What are your views about the roles of unconventional oil supplies going forward?
Sadad: I think it’s very important to understand the difference between conventional oil projects and unconventional oil projects—let’s say, the extra-heavy crudes. The IEA put out their report in 2008 on the long term. They listed a whole lot of projects. If you look at the conventional oil projects, which I have, and plot the cumulative capacity against cumulative cost, what you come up with is $30,000 to $32,000 per barrel of capacity for conventional oil. That’s for projects coming on-stream between 2008 and 2015. If you look at the unconventional—that’s the Canadian extra-heavy, and I included two Qatari gas-to-liquids projects—the cost per barrel of capacity is $92,000 per barrel. It’s three times the cost of conventional oil. That means that if you want 100,000 barrels of unconventional oil (syncrude), you’ve got to invest $9 billion. And those are just at current costs. For the conventional oil, when you can find it, it’s $3 billion per 100,000 barrels/day. But even the conventional has gotten very expensive. If you look at the Tengiz and the Kashagans, they’re running $40 billion to $50 billion to get 500,000 to 600,000 barrels of oil/day. So everything is getting far more expensive and slower to develop.
I think, yes, we will have synthetic crude oil. The Germans ran their World War II machine on coal-to-liquids, but that was a very expensive solution; we can’t replace 80 million barrels a day with coal-to-liquids. So they will be important supplements but not replacements.