Reflections on ASPO 10, Vienna 2012 – Part 1

On my first return visit to Scotland and Europe, I happened to be near the right place at the right time for my first ASPO conference since Pisa in 2006. In two parts, here are my thoughts on some of the energy related themes of the conference.

From the ASPO 10 Picture Gallery

Unconventional Oil and Gas

While there are big question marks about the financial and environmental sustainability of existing unconventional oil and gas production, I think it’s fair to say that the industry has ramped up production of these low-grade resources faster than many peak oil forecasters anticipated.

But when it comes to how much more of this resource we are going to turn into flows of oil, the short answer is we still don’t really have a clue. Euan made a courageous attempt in his presentation, with estimates for tar sands, EOR, tight gas, shale gas and coal-bed methane that respectively increase the ultimate recovery of oil and gas by more than 500 and 600 billion barrels of oil equivalent.

From an engineering point of view, it appears to me that access to the resource and energy return is sufficient for a good deal more tar sands production, although I have little idea how soon the availability of water might become a limiting factor. Otherwise it seems that value judgements by the Canadian people themselves, about the level of mining they are willing to tolerate, will be the long-term deciding factor in how much of the tar sands are converted to oil. Having just spent two months in Canada, it does not feel like the Albertans are about to lose enthusiasm anytime soon.

Despite valid questions about the size of the accessible resource and how quickly it can be produced, peak oil analysts would be wise not to dismiss the future production as inconsequential.

In the short and medium-term, a contracting economy and a low oil price could easily disrupt additional development. Given that tar sands have high marginal costs, even existing operations could be shut-down by a weak economy.

Gas and Coal to Liquids

There wasn’t much in the other presentations that has changed my view on Gas or Coal-to-Liquids (GTL, CTL). The capital costs for GTL plants are staggering and I can’t see anybody confident enough in the long-term cost of the feed gas and value of the produced liquids to build many more such plants. The capital costs for coal-to-liquids are similarly staggering but it just may be that somebody with ready access to cheap coal gets desperate enough for liquid fuels that they are willing to stump up the cash. If so, it would be the realisation of my recurring climate nightmare.

Geopolitics of Oil

Out of the first day of the conference, it was the discussion by Michael Klare and Karen Smith-Stegen about the geopolitics of oil that I found most interesting. In short, it’s as important as it ever was, but there are new players, new themes and new front lines.

The Middle East

Unrest and discontent in the Middle East is still easy to trace back to decisions made by the imperial powers after the First World War. And the importance of oil is everywhere, not just in the places that first come to mind. Egypt used to be a net oil exporter. But with the population growing almost four-fold in sixty years, and oil production declining, Egypt now consumes all of its oil internally and will soon depend be competing for imports. With such a turn-around in their balance of trade, it looks like a tragic story of riches to rags, and not hard to see how that could lead to desperation among the deprived young men and women of Egypt.

How the sabre rattling between Israel, Iran and the United States will play out is anyone’s guess, but Michael Klare thought the June meeting could not pass without either some compromise or confrontation.


The new power struggle of course is between China and the United States. The optimistic American view is that with relatively stable demand and strong production from Canadian tar sands, Gulf of Mexico and Brazil that U.S. dependence on the Middle East may actually fall. At the same time, Chinese domestic production is flattening out while consumption continues to rise, so their dependence on the Middle East and Africa grows ever stronger. One consequence is that China will depend critically on transit of oil around south-east Asia. Throw in some contested resources in the same South China Sea off the Philippines and you can see why the U.S. has just refreshed its relationship with the Philippines and planted naval resources in the area. Less strategically but still quite symbolic, Australia has also signed up for a new phase of military cooperation with the United States. Not something I would have chosen if I’d had any say in it.

Canada and the United States

Issues of access to oil resources are also playing out in the heart of North America. Observers in other parts of the world may not be aware how politically significant the approval or otherwise of the Keystone XL pipeline has become. The pipeline is intended to transfer Canadian oil sands production to markets in the U.S. While currently blocked by President Obama, Mitt Romney has promised to sign the approval on his first day in office. It appears that this is one element of his election platform, which will promise to return America to the era of happy motoring.

