Endless Oil

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"Technology, politics and lower demand will yield a bumper crop of crude"

Not many people think of the Netherlands as oil country, but a billion-barrel field lies under a nine-mile strip of grazing land along the Dutch-German border. When oil prices cratered in the 1990s, Royal Dutch Shell and ExxonMobil shut the Schoonebeek field down. Company executives reckoned its thick, hard-to-extract crude wasn't worth the trouble, although only about 25% of Schoonebeek's oil had been produced.

Now higher prices and technological advances are spurring a new JV of Shell, Exxon and the Dutch government to pump Schoonebeek's reserves once more. New wells drilled horizontally are reaching more of the oil. Steam injected into the rock loosens up the molasses-like crude to bring it to the surface more easily.

Shell won't say what price it needs to make such efforts profitable, but experts estimate $40$50. At a current price of $80, the field is a clear winner. "We wouldn't do this if the price was really low," says Michael Lander, the Shell executive running the project. The venture is expected to produce 120 million barrels from the reopened western section of Schoonebeek over 20 years. If another section of the field is developed, the recovery rate would approach 50%; the industry average is 30%35%.

The price spike of 2008 may lead to similar results. Lester Brown, president of Earth Policy Institute, notes the U.S. car fleet shrank by 4 million in 2009, thanks to scrapping and reduced sales. He expects that shrinkage to continue, reducing the U.S. fleet by 25 million cars by 2020. He also sees a cultural change occurring in which more people, especially the young, don't see owning a car as a necessity. "We are now looking at something new, a shift in the way people think about automobiles," he says. "That means less oil use."

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