Sating our energy hunger
Over 100 years of offshore resource extractionThere is a long tradition of offshore natural gas and oil production. The United States’ first coastal oil rigs were constructed in the late 19th century. One of the pioneers of offshore oil production was industrialist Henry L. Williams, who began extracting oil from the Summerland field off the Californian coast near Santa Barbara in the 1890s. His first oil rigs were built on dry land, but in 1896, he finally ventured offshore, constructing a 100-metre pier from which he began drilling on the sea floor. Before long, others followed suit, and within five years, there were a further 14 piers and more than 400 wells in the area.
- 1.1 > By the late 19th century, oil industry pioneers were venturing offshore. At first, piers connected the oil rigs to the mainland.
- For these oil industry pioneers, building oil rigs far out at sea was simply inconceivable. Their rigs stood in a few metres of water, with piers connecting them to the mainland. It is a different story today. Offshore oil and gas production has become routine. There are currently around 900 large-scale oil and gas platforms around the world. Over time, engineers have penetrated ever greater depths, for with oil prices rising, deepwater oil and gas production, although costly, is now a lucrative business.
With drilling and extraction technology also be-coming increasingly sophisticated, it is now possible to extract oil and gas at ever greater depths. The water depth record for oil production is currently held by an international oil company which produces oil from a well, located in the Tobago field, 2934 metres below the surface of the Gulf of Mexico.
The water depth record for subsea gas production is currently around 2700 m and is held by a platform located in the Cheyenne gas field, also in the Gulf of Mexico.
1.2 > Oil and coal are the world’s most important fossil fuels. The figure shows global primary energy consumption in 2011, together with the percentage share for each energy source. For oil, primary energy consumption is shown in millions of tonnes. For the other energy sources, it is shown in MTOE
Rising energy demand – for cars, heating and electricityHumankind’s energy hunger seems insatiable. In 2011, annual world primary energy consumption was estimated at 12,274 million tonnes of oil equivalent (MTOE) – 40 times Germany’s annual energy consumption. “Tonne of oil equivalent” (TOE) is a metric used to measure and compare consumption of different energy resources. One tonne of oil equivalent (TOE) corresponds to the energy content of one tonne of crude oil. Energy consumption in Europe has decreased in recent years due to the use of modern machinery and efficient electric engines, energy-saving measures and better insulation of buildings. Globally, however, energy consumption is increasing. Total consumption of energy has doubled since the early 1970s and, accord-ing to the International Energy Agency (IEA), is likely to grow by more than one-third to 2035. The world’s growing energy hunger is driven to a large extent by population growth in Asia and ongoing industrialisation in the emerging economies. China, India and West Asian nations account for around 60 per cent of the world’s growth in energy demand.
Today, energy production still largely relies on the burning of fossil fuels: natural gas, oil and coal. The early oil industry pioneers probably never imagined, even in their wildest dreams, just how much of their commodity humankind would ultimately burn or utilise for industrial purposes. Our modern world is almost entirely dependent on fossil inputs. We need them for heating and electricity generation, and of course to fuel our cars, railways, aircraft and shipping. Today, there are more than one billion vehicles – cars, buses and trucks – on the world’s roads, burning vast quantities of petrol and diesel.
Oiling the wheels of the modern worldOil is currently the most important fossil energy source, followed by coal and natural gas. Oil accounted for around 33 per cent of world primary energy consump-tion in 2011, followed by coal and natural gas with around 30 and 24 per cent respectively.
The term “primary energy” refers to the energy forms required by a power station, boiler or engine to generate electricity or heat or to create mo-tion. The term “final energy” is also used: this refers to the energy consumed by end users, such as households, for electricity and heating.
- The remainder comes from nuclear energy, hydropower and other renewables such as solar and wind energy. In 2011, global oil production reached around four billion tonnes, of which a full 61.5 per cent was consumed in the transportation sector. But oil is not only a fuel; it is also an important input in the pharmaceutical and chemical industries, e.g. in plastics production. Car paints and sprays, food storage containers and television sets are just a few examples of consumer items containing substances derived from oil.
