Submitted by Erico Matias Tavares via Sinclair & Co. [12],
With crude oil prices in a strong corrective mode, energy depletion is understandably not on people’s minds these days. However, this is a scenario that many of us might have to deal with at some point in our lifetimes.
Yes, the world currently has more than abundant supplies of crude oil. US tight oil production has been rising exponentially, accounting for the biggest share of global growth since 2009. This is by any measure an amazing technological and logistical achievement. OPEC has simply been incapable to accommodate the resurgence of the US as a major producer; and falling prices may actually prompt some of its members to sustain outputs, otherwise lost revenues will be even larger.
We might be swimming in oil for now, but this should be no reason to become complacent.
As an example, an important fact that is often overlooked is that tight oil exploration is a different animal, and relatively recent in terms of its significance. Each tight oil well has very steep decline rates – in many cases 90% within 5 to 7 years, much steeper than conventional wells. This means that to sustain (let alone increase) production many new wells need to be drilled each year. And at US$5-10 million cost per well, this is not cheap either.
Here’s an interesting question: with all these massive production increases, when is crude oil production projected to peak in the US?
In its annual energy outlook reports, the US Energy Information Agency (“EIA”) puts out estimates of future crude oil production taking into account the most recent reserve and production figures. Here’s when they believe production will peak according to their reference (baseline) scenario: 2019.
This is depicted in the following graphs extracted from their latest report:

Projected US Tight Oil Production (MMb/d) – Three EIA Scenarios
Source: EIA (Apr 2014).
That’s right. “Saudi America” may reach peak crude oil production just four years from now. After that the declining trend of net imports will reverse, and the US will once again become more dependent on foreign sources – with all the associated economic, financial and geopolitical considerations.
Given the uncertainties relating to tight oil production and recent technical advancements which have improved productivity, the EIA also developed a “High Oil & Gas” scenario, which is perhaps more in line with people’s current expectations based on all the headlines about a supply glut.
Perhaps this is quite possible indeed. But let’s take a quick look at shale gas production, where the US has become just flooded with the stuff in recent years. Given the technical similarities with tight oil, this can give us some clues about hydrocarbon availability in these types of plays going forward.
US Shale Gas production by Play (Billion Cubic Feet per Day): Jan 2000 - Jul 2014
Source: EIA, Post Carbon Institute.
We can see in the graph above that it is the relatively newer plays like the Marcellus that are driving production increases; the older ones are already in decline. The Haynesville is an interesting case study in that regard. Back in 2009, the CEO of Chesapeake Energy, a major US natural gas producer and a pioneer in many of these shale plays, was proclaiming [13] that it was “primed to become world’s largest gas field by 2020.” That of course turned out to be a huge overstatement.
The US has incredible energy potential for sure, but in light of these hugely optimistic expectations which did not pan out it may be wise to moderate our optimism. Should these impressive hydrocarbon production increases prove to be unsustainable much quicker than people think, we could very quickly become anxious once again about our future energy supplies.
Then what?
Well, what if we told you that there is a virtually limitless source of energy, completely renewable and in theory being large enough to materially replace fossil fuels as they become scarcer?
Enter the world of ocean thermal energy conversion, or OTEC.
The OTEC cycle concept was introduced in 1881 by Jacques Arsene D’Arsonval, a French physicist. He proposed that the flow resulting from the significant volumetric increase of using tropical sea surface water to boil a liquid with a low boiling point, such as liquid ammonia, could be used to power a turbine and generate electricity. Cold water extracted from much deeper levels in the ocean would then be used to cool the vaporized ammonia, enabling the cycle to be repeated all over again.
The OTEC cycle requires at least a 20ºC differential between the warm sea surface and the cold sea water deeper below. These ideal conditions are only available in tropical zones, and even so in regions where water depths exceed 1000 meters. That said, it is estimated that the sea water warmed by the Sun in these regions absorbs approximately 10,000 times the energy consumed by all mankind – each day! And this can be used for baseload power generation, not intermittent like solar or wind.

Source: Lockheed Martin.
The most suitable regions for OTEC generation are outlined in the graph above. Most geopolitical powers of the 21st century have some territorial exposure to this resource (with the notable exception of Europe). The deep red region at the center of the graph is where that temperature differential is the most significant, thus offering the greatest prospect for development.
Georges Claude, a student of D’Arsonval, built the world’s first OTEC facility in Cuba in 1930 and successfully generated electricity. This sparked an on-off development effort over the following decades, which only gained real momentum after the oil shocks of the 1970s. Several countries got involved: the US developed a range of prototypes and mini-facilities; Japan broke the record for OTEC power production in 1981 and eventually established one of the leading research centers worldwide; and India has been making considerable research efforts since the turn of this century.
The most prominent corporate proponent of OTEC to date has been Lockheed Martin, the US defense and aerospace company. There are clear benefits for its key client, the US Military, possibly eliminating its dependency on fossil fuels in many bases around the world, which is a considerable strategic advantage.
Once the technology gains prominence, it is likely that many other big corporations will want a piece of the action, particularly the oil & gas giants of today. And the benefits of OTEC can go far beyond power generation alone: think transportation, food and clean water. All of these are major issues – and very sizable revenue opportunities – in the 21st century.
Cars, buses, trains, golf carts, ships and even submarines have recently been adapted to run on hydrogen. But the problem is that there is not enough of it. More energy is required to split the water molecules than what we get from the resulting hydrogen. This unfavorable energy balance makes hydrogen production very expensive using conventional approaches (although some progress has been made in recent years using natural gas as a primary input).
However, the vast amount of solar energy stored in the oceans can be tapped through OTEC, and as such the huge energy requirements to produce vast amounts of hydrogen become much less of a limiting factor. The resulting H2 and O2 gasses can then be liquified and transported in large tankers to destinations around the world – pretty much like natural gas and LNG (only that here temperatures need to be much lower).
Of course the challenges of incorporating hydrogen in our energy matrix should not be understated, but the technology is there. And with enough economic incentives, de-risking and the benefits of scale it can only get better.
Fresh water can be produced using the electric power to run a conventional desalination unit or by using specific OTEC processes where it can be one of the outputs. This should be music to people’s ears in many tropical islands and coastlines around the world, where water stresses are often prevalent.
Harnessing this energy resource can be done via land based or offshore facilities, each with its advantages. The latter offers the biggest potential for large scale deployments, so we could be looking at the emergence of a new marine industry, possibly rivaling its fossil fuel counterpart sometime this century. And all that water coming from the deep ocean is rich in nutrients, which can be used to spawn new fishing grounds.
So, for all its promise, where are all the OTEC facilities?
There is only one demonstration unit in operation today (in Japan, where else?), but several commercial facilities are on the drawing board and some could even come online before the end of this decade. Lockheed Martin has partnered with a Chinese resort developer to build a 10MW OTEC power plant off southern China’s Hainan Island by 2017. The US Military is apparently still interested in developing a 5 to 10MW pilot plant off the island of Oahu in Hawaii, with plans to eventually create a commercial plant of up to 100MW.
We all know the challenges of developing this type of infrastructure. Billions of dollars will be required to properly develop OTEC into a credible energy alternative. The first step is usually the hardest, with the price of admission being very steep for something that remains largely unproven at commercial scale. And interest for implementing new approaches has historically correlated directly with the price of crude oil.
So as long as energy prices remain relatively low, OTEC will have a hard time beating OPEC. But as we have seen, we should have a credible plan and suitable technologies that can be ramped up in a future where energy supplies are not as abundant as we had anticipated. The vast energy potential that OTEC can bring about should be in that mix.
Our children and grandchildren will thank us for it.
