News Blog

REDWOOD CITY, Calif.--How much conventional oil is there left in the ground? Close to 2 trillion barrels, according to Don Paul, Chevron's chief technology officer.

The "geological endowment" of conventional oil--that is, the amount of oil in the Earth--once totaled about 3 trillion barrels, he said during a presentation at the Dow Jones Alternative Energy Innovations conference here. We've used about 1.1 trillion. Oil companies with current technologies can't get it all out of the ground, so maybe there is a trillion barrels left for human consumption.

Don Paul, CTO, Chevron

(Credit: Chevron)

And we're consuming a lot of fuel: about 3 billion gallons a day worldwide, or roughly a half-gallon for every person on the planet. By 2012, the human race will have consumed 1.5 trillion barrels, Paul said in a hallway conversation.

Thus, peak oil--the theory that we're about to get into declining numbers on conventional oil--is probably real. However, Paul said, "I don't think it has to be the catastrophe that other people have predicted because there are other ways to make fuel."

The alternatives include shale oil and oil sands. There might be a trillion barrels of oil in shale. One problem is that producing oil from shale or oil sands generates significant amounts of carbon dioxide--but a lot of that carbon dioxide comes from producing the hydrogen needed to process the raw materials. "It is this production of hydrogen that is creating the CO2," Paul said.

Some French companies, he said, have proposed building nuclear plants in Canada near the oil sands deposits to generate steam--that is, water vapor.

Biofuels will also contribute, but biofuels are small right now. Roughly 20,000 gallons of biofuels get made a day, and that needs to be increased by 10 or 20 times, Paul said.

Electric will also come, but batteries need work. "Even the best batteries have 1/10th of the energy density of gasoline," he said. (Others, such as Nobel-winning chemist Richard Smalley, have pointed out how there's no easy alternative when it comes to energy density.)

Liquid fuel makers will also have to develop carbon capture and sequestration sites. Chevron is kicking off a large sequestration project in Australia. Sequestration is a technological challenge, but the bigger problem is financing and planning the infrastructure. These are huge construction projects after all. Just to capture the carbon dioxide coming out of power plants, factories and other "stationary" CO2 emitters, it would take an infrastructure the same size as the natural gas infrastructure.

"That's a lot of pipe," Paul said.

Expect to see sequestration projects in the U.S. Given that the U.S. has produced more oil than anywhere else in the world, historically speaking--250 billion gallons have been sucked out of the ground here--there is lots of empty space underground.

Pure Biofuels has raised $30 million to open a biofuel refinery in South America and raise its own crops.

The company wants to build a plant capable of processing 52.5 million gallons of fuel a year in Peru. It has already bought a small refinery on the continent, so by mid-2008, it will have the capacity to produce 62.5 million gallons a year out of these two plants.

Rather than buy oil on the open market, it will grow its own. The company has secured 60,000 hectares in central Peru that will be capable of providing the feedstock for the operation. Pure will harvest canola, jatropha and palm oils.

"Japtropha has the highest yield (of oil per acre) after algae, but algae is still in pilot," said Pure president Steve Magami in an interview.

Right now, Pure doesn?t know how much of each crop it will grow or which ones will grow optimally on its land. It will study the issue in the near future.

By owning its own plantation, Pure insulates itself from commodity price fluctuations, which have made life difficult for other biodiesel producers. "Most people are building (refining) capacity, but feedstock is 80 percent of your cost," he said.

Labor and land, meanwhile, are comparatively inexpensive in South America.

The output from these first two factories will be sold almost exclusively in Peru. Peru does not have a subsidy program. However, diesel fuel is somewhat expensive. Magami says that it can produce fuel and sell it for less than conventional diesel. That won't be easy. In the U.S. biodiesel providers need a subsidy of 50 cents to $1 a gallon to stay competitive. (The level of the subsidy depends on the type of oil used to make biodiesel.)

Later, the company hopes to open plants and refineries in Argentina. Imperium Renewables, which just opened a 100 million gallon a year facility in Washington state also hopes to open a plant in Argentina.

