OTTAWA — The United States as one of the largest producers of natural gas in the world. A golden age for natural gas with dramatic increases in both demand and supply. Oil and gas reserves that surpass all the fuel consumed in human history. These exuberant declarations, oft-repeated by oil and gas experts these days, may reflect the optimism of an industry that not long ago seemed on the defensive and in decline, but there is nothing irrational about them.
New technology and especially growing energy demand from Brazil, China, India and much of the rest of the developing world, which helps keep energy prices high, has made it more feasible to tap so-called unconventional oil and gas resources — from natural gas and oil trapped in shale rock or sand or reservoirs miles below the ocean’s surface. The International Energy Agency estimates that the industry will spend $20 trillion on unconventional sources of gas and oil between now and 2035.
“It’s almost not worth calling it unconventional at the moment because so much of it has become the norm,” said Eric C. Potter, the program director for energy research at the Jackson School of Geosciences at the University of Texas at Austin. “Although we’ve only begun to scratch the surface of what it’s going to take to extract these resources.”
The challenges involved in turning all those reserves into energy, and profits, can get lost amid the industry’s reborn swagger. Few $20 trillion bets come without a downside.
For instance, if the global economy continues to teeter — or worse, if the developing world’s growth slows — energy prices could fall, making some of those trillions necessary to explore, extract and export unconventional resources a riskier investment. At the same time, expanding natural gas supplies at a time when market prices are low may be a hard sale in pure economic terms.
Even greater are the possible political and environmental challenges, which were brought into sharp relief last week by two separate events.
In Washington, the Obama administration postponed a decision on a pipeline to carry a form of heavy crude oil from Canada’s tar sands, underlining how sensitive the politics of unconventional energy are.
Meanwhile, the I.E.A. warned in its annual World Energy Outlook that if the world continues building greenhouse-gas-emitting factories and vehicles at the current pace for just the next five years, it “will lead to irreversible and potentially catastrophic climate change.”
Then there is that rising demand. While normally a boon for any commodity, rising demand could clash with falling productivity at existing conventional wells and squeeze the industry. The falloff in existing fields will be five times greater than the increase in flow from unconventional sources, predicted Fatih Birol, the chief economist at the I.E.A.
Finally, some technological issues remain, too. But those are least likely to brake the growth of unconventionals.
“I’d put economic and environmental challenges side by side,” said Andrew Leach, an economist at the University of Alberta in Edmonton, the capital city of Canada’s main oil-producing province, which is also home to one of the world’s largest unconventional sources, the oil sands.
“We’re at a point where a lot of the new technologies are coming online. But you have to be able to produce at competitive prices and getting incremental oil out of the ground where the environmental impact is limited is much more challenging than with conventional oil and gas,” he said.
The diversity of unconventional oil and gas resources, their location and the technologies required to exploit them, make it difficult to estimate how the cost of recovering unconventional oil and gas differs from traditional wells. But everyone agrees that the gap is substantial.
That financial reality limited interest in investing in unconventionals for many years. Political pressure, even from nonactivist citizens, made leaders in much of the West at least pay lip service to moving toward renewable forms of energy. The Macondo oil explosion in the Gulf of Mexico last year increased public wariness of deep-water drilling.
That climate is changing. “Security of supply” has become increasingly important for China, the United States and other countries, offsetting some of the economic concerns surrounding investment in unconventionals.
There has also been a political shift. In many Western countries, budget cuts are increasing pressure to curb subsidies for renewable energy (and, to a lesser extent, subsidies on oil and natural gas). At the same time, elevated unemployment is boosting support for unconventional oil and gas projects with the potential to create jobs.
The even bigger shift of global economic and political power — with more going to China, Brazil and others — has meant that what the anemically growing and self-doubting West wants weighs less heavily on the world than it once did.
Economic growth in the developing-world powers, and their resulting energy needs, are now more likely to dictate the future of all forms of energy than the campaign platforms of European Green parties.
There is no universally accepted estimate of the amount of unconventional reserves, largely because defining what will be economically recoverable is a moving target. In its report, the I.E.A. estimates that unconventional resources now account for about half of the world’s natural gas reserves and that unconventional oil production, mainly from Canada and Venezuela, will reach 10 million barrels a day by 2035.
“The reserve of unconventionals is unfathomably big,” said Mr. Leach, perhaps 10 to 12 times as much oil as humans have used in history, at 30 to 40 percent more than current prices. “Even if that’s off by a factor of 10, that’s a mind-boggling number.”
Despite the recent growth of unconventional extraction, much remains unknown about several of the processes.
The unconventional oil and gas resource closest to traditional reserves production is coal-based methane drilling. As it sits underground, coal emits gas. Traditionally, coal-based methane was captured with vertical drilling, although that often failed to recover all of the gas surrounding a well partly because of its low pressure.
Modern drilling technology, which allows drills to move horizontally underground,, however, has offered higher yields, particularly when recovering gas from coal beds, which are generally horizontal. The catch is that all other factors being equal, a horizontal well can be three times more costly than a traditional vertical well.
Horizontal drilling technology is also one of the keys to recovering gas and oil from shale. While blood cannot be produced from a stone, new technologies allow oil to be squeezed from shale, sandstone and similar rock formations.
Shale gas holds the most potential for expanding China’s energy production, could turn the United States into a net energy exporter and may make countries traditionally not known as energy producers, such as Poland, players in the business.
