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Slide in America's oil production to be stopped by technology and algae

Peak Oil; American dependence on foreign supplies. Is it possible that the energy crisis is not as bad as America’s politics would have us believe?
Old time fuel dispensers at the GM Heritage Center in Sterling Heights, MI

[Updated 3-1-2012: Added backlink at end to TN writer, Aaron Turpen's article]

Yes, worldwide demand for crude oil is still high; and, if you believe the news, we’re supposedly running out, especially with China and India coming on-line with industrialization. And what oil is left seems to be trapped in a war zone or in a dying well.

Wouldn’t it be great if we could replenish oil?

Well, that Peak Oil news is so yesterday, because this is now. Investment newsletters look ahead for a reason, and increasingly want investors to consider alternate scenarios. So, imagine a world where so-called Peak Oil is merely applicable to the easy crude oil; that is, oil in the ground like the deserts of Saudi Arabia, Texas and Oklahoma. In that respect, we have peaked our access to easy oil, but not the more difficult access oil like shale, offshore and deep water ocean.

According to many investment newsletters that I receive, the doom and gloom about Peak Oil is unwarranted even there. I know that sounds crazy on the surface, as it's the opposite of everything you've been reading in the news.

Simply realize that Peak Oil does not mean we’re totally dry on this planet; far from it. It means we have merely reached the 50% limit of “known” world oil supplies; in other words, the barrel is still half full. Problem is, more than half of the world's remaining oil reserves are trapped in rocks like chalk and limestone.

That also means, with the help of technology alone, you could see the remaining oil still get pumped; and if the technology really gets applied efficiently, oil supplies as of today could double or triple in your lifetime.

Much to the surprise of those who believe in technology, too many Americans discount ingenuity, and shouldn't. Too many times we have proven there's an upside to every crisis; and the crisis over desperate oil demand and high oil prices is no different. For one thing, new demand for anything old means new incentive opportunities. For oil drillers that means inventing bigger and better ways to get more crude; and that is precisely what they are doing; and in the future, that will extend to other forms of oil.

Now, nobody is saying the cost of oil will go down to the so-called hey days of oil when you could fill up for 19 center per gallon. What they are saying is that supply is no longer a sliding issue, at least in production terms.

In fact, a copyrighted chart that I viewed shows the downtrend in U.S oil production has literally stopped. How can this be? Well, think shale oil. For instance, finding oil used to mean turning rock beds into pin cushions until you got lucky. Today, the industry uses the tech of satellites and ultrasound to find oil-rich new fields like the Bakken oil field between Canada and the United States.

Now, I am not naïve to think that pollution should be set aside. However, I do know that new engine technologies will soon be cleaner, burn more completely and get more miles per gallon than ever in the history of the IC engine. Already we have High Compression Combustion Ignition or HCCI ready to emerge from the labs, where the diesel cycle uses gasoline; and far less of it than today. Instead of gas guzzlers, you will be calling them fuel sippers.

Then we have split-cycle engine technologies like that of the Scuderi Engine and the Tour Engine. In these cases, the ICE is divided into its hot and cold cycle components. In other words, the intake-compression is in one cylinder, and the hot power-exhaust takes place in another or two or three cylinders. One simulated test by Scuderi shows 65 MPG is achievable; and that an air hybrid is part of that scenario.

Now, this does not negate a light form of electrification either. But imagine a split-cycle engine with air hybrid as well

Wait, there’s more with pond scum

Already I can feel the disturbance in the force as Anonymous comments will likely fill the end of this article. Yet, there is indeed more to this future scenario.

See, there is more to technology than inanimate entities. Think living cells that can produce oil. And if you think I'm talking about boring "biofuels" think again.

According to an email newsletter from Teeka Tiwari, the Italian city of Venice is gearing up right now to power half their city with an algae-based power plant. Others will follow. The windfall profits will follow too.