The $30 million raised is not venture funding. It consists of a $10 million convertible note and a $20 million secured credit facility. That sort of thing is going to be more common in the green biz. Many of the fuel and coal projects are more suited for standard credit financing than venture funding, according to many VCs.

The oil industry is swimming in revenue. Sales for the member states of OPEC hit $649 billion last year, a 22 percent increase. Oil also hit a recent (but not an all-time) high of $78.81 a barrel.

But it's also getting more expensive to find new sources of oil and extract it. (The industry is also facing a hiring crunch.)

The Wall Street Journal (subscription required) tallied some stats in an article earlier this week culling data from various sources. Here are some of the more interesting ones:

Cambridge Energy Research Associates says the capital costs for extracting oil have gone up 80% since 2000. The price of crude, meanwhile, has about doubled. Thus, revenue is going up but expenses are keeping pace.

The production cost of a barrel of oil have risen from $5 in 2001 to $20.40 last year, according to Lehman Brother. The firm said the cost should rise $5 to $10 a year for several years.

Drilling projects in Kazakhstan and the Sakhalin Islands have been delayed for several years, in part because of spiraling costs.

OPEC's production last year came to about 32 million barrels a day, up 3.2 percent.

It's a good news/bad news scenario. Gas will probably cost more. At the same time, though, expect to see oil producers spend more on high tech equipment to extract oil. At the same time, the public's demand for green fuels may grow as prices continue to rise. (Even oil rich nations don't like high oil prices all of the time. Abu Dhabi is investing in solar.

More on all of these issues later in the fall. OPEC holds a meeting in Vienna on September 11 and will release stats on the industry on September 13.

Americans don't exactly like nuclear power, but they like oil even less.

Concerns about global warming, high oil prices and worldwide political turmoil have made oil the least popular fuel in the U.S., according to a survey from MIT and Knowledge Networks. In the survey, 74 percent of respondents said that they want to see decreased use of oil, up from 56 percent in 2002.

In the previous 2002 survey, nuclear was the least popular fuel. The 2007 survey polled 1,200 adults nationwide.

Nuclear, in fact, has gained a little bit of acceptance. The 2007 survey found that 35 percent of those polled said they wanted to see an increase in nuclear power, a rise from 28 percent in 2002. The rise was attributed to concerns about global warming, according to professor Stephen Ansolabehere, who oversaw the project.

Still, nearly 40 percent oppose the proposed storage site at Yucca Mountain in Nevada, and only 28 percent said they agreed with the proposition that nuclear waste can be stored for long periods of time safely.

The survey further asked people how much they would pay--in the form of higher utility bills--to counteract global warming. The average answer is $10 a month. In reality, the answer needs to be closer to $25 a month, according to Ansolabehere.

CORONADO, Calif.--The car of the future will apparently have more in common with a kitchen appliance than a lawn mower.

Car design in years to come?

(Credit: Cuisinart)

"The future is going to be an automobile that looks like a two-ton Cuisinart," said Josh Wolfe, managing partner of Lux Capital, at the Future in Review conference Wednesday. Wolfe was part of a panel discussion entitled "The Future of Energy on the Nanoscale," in which panelists focused mostly on battery technologies and how those will evolve for cars and other devices.

The night before, researcher J. Craig Venter suggested that fuels derived from algae could provide a much more abundant source of energy than that black goo under the deserts of the Middle East. Venter has been analyzing samples of ocean water taken during a cruise of the Sargasso Sea, and he and his team think they can use gene-sequencing technology to create microbes that could provide a future source of fuel. "My goal is to replace the petrochemical industry by the next decade."

Wednesday's panelists steered clear of biology, preferring to work on finding new markets for their existing products. "The nanomaterials and nanoscience haven't hooked up with the market," said Keith Blakely, CEO of Nanodynamics, which is working on fuel cell technology*.

"Most important is the electrification of automobiles, this is the trend, more than biofuel or gas substitutes," Wolfe said.

The Future in Review agenda is filled with discussions on future energy sources and challenges, and more debates are sure to emerge on how best to reduce the world's dependence on oil and coal.

