Prospects for enhanced oil recovery

Conference report OPEC joins North-South debate Fourth Annual OPEC Seminar, Vienna, 24-26 November 1981. After falling victim last year to a discussion of the Iran-Iraq war, the O P E C Seminar has returned in full swing as one of the more interesting events of the oil industry's calendar. With Sheikh Yamani in the chair, the Seminar drew some 30 government ministers and 500 participants from all parts of the globe. Partly a contribution to the North-South dialogue, partly a public relations exercise by OPEC, the seminar provides a useful insight into how O P E C and the Third World oil importers see the state of the world. On the formal level, this was a postCancun conference, with Third World spokesmen continuing to promote the concept of global negotiations, which will include discussion of energy issues, within a much wider North-South context. The spokesmen from the West were conciliatory, without offering the kind of concessions which the OPEC ministers were demanding. Perhaps the most interesting exchange of views was on the relative desirability of the creation of a World Bank energy affiliate. Most of the spokesmen from the West came out in favour of such an initiative, as did a fair proportion of the non-OPEC Third World participants. The OPEC speakers were more ambivalent. Yamani's position, for instance, was that, though such an affiliate is in line with OPEC thinking, it would in fact be too narrow, and that a broader body incorporating wider developmental considerations is what is needed. Moving away from the formal dialogue on North-South issues, the most interesting aspect of this seminar was the consistency with which the spokesmen from the non-OPEC Third World described the policy measures which had been triggered by the oil price rises of the last decade. These spokesmen came from countries such as Tanzania, Kenya, the Philippines,

ENERGY POLICY June 1982

Costa Rica, Argentina, Thailand and Mexico, and, almost without exception, they described measures aimed at conserving energy, substituting other forms of energy for oil, and discovering new sources of power within their own countries. They obviously paid attention to issues such as the firewood crisis (interestingly, the West's ministers now routinely raise this as an issue) and untapped hydropower potential. Some, however, went very much further, showing how imported coal could be delivered to power plants (in Thailand's case) at half the cost of fuel oil. Even accepting that there is a gap between intentions and achievements, the consistency of these reports suggests that forecasters may need to rethink their current assumption that demand from the non-OPEC Third World is going to be the most dynamic sector of the OPEC market in the coming decades. Finally, it was extremely noticeable

that the future of oil prices was barely mentioned, apart from a paper by AlChalabi on OPEC's hydrocarbon pricing policy options. The significance of this paper, though, was that it remained precisely as its title suggests a discussion of options - and there was none of the tendency, so obvious a couple of years back, to make tentative projections of the demand and price for O P E C oil over the next twenty years. The 'long-term strategy' is still formally alive, but no OPEC representative was willing to put a date on when (if ever?) indexed price increases might come to pass. The West's observers suggested that the absence of price forecasts reflected OPEC's uncertainty about where oil markets are going. OPEC representatives pointed out that the seminar was primarily about NorthSouth issues and not about pricing. Inevitably, though, both kinds of issues got raised. My overall impression is that the OPEC-Third World alliance is still in good working order, but that some of the self-confidence has gone out of O P E C since the last of these seminars two years ago.

Louis Turner Royal Institute of International Affairs London, UK

Book reviews Prospects for enhanced oil recovery WINNING MORE OIL by R. Dafter Financial Times Business Information, London, 183 pp + Appendices, £90 paperback Ingredients : a number of repetitious non-technical descriptions of enhanced oil recovery (EOR) processes; extracts on the E O R theme from various oil companies' reports; and a full, and several partial, but not very detailed, listings of E O R projects under way. Mix well together, add a descriptive chapter on what's happening in the

field in the USSR, plus enough material for two good articles and part of a supplement in the Financial Times on world oil development. Put the result in photo-offset form in a spiral binder, add the imprint of the Financial Times Business Information publishing service and then have the audacity to put it on the market for £90. Result: perhaps a recipe for high financial rewards, but very little by way of addition to knowledge. In brief, an expensive pot-boiler to capitalize on the availability of data already collected and, to a large degree, published in a much more serious and worthwhile 1980 book, Scraping the Barrel