He also states that technicians in a half-dozen labs and companies are figuring out how to "make" oil — and I mean the real kind — in laboratory beakers. It's called "cellular oil" and it could soon replace the need for every drop of oil we now get from the ground... or from overseas... and even from Alaska or offshore drilling.

Think liquid fuel for your car, jet fuel for airplanes, truck and train diesel — all of it homegrown, and as much as we want. In the same way earth "made" trillions of gallons of oil, but at a much faster rate.

See, according to my investment research sources, not only did the earth use the natural lipids in algae to make oil over the millennia, but today's algae — also known as common pond scum — is packed with those same natural lipids.

This isn't "biofuel" from food crops either. For one, you don't eat algae. So using this won't jack up your grocery bill. Furthermore, we can get much, much more more oil out of algae than we can from any other crop source.

For example, an acre of corn, which we presently use for ethanol, yields only 250 gallons of fuel. Even sugar cane only yields 450 gallons of fuel per acre. Meanwhile, just one acre of algae can yield up to 10,000 gallons of fuel. That’s called leverage and throughput.

As a result, the U.S. Department of Energy says we could replace all U.S. oil demand with algae-oil farms totaling just a little bigger than the state of Maryland. And one top biotech engineer from Arizona State recently told NPR that algae-oil technology could meet worldwide demand — not just oil, but all fossil fuels — with as much land-area as Texas.

Furthermore, we don't have to grow algae-oil on land at all. They can make oil for us almost anywhere; out at sea, in skyscraper-like greenhouses, even in wastewater. And oil-producing algae grows fast too. You can replace an entire fuel crop of algae in about 10 days. Then you can harvest the oil and start all over again, as often as you like, with the same algae.

According to my other investment sources, Exxon is already "in" on algae oil for $300 million. That's how much they are giving Synthetic Genomics, a private firm, and just one of dozens of companies working to get this onto the market.

So, the next time someone cries foul with their rant on the benefits of electrification for automobiles, tell them that Peak Oil is about to be negated with more oil. Also read Aaron's article, Algae Oil for as low as $2.28 / gallon possible says OriginOil

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Comments

random dude (not verified)    March 1, 2012 - 2:13AM

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Dude, don't fall the forever and ever oil talk. Peak oil isn't about doom and gloom. It's about the rate and cost at which production cannot meet demand, that's all. It has ecomomic consequences which may just very well be as simple as having less stuff and spending less. Don't listen to the banking, financial, economic, money people. Clearly they have an interest in having lots of money. They are going to tell you anything, just like car salesmen. All of these alternatives cost money that simply isn't available. Investment dudes don't live in reality ok, they are money people. Money people detach from the physical world. We all want to believe in the whole barrel is half full not empty mentality. The fact is the barrel is half full and half empty at the same time, you don't get to 'physically' choose sides. If you do, it's called denial. And denial is a form of psychosis. In other words, a pathological condition of the mind. Mental Illness. Innovation is awesome but keep it real mate. The market is the market, just an indicator of how good or bad things are in terms of trade. The market is not the be all and end all. No energy, no money, no market. There, there's my rant. There's no replacement for oil because if there was, we wouldn't be so desperate to have it. People only do things because they have to, that's how energy works. The path of least resistance.

Frank Sherosky    March 1, 2012 - 10:42AM

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I never once thought that crude oil (as we know it) is forever and ever. I'm simply stating that new tech will avail that so-called hard-to-get oil, which is a lot; and will buy us time to advance toward cleaner fuels. And I didn't even discuss nat-gas yet, which will really buy us a lot of time. Fact is, the industry is headed in that direction, whether it is used directly in cars or indirectly via a powerplant which charges a PHEV. - Much thanks for the balanced rant.

Anonymous (not verified)    March 1, 2012 - 8:29AM

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DOE BIOMASS PROGRAM AND ALGAE RESEARCHERS NEED TO BE INVESTIGATED!

