With the end of the cold war, Fukuyama famously predicted the end of history. It was one of the bigger blunders in the predicting business as things not only have not gotten less exciting – it even got significantly more interesting to be an earthling.
We are indeed living in exciting times. The world I have grown accustomed to over my lifetime is changing radically. Not only is the cold war ancient past or the war on terror past its first official decade or even the once seemingly unchangeable Arab World transforming itself. A couple of age-old immutable truths are starting to not only show cracks, they are disintegrating into rubble at a very rapid clip. One of them is the energy and fuelling architecture of planet earth.
Old earth was all about moving crude from the Gulf to the rich world. Saudis were strange but incredibly wealthy and benevolent individuals who liked to spend vast amounts of money in western hotel lobbies and the world had to bow to their every whim. No more.
Its all about one of those little and often forgotten truths. The dictate of scarcity and the resulting resourcefulness of the human race. But what is really scarce? Oil? No way, there still is plenty of the stuff to go for a long time in earth’s crust. The question is not if its there. We know it is. Its also not if we can lift it. Of course, we can but the real question is can we afford it and aren’t there better alternatives? And with alternatives, I mean anything else – not only the renewable yadda yadda.
Now, what are we stuck with if there is still plenty of the smeary stuff to go for?
New oil is either hard to find and assess, or it is hard to reach, or it is hard to extract or it is hard to process. Or combinations of it. And hard is in any instance also more or less expensive.
Lets cut some examples. Shale oil is known to exist for centuries now. It was exploited as kerogen oil in Austria and Switzerland at the end of the 19th century for its (seemingly) curative properties. But until a very few years ago it was believed that shale oil could not be economically exploited for energy purposes as it is very hard to extract from the rock. Besides, the resulting oil is of very poor quality and needs extensive refining treatment.
Not really the stuff that gushes out of Saudi soil. No surprise that you need higher oil prices if you want to make your shale oil well produce anything else but sleepless nights.
A live example is Canadian oil sands. They were THE big master blaster investment of the first half of the last decade. But this again is very poor grade heavy crude that needs to be cooked in order to separate the liquid stuff from the solids. That means you need cheap energy in order to produce expensive energy. Ain’t that mad?
Other examples are very heavy grades (usually you get half a barrel of revenue-producing distillates for every barrel of crude). Heavies can be chemically cracked in order to produce more of the good stuff but there is no surprise – no money, no fun.
Why is all that yadda yadda important you might ask?
It is a funny fact that most of the expensive oil reserves have been known for quite a while. I mentioned shale oil being known for more than a hundred years. Same for Abu Dhabi sour crudes which are known to exist for many decades and the list could go on almost endlessly.
Whats different is that with today’s high price environment many of those resources are thought to be commercially attractive. Really attractive is something else – to me, it smacks more of pure desperation. We need more oil – but we are sitting on all those previously unattractive resources so let’s play progressive humans and have some technological development have unfolded its wonders.
In the background, something much more significant happens. Not only previously bad oil becomes good oil. Also, it pushed us out of our armchairs as high prices for energy and fuel are a pain to everyone. And a pain that stings you every day sure makes you think of a way out.
LNG is such a way out. LNG as a fuel is not exactly a new idea. The technology is age-old and all the mechanisms (commercial or not) are well understood. The only thing preventing it was – well – cheap oil. As long as getting the fill is not really a wallet slimming exercise – why looking at something else? Why even bothering of having new ideas?
We, humans, are used to what we are used to. If we would have been raised on wiggly worms since birth we would gladly continue gobbling it up and not even look at the medium rare piece of ox on the plate. It would look strange to us and – well – its not what I have always eaten so get me the wigglers, will ya?
The basic rationale is simple. We would like to fool ourselves into believing that as humans we make rational choices and that in the end what is good for us will win the day. Natural Gas and LNG as a fuel is an infinitely better choice for us as humans (cleaner, more abundant, even safer on any count) than diesel for many decades now. Have we gone for it? No way. Why should we?
Are we quitting smoking when cancer is still a remote possibility or just before surgery? Are we starting to take care of our families when the kids are still little and our spouse just wants a little chat at the end of the day or when the kids are on rehab and the divorce filing is delivered? Are we making healthy choices as far as our environment is concerned when the earth is still a habitable place or when mayhem strikes us?
To be fair – there have always been those who make healthy choices early. It’s just not a majority occupation.
I am not a tree hugger but if I had a choice between a cleaner, renewable and sustainable alternative or the dirty, filthy, stinky one I would gladly take the clean one if it’s economically attractive.
LNG is such a thing. Whats the barriers then? What was holding us back? Well, cheap oil it was. Oil had to become as painfully expensive as it is right now so people start to question some age-old dogmas. And when they start to stretch their necks in order to see neighbors lawn, they will find themselves attracted to LNG as a fuel. Not because its cleaner (it is), not because its cool (it most certainly is) and not even because it’s sustainable (scores in that one too). It’s because being separated from a loved one hurts and I sure love my Benjamin Franklin’s.
Good old greed comes and deals a new deck. The Saudi oil minister Zamani said it famously “The stone age did not end for lack of stone and so will the oil age not end for lack of oil”. It just won’t be cheap anymore.