Tar baby: Oil sands and peak oil

As promised I'm going to discuss how new nonconventional sources of oil, particularly oil sands (also known as tar sands, hence my headline) fit into the arguments about peak world oil production. To understand this, you must first understand the idea of "net energy." The simplest way to explain it is that it takes energy to get energy. In other words, some energy has to be expended in the form of drilling, pumping, refining and transporting oil, for instance, before its energy can be used. The same is true of any energy resource. It follows that if there is no net energy from an energy resource, it is pointless to extract and refine it since this leads to a net loss of energy or at best, no net gain. (An energy source, such as oil, may be valuable for other things such as plastics or petrochemicals and therefore still be worth extracting for these purposes even if there is no net energy gain.)

As you might expect the earliest discoveries of oil and coal were the easiest to get and thus yielded the highest net energy. Before 1940 the net energy for oil was greater than 100 to 1, that is 100 units of energy yielded for every 1 unit expended. Since then it's declined to around 20 to 1 for current production and 8 to 1 for new discoveries. The same is true of coal though the ratios differ.

When oil optimists point to the Canadian oil sands and say there is more oil there than in all of the Middle East, what they don't tell you is this. First, as I mentioned in Do high oil prices foreshadow a deeper crisis?, no resource can ever be economically extracted at 100 percent rates. It's not unusual for oil fields to yield only 30 to 40 percent of their total oil before it costs more to extract the oil than it's worth. There's every reason to believe that extraction rates for the oil sands will be no better.

Second, it takes a lot of energy to separate the oil film from the sand. Lots of hot water is involved. That takes a lot of energy. Third, the water has to come from somewhere and pumping it takes energy. (The oily waste water is pumped into vast lagoons for disposal, but that is another issue.) Fourth, and very important, the product produced up to this point isn't conventional oil. The residue left from this process has to have hydrogen added to it before it becomes suitable for use. Where does the hydrogen come from? Much of it comes from natural gas another finite resource the supply of which may very well be peaking in North America and may peak worldwide sometime before 2050.

The bottom line: It takes something like the equivalent of two barrels of oil in energy to make three barrels of conventional oil from oil sands. The technology will surely improve. But, it is unlikely to ever move from 1.5 to 1 to the 20 to 1 ratios we're getting from old production. And, as the cost of all conventional energy sources rises, so will the cost of extracting oil from oil sands.

This doesn't mean that oil from oil sands won't be useful. Many who say a peak in world oil production is imminent believe that such sources of oil will prevent an abrupt falloff of production on the other side of the peak. But, oil sands and other nonconventional sources of oil will probably not do anything to delay the peak if it is nearby, say, within the next 10 to 15 years.

For a good discussion of this topic and the entire peak oil issue, I recommend Richard Heinberg's "The Party's Over." It's the clearest account I've read to date.

[In my next post on this topic I'll discuss why the so-called "cornucopian" economists who believe the marketplace will take care of our energy challenges may be drastically miscalculating.]

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