Three Technologies Poised to Impact Oil Market

Here are three technologies that will significantly impact world oil markets.

Gas-to-Liquids: Last month, Shell completed its Pearl project in Qatar, by far the largest facility built so far to convert natural gas to liquid hydrocarbon products. The project was subject to severe cost over-runs, but upon completion the final capital cost per barrel/day of output is approximately $73,000 — at the absolute lower limit of the cost of building greenfield oil refining capacity.  Most of Pearl’s output will be in forms directly substituting for diesel, jet fuel and naphtha. The technology used in the Pearl project could be applied to the vast reserves of natural gas available from remote fields now inaccessible to markets by pipeline and to developing shale gas resources, particularly in North America.

Oil Shale: Breakthroughs in drilling technology are making accessible vast reserves of production from oil shale, a resource that is widely distributed around the world.

Solar: The rapidly declining cost of solar power has reached a point where solar power is now competitive against oil-generated power in some applications. Particularly in developing countries where property rights are insecure, the cost of capital for public projects is high, or where power markets are not large enough to justify more efficient but capital intensive generation options, the technology of choice for power generation is often diesel in reciprocating engines. Intermittency and non-dispatchability lowers the value of solar power, but taking these factors into account, the average cost of solar for one Arizona utility is now in the order of 16-20 cents US per kWh, a cost competitive to diesel in some applications at current prices. The marginal cost of solar is lower than the average cost and dropping, with some forecasts indicating a decline in capital cost of 40%-50% over the next five years.