to more than double production of its black gold in the past twenty years. This is a feat few other oil producing nations can tout and makes the country a strategic member of OPEC.

But many of Qatar's oil fields are old. And most are largely depleted. The country largest liquid hydrocarbon deposit is the Dukhan oil field. The Dukhan complex has production facilities that can handle up to 335,000 barrels per day, over 40% of the country total output. But this field starting producing crude back in 1947. And at over 60 years old, Dukhan is an aging grandfather in oil field years and will not be able to sustain current production levels much longer.Other than the Dukan field, Qatar has only two other offshore oil fields, Al-Shaheen and Idd Ed Shardi, that have the capacity to produce over 100,000 barrels per day. Al-Shaheen is the most prospective of the two with crude oil reserves of about 780 million barrels. Production began at Al-Shaheen in 1994 with an average daily capacity of 30,000 bbls/d. The field's production in the first quarter of 2006 mounted to 240,000 bbls/d and has been estimated to increase to 525,000 bbls/d by the end of 2009.But Al-Shaheen may be Qatar's last oil revenue hurray. By 2023, all of Qatar's oil fields are projected to be mostly depleted.Fortunately for the country, Qatar controls the North natural gas field, which is currently assumed to contain an eye-popping 900 trillion cubic feet of recoverable natural gas reserves. That's about 14% of the total worldwide reserves.Matthew Simmons called this monstrous natural gas field the "Single, most important natural gas field in the world."Much of this natural gas will likely be converted into liquid fuels by employing a process known as gas-to-liquids. Using this technology, refineries can convert gaseous products into valuable fuel oils, which can be sold as or blended with diesel fuel. Liquid fuels are cheaper to transport, market, and distribute to large markets making them ideal products.Moreover, gas-to-liquids technology is becoming increasingly significant as crude oil resources are depleted, while natural gas supplies are projected to last into the 22nd century.At this point in time, however, it's still cheaper and easier for most countries to create refined petroleum products using traditional crude oil. Gas-to-liquid technology requires significant capital expenditure . . . in the tens of billions . . . much of which is needed for engineering and technical resources. Fact is, there are only a few guys in the world today that can be considered gas-to-liquid "experts" and securing one of these guys to work on your project right now is extremely difficult. Because of this lack of wide knowledge base, gas-to-liquid technology, while very promising, is still a few years away.In the meantime, the world needs crude oil . . . and lots of it. And the depletion of Qatar's oil fields in the next 15 years will further add to the supply/demand imbalance and ultimately push oil prices ever higher. It's difficult to say exactly how high oil prices will go. Some think the black goopy stuff should already be over $100 per barrel . . . like Qatar's energy minister.Earlier this week Abdullah bin Hamad Al-Attiyah, the Deputy Prime Minister and Minister of Energy for Qatar, said in remarks aired by Al-Jazeera television, "If we take into account inflation from 1972 to the present day, the real and fair price for oil should be more than 100 dollars."The current price of crude oil still does not reflect all the fundamentals. And even while currently trading at record highs, oil prices still have plenty of room to run. And as crude prices knife higher, oil and gas stocks will inevitably continue to bloom.With this in mind, we've carefully handpicked a select group of oil and gas stocks for the Secret Stock Files portfolio, including one that I think is right now worth 45.7% more than current share prices. And I urge you to start taking positions in oil and gas firms now if you haven't already.

Qatar Gas

Qatargas is a natural gas company in Qatar. It has offshore natural gas production, which supplies the LNG plant in Ras Laffan, which has three operation LNG trains. The company was established in 1984 and the shareholders of the company are Qatar Petroleum, ExxonMobil, .Total, Mitsui and Marubeni
Qatargas II, a joint venture of Qatar Petroleum and ExxonMobil, consists two LNG trains. It is involved in the construction of the controversial South Hook LNG terminal at Milford Haven, .Pembrokeshire, South Wales, which will feed the South Wales Gas Pipeline
In addition to the Qatargas II project, a further two trains are under construction. Qatargas III is a joint venture between Qatargas and ConocoPhillips. Qatargas IV is a joint venture between Qatargas and Shell. At first approached as separate projects, Qatargas 3&4 are now being built by a joint asset development team (JADT) which is staffed by Qatargas,
.ConocoPhillips and Shell employees as well as project direct hires and short term contractors