Biomass and Heating Oil

One of the sponsors of ASPO Vienna was Pro Pellets, an Austrian company providing wood pellets and high efficiency burners for home heating.

The pellets are delivered by truck and are blown into household storage and to the burners somewhat like a liquid. By maximising the time in the combustion zone and controlling the temperature of combustion and oxygen supply, they claim that combustion is close to 100% and emissions simply CO2 and water. (What happens to the nitrogen and everything else in the intake air?) The burners ignite and dose the pellets automatically so fuel use is well optimised to provide just the amount of heat required.

Wood pellets are about half the cost of heating oil, but the downside is the capital expense. 12,000 euros for a household system is a big investment (and would normally be combined with solar thermal). But 2,000 euros for a simple room heater fed with bagged pellets is a good deal more affordable.

Austria seems to produce and use quite a large amount of biomass in its energy mix. It would be good to know more about where this is produced and in what quantities. There are also quite significant imports from North America. Apparently forestry areas that used to supply paper mills are now exporting to Europe as the demand for paper has fallen?

Biomass for Heat rather than Biofuels

The key point here is that biomass is much more efficient if you use it directly, rather than messing around with it. Simply cutting and drying the wood and converting it to pellets involves a lot less energy inputs than the complex process of trying to convert corn and other biomass into biofuels.

Given a limited amount of land that can be used to grow biomass, it does seem more sensible and efficient to replace heating oil with wood pellets than to displace gasoline with ethanol from corn. The logical conclusion is that the amount of land currently growing corn for ethanol production would be better off turned to short rotation forestry.

Living in Australia it’s easy to forget about how much heating oil is used in Europe and North America. Whether it’s wood pellets, gas, solar thermal, heat pumps or a combination (including turning down the thermostat) there are several ways in which 5-10% of the world’s oil consumption could be switched without any great difficulty. That alone makes for a pretty useful wedge of displaced oil consumption.

Good report. Thanks.

Thanks for your report.

Did you attend Prof. Aleklett's presentation of his new book?

It is good you mention geopolitics. The peak oil community is too much focussed on the global peak while peaking events in certain countries have now a huge impact on world events. Egypt is very critical because of its population size and location (Suez canal and Sumed pipeline). Just imagine what could happen if strikes, demonstrations or even sabotage threatened these chokepoints.

Matt - Geopolitics seem to be adjusting quickly at the moment. Consider one current event: this week they had the ribbon cutting at the Motiva refinery in Port Arthur, the largest (600,000 bbls/days) in the US and one of the largest on the planet. And built specifically to process the Saudi heavy oil, an increasingly important component of exports. They plant is a 50/50 partnership between the KSA and Royal Dutch Shell.

This new plant is located in a very safe and politically stable region. The oil source, though half way around the world, is easily delivered to this massive terminal system. Likewise easy protected in transit by one of the strongest naval forces ever amassed. It's also located in a complex specifically design to easily ship products to US regions as well as other countries. The imported oil will never be "US oil"...the title will always belong to foreign companies that can do with it as they choose. Consider just what implication this has for the EU: one of their major oil suppliers now has a strong great financial incentive to ship a large portion of their production to somewhere other than EU refineries. IOW to the $10 billion refinery in which they just invested. OTOH, though refined in the US, the products could still be exported to the EU if they can match the market price. Or maybe not. Such decisions may not be made solely on price.

A shortage of a commodity is not a shortage to those that can capture that which they need.

We can expect that social unrest and armed conflicts will spread in the Middle East.

The heavy oil you are referring to comes from an area not very far from Abu Musa:

A Tiny Island Is Where Iran Makes a Stand

Thanks for the report.