Currently, the United States of America (US) is the world’s largest oil consumer, followed by China, whose economy has been growing strongly for many years. Highly industrialised Japan ranks third, with India, an emerging economy, in fourth place. Russia ranks fifth, but its oil consumption remains less than one-sixth the level of the US. In 2011, global oil consumption rose by 2.7 per cent compared with the previous year. The strongest rise in consumption – 6.1 per cent – was observed in the Australasia region. This contrasts with the trend observed in Europe, where consumption fell by 1.2 per cent.
Power and heat from gasIn 2011, global production of natural gas totalled 3337 billion cubic metres – 35 times higher than Germany’s annual consumption of natural gas. Average annual gas consumption for a German household is around 3500 cubic metres. Natural gas is used primarily for heating and electricity production, but it is also a raw material in the chemical industry, e.g. in hydrogen production, ammonia synthesis and the manufacture of nitrogen-based fertilisers. In Germany, Denmark, other European countries and China, natural gas is increasingly replac-ing coal in power generation as it burns cleaner than coal. Here, gas is used in modern combined-cycle (gas and steam) power plants which not only generate electricity but also recover waste heat, making them extremely energy-efficient. Many traditional coal-fired power plants, on the other hand, merely generate electricity with no waste heat recovery. In Europe, demand for gas decreased by 8 per cent between 2010 and 2011, due to the weak economy, relatively high prices and warm weather. The continuous expan-sion of renewable energies was also a factor.
- 1.5 > The world’s 10 largest oil consumers: the United States is by far the largest user of oil. 1.6 > The US is also the world’s largest consumer of natural gas. As with oil, the 10 largest users account for a good 60 per cent of global consumption.
- However, global natural gas consumption increased by 2 per cent over the same period due to strong demand in Asia and the emerging economies. In China, for example, natural gas consumption increased by 20 per cent, while Japan’s gas imports soared by 19 per cent after the 2011 Fuku-shima Daiichi nuclear disaster. As an island nation, Japan relies heavily on liquefied natural gas (LNG) imports which are brought in by sea. As this is more expensive than transporting gas by pipeline, gas prices in Japan are relatively high.
The US was the world’s largest consumer of natural gas in 2011, followed by the Russian Federation and Iran. Iran’s high consumption is due firstly to the strong demand for gas to heat buildings during the country’s cold winters and secondly to the use of gas injection to improve oil recovery in situations of declining pressure in oil wells. China is the world’s fourth-largest consumer of natural gas, with Japan in fifth place.
Conventional or unconventional?
Experts differentiate between conventional and unconventional reserves and resources. Conventional deposits can be devel-oped and exploited using existing technology, whereas unconventional reserves and resources are recoverable only with new, sophisticated and therefore expensive technologies. The shale gas deposits in the US are an example of an unconventional resource.
How long will stocks last?How long will stocks of fossil fuels last? There has been much debate about this question in recent decades. Despite fears that oil in particular could become scarce, this situation has not yet arisen. At present, sufficient oil is still available worldwide to cover growing demand: thanks to more sophisticated technologies, many new on- and offshore oil fields are being discovered and offshore fields can be exploited at ever greater depth. New extraction techniques also allow more oil to be pumped out of the deposits than before. In some cases, disused wells are being reopened in order to extract the remain-ing oil which could not be recovered in the past.
In order to determine the future supply situation, scientists and the oil industry are attempting to predict energy demand trends over the coming decades with the aid of energy scenarios, such as those regularly published by the IEA. The findings are then compared with current estimates of reserves and resources.
Still enough oilThe remaining proven crude oil reserves and resources in 2011 totalled around 585 billion tonnes. Unconven-tional oil accounted for 258 billion tonnes of this total. However, the global distribution of oil fields is extremely uneven. Almost 50 per cent of oil reserves and resources are accounted for by the OPEC states such as Iraq, Iran, Kuwait, Saudi Arabia and Venezuela, whereas only around 20 per cent are accounted for by the Australasia, Africa and Europe regions.
Given the scale of the current oil reserves and resources, it is clear that from a geological perspective, sufficient oil will be available worldwide over the coming years to accommodate a moderate rise in consumption. But will it always be possible to provide sufficient quantities of this energy carrier when it is need-ed in future? That cannot be predicted with certainty. To date, however, it has been possible to calibrate oil production so that there is always enough to meet demand.
