Crude oil and retail gas hit record high prices last week—more than $135 a barrel and $3.83 for an average gallon of regular. During a congressional hearing, lawmakers verbally pummeled oil execs for raking in profits while consumers endure pain at the pump. "Does it trouble any of you when you see what you're doing to us?" Sen. Richard Durbin (D–Ill.) asked industry officials hauled to Capitol Hill to testify on skyrocketing oil prices.
Oil companies are reaping a windfall from soaring petroleum prices driven largely by heightened demand from China starting in 2003. But a combination of geology and changing geopolitics means that increasing the energy supply is not so simple as pumping more of the same old crude. As a result, Big Oil is exploring its technological options.
As rising prices have made oil a more valuable commodity than ever, petroleum-rich countries such as Russia and Venezuela have tightened control over their nations' reserves by essentially raising the rent on U.S.-based oil companies—a development termed "resource nationalism." "The high oil price environment allows them to turn the screws" on the oil industry, says Ian Nathan, senior research analyst for Energy Intelligence Group in New York City.
In prepared remarks, John Lowe, executive vice president of exploration and production for Houston-based ConocoPhillips, the number three U.S. oil and gas company behind ExxonMobil and Chevron, told the Senate Judiciary Committee last week that 75 percent of the world's available oil reserves are "completely controlled by national oil companies and are not accessible." Only 7 percent of those reserves are directly accessible to Big Oil, he said.
Oil companies have traditionally looked to so-called conventional petroleum resources—pockets of underground oil and gas wedged between water and impermeable rock—which gush to the surface when tapped by drilling.
Nathan says high prices have made it increasingly economically viable to extract more unconventional forms of oil, in particular the asphaltlike tar sands (also known as oil sand, or extremely heavy crude oil) plentiful in northern Alberta, Canada. Converting petroleum from tar sands into a type of oil is more costly because it requires strip-mining or the injection of steam to drain the petroleum.
Lou Burke, manager of biofuels for ConocoPhillips, says the company is still largely focused on finding more cost-effective ways to extract and refine traditional oil and gas. But he rattles off a diverse array of research projects that the company is pursuing for the longer term. He says the company has a patent on a process to extract methane gas from hydrates—essentially cages of ice—by exposing it to liquid carbon dioxide, which becomes trapped in the hydrate in return.
"You release a hydrate and then form a hydrate, which is pretty cool," he says, especially given that methane gas hydrates represent the most abundant global natural carbon resource.
In another approach, his group has demonstrated in the lab all the chemical reactions necessary to turn biomass such as corn fiber into biocrude, an intermediate product on the way to gasoline and diesel fuel, he says, although the reactions are not yet efficient enough to operate on a large scale.
ConocoPhillips teamed up with Tyson Foods, Inc., of Arkansas in 2007 to convert waste fat from livestock animals and agricultural waste into conventional diesel fuel. Burke says the company has a commercial refinery in Borger, Texas, turning inedible beef tallow into diesel, and a second plant in Cork, Ireland, doing the same with soybeans.
Burke notes that novel concepts such as renewable diesel are "a very small part of our portfolio" and are unlikely to supply vast quantities of energy, but he says they demonstrate a certain mind-set. "The world needs a lot of energy," he says, "and we need to diversify our sources."