unconventional oil resources

Crude oil is divided into light crude oil, medium crude oil and heavy crude oil for different API degrees. Light crude oil is often more expensive than heavy crude oil, because through simple distillation, light crude oil has a higher light oil yield (gasoline, diesel, jet fuel), and for medium and heavy oil, the same amount of distillate must go through more processing processes, such as catalytic cracking, delayed coking, etc. This also means higher processing costs.

What are unconventional oil resources?

Oil sands, shale oil, deepwater oil, polar oil, super heavy oil and super heavy oil are usually classified as unconventional oil resources in the industry. The characteristics of such resources are that they cannot be explored and developed by conventional methods and technical means, so it is difficult to exploit and the cost of exploitation is high. In recent years, with the rapid development of exploration and exploitation technology, unconventional oil and gas resources, which were originally difficult to develop, high development cost, and difficult to store and collect, have gradually entered people’s vision and become an important strategic supplement to conventional energy.

(1) Canadian oil sands

“Oil sands,” also known as “tar sands,” “heavy oil sands,” or “tar sands,” look like black honey and are mined in a very different way than traditional oil extraction. Simply put, oil sands mining is “digging” oil, not “pumping” it. The sandstone saturated with heavy residual oil, which has been exposed or near the surface, is the product of the loss of light components during the migration of bituminous base crude oil. Oil sands are essentially a mixture of bitumen, sand, rich clay and water, of which bitumen is 10% to 12%, sand and clay 80% to 85%, and the remaining 3% to 5% water. Oil sands have the characteristics of high density, high viscosity, high hydrocarbon ratio and high metal content, and oil sands can be extracted from heavy oil and bitumen.

Eighty-five percent of the world’s oil sands are concentrated in northern Alberta, Canada, mainly in the Athabasca, Cold Lake, and Peace Lake regions. With a total content of 400 billion cubic meters of bitumen, Canada’s oil sands are the largest bitumen resource in the world, of which 24 billion cubic meters are distributed in the surface layer (within 75 meters underground) and 3,760 cubic meters in the deep layer. Alberta’s oil sands hold 180 billion barrels of crude, less than Saudi Arabia’s 267 billion and more than Russia’s 112 billion. However, with the improvement of oil sands refining technology, by 2020, the existing oil sands resources are expected to extract 130 billion barrels of crude oil, so that Canada’s total reserves to 310 billion barrels, surpassing Saudi Arabia to become the world’s largest oil resources.

(2) US shale oil

A more accurate term for “US Shale Oil” as commonly reported in the media is Tight Oil. Tight oil refers to the oil resources stored in tight reservoirs such as shale and sandstone. The International Energy Agency defines tight oil in engineering terms as oil extracted from shale or other low-permeability reservoirs using horizontal drilling and multi-stage hydraulic fracturing.

The United States is currently the most successful tight oil exploration and development region in the world, and tight oil has become the main driving force for the growth of crude oil production in the United States, its tight oil production surged from 0.3,400 barrels per day in 2007 to more than 5 million barrels per day in 2015, accounting for more than 50% of the total US oil production. According to the U.S. Energy Information Administration (EIA), there are five significant areas in the United States that have been identified as having tight oil potential, including the Bakken, Eagle Ford, Permian, Niobrara, Utica and others. Among them, the Bakken, Yingtan and Permian basins have the greatest resource potential and the greatest development efforts, and are currently the main producing areas of tight oil in the United States. The Bakken and Yingtan basins are the early developed basins, the Bakken crude oil production of more than 1 million barrels/day, Yingtan basin more than 1.5 million barrels/day, the Permian basin as a traditional oil production area is also revitalized under the shale wave, the current crude oil production of more than 2 million barrels/day, becoming one of the most potential tight oil production areas.

(3) Deepwater oil and gas

For the offshore oil industry, deepwater is a dynamic concept, with the development of science and technology, its connotation is constantly changing, the scope of the definition of deepwater is constantly changing, and will continue to change. In the 1970s, the minimum limit of deep water was 100 meters, and in the late 1980s, the minimum limit of deep water was 300 meters, which has been used ever since. However, in 2003, the United States mine Administration defined the deep water zone as a depth greater than 450 meters, and the water depth greater than 1,500 meters is called the ultra-deep water zone. In fact, the current water depth of 400~500 meters below the exploration technology has been mature, so often 400~500 meters as the boundary between deep and shallow water.

At present, the world’s deep water oil and gas exploration is mainly concentrated in the Gulf of Mexico, Brazil and the coast of West Africa on both sides of the South Atlantic three major sea areas, known as the “golden triangle” of deep water oil and gas exploration, concentrated about 84% of the current deep water oil and gas drilling activities. The Gulf of Mexico has the most at 32%; It is followed by Brazil with 30 per cent. Third is West Africa. These three regions are home to the vast majority of the world’s deepwater exploration Wells and new discoveries. In addition, there are active deepwater exploration activities on both sides of the North Atlantic, along the Mediterranean coast, off the coast of East Africa and in the Asia-Pacific region. In recent years, Norway and Russia have prepared joint oil and gas exploration in the Barents Sea.

The United States Geological Survey and the International Energy Agency estimate that the ultimate potential global deepwater oil reserves could exceed 100 billion barrels. With the deepening of deep-water oil and gas exploration, the actual reserves are likely to be far more than this number. According to statistics, there are more than 60 countries engaged in deep-water oil and gas exploration, and the cumulative discovery of oil reserves of more than 25 billion barrels. Deepwater and ultra-deepwater oil reserves are estimated to account for 6% of global oil reserves. In the future, 44% of the world’s new oil and gas production is expected to come from deepwater.

Why is oil so geopolitical and financial?

As for the importance of oil, former US Secretary of State Henry Kissinger once said: whoever controls oil controls all countries; Whoever controls the grain controls the human race; He who controls the currency controls all governments.

In the early days, oil was only used as a substitute for whale oil, and the scope of use was narrow. Only after it became the blood of industry and became a commodity that could be mass-produced and consumed, oil was closely related to people’s lives, and the political and financial attributes of oil became so important. The evolution of the oil market structure, the collusion of large companies, and the game between great powers all came into being under this background. Most of the news and events about oil that we hear and see in the media today are related to these two attributes.