As per water in the Albertan oil sands, I don't think it's going to be the limiting factor. The future of recovery from the oil sands is from in-situ recovery like SAGD, not surface mining, and the majority of new projects are using saline well waters for their processes. This isn't such as huge stretch, since I know that all SAGD operators are using extensive water purification processes so they can recycle water. Coincidentally, there's a huge market for desalination and water purification in Alberta right now. I was recently at a 2 day workshop on water in the Oil Sands and a full block of presentations was devoted to desalination processes and according to this workshop it seems that desalination is economical.

I personally think that the limiting factor for oil sands recovery is going to be the timing of the Keystone XL, Northern Gateway, and twining of the Kinder Morgan trans-mountain pipelines, because right now the hold up is getting the bitumen out of here. I know from talking to a director in one of the new surface operations that they're entire business plan is to export to Asia, they have little interest in the North American markets. So, while I think Keystone XL will proceed no matter what happens in the US election, I'm not as certain about the Northern Gateway or the KM pipelines and these are probably the two most important projects. The problem with these 2 pipelines is that they will go through British Columbia, and while the current government in BC (the Liberals, who are actually aligned with the federal Conservatives) are for the pipeline they are trailing the NDP by about 20% in the polls and are likely to be decimated in an election next year. So assuming all things are equal, next year there will be an anti-pipeline government in BC which could stall both projects. At that point I have NFC what's going to happen cause technically the federal conservatives could try to force it through (I think there is case law for this), but that would probably results in a constitutional crisis and god knows what kind of legal battles.

I cannot see a physical reason for why oil sands cannot ramp up flow amounts to very, very high levels. Even if water is scarce it can be piped in if the price is right. Canada could actually become a giant Saudi-like player, which is something many people do not want to believe. Two things that may halt this process: 1. massive global warming destruction that turns the world strongly against fossil fuels (especially if a catastrophe occurs in Canada) 2. renewables or some other power source becomes so cheap that oilsands cannot compete. Otherwise, Canada is poised to become one of the top oil producers and the final knife in the back of world climate stability.

Water really isn't the problem, as per my earlier post. I think it's important to point out that there's a large distinction between surface mining and in-situ recovery.

As I see it surface mining is up against a wall because of tailings disposal and there hasn't been any economically viable solution presented yet (nevermind what suncor, syncrude, et al would have you believe from their PR). I mean syncrude was just trying to use centrifuges to separate it out the fines, but IIRC at an astronomical cost of about 20 dollars per barrel of bitumen.

Now in-situ recovery is a way different story. Water nor tailings are a limiting factor. The biggest process factor is that it's energy intensive, but economically it's okay cause Alberta has cheap natural gas. For me the biggest issue with the in-situ methods is that we really don't understand them ... this is one my principle areas of research and honestly it's amazing how well SAGD is performing without the recovery mechanism being well understood. But in any case I see SAGD being able to produce oil at a rate that Canada can become the next Saudi Arabia, especially as we find ways to increase it's efficiency.

However I still see oil transport being bottleneck, especially since a lot of big oil's plans seem to revolve around access to the Asian markets that does not currently exist. And I forsee that the construction of these pipelines is going to be difficult given the current provincial politics of BC.

Just my 2 cents.

thanks for the helpful comments on water use, pipelines and politics. sounds like the canadians are the ones to decide how much tar sands production increases! not great news for the climate perhaps..

Not perhaps.Here are James Hansen's calculations that we can't afford to burn all those unconventional fuels:

CO2 from unconventional fossil fuels

I think you're on the mark, save for natural gas. Yes, it's cheap now, but production is almost a decade into terminal decline. While unconventional gas may offset some of this decline, given NAFTA commitments and SAGD, there won't be much left for home heating in a couple decades. We've got maybe a decade left of conventional gas here in southern Alberta. The decline curves are pretty steep. There's a good modelling exercise on the Canadian Oil Drum site, which predicts we will be a net importer of LNG by 2030. It's a bit old, but it's a pretty good indication of where we're headed. Unless they go nuclear, I suspect that the availability of gas will limit production. I can't help but think we're being kept in the dark deliberately about this. I think most Canadians would choose to have a long-term supply of natural gas than use it to melt and sell oil. And to think that BC wants to ship its gas to Asia. Maybe I'm off base, but I'm amazed at how short-sighted these plans are.