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Book reviews (Financial Times Business Informa- average 3.5% per annum increase in tion) by the same author. the real price of oil from the 1981 level There is nevertheless something to of $32-41 per barrel as 'reasonable' be said for the new publication- as (p 92). If this were to happen then, reflected in the title. Scraping the indeed, there would be sufficient Barrel carried overtones of a world incentive, government taxation permitdesperate to find the last gallon of oil. ting, for investment in E O R to substiWinning More Oil, by contrast, lays the tute high cost imported oil by lower emphasis more appropriately on the cost domestic production: providing, efforts and prospects for the exploita- of course, that one could also make the tion of more oil than hitherto expected, further assumption that investment in as a result of both technical and E O R turns out to be a better option economic developments in the 1970s. than local investment in oil conservation measures and/or in the discovery and exploitation of new oiifields. In this New oil context the £10 million that Dafter This is, moreover, more oil from the reports (p 34) as having been allocated oilfields of the world that have already by the U K Department of Energy for a been discovered and, in most cases, programme of research into enhanced partly depleted. Dafter points out that recovery techniques, seems unlikely to these oilfields account for some 1100 x account for much additional oil from 109 barrels of recoverable oil (of which known U K reservoirs in comparison about 450 x 109 bbi have already been with the volume of oil that will be produced); but this figure emerges produced from new fields in offshore from a present technology which, on waters or with the quantities of oil average worldwide, only allows 30% of which will not be used because of in oil consumption the oil in place to be produced. The investment author's survey of current opinion in projects: especially in the light of a UK the USA, and in the international oil oil taxation system which positively industry, together with information discourages a high rate of recovery about the USSR's progress indicates from any given offshore field (given a that this percentage recovery figure can steeply rising unit cost curve and a rate gradually be increased to an average of of tax that tends to be progressive with + 40% - to give an additional + 350 x higher rates of production). 109 barrels of oil availability from known fields. To put this in perspective Adverse conditions for EOR it is worth noting that current world annual oil use is about 20 x 109 barrels; These sorts of adverse conditions for 10% enhanced recovery would, in E O R , moreover, apply throughout other words, yield enough new oil to most of the O E C D w o r l d - with the meet this global rate of use for all but notable exception of the USA where, as Dafter indicates, some 90% of the the last 3 or 4 years of the 20th century. Not, of course, that this particular effort to enhance recovery rates seems supply/use relationship has any real likely to be concentrated over the rest world relevance, for this sort of new oil of the century. This will produce results is relatively costly to produce, at the low end of the range of expectacompared not only with today's proven tions (of 2 to 3 million bbl/day by the oil reserves (which in themselves mid-1990s - p 17), consequent upon a constitute over 30 years supply), but low rate of expansion in oil use and a also with most oil from provinces and continuing ready availability of falling fields yet to be explored and exploited. real price conventional oil in the now to The element of competition is pointed be expected restructured international out-by Dafter, but its significance is oil market. discounted in the context of an uncritiNonetheless, the oil not produced cally presented OPEC view of a world this century by enhanced recoveryof permanently tight oil supplies, amounting ultimately to at least 750 × accompanied by a steadily rising real 109 bbl as Dafter shows - will then be price for the commodity. available for oil consumers in the 21st Indeed, Dafter actually defines an century: and such a delay in its exploi-

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tation appears likely to be advantageous, given that this means that sufficient time will be available first, to enable the technology of E O R to be perfected from its current largely experimental stage; and second, to enable economies of scale in the operations to emerge slowly, but steadily and so bring down the real costs to levels which mean that oil need not increase in price even when a significant part of the world's needs have to be provided through enhanced recovery projects and/or from oilsands and shales (the development of which has much in common with the enhanced recovery of conventional oil).

Peter Odell Rotterdam Centre for Intemational Energy Studies The Netherlands

An overview of oil policy OIL OR INDUSTRY? Energy, Industrialization and Economic Policy in Canada, Mexico, the Netherlands, Norway and the United Kingdom edited by Terry Barker and Vladimir Brailovsky

Academic Press, London, 1981, 330 pp, £15.80, $38.00 THE EUROPEAN TRANSITION FROM OIL: Societal Impacts and Constraints on Energy Policy edited by Gordon T. Goodman, Lars A. Kristoferson and Jack M. Hollander

Academic Press, London, 1981, 354 pp, £20.60, $49.50 US ENERGY POLICY AND US FOREIGN POLICY IN THE 1980s: Report of the Atlantic Council's Energy Policy Committee by John E. Gray, Henry H. Fowler and Joseph W. Harned

Ballinger, Cambridge, 1981, 309 pp, £17.50

MA, USA,

ENERGY POLICY June 1982