"As production is maturing in older fields, that's where future capacity lies," Samuel Ciszuk, an energy analyst at IHS Global Insight in London, said of heavy oil. "It's less valuable crude, and it's more difficult to produce."
Hence the cost of accessing is getting higher and higher too. The cost of developing a barrel of crude in Khurais is today $10,000 — almost double the cost of development in the Empty Quarter a decade ago.
And for the global needs to be met, refineries need to be geared up to refine this crude and this not only means colossal investments in the refining sector, it would also translate into higher refining costs. The era of cheap oil is definitely over.
A look at the globally accessible crude reserves indicates the dominance of heavier quality — and interestingly the energy rich Middle East dominates the dots. The region is estimated to have in place 1,000 billion barrels of heavy oil which is equivalent to 28 percent of the estimated world total reserves. "Despite this immense resource base, heavy oil and natural bitumen accounted for only 3 billion of the 25 billion barrels of crude oil produced by the beginning of this millennium. Much still needs to be made accessible.
And it was from this perspective that Bahrain hosted the Heavy Oil World MENA 2010 conference last week — to focus on the region's riches of this grade of crude. The conference, looked at ways of accessing more than 1,000 billion barrels of untapped oil resources across the region, examining how developing technology, already in use elsewhere in the world, can be applied to the region to practically double the regional hydrocarbon reserves.
There is a lot of unpublished data about prospective reserves in these fields that can be built on and the technology which has been developed in places like Canada can now be applied to fields in this region."
Heavy oil takes more work to extract and yields less valuable refined products than easier flowing light oil, can cost more to produce, depending on the location and technology needed to pump it. Technology has been advancing in this field and recently has been moving forward fast and with the oil price rising and stabilizing in the past year the potential for exploiting these resources has become more attractive.
"The vast reserve demonstrates the importance of heavy oil as a future energy source, one that cannot be overlooked and, therefore, companies that position themselves early in the heavy oil business are likely to win the game," the Bahraini Oil and Gas Affairs Minister and National Oil and Gas Authority Chairman Abdulhussain Mirza emphasized while inaugurating the conference. And indeed there could be no denial of the importance of heavy oil as future energy source. "Heavy oil will be a savior to the ever-increasing demand for fossil fuels from the developing nations," he emphasized.
Energy professionals from Bahrain, Kuwait, Saudi Arabia as well as oil majors Total and Chevron discussed projects and technology available to make this heavy grade available and accessible.
The region is already working to develop its heavier riches. With domestic consumption rising, processing the heavy crude grades at home will leave Saudi Arabia more valuable light crude to sell. And this appears a major plank of the Saudi and the regional hydrocarbon strategy today.
Saudi Arabia aims to develop heavy crude at deposits such as Manifa and is planning refineries to process the oil. Aramco is developing two 400,000 bpd refineries to process heavy crude at Jubail and Yanbu and is also working on a third facility at Jazan in the country's south.
Kuwait is in talks with US oil major ExxonMobil and French giant Total to make the most of its heavy oil deposits and boost its production capacity 50 percent to 4 million barrels per day by 2020.
Chevron has been conducting a pilot project for about a year pumping steam into the Wafra oil deposit shared by Saudi Arabia and Kuwait to force more crude out and full operation using the technology at the field could start by 2017.
Abu Dhabi has also joined the vanguard of technically challenging efforts to develop the region's vast heavy-oil potential through the Mubadala Development. Mubadala is a strategic investment company owned by the Abu Dhabi government and is part of a joint venture aiming to boost output from Bahrain's only oil field. The development will be among the first to unlock output from an estimated 1 trillion barrels of largely untapped regional heavy oil resources. Bahrain's National Oil and Gas Authority signed an agreement with Mubadala and the US oil group Occidental Petroleum to establish Tatweer Petroleum as a joint venture to develop the Bahrain field. The oil field, also called Awali, was the first discovered in the Gulf, in 1932. It produces 32,000 barrels per day (bpd) currently, which could be doubled or tripled by applying advanced oil recovery technology and developing parts of the field containing heavy crude.
The world definitely needs more fossil fuel. And the role of heavier crude in the overall global energy equation is bound to grow — with the passage of time. The world needs it. The global energy mix is changing and heavier crude has a significant role in this. For the region to continue its domination of the energy markets — developing its heavier crude riches is virtually inevitable. And that is the route the region seems to be taking now.