I honestly can't tell you how much gas is economic at 6-7 dollars in WCSB. Conventional production may be on a decline right now but I can name half a dozen juniors with a few Tcf of unconventional gas: AAV, NVA, PPY, FEL, SPI, BIR. This isn't even touching on the intermediate or senior names with multiple times the acreage. Likewise don't forget the majority of the Horn River basin hasn't been drilled. I think you are greatly underestimate productivity of WCSB.

Likewise, I would be interested in a link to the analysis you mentioned in the Canadian Oil Drum.

...p.s. just checked Canadian oil drum, the last written article was Dec 2008???

Yep--it's old, and I think they gave up on updating it. I agree--there is still potential for unconventional gas production. I just find it suspect that massive reserve estimates are being rolled out. If production is anything like US shale gas plays, they're doomed to failure. I don't know if you've read much about the history there, but estimates have been significantly (and quietly) downgraded. This post sums it up nicely.
It makes me cynical about unconventional gas promises--I'm no geologist, and if estimates are based in reality--great. For me, the end game is whether or not these sources can continue to offset production declines. I don't hold out alot of hope. If this is the case, then prices must go up. What's the impact on oil sands production? If production of oil sands is only economical at $85/barrel with cheap gas, what's the price point with expensive gas? If you're interested, David Hughes (a former NRCan geologist) has some good videos on Canada's energy future. Google him, and you should find some YouTube videos. His views definitely don't align with industry's claims, and I'm more apt to accept his conclusions. He certainly has nothing to gain by speaking out.

That's interesting to hear about the natural gas supply, you'd never know that there's any issues listening to the directors or executives at workshops and meetings. I mean right now Cenovus, Husky ... and one other company, I think maybe Laracina, are pumping natural gas with steam as process aid in SAGD because they consider it so abundant.

Furthermore, there really isn't "long term thinking" in the oil sands as far as I have seen. I mean Karl Clark, of the Clark Hot Water Extraction, predicted the clay dispersion problems in oil sand tailings in the 30's and no one bothered to investigate or worry about those concerns and now we have gigantic tailings ponds.

Thanks for the tidbit. I had no idea. I'd ask the question, but I think I already know the answer. The loophole was to classify tailings ponds as "experimental mitigation" to avoid the nasty problem of having to deal with them until later. I had no idea the problem was identified so long ago...

Yeah, the real kicker right now is scale. There are tailings with similar or even worse qualities compared to the oil sands, noticeably in diamond mining, but the thing is diamond mines are minuscule compared to the oil sand mining operations and it doesn't hurt that diamonds are also a lot more valuable; however, the technology used to process tailings in these smaller mines just doesn't scale up to monstrosity that is oil sands and also oil sands has to be way more economical since in all honesty bitumen is worth nothing in the grand scale of things mined. To give an example there's a technique called cross-flow filtration, I believe borrowed from other mining disciplines, that has shown some success in the lab scale, but I remember a guy from Syncrude commented that to implement this technology on their slurry stream would require the installation of thousands upon thousands of kilometers of tapering porous pipes, which they viewed to be unfeasible due to cost and footprint (I think all the pipes had to be kept in heated building).

Are you really sure it is terminal? How do you know? Enormous new gas fields are being found off West Africa "all" the time.

The EROI of SAGD looks pretty grim...

From a Nikiforuk article...

However, bitumen, like many so-called green alternatives such as wind, provides poor energy returns. According to Peter Tertzakian, the chief energy economist at ARC Financial Corporation (and a very astute energy commentator), the EROI for the oil sands amounts to 7:1 for extraction and drops to 3:1 after it has been upgraded and refined into something useful such as gasoline. Several industry experts say that oil sand mines have an average EROI of 5:1 or much better returns than Steam Assisted Gravity Drainage (SAGD) plants. In fact, a detailed energy balance analysis sponsored by the Alberta Government for SAGD suggests that its EROI is close to 1:1. That makes bitumen a source of energy as pathetic and tragic as corn ethanol.