Solydra story is opening a huge can of worms at the DOE LOAN GURANTEE LOAN PROGRAM. Its not just about the Solar loan guarantee program. Look at all the millions in fees collected by the DOE LOAN GUARANTEE PROGRAM with algae projects less than 20% completed. An audit is being done on all DOE GRANTS to algae researchers and ndividuals from the DOE that are now working in private industry. Very incestuous!

The US taxpayer has spent over $2.5 billion dollars over the last 50 years on algae research. To date, nothing has been commercialized by any algae researcher.

The REAL question is: Does the DOE BIOMASS PROGRAM really want the US off of foreign oil or do they want to continue funding more grants for algae research to keep algae researchers employed at universities for another 50 years?

In business, you are not given 50 years to research anything. The problem is in the Congressional Mandate that says the DOE can only use taxpayer monies on algae research, NOT algae production in the US. So far, algae research has not got the US off of foreign oil for the last 50 years!

A Concerned Taxpayer

Neither Sapphire Energy nor the Algal Biomass Organization responded to requests for comment.
BY: CJ Ciaramella - February 22, 2012 5:00 am
The federal government awarded Sapphire Energy, a green energy concern, more than $100 million for a project that is behind schedule, has only created a fraction of its expected jobs, and is, according to some experts, at least a decade away from creating a viable product.

Founded in 2007, Sapphire is working to develop algal biofuel—a replacement to crude oil made from algae and able to be refined into gasoline, diesel, or jet fuel.

Sapphire raised $100 million from private investment firms, including ARCH Venture Partners. Bob Nelsen, a founding partner of ARCH, served on Obama’s National Finance Committee during the 2008 campaign.

A Washington Post investigation found billions of taxpayer dollars flowed to green energy companies backed by venture capital firms with ties to the Obama administration.

Sapphire was no exception. In 2009, executives, board members, and employees at Sapphire contributed almost exclusively to Democratic campaigns. For example, Sapphire CEO Jason Pyle has donated only to Democrats, according to the Center for Responsive Politics.

The company has received $104.5 million from the federal government, roughly half of which were 2009 stimulus funds from the Department of Energy, to build an algae-based biofuel operation in Columbus, New Mexico.

Sapphire has spent more than $1.8 million lobbying the federal government since 2008, with an appreciable spike in 2009, when there were several biomass-related bills up for consideration.

One such bill was the Algae-based Renewable Fuel Promotion Act of 2010, which would have expanded federal tax credits for biofuel to include algae-based fuels. It passed the House in 2010 but never made it to the floor of the Senate. The House bill was co-sponsored by Rep. Brain Bilbray (R., Calif.), whose district surrounds Sapphire’s San Diego headquarters. Bilbray is the only Republican to whom Sapphire executives and board members reliably contribute.

In 2011, the Algal Biomass Organization, which promotes the industry, hired one of the biggest law firms in the U.S., K&L gates, to advocate at the federal level. That same year, Tom Udall (D., N.M.) co-sponsored a new bill, the Renewable Fuel Parity Act of 2011, that would give algal biofuel the same tax breaks as other forms of biofuel.

There is considerable interest in developing algal biofuel. Sapphire was ranked 97 on a Forbes list of the most promising companies in 2011. There are several other companies working to develop the fuel as well.

However, like many stimulus projects, Sapphire’s new facility has faced delays. The plant was supposed to be operational by 2011, creating almost 750 temporary and 40 permanent jobs. But Sapphire did not break ground until June 2011.

In October 2011, two years after being awarded federal grants, the project had only employed 15 New Mexicans and spent $575,000. Sapphire Vice President of Corporate Affairs Tim Zenk told the Las Cruces Sun-News that the project has “a long ways to go.”

In November 2011, the federal government kicked more money Sapphire’s way—this time a $54.5 million loan from the Department of Agriculture.

According to the most recent quarterly report filed at Recovery.gov, the project is less than 50 percent complete and has created 36 jobs.

