Q & A with Sally Odland
Sally Odland has worked 20 years as a geologist and project manager in mineral exploration for the U.S. Geological Survey, in oil and gas exploration for the private sector and in environmental remediation as a federal Environmental Protection Agency contractor.
She currently administers the Division of Marine Geology and Geophysics at Lamont Doherty Earth Observatory of Columbia University in Palisades. She holds advanced degrees in economic geology and business administration. Her 2006 MBA dissertation was titled: “Strategic Choices for Managing the Transition from Peak Oil to a Reduced Petroleum Economy.”
1) How many barrels of oil flow through the world”™s veins in a single day?
“The world runs on 86 million to 87 million barrels of oil per day, give or take. Or a thousand barrels a second. That”™s the flow we need to keep our economies going at their present rate.”
2) When we hear about oceans of oil underground, what sort of geologic environment are they describing or misdescribing? What”™s it like down there?
“People often visualize an oil reservoir as a vast underground pool. But actually, the oil occupies tiny pore spaces in a rock matrix. It takes very specific geologic conditions to get oil into the reservoir: you need an organic-rich source rock, porous reservoir rocks, some kind of trapping feature, a migration pathway. And most importantly, the deposit needs a Goldilocks history in the ”˜oil kitchen.”™Â Not buried deep enough or long enough ”“ too cold ”“ and the organic stuff doesn”™t convert to oil; too hot and the oil bakes off.
“So, we”™re talking relatively high pressure, high temperature environments for oil formation.”
3) You have a tongue twister that”™s related to oil availability. What is it and would you explain it?
“It is ”˜tortuosity of porosity.”™ That describes how tortured the pathway is that the oil must follow to move from it”™s pore space to the well.”
4) Where does it come from by volume? Middle East, Gulf of Mexico, Venezuela, Alaska?
“The top three oil countries are Russia, Saudi Arabia and the U.S. They produce about 10 million, 9 million and 7.5 million barrels per day (mbd), respectively. Iran produces about 4 mbd, then China and Canada at 3-plus mbd. Iraq, Kuwait, United Arab Emirates, Mexico, Nigeria, Norway, Venezuela, and Brazil all produce more than 2 mbd but less than 3 mbd. The 1 mbd countries like Libya, Angola and Algeria are relatively small players, though critical to world export capacity.
“The U.S. consumes so much oil that it has to import more oil than it produces domestically. Our main ”˜dealers”™ are Canada, Mexico, Saudi Arabia and Nigeria.”
5) The Middle East has been called, usually disparagingly, the world”™s gas station. Political volatility notwithstanding, how long can that go on? Didn”™t the Wikileaks scandal indicate Saudi Arabia has less oil than it has let on?
“It will go on until it doesn”™t. Then we”™ll know. Reported reserve numbers are unaudited and highly political. But rate is more critical than reserves. Many analysts are skeptical that the Saudis can open the spigot much further. They claim the ability to pump more than 12 mbd, but have not pumped above 10 since the 1980s. I suspect we”™ll find out soon enough whether that spare capacity is really there. The Saudis are pumping about 9 mbd now, after announcing an increase to replace lost Libyan production.”
6) Doesn”™t technology make available deeper and deeper deposits?
“Well sure. But there”™s a limit. And a price. You still have to find favorable geology within the ”˜oil window.”™ And conditions get more much more difficult and expensive with depth, especially when you start in deepwater.”
7) When the Deepwater Horizon blew up in the Gulf of Mexico, it was already preparing to leave its spot above a well that went on to gush for months. Why is this?
“The oil reservoir they encountered was obviously very highly pressurized.”
8) What are the tar sands in Canada and how hard/easy is it to capture oil from them? Cost per barrel vs. more standard extraction?
“Canada”™s ”˜oil sands”™ are really bitumen, not oil. Hence the nickname ”˜tar sands.”™ These were once real oil deposits, but now all the light hydrocarbon components have been stripped off, leaving only the heavy residuals. These deposits are nothing like free-flowing oil well fields; they are large-scale mining operations. And there”™s no ”˜oil”™ to capture. The bitumen has to be thinned and then synthesized into oil by adding hydrogen.
“There are very large energy and water inputs involved in generating oil from tar sands. Price-wise, breakeven is reportedly around $70 to $75 per barrel. Below that price, the oil stays in the ground.”
9) As this is being written, we are experiencing another gasoline price spike ”“ this one apparently spurred by Libya. We saw $4 per gallon briefly a couple of years ago and now it appears to be coming back. Is there a top price that you foresee in the next decade?
“I”™m not falling into your forecasting trap! Oil price depends on so many things ”“ demand, supply, spare capacity, geopolitics, weather, the value of the dollar, where hedge funds are throwing their money. Gasoline prices reflect all that and refinery issues. What I will predict is tightening oil supplies and increasing price volatility, with periodic price shocks. Oil prices could easily double in the next decade. They tripled in the last one.
“It all hinges on spare capacity. Even before Egypt and Libya, many industry watchers were predicting the next price spike by 2012 or 2013. Now it looks like it could happen this year.”
10) Fracking is a hot topic. Why is it controversial? Isn”™t homegrown energy a grail?
“This is a huge topic. Horizontal drilling and hydro-fracturing (”˜fracking”™) technology has freed up oil and gas from ”˜tight,”™ low-permeability formations that we had zero ability to tap only a few years ago. Without it, U.S. natural gas production would be in a steep decline.
But the shale gas industry emerged fast and relatively unregulated. And that”™s where the problems lie. The fracking process injects large volumes of water and additives into the host formation to create microfractures so that the oil or gas can flow to the well. In a few cases, shoddy drilling or waste fluid containment has led to contamination of nearby streams or drinking water supplies. Waste fluid disposal is one of the hottest topics. Sewage treatment plants aren”™t equipped to handle it, and now there”™s concerns that disposing it in injection wells causes earth tremors.
“Other objections are the road construction, noise, emissions, heavy truck traffic and pipelines that are required to drill each well. And then there”™s where you get the fracking water from and where you put it when you”™re done. Shale gas has become an economy-versus-environment hot-button issue. New York state has a moratorium on gas drilling in the Marcellus Shale until the EPA completes environmental impact studies and develops regulations and monitoring requirements. I don”™t think the industry has adequately priced in the delays and future regulations.”