But horizontal drilling is only one component in releasing gas trapped in shale and other deposits, which are known as “tight” in the industry. It is generally combined with hydraulic fracturing. More commonly known as fracking, that process breaks apart the rock to free the gas with an extremely high-pressure blast of water and chemicals. Silica or other porous material is then often injected into the resulting cavity to keep it open.
But fracking is not as admired by environmentalists as it is by gas producers.
It can create large amounts of contaminated water, and many environmentalists say that the wells contaminate groundwater supplies. On the surface, fracking projects in North America and Europe are often in or near urban areas. The large, noisy and often unsightly activity above a development site are often an unwelcome addition to neighborhoods.
Then on top of all that, Cuadrilla Resources acknowledged earlier this month that its fracking operations in Britain had probably caused a number of small earthquakes, swiftly leading to speculation around the world that fracking projects might be upsetting the seismic status quo.
The result has been widespread public resistance to proposed fracking projects in a variety of places, including the U.S. states of Pennsylvania and New York, the Canadian province of Quebec, and parts of Europe. “Gasland,” a documentary film by American director Josh Fox has proved to be a popular tool for anti-fracking groups worldwide.
Mr. Potter, a former oil industry executive, said that the extreme depths of fracked wells make it impossible for them to contaminate groundwater
Mr. Fox, in an online rebuttal to oil industry critics, agrees but adds, “We don’t know why fracking chemicals and fugitive natural gas are getting into water supplies; we just know that they are.”
While Mr. Potter and others say that fracking producers need to mitigate intrusions at the surface, disclose what chemicals they are adding to their water injections, and minimize water use, he does not think environmental protests will ultimately stop significant shale gas development.
“We’re already way down that road in the States,” he said, adding that fracking now accounts for about half of U.S. gas production. “But in terms of the future, it’s certainly going to slow growth.”
While fracking has successfully attracted investment and generated production, the process is something of an experiment in progress.
Although large-scale research started on gas fracking back in the 1970s, “there’s still a lot of work to be done just understanding basic flows through the reservoirs,” said John B. Curtis, director of the Potential Gas Agency at the Colorado School of Mines.
That is particularly the case with shale oil. For many years, Mr. Curtis said, the prevailing industry wisdom was that it would be impossible to force oil droplets out of shale, so research focused almost exclusively on gas. That assumption has been dramatically proven wrong by the Bakken shale oil field in North Dakota and Montana, which now produces 400,000 barrels of oil a day even if its inner workings are not well understood.
Trial-and-error shale oil extraction has worked to date mainly because developments have focused on obvious reserves. As is the case with conventional oil reserves, however, not all shale oil and gas will emerge easily, if at all, without further research.
Canada’s oil sands have enabled that country to become the United States’ top supplier of imported oil. But even though many Americans are not aware of Canada’s importance as a supplier, the oil sands are becoming increasingly controversial.
The pipeline project that would send the product of the Canadian oil sands to refineries on the Gulf Coast of the United States requires presidential approval and has become a rallying cry for U.S. environmentalists.
The European Commission is also considering classifying oil from oil sands as highly polluting. While the move would be mainly symbolic — Europe does not import Canadian oil — the Canadian government fears that such a declaration might impede future efforts to expand oil sands exports beyond the United States.
There are two methods for recovering the tarlike bitumen which is mixed with sand and which, after upgrading, becomes synthetic crude oil.
Early operations used huge open-pit mines populated with similarly oversized excavators and dump trucks. That, of course, left behind gaping holes in the landscape that the industry promises to restore, a vow not all environmentalists believe it is possible to fulfill.
More recent projects, known as in situ developments, are somewhat like oil drilling. Blasts of steam are injected into underground deposits to loosen them, creating a slurry that can be pumped to the surface. While those projects minimize the damage to the landscape, they add to one of the major challenges of all oil sands projects: getting energy from the oil sands requires consuming a lot of energy, mostly natural gas. The result is that oil from oil sands creates more greenhouse gas emissions overall than conventional oil.
Several proposals, including the use of nuclear power, have been floated to reduce that impact. The Canadian government and the energy industry have also been funding extensive research into capturing and storing carbon emissions from the oil sands. But an extensive examination of the environmental and health effects of the oil sands released last year by the Royal Society of Canada, the country’s leading academic body, found that carbon capture and storage “does not appear to be very feasible for oil sands production in general and in-situ in particular.”
It increasingly appears oil sand operators will have to settle for efficiency improvements rather than any technology breakthrough.
Deep-water offshore drilling has become increasingly important largely due to new imaging systems which provide geologists with a comparatively complete sense of deep ocean beds. But again, the industry will likely be faced with challenges about its ability to operate deep-water rigs safely, particularly after the Deepwater Horizon disaster in the Gulf of Mexico last year. Those concerns will only become more acute if producers in Canada, Norway and the United States follow through on plans for offshore drilling in the delicate environment of the Arctic.
And then there are the unconventional resources that remain unquestionably unconventional and where the questions surrounding their future are still mainly technological, rather than economic or environmental.
Natural gas hydrates are icelike crystals of water and gas, usually methane, that are found in Arctic permafrost or deep on ocean floors. Canada and Japan have been particularly active in hydrate research. Canada organized a multinational group, which included the U.S. Geological Survey and the Indian Ministry of Petroleum and Natural Gas, to drill for hydrates in the Canadian Arctic in 2002. The three wells produced enough gas to fuel a flare.
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