EGEE 120
Oil: International Evolution

The Quest Chapter 12: Unconventional


Consider the following questions:

  • What challenges faced the developoment of the North Sea petroleum?
  • Compare the challenges with North Sea and Natural Gas.

After reviewing the origins and early years of OPEC, we see the control and world wide impact this new organization can bring to the oil industry. This portion adds some balance to the swing for oil control. The North Sea adds unconventional petroleum to the world market and counters the percentage control with OPEC. This also highlights the advantages with continuing to advance technology for recovering oil. The North Sea deep oil drilling have their own challenge being cold and harsh weather conditions. This offshore drilling is more expensive than drilling in the Middle East and Venezuela even. Yet in response to the raise in the price of a barrel oil, it would cover this increased cost.

Just as we see today with the increase of hydraulic fracking (HF). HF is more expensive than conventional drilling but as the price per barrel goes up the so can the investment in unconventional drilling process and recovery.

The challenge is to make the recovery of the oil economically profitable. There is a threshold where if the price of oil drops below it, then recovering this unconventional oil is no longer profitable. The companies can continue drilling at a loss or stop drilling until the price rebounds. There is no point in drilling oil that costs more to produce than the oil company can sell it for.