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FinHarmony > Food for thought > What is unconventional oil?

What is unconventional oil?

access_timeMay 8, 2020
perm_identity Posted by webexpr
folder_open Food for thought
It traded as low as -37.63 dollars a barrel. Unprecedented.

What is unconventional oil?

By Christophe Marion

Of course, there is no convention, in the sense of an international convention, on the type or origin of oil that can or cannot be produced. Conventional is just a lazy translation of " conventional ".

On the one hand, we have conventional oil, contained in porous rock. Formed in a bedrock, the oil has migrated to the reservoir rock. From there, it's relatively easy to extract by drilling. Note that the term reservoir is misleading: it does not mean a tank in which the oil is contained, as in an underground lake. A more accurate image would be that of a sponge. Porous and permeable, the reservoir rock contains a liquid (or gas), which can easily rise to the surface due to the pressure exerted by the rocks above. This is why oil can flow once the cap rock holding it in place has been drilled away.

Unconventional oil, on the other hand, never gushes out. It may be unconventional in terms of the drilling technique or the production process.

The most important unconventional oil is shale oil. It is obtained using a special drilling technique known as hydraulic fracturing or " fracking ".

Oil extracted by ultra-deep offshore drilling, or in polar conditions, is also sometimes referred to as "unconventional". But with advances in drilling techniques, the definition is fluid. The boundary between "conventional" and "unconventional" is therefore not precise. What's more, hydraulic fracturing and other "unconventional" techniques are also used to enhance production from "conventional" deposits.

Other non-conventional oils are manufactured by the production process. This is known as synthetic oil.

Oil sands contain oil that is too heavy and not liquid (or even solid) enough to percolate between the grains of sand and be drilled. The sand is extracted from a mine, often an open-pit, and various treatments are applied to isolate the bitumen, which is then transformed into oil.

Oil sh ale is also harvested by mining. Oil shale can be burned as is, or processed to produce oil through pyrolysis. Please note: (1) the rock is not always shale, and (2) it should not be confused with shale oil.

Other synthetic oils are produced by processing coal, natural gas or various petroleum wastes or residues.

Finally, biopetroleum would be unconventional oil if produced industrially. And some consider biofuels to be unconventional. But they are refined products, not crude oil.

What unconventional oils have in common is that they require more extensive processing than conventional oil, which entails greater financial and environmental costs.

Paradoxically, to support oil prices, it is often the least expensive oils to produce (Saudi Arabia, in particular) that are withdrawn from the market first. OPEC member countries are subject to production quotas that do not apply to American shale oil producers.

[Back to main article: Understanding the negative price of oil]

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