Charles Hall has tar sands EROI at 2-4; see table 2 in this article (pdf)

My apologies--I think I clicked the wrong icon and flagged your post. The paper you link is the best I have ever read--thanks. It's too bad academic studies like this aren't more accessible.

Meanwhile, the KSA is 'leaving it in the ground for future generations', or they are proclaiming the intention at least. Better invest all them profits 'wisely'...


Based on the BP data base, the combined net oil exports from the seven major net oil exporters in North & South America*, inclusive of rising net exports from Canada, recently fell by 1.4 mbpd, down from 6.2 mbpd in 2004 to 4.8 mbpd in 2010. If we extrapolate the 2004 to 2010 rate of decline in their combined ratio of production to consumption, they would collectively approach zero net oil exports in about 20 years or so.

The average annual volumetric increase in Canadian net oil exports from 2004 to 2010 was 34,000 bpd per year.

*Canada, Mexico, Venezuela, Trinidad & Tobago, Argentina, Colombia, Ecuador

Thanks for reminder! ;)

Would it be fair to say that Canada is going to have to run pretty fast to just keep up with their own decline, and a lot faster to be a 'Saudi Arabia' net exporter? And most of the rest of the world (Asia, USA etc)is going to need to afford to pay them at ever increasing cost if they, RoW, want a share of a relatively small year on year increase in Canadian net exports?


The comparison to Saudi Arabia is a little ironic, given that Saudi Arabia's net oil exports have been below their 2005 rate of 9.1 mbpd (total petroleum liquids, BP) for six straight years. Also, if we project the rate of decline in the Saudi's ratio of production to consumption (P/C), Saudi Arabia would approach zero net oil exports in about 20 years, about the same time frame that the P/C projection gives us for the combined net exports from the seven major net oil exporters in the Americas.

However, I should mention that annual net exports from the top seven in the Americas have stabilized in the past couple of years at 4.8 mbpd (through 2010). We will see what happens from here.

Saudi P/C ratio (BP):

A couple of clarifications and comments:

By "Saudi Arabia" I mean the "dominant producer", not the producer of X or Y amount of oil, in other words, the nation with the greatest amount of exports compared to all the others- even if this is less than historical numbers

Natural gas reserves are vast in Canada and add to this a growing exposure to the arctic circle- population is small and so there is a reduced export land effect as a result- contrast to SA eating it's own future with an exploding young population in childbearing age

The absolute price of natural gas is not as relevant as the relative price of gas to oil- if gas prices rise but oil rises higher the game is still on- this is the situation I expect to develop

Living in Australia it’s easy to forget about how much heating oil is used in Europe and North America.

Even in Australia the direct use of biomass can be significant. My brother, who lives in Australia, has a house which uses biomass for heating, hot water, and cooking, supplemented by solar energy, which also supplies electricity.

His "biomass" consists of dead trees, fallen branches, etc., converted to usable sizes with a chainsaw, and split where necessary by hand using an axe and, where needed, wedges.

What matters are liquids from biomass:

Powerful Choices: transition to a biofuel economy in Australia

Mr Barney Foran

Around 50 million hectares of managed woodland needed

If anyone has presentations from the conference, we would love to publish them at Business Insider. Please send to Thanks!

Any MP3s of any presentations available perchance?

All this biomass ... all this unconventional fuel ... has to be paid for by someone.

Only the smallest fraction of the fuel burning activities provides a direct return: the funds to pay for the fuels must come from elsewhere other than use. This means borrowing as non-fuel-use activities pay for themselves and little more.

Paying for non-remunerative activities with credit has left the world with trillions of unserviceable debts. Unconventional fuels are interesting but any price at this point is sure to leave them in the ground ... surrounded by increasing numbers of desperate, credit-strapped 'consumers'.

Okay, the debts can be canceled and we can start over. The very next day new debts in amounts equal to those forgiven would need to be taken on in order to subsidize the fuel waste.

Fuel waste, fuel waste, fuel waste ... it's not about getting more, it's what we do after we have it. This is where the problem is: not energy return on energy-invested but the return on consumption. There is none, a state of affairs that is not changing soon.

