Someone doesn't understand EROEI

[kenneal - lagger]

The writer of this article just doesn't understand the difference in the EROEI of the oil resources in Norway and Canada and the different levels of profit that this brings.

Having said that, in all probability, Canada could get more out of the oilcos if the will was there. As the oilcos have now made large investments the Canadians are now in a better position to squeeze some more cash from their oil. They need to build up a very big fund to pay for the clean up that I doubt the oilcos will undertake.

[biffvernon]

Just what is the profit in oil? Take for example the live planning application in my neck of the woods to drill for oil. The applicant claims (and for the sake of discussion let's just take their figure as close to reality) a recoverable quantity of 8 million barrels of oil. So at £70 a barrel that's £0.5 billion. Just where does that money flow to? Bear in mind this is an onshore well in a politically and climatically stable environment a short distance from an oil refinery with adequate capacity, close to final market and no additional infrastructure required for production.

Any guesses as to how that half million pounds will be distributed? The cost of drilling the first well is said to be £1.3 million. That leaves a bit of loose change spare.

[biffvernon]

Having said that, in all probability, Canada could get more out of the oilcos if the will was there.

Yes, the article quotes 70% royalties in Norway and 12% in Alberta but these are levied on profits so that's after EROEI has been taken into account, so there must be some wiggle room before the oil companies pull out. With crude at over $100 even the tar sands are showing a profit.

[JavaScriptDonkey]

So at £70 a barrel that's £0.5 billion.

Any guesses as to how that half million pounds will be distributed? The cost of drilling the first well is said to be £1.3 million. That leaves a bit of loose change spare.

I think you may have confused million and billion there Biff.

500 million - 1.3million leaves a lot more than spare change.

In answer to your question though I suspect half of it will end up in the Treasury paying part of the massive pensions bill.

[adam2]

Also the oil field in question has yet to be exploited, and it seems probable that oil prices will increase before the oil is extracted and sold.

At least some of the costs of exploration etc have already been paid for at todays prices, but the future income might reasonably be at about £100 a barrell rather todays £70.

I would prefer that these small onshore oil field be not exploited now but be kept in reserve for future needs.
Oil may be easily purchased from elswhere at present but this may not be the case in the future.

[biffvernon]

I think you may have confused million and billion there Biff.

Thanks JSD, I did indeed mean half a billion.

Of course much of the money will be taxed, despite the latest announcement from Osborne to stimulate the gas fracking business.

But I'd still be interested in guesses as to how such a half billion gets distributed.

[biffvernon]

I would prefer that these small onshore oil field be not exploited now but be kept in reserve for future needs.
Oil may be easily purchased from elsewhere at present but this may not be the case in the future.

Er, what about global warming? Seems to me that it's rather important that it all stays underground forever.

[Mr. Fox]

Almost 90% of Canada belongs to The Crown, so presumably 'royalties' would go there, rather than to 'public coffers' that the tax on profit feeds?

Perhaps they can remember what happened here when a certain Mr. G. Brown had thoughts about re-negotiating a remarkably similar arrangement - 13 years ago to the day.

[fifthcolumn]

At the risk of stirring things up Biff you are missing how things actually work too.

1. Nobody in the Canadian oil industry takes the standard peak oiler's version of EROEI seriously. (Oil is not the only possible input and barrels of oil equivalent should not be used as a measure)
2. Nobody in the Canadian oil industry even considers EROEI *at all* when making investment decisions - further underlining it's credibility. (Because investment decisions are measured in *money* - as much as peak oilers would love to say that they know better than economists and financial analysts, they do not).

[RenewableCandy]

But if you underline something, doesn't that mean you emphasise it??

I think what Biff et al are pointing out is that the industry you speak of is essentially catabolic, in that it's taking one (plentiful) source of energy and using it up in order to get at a different (but more versatile) source of energy.

(Which is itself used merely for farting round in circles, but that's another story!)

[fifthcolumn]

Candy,

Yeah *but* if the energy source that's used to get the more versatile energy source out is very plentiful then who cares?

The key question isn't barrels of oil to get barrels of oil it's how much *wind and solar* can we harvest? (And also in the interrim nuclear).

[RenewableCandy]

Candy,

Yeah *but* if the energy source that's used to get the more versatile energy source out is very plentiful then who cares?

Rather a lot of people I imagine, once it starts to not be cheap and plentiful! But that's a characteristic of catabolic-ness: no-one cares, or at least, no-one acts as if they care, until all the canibalised stuff has gone.

[biffvernon]

Actually, the key question is how are our grandchildren going to survive global warming? This is not a question that quite a lot of people in the carbon extracting and burning businesses seem to care about.

[fifthcolumn]

I'm glad you agreed that EROEI isn't the question.

But in terms of global warming the question is *not* your loaded and framed piece of rhetoric but instead is "what are the *actual* impacts going to be of global warming?"

Personally speaking as a scientist (as well as a business person) I find it suspect that everything about "global warming" is allegedly negative.

Crop yield reductions.
Increased damaging storms.
Flooding
Wars
Reduced arable land etc
Increased desertification
Species diversity decline
etc etc


Two thousand years ago in Roman times with a temperature warmer than today things were *better* for farming than they are today.
Millions of years ago when Co2 was much higher than today and the climate was warmer, it was *wetter* and the species diversity was *higher*.

So I have to say Biff that it smacks of an agenda here. But you are not thick mate, you always avoid directly addressing things when you are asked direct questions such as "do you support the massive involuntary reduction of the human population in order to return large chunks of farmland to natural state?"

[clv101]

Personally speaking as a scientist (as well as a business person) I find it suspect that everything about "global warming" is allegedly negative.

I don't find it that surprising as we have spent the last few thousand years optimising our civilisation to the ~stable climate. Everything from the locations of of cities and farm land, the crops and animals we've bread, the immunities we've built up etc etc. 2 degrees hotter - or colder, 20% wetter or drier, bound to have negative impacts.

That's not to say all change is negative. I'm sure Phoenix, Arizona would benefit from 20% more rainfall, and globally more people die of cold than hot. However, I'm pretty happy with the idea that the net impact of (any) climate change will be negative on today's civilisation.