Understanding Energy Return On Energy Investment (EROEI)

Energy Return On Energy Investment (EROEI) is an important concept to understand and a concept that is severely lacking in our current political debate on new energy sources.

EROEI is simply defined as:

EROEI = Energy Produced / Energy Used

For example: If you drill an oil well to 2000 feet and get 10,000 barrels per day, it might only cost $1.00 in energy to produce each barrel. The $1.00 is used to pay for the energy in the steel required for the drilling rig and pipe, the power to actually run the drill, and the power to pump the oil out of the well. If oil is selling for $140 per barrel, then the EROI is 140. This is the type of return that you used to find drilling large reserves in the Middle East. If you have to drill off-shore in deep water, it might cost $20 in energy per barrel so the EROI is 7. Traditional oil development is estimated today to have an EROI of about 15.

As sources of fossil fuels get more ‘marginal’, it means that the amount of investment required to return a unit of energy is very high. This could mean an EROI that starts to approach 1.0. If the EROEI goes below 1.0 then you get less energy out for the amount of energy put in.

For example, developing oil shale is very energy and capital intensive. Shell has been developing an in situ process for extracting oil shale. Their process involves drilling heater holes 1,000 to 2,000 feet down where they heat oil barring shale to 700 degrees. This causes the kerogen in the oil shale to form crude oil and natural gas. Producer wells are drilled into the formation to extract the oil and natural gas. The process uses a lot of energy to heat the rock. This could come in the form of electricity from a coal-fired power plant. Shell claims that the EROEI from their process is about 3 meaning it takes one unit of energy to produce 3 units of oil.

Tar sands are another example of a process with a very low EROEI. Tar sands are typically mined which requires a large amount of energy to start the process. The tar sands are then heated with hot water or steam to extract the bitumen, which is very heavy viscous oil. The energy to create the hot water or steam usually comes from natural gas. The bitumen then has to be upgraded so that it can be refined. This can be done by adding methane or hydrogen from more natural gas to the bitumen to create lighter oil. The EROEI on this process is about 5. Tar sands are not as energy efficient as drilling for oil, but more energy efficient than oil shale.

A lower EROEI has a direct relationship to the amount of carbon dioxide released by the fuel as it impacts global warming. You have to add in all of the carbon dioxide released by the production process to gauge the total impact a fuel source has on global warming.

President Bush today rescinded the presidential ban on off-shore drilling and called on congress to lift its ban. Does it make sense to drill off-shore for oil if we are trying to reduce our release of carbon dioxide? It may seem that this would contribute to global warming, but it is not that simple. It will take us decades to switch our energy infrastructure to clean, renewable energy. There is no way to replace the 85% of our energy that currently comes from fossil fuels any faster. We could do without, but that would cause severe economic hardship for the majority of people in this country who could no longer drive their cars or heat their homes. Drastically reducing fossil fuel use in this country would probably cause a severe recession with high unemployment and high inflation. We are going to continue to need oil and other fossil fuels during the time it will take to develop new technology and new clean energy sources.

What we should be doing is using the oil resources that have the highest EROI first and not using the oil sources like oil shale that have the lowest EROI. By restricting drilling, our market based economy will drive up the price of oil and create the economic conditions to more heavily develop oil sources like tar sands. We can’t stop the development of tar sands as they are in a foreign country, Canada. We will end up buying Canadian oil from tar sands to replace the oil we would have gotten from off-shore. Restricting drilling will hurt our economy by raising oil prices on the margin, slow economic growth, increase our balance of payments deficit, and hurt the value of the dollar. If high energy prices in this country cause energy intensive business to shut down, we might end up buying those products from countries like China that are less carbon efficient than our economy. All of this creates more greenhouse gas emissions than just drilling for oil off-shore.

Being against off-shore oil drilling might seem like a good idea to reduce greenhouse gas emissions. The reality is that this is a world problem that will have to be solved by taking into account what other countries will do. Off-shore oil drilling may be a smart way to actually reduce greenhouse gas emissions in the long run, improve our balance of payments, improve our economy, and give us the profits we need to invest in a clean energy future.

Topics: Global Warming , Bush , Carbon Dioxide , Greenhouse , oil , natural gas , Congress , inflation , oil shale , tar sands , energy policy