Big Money Abhors a Vacuum--Wildcatters Enter the New Oil Rush

Big oil companies have reduced their oil exploration efforts since the 1980s. That means there is big money to be made in finding new oil fields--and the small wildcatters are the ones who are going to be cashing in. Venture capital is beginning to find the wildcatters with the best chances of hitting crude.

The American oil patch, once left to languish during an extended period of low oil prices, is on the rebound. Wildcatters like Mr. Bryant are ready to pounce. With oil prices now hovering around $60 a barrel — three times higher than they were throughout the 1990s — the industry is expanding at a pace last seen decades ago.

“The oil industry has changed dramatically in the last 20 years,” Mr. Bryant says. “Barriers to entry have dropped significantly. It doesn’t matter if you’ve been in the business 100 years or 100 days.”

Easily available capital and technology, once the preserve of traditional oil companies, are reordering the business. Investors are lining up to finance energy projects while leaps in computing power, imaging technology and collaborative online networks now allow the smallest entities to compete on an equal footing with the biggest players.

“There’s a lot of money out there looking for opportunities,” said John Schaeffer, the head of the oil and gas unit at GE Energy Financial Services. “It seems like everyone wants to own an oil well now.”

...Instead of looking for new petroleum sources, the big oil companies now spend more money on strategic and financial maneuvers like acquisitions and share buybacks, according to analysts. Many have also bolstered dividend payments in order to please their shareholders. A decade ago, oil companies spent $2 on exploration for every $1 spent on acquisitions; today, it’s the other way around. Exploration, which once took a place of pride among major oil companies, now takes a back seat.

But analysts warn that the industry should be expanding exploration, because much more energy will be needed in coming years. According to the International Energy Agency, the world will be consuming 115 million barrels of oil a day by 2030, up from 85 million today.

“It’s hard to explain why exploration isn’t getting more attention,” Mr. Smith said. Oil companies, he said, “have become more risk-averse.”

For whatever reasons Big Oil is forgoing exploration, that reluctance has opened a door to entrepreneurs like Mr. Bryant. Cobalt, taking advantage of the lush financing available to energy start-ups, has secured $600 million from investors like Goldman Sachs and Carlyle/Riverstone, a private equity firm. It is about to secure an additional $600 million to $900 million from its investors.

....Finding, developing and operating costs in the Gulf of Mexico run below $20 a barrel. With oil prices at $65 a barrel, if the company finds a field that flows at 50,000 barrels a day, it can potentially earn more than $2 million a day — or $800 million a year — from a single field. “The whole game is to put a string of those together,” Mr. Bryant says.

....Cobalt is looking for oil reserves ranging from 100 million to 300 million barrels. While a big discovery can instantly earn the company billions, there is no guarantee that the company will find oil at all. “How are you successful in oil and gas exploration? It doesn’t need a whole committee,” said Mike Lentini, a 49-year-old geologist who spent 25 years looking for oil at Shell and recently moved to Cobalt. “If you go the consensus path, you get the average result rather than what is truly path-breaking.”

On a recent afternoon here, Mr. Byrant, who had just returned from a visit to the Middle East, said Cobalt would never be able to compete with Big Oil everywhere. But he said independent companies now had more than a fighting chance.

“Exploration has become a game of super technology,” he says. “That’s a lot different from the early days of the industry when wildcatters would just drill a well, cross their fingers and hope for the best.”

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For more on the promise of new oil exploration technologies, see here, here, here, and here.


Such independent operators could not operate in most "oil countries", where corrupt government leaders hover--waiting to pounce on new finds and nationalise them to enrich their Swiss bank accounts.

Hat tip instapundit.

Peak Oil: Meet Biofuels

The entire transportation infrastructure is based on combustion engines. Combustion engines feature very high energy density combined with very high power density. Such a combination is difficult to achieve with electric storage and fuel cell technologies. So it is natural that a lot of venture capital is being invested in the development of liquid biofuels, to substitute for fossil fuels currently used in the transportation industry.

Biodiesel, cellulosic butanol, and now pyrolytic liquid biofuels offer a renewable way to ease the transition from a fossil fuel based infrastructure to an eventual combustion-free transportation and energy infrastructure.

A team of University of Georgia researchers has developed a new biofuel derived from wood chips. Unlike previous fuels derived from wood, the new and still unnamed fuel can be blended with biodiesel and petroleum diesel to power conventional engines.

“The exciting thing about our method is that it is very easy to do,” said Tom Adams, director of the UGA Faculty of Engineering outreach service. “We expect to reduce the price of producing fuels from biomass dramatically with this technique.”

Adams, whose findings are detailed in the early online edition of the American Chemical Society journal Energy and Fuels, explained that scientists have long been able to derive oils from wood, but they had been unable to process it effectively or inexpensively so that it can be used in conventional engines. The researchers have developed a new chemical process, which they are working to patent, that inexpensively treats the oil so that it can be used in unmodified diesel engines or blended with biodiesel and petroleum diesel.

Here’s how the process works: Wood chips and pellets – roughly a quarter inch in diameter and six-tenths of an inch long – are heated in the absence of oxygen at a high temperature, a process known as pyrolysis. Up to a third of the dry weight of the wood becomes charcoal, while the rest becomes a gas. Most of this gas is condensed into a liquid bio-oil and chemically treated. When the process is complete, about 34 percent of the bio-oil (or 15 to 17 percent of the dry weight of the wood) can be used to power engines. The researchers are currently working to improve the process to derive even more oil from the wood.