*UPDATED - Keith Blakely notes in the comments below that I misinterpreted the tense on his remarks, in that when the Future in Review conference first started, the market opportunities weren't there. But, as evidenced by the fact that companies like Nanodynamics exist, the situation has changed. Sorry, Keith.

Austin, Tex. Who does Richard Gephardt, the former Speaker of the House, look like to you?

A weatherman or a congressman in a movie, Gephardt said during a lunchtime speech at the Clean Energy Venture Forum taking place in Austin, Texas this week. Two women stopped him in an airport a while ago and one thought he was a weatherman from CNN. Another thought he was either a congressman or someone that played a congressman in a movie.

R. James Woolsey, the former director of the CIA and now a vice president at Booz Allen Hamilton, had his own encounter with mistaken identity. On his first plane flight after taking the CIA job in the Clinton administration, Woolsey was fenced in between two burly security guards.

A stewardess later said that "he was the most polite prisoner I've ever seen" transported on the airline.

The rest of the lunchtime talk was less jovial. Gephardt said that the U.S. government has to come up with a comprehensive energy policy that puts economic and national security above low prices. Until now, low prices have ruled in national policy. He also recalled that, as a youngster, how coal dust coated his family home in St. Louis. The family had a coal burning stove inside their home.

Woolsey, meanwhile, exhorted the crowd to remember that large amounts of the petroleum consumed in the U.S. comes from the Persian Gulf, and a lot of the profits from oil exports go to fund terrorism.

The Muslim religion is not the problem. If the Middle East oil fields were located under Java, an island with a far larger Muslim population, world politics likely wouldn't be in turmoil. Instead, the oil fields are under a region known for extremism, Woolsey asserted.

"Unfortunately, it is under the Wahhabis," he said. Americans sometimes have a tough time with coming to grips with the issue because they often associate political extremism with political ideologies.

"We are not used to talking about totalitarianism that grows out of religion."

Gephardt agreed.

"There were 15 Saudis on the airplanes (involved in the 9/11 attacks.) What don't we get about this," the ex-congressman and wannabe weatherman said. \

Why make a shampoo bottle out of petroleum products when it can be formed out of agricultural-waste products? That's the premise behind Segetis, which today said it has raised $15 million.

The Minneapolis-based Segetis is one of a number of outfits trying to displace petroleum in household products like countertops, bottles and other items. Using organic matter cuts down on pollutants in the manufacturing process and makes recycling far more feasible.

Organic plastics have historically cost more than their petroleum counterparts, but the rising price of oil, coupled with other factors, is making organics more palatable.

Other companies in the field include Cereplast (plastic forks and paper cup liners) and Archer Daniels Midland.

Segetis says its basic chemical blocks could also be used in the production of biodiesel and other products.

The company was founded by Sergey Selifonov, who has worked for start-ups in Silicon Valley and has also conducted research at the Institute of Biochemistry and Physiology of Microorganisms, a division of the Russian Academy of Science.

Investors in the company include Khosla Ventures, which has been putting money into a wide range of green start-ups. Recently, for instance, the firm has placed a number of investments in companies specializing in developing microorganisms for converting vegetable matter into biodiesel and other products.

You can imagine all of these companies cooperating to some degree someday.

Those friendly Russians want to bring more energy directly to your doorstep if you live in North America. That means digging the world's longest tunnel. The proposed project would dig a tunnel over 60 miles long beneath the Bering Sea, surfacing at two islands en route.

Next week a coalition of Russian businesses will present this plan to Canada and the U.S. If it moves ahead, the tunnel would be twice as long as the one now connecting Britain and France.

The tunnel would connect major highways and pipelines yet to be constructed. The hope is to deliver petroleum, natural gas and even electricity from energy-rich Russia to energy-hungry North America. You can bet Saudi Arabia is NOT going to invest in this.

This tunnel project promises to run counter to any plan from President Bush to lessen American need for oil. But there is a green angle as well. Some of the electricity is supposed to come from yet-to-be-built tidal power plants in eastern Siberia.

There is one reassuring angle if you're already planning your trans-Siberian drive for 2025--Miami to Mermansk by car. There are no major earthquake fault lines running beneath the Bering Sea. So you may drive through a tunnel next to a large pipeline full of natural gas in relative security.