Nonetheless, some critics have predicted a scenario known as “peak oil”. This refers to the point in time when the world’s annual oil production reaches an all-time high – a historic peak – and then starts to decline. But with new oil fields constantly being discovered and extraction technologies becoming ever more sophisticated, output has in fact steadily increased worldwide.
- 1.10 > The global distribution of oil reserves and resources is uneven. The most important region is the Middle East with the Arabian Peninsula. In 2011, global oil consumption reached around four billion tonnes, compared with around 585 billion tonnes of oil reserves and resources. Cumulative production is the sum of all oil that has already been produced by a specific date in a given region.
- Some experts are now predicting a “peak plateau” over the coming years: this means that oil production will be sustained at a high level over a longer period of time. However, oil prices will continue to rise, as oil production will increasingly rely on unconventional deposits whose exploitation requires significant technical effort. They include oil sands, which are being exploited on a large scale in Canada, and shale oil, which is trapped in almost impermeable layers of rock and whose extraction therefore also requires major technical effort.
Offshore oil production at ever greater depths will also drive up oil prices. Experts predict that by 2015, as much as 12 per cent of oil will be extracted in deep-water projects at a depth greater than 200 metres, compared with only 2 per cent in 2001.
So it is hard to predict, at this stage, exactly when global oil production will start to decline or when oil will indeed become a scarce resource. If all the various oil resources are consistently exploited, this point is unlikely to be reached before 2035. Nonetheless, some countries have already experienced peak oil in their own industries. One example is the United Kingdom: oil production in the UK peaked in 1999.
Fracking – opportunities and risksIn 2011, the world’s natural gas reserves and resources totalled around 772 trillion cubic metres. This figure is around 230 times higher than the amount of gas con-sumed globally in 2011. Resources account for the major share, amounting to 577 trillion cubic metres, with unconventional natural gas resources comprising around 60 per cent of the total natural gas resource base. One example is coalbed methane, also known as coal seam gas (CSG), a form of natural gas extracted from coal beds. CSG extraction using unconventional technologies is already under way in a number of countries, notably Australia. The US’s extensive shale gas deposits – another major unconventional resource – are attracting particular interest at present. Shale gas is a form of natural gas that is trapped in layers of almost impermeable rock. Although the rock is porous, enabling it to store natural gas, the pores are isolated from each other and, unlike conventional deposits, are not connected to each other by “necks”, or connecting channels. The extraction of shale gas began in the US some years ago, using a technique which relies on the creation of artificial fissures in rock formations containing gas. A mixture of water and chemical agents is pumped into the target formation at high pressure. This comparatively new method of extracting natural gas from shale is known as hydraulic fracturing, or “fracking”.
Fracking has unleashed something of a shale gas revolution in the USA – such that the US is likely to become completely independent of natural gas imports over the next few years. According to current estimates, the US has almost 14 trillion cubic metres of shale gas resources. Globally, the recoverable shale gas potential amounts to around 157 trillion cubic metres. However, our knowledge of the extent to which shale gas deposits exist worldwide is still patchy, putting a question mark over these estimated figures. What’s more, fracking is a highly controversial technology, with critics fearing that the chemical agents used in fracking could leach out and contaminate groundwater.
The future of offshore oil and gas productionToday, most oil and gas extraction still takes place on-shore. Nonetheless, a considerable amount of gas and oil is already produced offshore. Offshore oil extraction currently accounts for 37 per cent of global production. At present, 28 per cent of global gas production takes place offshore – and this is increasing. Coal mining does not currently take place offshore.
For many years, offshore natural gas and oil production was restricted to shallow waters such as the North Sea or coastal areas around the US. However, as many older deposits have become exhausted, companies have increasingly moved into deeper waters. Three separate depth categories are defined:
- shallow water production at water depths of less than 400 metres;
- deepwater production at depths up to around 1500 metres, and
- ultra-deepwater production at depths greater than 1500 metres.