The outcome is credit collapse, taking place under everyone's nose in Europe. Starting soon in China, Japan, US, Brazil ... everywhere. Our toys are fun ... but they cannot pay their own way.

I think you've hit the nail on the head. There's been a couple of articles now in peer-reviewed journals about the relationship of oil and the 2008 crash. Yes--unconventional sources can produce, but their price points are so high, few can afford them. It's just that no one has figured it out yet, particularly economists. It's only been 4 years. How's the stimulus working? How's the austerity working? The problem is so big and so systemic, it'll be overlooked for a while yet.

Austerity vs Liberty.

The mutual exclusion will make many a head explode.

Yes, well said.

As I was feeding a meter in the city yesterday, a young bloke approached me from the "Wilderness Society" (home-made clothes it seemed, ear rings in all the wrong places). After the quick introduction, he asked what I thought about the environment. "Economic environment?" I asked. I then began quizzing him on PO and for the next few minutes did my best to explain a few things I'd learned here at TOD; limits-to-growth, the grossly inappropriate commercial use of words such as "green" and "sustainable"... and all that. I don't think I made his day.

4 years and 32 weeks I've been visiting here. Can't see much has changed.

Cheers, Matt

I think you have it.

But, would it be true that for a while petroleum even in the private car did increase labor efficiency and make 'savings' for parts of the retail and service sectors, and even in industrial sectors? Customers and clients arrived at super just-in-time depots like food stores and hospitals, and workers arrived from all over? Households could have two earners going in different directions and time was used in paid employment? I see the utter dependency even in my life-time here in the UK, especially in lower income 'working' households who have otherwise lost out in the GDP share-out.

At some point the system stopped paying for itself and ceased to be self-stoking?

It was ever thus. At some point the British Empire ceased paying for itself ('wealth pump') and became a liability. When I was five, the new prime minister in bankrupt 1946 Britain first job was to get rid of the empire as fast as possible. It took decades though for the point to fully sink in.


... would it be true that for a while petroleum even in the private car did increase labor efficiency and make 'savings' for parts of the retail and service sectors, and even in industrial sectors? Customers and clients arrived at super just-in-time depots like food stores and hospitals, and workers arrived from all over? Households could have two earners going in different directions and time was used in paid employment?

All of these are self-created problems with 'automobile' as the answer. Nature does not mandate people live 20 km from their work or buy useless goods.

Industrialization is a powerful myth because is creates such compelling artifacts. We are encouraged to linger over the wonderfulness of the artifacts, to fetishise them and skip over the process of their creation.

The larger and more intricate are the artifacts, the greater the need for capital. That cell phone in your hand represents $40 billion spent before the first phone ever emerged from the assembly line. Ditto with Adam Smith's famous pin factory. That first pin cost thousands of pounds that no manufacturer would afford until he sold millions of pins. Chicken-egg, how could the pin manufacturer make that first pin? He borrowed.

Once he sold a few pins from his borrowed factory (and put all the local silversmiths out of the pin business in the process) he could borrow some more. If he borrowed enough he could buy up- or put under all the other pin manufacturers and create a pin monopoly. He could -- and did -- borrow millions of pounds and put those in his pocket, leaving it to his customers (his labor) to repay the the loans.

If the customers couldn't pay the loans, the government would, borrowing in the customers' name, then taxing them even as their wages are reduced.

I don't think even extraction industries were ever 'self-stoking', they were (and are) easier to subsidize w/ debt.

There is a reason why we have these trillion$ in debt, it's not to pay pensioners.


We in the OECD with all our wealth are being outbid for $100 oil by third world farmers who use it to power their irrigation pumps and to drive their produce to market in the back of a pickup. If they can't irrigate their crops they starve. If they can't get them to market they can't afford oil for the pumps.

Faced with $100 oil we a faced with not driving 20 miles in our SUV for a pint of milk, or not flying 1000 miles because Grandma cannot get to grips with Skype.

We still have a long way to fall.