Questions have also been raised about the viability of algal biomass as an alternative fuel.

Mary Rosenthal, the head of the Algal Biomass Organization, predicted in 2010 that algal fuel could compete with oil within seven years. However, a 2010 report by the University of California Berkeley’s Energy Biosciences Institute said it would take a decade of testing to even determine if algae companies can produce mass quantities of fuel at competitive prices.

The fuel is not yet commercially available. The main consumer has been the U.S. Navy, which paid $12 million for 450,000 gallons of biofuel in 2011. That works out to $26.67 per gallon.

Neither Sapphire Energy nor the Algal Biomass Organization responded to requests for comment.

ARPA-E halts algae project, citing missed milestones
Jim Lane | February 16, 2012
Share"In Washington, the DOE has halted a research project at Iowa State University funded by ARPA-E to develop biofuel feedstock from an aquatic micro-organism for failing to reach research milestones. About 56% of the $4.4 million grant was used. Politicians against increasing APRA-E funding as proposed by President Obama’s new budget are using it and other halted ARPA-E projects as examples to reject the program."

Brian (not verified)    March 1, 2012 - 11:32AM

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I noticed that the Scuderi and Tour Engines made their way into this article. Does anyone, anyone at all, have a clue as to why products with so many upsides has not yet been picked up by an OEM? It defies common sense!

Frank Sherosky    March 1, 2012 - 11:50AM

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OEMs are looking at the split cycle engines, but Scuderi and Tour have been mum on making any comments or even hinting at who they are. I have personally witnessed OEM interest at various shows; and I know for a fact Scuderi has some European companies interested. I also witnessed GM engineers talking to them at SAE, and Tour Engine as well at a separate event where I interviewed Dr. Oded Tour.

Truth is, OEMs are slow to respond with any tech that is not invented in their own labs. Ford is counting on small displacement with turbos; GM is hedging bets with HCCI; and Toyota is still using modified Atkinson cycle engines. While the split cycle would use all the same engine tech like variable valve and cam timing, turbos, direct fuel injection, etc. it would involve some tooling changes; and those do not happen overnight at OEMs. Furthermore, there are validationa and certifiications involved with the government EPA arm.

I will cover the SAE World Congress in a few months and will have a report on split cycle then; hopefully another interview where I will press those very questions.

Aaron Turpen    March 1, 2012 - 11:39AM

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Another interesting point is that you can, in fact, eat algae, even after the oils have been extracted. Many of the strains being developed for petroleum replacement are types of spirulina, one of the most nutrient-dense plants on the planet. Health food nuts will know what that is.

Once algae is used, it can be recycled as fast-setting compost for more algae or dried into cakes to be fed to livestock or even humans.

Anonymous (not verified)    March 1, 2012 - 8:56PM

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March 1 (Bloomberg) -- Excluding Iran from the global oil market would increase the shortfall between worldwide supply and demand sixfold, based on February production and consumption estimates, the U.S. Energy Department said.

Global fuel use averaged 3 million barrels a day more than output when Iran is excluded from the calculations and 500,000 more when Iran is included, the department’s Energy Information Administration said in a report yesterday.

The examination of oil and fuel supplies and prices with and without Iran was prepared to help guide President Barack Obama’s administration in determining the feasibility of imposing sanctions related to Iranian oil trades through its central bank. Yesterday’s report was the first assessment issued under a Dec. 31 law that requires the EIA to provide an update on oil market conditions every 60 days.

“The EIA report highlights how tight the global market is,” Trevor Houser, an energy analyst and partner at Rhodium Group, a New York-based economic research firm, said in an interview.

“With oil inventories and spare OPEC production capacity running low, consumers don’t have much buffer against additional disruptions in supply.

OPEC spare oil production capacity dropped 33 percent in the first two months of this year compared with same period in 2011, the report showed. The 12 members of the Organization of Petroleum Exporting Countries had an average 2.5 million barrels a day spare capacity during January and February, down from 3.7 million a year earlier.