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Many scientists have opposed biofuels as being inefficient and potentially harmful to the public health. The facts of transportation and energy/heating suggest that petroleum based fuels will trend progressively higher over time, as long as there is no significant recession or depression in the world economy. Given these rising costs, one would expect the smart money to invest in ways to produce useful fuels less expensive than future fossil fuels will be.


Many science bloggers have suggested that biofuels are a dead-end for the future. They say that the costs of producing the fuel are as great as the value of the fuel itself. They suggest that there is not enough land to grow both biofuels and food crops.

These are interesting claims, but they are unlikely to hold up in the face of the economic importance of viable alternatives to fossil fuels that can be used with existing combustion equipment, and such equipment as is likely to be introduced in the near term.

Food crops can be grown economically using aeroponic techniques, in the driest deserts, in outer space, or on sea-floating arcologies. Human ingenuity in the growing of both food crops and biofuel crops has just barely been tapped. The importance of liquid fuels in the trillion dollar infrastructures suggest that liquid biofuels will be very important quite soon, and for at least several decades.

Peak Oil: Meet Saskatchewan Oil Sands

Alberta does not have all the oil sands in Canada. Saskatchewan comes in for her fair share.

Industry and Resources Minister Eric Cline is hoping new regulations that came into effect Monday will encourage more exploration of Saskatchewan's oilsands and oil shale resources.

"If we had more companies operating up there ... then that would dramatically alter the situation,'' Cline said Monday.

The new regulations have been developed after consultation with the industry and other jurisdictions, and are an update of regulations approved over 40 years ago.

....Oilsands were identified in the province in the 1970s in an area north of the Primrose Lake Air Weapons Range, but there has been limited interest until the last few years.

Exploration for oil shales in the Hudson Bay area of the province was conducted 40 years ago, and the area has seen renewed exploration by industry recently.

Meanwhile, the first company to explore and develop oilsands resources in northwestern Saskatchewan in 40 years is stepping up development of its Axe Lake discovery, near La Loche.

Source

Meanwhile, several giant oil sands development projects are getting started in Alberta.

This summer, as many as 7,000 construction workers will be on the site of Canadian Natural Resources Ltd.'s Horizon project, which features an oil sands mine and upgrader north of Fort McMurray. The expansion of Royal Dutch Shell PLC's Athabasca mine and its Scotford upgrader near Edmonton employ about 2,000 workers right now, with a peak of more than 6,000 next year.

An upgrader is a sprawling industrial facility where bitumen, a mixture of sand and oil, is put through searing processes where the sand is stripped away from the oil and the low-grade crude is upgraded into synthetic oil. Total plans to use a method that's called delayed coking, a widely employed and proven process.

Skilled construction workers such as welders, ironworkers, electricians, pipefitters, millwrights, and other skilled workers will be getting paid a lot of money in various oil sands, shale oil, and coal projects over the next two or three decades. After 20 to 30 years, I suspect the transportation industry will be using more biofuels and electrical energy than fossil fuels.

If you know a poverty stricken English or History major working for minimum wage and struggling to make payments, you might tip them off--tell them to learn a useful trade!

Ultracapacitors Compared with Storage Batteries

Ultracapacitors, storage batteries, and fuel cells each have strengths and weaknesses, in terms of supplying energy to an electric vehicle. Fuel cells can store a large amount of energy, in the form of fuel, but cannot provide the huge surges of power needed for rapid acceleration. Storage batteries can store an intermediate amount of energy, and can provide a moderate surge of power. Ultracapacitors store small amounts of energy but provide very large surges of power.

Combining the strengths of all three storage media will almost achieve the strengths of the internal combustion engine, but with a cleaner, more efficient use of energy. In the future, the distinctions between fuel cells, storage batteries, and ultracapacitors are likely to fade.

This Google Tech Talk presents some details of the approach to ultracapacitors by a Ukrainian/US startup, APCT. It provides a useful overview of the need for ultracapacitors, and the potential market.

Pluggable Hybrid Video

Pluggable hybrids can be plugged in to the electrical grid, or other source of electricity. Electrical energy is currently less expensive per unit of energy, than petroleum based fuels. As time goes by, electricity should become more available and de-centralised, while petroleum will probably trend more expensive, over time.

Battery technology is lagging far behind the needs of modern travelers. Electric vehicles are severely limited in their travel range, due to the miniscule amount of energy storage that even very large and heavy battery banks can contain.

Current battery storage is a joke. Fuel cell technology, on the other hand, promises to advance more quickly in the near to intermediate term than battery technology. Fuel cells that run on biofuels would run fairly clean.

Pluggable automobiles that combine fuel cells running on biofuel, with state of the art electrical storage batteries, may be the best near to middle term approach to personal transportation. Ultracapacitors may by some miracle become good enough in energy density to replace storage batteries, but that would require significant advances in nanotechnology. By that time, integrated molecular manufacturing will probably probably blur the distinctions between the ultracapacitor and the storage batter. Fuel cells will also become far better, and closer to the high performance in both energy and power densities that typify the internal combustion engine--while maintaining a cleaner and more efficient operation.