In the mid-2000s, there was considerable

concern that the world was running out of oil and, ultimately, natural gas. And
that the oil and gas industry was
going to go the way of the dinosaurs and become extinct. Such speculation has
largely been quelled
by this, hydro carbon rich shale. This particular piece is from
the surface outcropping of the Marcellus shale in western Pennsylvania. Marcellus
shale is both the source
rock and reservoir rock of one of the largest accumulations of natural
gas ever to be produced in the US. Similar shales occur elsewhere
throughout the US and are being successfully tapped for
not only natural gas, but also oil. Shale gas and shale oil were once
referred to as unconventional resource or resources that required unconventional
methods to get any gas or oil out of the reservoir rock. And being unconventional,
these methods
were also typically uneconomic. Consequently, unconventional
resources remain just that, resources that we knew were there,
but that were too costly to extract. Cost reductions in horizontal drilling and
fracking however, have transformed shale oil and shale gas
from being unconventional resources, into being conventional resources. This
transformation has in fact been so
significant that it has turned the U.S. from being a net importer of oil
to being a net producer of oil. And it has raised our domestic production
of natural gas from being five times what we imported in 2006. To now, in 2015,
being 10 times our imports. Further more,
large accumulations of shale gas and shale oil still remain to be produced. Not
just here in the US,
but also around the world. Estimates for these resources suggest that
supplies could last another hundred or more years at current
rates of consumption. On top of this, our massive accumulations
of other types of hydrocarbon resources that have also
largely remained untapped. One of these, heavy oil, is like shale
oil and shale gas in that it was formally an unconventional resource
that has since become conventional. Heavy oil is a viscous oil
that is composed mostly of long chained hydrocarbons and can be so
dense that it actually sinks in water, rather than floats like conventional oil.
The largest accumulations of
heavy oil are found in Canada and Venezuela, with the Venezuelan
heavy oil resources being as big as Saudi Arabia's
conventional oil resources. Canada also contains vast
accumulations of oil sands. These are sands saturated with bitumen or
what is more commonly referred to as asphalt, an even more viscus form of oil
that is often semi-solid in appearance. Technologic advances have reduced
the cost of processing heavy oil and oil sands so much that the average
break-even price to produce heavy oil has fallen to less
than $50 a barrel in 2015. And the average break-even price for
oil sands is at $70 a barrel. These prices are comparable to
the average break-even price for producing shale oil in North America,
which is currently about $65 a barrel. And then there are the unconventional
natural gas resources. For example, in addition to shale gas, there is tight gas,
which is gas
in what would be conventional rock reservoirs except that the rocks have
such low porosity, and or permeability. They are referred to as being tight. Like
shale gas, tight gas reservoirs have
been turned into economic reservoirs by directional drilling and fracking. Another
unconventional form of
natural gas is coalbed methane. This is methane that is formed
along with the coal and is absorbed onto the surfaces of the coal. Coalbed methane
is produced by simply
drilling a well into the coal. The well provides a low
pressure conduit for the gas to escape from the high
pressure confines within the coal. Possibly the largest source of
unconventional gas in the world is methane hydrates. These are located beneath the
sea floor
in water depths greater than 300 meters, where water temperatures are around two
degrees celsius or 36 degrees fahrenheit. Methane hydrates are methane that's
been frozen by the temperatures and pressures at these water depths. Methane
hydrates often overly and trap beneath them gaseous methane
in more deeply buried sediment. The total amount of energy in these
gases and methane hydrates far exceeds that in all the world's conventional
existing oil and gas resources. For now, however, methane hydrates
remain a true unconventional resource, in that they are not currently
economic to produce. However, when you add all these
unconventional resources together, they total a still tremendous amount of
oil and gas in the world that has yet to be extracted. And this amount does not
include
conventional oil and gas resources that may exist beneath still largely unexplored
regions of the world, including the East and South China seas, the Arctic
and the waters surrounding Antarctica. In summary then,
while there are things that could lead to the ultimate demise of the oil and
gas industry over the coming decades. Running out of oil and gas resources
doesn't appear to be one of them.