According to recent studies, 481 larger fields were found in deep and ultra-deep waters between 2007 and 2012. They account for more than 50 per cent of the newly discovered larger offshore fields, i.e. fields with an estimated minimum 170 billion barrels of recover-able reserves, corresponding to around 23,800 million tonnes of oil equivalent (Mtoe). The deepwater and ultra-deepwater sectors are thus becoming ever more important. It is also interesting that the newly discover-ed offshore fields are generally around 10 times larger than newly discovered onshore fields, which makes deepwater and ultra-deepwater production an attractive prospect despite the higher costs. Globally, oil and gas extraction at water depths greater than 400 metres is currently limited in scale, amounting to just 7 per cent of production. This is partly because only 38 per cent of the proven deepwater and ultra-deepwater fields are currently in production. Most of these fields are still undergoing detailed surveying, while initial test drilling has already taken place in some cases.
Many experts agree that deepwater and ultra-deepwater fields are the last bastion of oil production. Many of the once high-yielding fields onshore and in shallow waters are almost exhausted, so there is virtually no alternative to deepwater and ultra-deepwater production now and over the coming years. But is oil production in these water depths viable? That ultimately depends on oil prices. Generally speaking, the deeper the water, the higher the extraction costs.
The offshore oil industry extracts oil mainly from conventional sources. If oil prices continue to rise significantly over the coming decades, however, exploiting unconventional deposits, such as shale oil, offshore may well become an increasingly attractive proposition. But this is still a long way off.
- 1.12 > A glance at the volumes of offshore oil and gas fields newly discovered between 2007 and 2012 clearly shows that the bulk of the resource is located at depths of more than 400 metres. 1.13 > The deeper the water, the higher the costs: in 2012, one day of drilling in ultra-deep water, i.e. at depths greater than 1500 metres, cost around four times more than drilling in shallow water.
Promising maritime regionsA number of significant deposits have been discovered offshore since 2007. The Santos Basin off the coast of Brazil, for example, holds several major oil and gas fields with as much as one billion tonnes of oil and a billion cubic metres of natural gas, located under a massive pre-salt layer several thousands of metres under the sea floor. Deposits on this scale could potentially cover total world demand for gas and oil for many months. Despite geophysical surveys of the sea floor, these deposits remained undetected for a very long time because the salt layers caused perturbation in the signals from the measuring devices. Using more advanced technology, the deposits were finally detected a few years ago.
- 1.14 >In recent years, the most significant discoveries of gas and oil fields in water depths greater than 400 metres were made in the South Atlantic and off the coast of West Africa.
- On the other side of the Atlantic, in the Kwanza Basin off the Angolan coast, oil fields have been discovered beneath a 2000-metre thick pre-salt layer. In the Black Sea and the Caspian Sea, new oil and gas fields at depths greater than 400 metres have also been discovered in recent years. Extraction has already begun in some cases, with countries such as Iran, Romania and Russia now engaged in deepwater production.
Important new oil fields were also discovered in the Gulf of Mexico and off the coast of Ghana and French Guiana. Spurred on by these findings, there are now plans to search for further deposits in similar geological formations off the coast of two neighbouring countries, Suriname and Brazil. Today, the deep and ultra-deep waters in the Gulf of Mexico and in the Atlantic off South America and West Africa are regarded as the most promising regions for oil exploration.
Between 2007 and 2012, major gas fields were discovered off the coast of Mozambique and Tanzania and in the Mediterranean close to Israel and Cyprus. Both fields are so abundant that they will revolutionise the supply of gas in these regions: Israel, for example, has the potential to become completely independent of gas imports from its Arab neighbours for the foreseeable future.
The Arctic region – a special caseAs the Arctic sea ice melts as a result of climate change, hopes are growing among Arctic nations of tapping the oil and natural gas deposits in the northern polar re-gions. Current scientific studies suggest that there are indeed substantial deposits in this region. It is estimated that about 30 per cent of undiscovered gas and 13 per cent of undiscovered oil can be found in the ma-rine areas north of the Arctic Circle. The substantial gas deposits are thought to be located mainly in Russian waters.
As yet, no one can say whether or when extraction will begin in the Arctic, especially as various legal questions have still to be clarified. Over recent years, a conflict has erupted among Arctic nations over territo-rial claims to the Arctic seabed. The Arctic nations expect to derive substantial revenues from these natural resources, but will have to be patient. Complicating matters, extraction in these regions is not economically viable at present: exploration alone will require expensive and complex ice-breaking operations.