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Energy Return on Investment of unconventional resources

September 19, 2012

Many critics argue that simply pointing out the existence of a resource in the ground does not mean that it is economically viable to develop that resource.  Of course, this is true – I have written before about the McKelvey Box, and about my belief in technological positivism – that Incentive + Ingenuity = Innovation, and that – as it has in the past – innovation will bring the price down both in real terms and in terms of energy return on investment (EROI).  EROI is not just a measure of the financial cost of production, it takes into account the amount of energy that it takes to produce a like amount.  As such, it is in essence a measure of the quality of energy – the lower the EROI, the lower the quality of the energy.  A subset of economists believe that it is the high quality of conventional fossil fuels that was the primary cause of the terrific economic explosion of the last few hundred years and that, even though there remains a vast amount of unconventional fossil fuels, the difficulty in obtaining and processing them means that they are not just qualitatively different, but so sub-standard as to represent nearly as absolute a limit on growth as would a pure exhaustion of fuel.

There are two widely used measures of energy efficiency:

  • First Law Energy Efficiency, which is simply energy output/energy input and is expressed as a percentage.
  • Energy Return on Investment, which is (energy output – energy consumed)/energy consumed – this is a net energy return, and the higher the number, the greater the energy return

In the early days of the oil industry, energy efficiency was near 100% – you would drill a well and the oil would gush to the surface.  Over the years, as this easy surface oil has dissipated, the current first law efficiency has fallen to 92%.  EROI is on average 10.5 for conventional petroleum today.

As we move to unconventional resources, efficiency falls further because additional energy is required to process the resource into useable qualities.   Oil from the Alberta tar sands, for example, has a first law efficiency of 82% and an EROI of 7.2.

The table below represents an estimate of the efficiency and EROI of various petroleum, unconventional, and synthetic resources and processes.   Note that I have begun to use the term “kerogen” in replace of “oil shale,” in order to avoid confusion with shale oil, which can be easily mined via fracking techniques and which tends to be in the light, sweet category that does not need extensive processing.

Table based on data from US Department of Energy, Office of Petroleum Reserves

Not included in this table is the new process developed by Red Leaf Resources – the EcoShale process that I have been following for quite some time.  Red Leaf claims that, at scale, EcoShale will convert kerogen at an efficiency above 90% and with an EROI of 10 or greater.  If this claim holds up, it means that the huge Rocky Mountain kerogen deposits (the US kerogen total is about 50% greater than the entire world proven reserves of conventional oil) not only become feasible, but from an efficiency point of view are virtually indistinguishable from so-called “easy oil.”  And, let’s not forget – the EcoShale process uses no water, other than that needed to support the production staff.   The chart below is a reminder of why it is so crucial that Red Leaf’s demonstration project, put on hold earlier this year due to concerns by environmental groups, be allowed to go forward.  If successful, it will change both the energy and geopolitical maps of the world.

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