Oil & Gas: Technology is Driving a Bright Future

Many experts for the past fifty years have been saying there is no future for oil and gas. Some take the approach that we are rapidly running out of oil and gas, while others take the approach that renewable energy will simply replace the need.

What most people seem to have overlooked is the impact of technology on the oil and gas industry. While I have not spent my career in oil and gas, I have spent my life in technology.  (And when you spend much of your adult life in Texas, as I have, you end up learning a lot about oil and gas.) I believe that oil and gas will continue to be the primary source of energy in the world for the next fifty years, just as it has been for the past fifty years, thanks to ever advancing technology.

All of the reports over the years on the amount of available oil and gas in the world have been based on the existing technology at the time of the report. They have grossly underestimated our resources by not taking into consideration how rapidly technology changes, and how great of an impact it has on finding, drilling, processing, and transporting oil and gas.

Consider the case of the Kern River Oil Field in California, one of the largest oil fields in the United States. Pumping began there in 1899, and fifty years later, experts were saying the field was almost dry. Yet over the fifty years following those predictions, operators had pumped more than one billion barrels of oil from the field. Once again in 1949, the experts said the field was almost dry, and yet the oil field has produced yet another billion barrels and Chevron, who now owns the field, continues to pump oil at Kern River today. This story has been repeated at almost every major oil field around the world over the past fifty years.

Advances in technology are what have made this possible. From high-tech computer driven 3D seismic geophysical surveys to computer assisted drilling techniques, technology is transforming the oil and gas industry. Unlike oil and gas, which are fixed resources, technology is a dynamic resource that continually builds on previous advances to create a next generation of new technology. These technologies don’t change the amount of oil and gas in a field, but they do radically change our ability to locate and mine the oil and gas in those fields in a cost-effective manner.

Fracking is the most significant of these new technologies and has had the largest effect on oil production of anything in the past one hundred years. Fracking is not a constant technology but one that is constantly improved to be more effective and more efficient. Fracking and other technologies have led one MIT professor to take the position that we will never run out of oil and gas resources. Fracking is certainly not the only technology in the industry – there are hundreds of new technologies introduced to improve our ability to locate and mine oil and gas resources.

While we often talk about the shortage of oil, nobody ever talks about the shortage of natural gas because America has one of the largest supplies in the world. Natural gas has largely been an ignored resource compared to oil for many reasons but again, technology is now changing that equation. Technologies that allow us to cost effectively convert natural gas to its liquid form for storage, transportation and use have now made liquid natural gas (LNG) the most cost effective fuel for commercial trucks.  

Several things need to be kept in mind when thinking about transportation and oil & gas. According to T. Boone Pickens, a lifetime expert on oil and gas, transportation accounts for 70% of the use of oil in America, with about half of that in gasoline vehicles and the other half in diesel commercial trucks. Therefore, if we take the technology readily available to us today to better utilize our existing resources for transportation, it would dramatically reduce our crude oil usage and therefore expand the future for crude oil by decades. If we converted all tractor-trailers to using LNG instead of diesel, we would reduce our current demand for crude oil by 35%. Not only would that alone make us energy independent in America, it would replace the use of diesel with lower cost, lower emissions LNG. That would be a huge winner for our pocket books, our environment, our independence from Middle East oil, and it would create hundreds of thousands of U.S. jobs.

LNG also has the ability to turn America into an oil and gas exporter rather than an importer which would dramatically strengthen our economy. While the extreme cold temperature LNG requires does not make it a safe and reasonable resource for our cars, compressed natural gas (CNG) is a low cost, low emissions solution for commuter cars. Consumer vehicles do not have the storage capacity for long trips on CNG, but it is ideal for commuting. Estimates vary but somewhere between 60% and 80% of US passenger car driving is done commuting less than fifty miles to work. A CNG car can be refilled at night in your garage while you sleep, so it is ready to drive each morning. Together, LNG and CNG could convert 50% of our requirement for oil for transportation to natural gas using today’s technologies. As technology continues to advance it will make the use of natural gas even more efficient for our transportation needs.

Our need for foreign oil gives other countries incredible power and control over our country’s economy. Technology is helping us gain freedom from that control, not only by improving our access and use of our own traditional oil and gas resources, but by opening an entirely new and vast (almost unlimited) resource of methane hydrate. Methane hydrate is the world’s largest natural gas resource trapped beneath permafrost and ocean sediments. Technology is currently being developed that will allow us to cost-effectively mine this new energy source over the next ten years. Technology has allowed us to find this new black gold, which will have to be called white gold, since it is literally ice that burns, and new technologies will make it cost effective to use. This will provide another incredible resource for converting from oil to natural gas.

There is no question that technology has played a major role in oil and gas production, and it will continue to do so well into the future. It is also clear that while technology is playing a major role in the development and use of alternative, renewable energy, such as solar and wind, the fact remains that oil and gas will continue to be the most cost effective and efficient source of energy for transportation and many other markets. So the future of oil and gas, as in the past, is bright, as it continues to be the energy that drives the world. But even more important is recognizing that technology is the new engine that is and will continue to drive the world.

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