Aaron Turpen    March 1, 2012 - 9:10PM

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Except Iran isn't stopping oil production or export, they're just shifting it away from all of the NATO-aligned and Israeli-attached countries who're imposing sanctions and warmongering for no reason.

Iran is continuing exports to Russia, China, etc. Both of those countries have made military moves to stop any attempt by the U.S. to blockade Iran's access to the Gulf.

President Obama and his pundits are playing with WWIII with this asinine insistence that we go to war with Iran.

Frank Sherosky    March 1, 2012 - 10:43PM

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If oil supplies are so fragile, then why doesn't Obama opt for immediate approval of that pipeline from Canada? He is not ignorant of our true supplies. But if we are indeed short, then why no Manhattan Project for nat-gas cars. Surely we have enough of that to avoid going to another war. All of those LNG tankers are not being built to haul coconuts.

Anonymous (not verified)    March 2, 2012 - 1:07PM

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Sure thing, I can attest to that fact. Already my 100 gallon fish tank has a thick soup of algae and I'm ready to process it into fuel! That should make Exxon/Mobile happy, taking them out of the loop! Watch out for what you wish for folks.

Anonymous (not verified)    March 2, 2012 - 1:08PM

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Sure thing, I can attest to that fact. Already my 100 gallon fish tank has a thick soup of algae and I'm ready to process it into fuel! That should make Exxon/Mobile happy, taking them out of the loop! Watch out for what you wish for folks.

nimigje (not verified)    March 2, 2012 - 2:57PM

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Frank,

Great News.

So oil from algae, will save us from expensive oil from the graund. You have to say that soon the algae oil will replace and the coal. We will have a clean world, where the energy will not be a problem anymore.

This will benefits to everybody? Please, can you give me an idea, haw long it will take that the investors or the governments will produce oil from algae.

Thanks,

Frank Sherosky    March 3, 2012 - 11:25AM

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It wasn't that long ago that everyone thought ethanol was a pipe dream; and now it's being commercialized and sold at the pump.

According to the Origin Oil website, there is no target date. The first entry, though, will be to blend algae with other, much cheaper ingredients such as municipal and forestry waste. According to them, the algae provides an energy boost and its petrochemical profile.

From all that I can uncover now, that blend is what's targeted first to become an affordable alternative to petroleum; I assume as a first wave. After that, gasoline is a blend, too. So, the pure play on algae oil will likely increase over time. How much time? Honestly, I do not know. I do know the technology is there; and like other technologies and processes, it takes time to ramp up and increase commercialization.

Recall that everyone thought ethanol blends from corn would indeed be the savior; and it was far from becoming reality. There was lots of talk, then investment, then finally action. And now it is in the system, but algae fuel has a distinct advantage in that it bypasses a key element in our food supply. So I can see algae fuel replacing ethanol first.

Can algae fuel fall by the wayside? Sure, because commercialization requires large investments. But investments from the likes of Exxon tell me even they know it is in their best interest. Why drill for a finite quantity which is captial intensive, when they have the potential to grow, extract and replenish it?

By the way, your time question also applies to the newer IC engine technologies on the horizon, like the split cycle of Scuderi and Tour, the HCCI of GM and the closed-loop external combustion steam engine of Cyclone Power.

Anonymous (not verified)    March 4, 2012 - 2:18PM

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A fringe benefit to producing algae oil is that it can be grown on land that has no other use. It will thrive in the arid deserts of the southwest and will not compete for food producing farmland the way ethanol production does. Also, since it requires carbon dioxide for growth, it's a natural to locate the growing facilities next to big carbon dioxide producers such as power plants to capture the greenhouse gas otherwise released into the atmosphere. The natural growing process then converts CO2 to oxygen. Sure looks like a win-win-win situation all around to me.