Oil technology invesment: Subtle hints at rising prices
Posted October 9, 2009 at 7:50 am 
Filed in: Following weeks of new discoveries, if anyone is still concerned that global oil supplies are falling, today we received news about yet another new technology for extending the life of existing oil fields.
To do this, Chevron is injecting steam into the rock of the Kern River oil field. This steam, heats the oil trapped between layers of sand, silt and shale, and makes it less viscous, allowing it to be pumped to the surface. Facilitating this process is a network of 660 surveillance wells from which they monitor the temperature of the reservoir in order to identify where the steam is needed. This has one major advantage; it means that they require half as much steam to produce a battle of oil. However, as usual, the major disadvantage is cost, and as the article highlights; “the process is far more expensive than conventional oil production, with thin profit margins that can disappear entirely when oil prices drop or costs rise.”
And yet, ExxonMobil and Royal Dutch Shell are also showing interest in such projects, and Occidental Petroleum has already extended the lives of fields in West Texas using steam injection techniques.
Why would oil companies be interested in this? Most obvious is that it is almost certainly cheaper to extend the field life than finding new ones. After all, U.S. oil production continues to fall, and coaxing more oil out of existing fields presents one viable option.
However, prices and profits are just as logical a reason. Oil companies will not make an investment in new and expensive technology unless they believe it will be profitable. More subtle might be that they anticipate oil prices to rise steadily again and bring them significant returns on this investment. In fact, even the Department of Energy expects crude prices to rise over 75 percent in the next five years.
It appears Chevron and others are just thinking ahead. Anticipating the economic and national security cost to the nation that this price rise will have, America should too.
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