Bye-bye, oil sheiks of the Middle East – by Luiza Ch. Savage (MacLean’s Magazine – February 14, 2012

http://www2.macleans.ca/

Will new technologies make North American energy self-sufficiency a reality?

The rural state of North Dakota is famous mainly for its rough weather. Its largest city, Fargo, is best known to outsiders as the title of a noir movie in which a body is fed through a wood chipper. With a population half the size of Winnipeg’s scattered across rugged plains, it once held the distinction of being the least-visited state in the U.S. But today, so many people are flocking to North Dakota that there is nowhere to put them.

In a nation beset by joblessness, workers are coming here in such numbers that an estimated 15,000 people are now living in trailers, cars, corporate “man camps” and other forms of makeshift housing. So scarce are places to sleep that in 2010 one firm housed some of its workers by trucking in a chunk of Vancouver’s recently used Olympic Village to the overwhelmed city of Williston.

The reason is an oil boom. Production in the state has surged from 100,000 barrels per day in 2007 to 500,000 barrels per day and growing—almost overnight making North Dakota the fourth-largest producer in the U.S., and on its way to becoming second only to Texas.

And, like the Alberta oil sands boomtown of Fort McMurray—whose mayor recently visited to offer advice (“Plan ahead!”)—Williston is abruptly bursting.“First it got hard to find the hotel rooms. Then it was housing. Now it’s everything,” says Ron Ness, president of the North Dakota Petroleum Council. The state is racing to build more houses, roads, schools and hospitals. The biggest sign of change: “Young people in the communities,” says Ness—sons and daughters are not leaving the state to look for work as soon as they turn of age. It’s been, he says, a “renaissance—and a challenge.”

A rebirth of the local economy is the least of it. The oil boom under way here is part of a global transformation with far-reaching consequences for matters of warfare, the environment and modern life. Like Alberta’s oil sands, the sudden bonanza in North Dakota is driven by recent technological advances that have, for the first time, made it economically viable to extract oil (and natural gas) from previously untappable geological formations—so-called “unconventional” fuel trapped in rock. Such formations have been discovered elsewhere around the United States, but for years sat fallow as a mere curiosity. Suddenly, however, the technology is available to get the oil and gas out. And the rise of the feasibility this type of oil and gas extraction is poised to transform the geopolitics of energy.

In spite of the considerable environmental and logistical challenges involved, these developments have led to feverish calls for “energy independence.” The prospect that the U.S. could fulfill all its own energy needs from domestic sources, plus those from friendly neighbours such as Canada, has become a rallying cry for the Republican presidential candidates who are attacking President Barack Obama for standing in the way of job creation and “energy security.” Obama’s decision to deny a permit for the Keystone XL pipeline, which would have moved Alberta oil sands crude to refineries on the coast of the Gulf of Mexico, has become a staple topic on the Republican presidential trail. In November, the Obama administration did move to open more areas in the Gulf of Mexico and Alaska to offshore drilling, but banned development along the East and West Coast, fuelling more criticism from industry groups and Republicans.

The debate over North American energy security has been unfolding against the backdrop of the unpredictable Arab Spring in the Middle East and North Africa, home to 70 per cent or more of the world’s known conventional oil reserves. “The Arab world is very possibly at the beginning of the great revolutionary period of the 21st century,” says Paul Sullivan, an economics professor at the National Defense University in Washington. “Nobody really knows how long this will go and how it will all play out.” Of course, non-oil-producing states like Egypt and Syria are in chaos. But tensions continue to threaten some of the region’s largest producers, like Libya, Algeria, Bahrain, even Saudi Arabia.

And now the discussion has been sent into overdrive by recent threats by Iran to close the Strait of Hormuz—a choke point on the Persian Gulf separating Iran from Oman—as retaliation for harsh economic sanctions over its nuclear program and the threat of a military attack on its nuclear facilities. The Strait of Hormuz is only 54 km wide, but each day, 15 million barrels of oil—17 per cent of the oil consumed by the world—move through the waterway. It would be a global disaster.

The rise of North America as an energy power is starting to get attention overseas. “A few years ago, much of the global debate was based on the premise of acute resource scarcity and its economic and political ramifications,” said Khalid al-Falih, the head of Saudi Arabia’s state-owned energy company, Aramco, in a speech on Nov. 21. But, he added, “Rather than supply scarcity, oil supplies remain at comfortable levels, even given rising demand from fast-growing nations like China and India.” The reason? Abundant supplies and a “more balanced geographical distribution of unconventionals”—such as the new sources now being developed by Canada and the United States.

For the rest of this article, please go to the MacLean’s Magazine website: http://www2.macleans.ca/2012/02/14/bye-bye-sheiks/

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