Enverus Blog

Insights across the energy value chain

A recent press release from Sapphire Energy sparked conversations about the long-term sustainability of algae farming (turning algae into energy) in the Southwestern United States. Sapphire’s plan is to construct a “green crude” farm near Columbus, New Mexico, which will supply 1.5 MM Gallons of green crude per year.

To kick off this ambitious project, Sapphire has collected several million dollars from the Department of Energy, Bill Gates and other sources. A recent Penn Energy article stated Sapphire has constructed a cultivation area with two ponds; one is 1.1 acres, the other is 2.2 acres and both are 1/8 of a mile long. This makes the 300 acre algae impoundment the largest of its kind in the world. They have acquired the requisite filtering, piping, pumping and collection equipment needed to run the operation.

The algae ponds are “inoculated” with CO2 to accelerate the growth process. The resulting green crude can supposedly be refined to the same ASTM standards as light black crude for products like jet fuel, gasoline and diesel. The company’s “Phase 1” goal is to produce 1.5 million gallons of green crude per year by 2015.

Really?

If my math is correct, that comes out to 35,714 BBls in one year. There are oilfields all over the world that produce that much crude in one day, let alone one year! At $95/BBl, one year’s worth of green crude would sell for $3.4 million. I am the first person to acknowledge the potential in renewable energy. If managed properly, it will help to reduce our reliance on foreign oil. However, with figures like these, I have to use the same argument against green crude (slime) that I have against wind, solar and french fry grease; we do not currently have the funding to grow, sustain and make this kind of renewable “revolution” profitable. The oil industry took over 140 years to get where it is today. Why should we believe renewables can usurp the oil industry in just a few short years?

Why Algae Farming is Not Scalable or Profitable
There is a reason most funding sources are not willing to invest billions when green technology is unproven and unprofitable, except maybe the US government. Solyndra, anyone??

Another rather inconvenient truth about green crude development is scalability. Its production ties up too much land to make it economically feasible. A recent article in Nature titled “Exploiting diversity and synthetic biology for the production of algal biofuels” is rather enlightening. According to the piece, a similar green crude pond farm could be scaled up to 30 million hectares. Again – Really? A single professional baseball diamond is around 1 hectare. So, you’re telling me a fully-scaled green crude farm would take up as much land as 30 million professional baseball fields? How would you like to negotiate the lease on that?! This 30 million hectares would deliver 1200 billion liters of green crude, which equates to the entire current US daily hydrocarbon load or 20.7 Million BBls of crude per day. I won’t even comment on the absurd usage of liquid units here.

Why Algae Farming is Not Scalable or ProfitableBut, to the uninitiated, these numbers can sound pretty impressive. So, to put this in perspective, I looked at a recent Drillinginfo presentation that contained a passage from Harold Hamm at Continental Resources. He stated they leased 1 MM acres (net) in the Bakken oil formation, from which they delineated 3500 well locations. If you err on the cautious side and assume an EUR/well of 450,000 BBls/well, you would yield a total of 1.575 Billion BBls of crude oil. And, it would come from only 1 MM acres, or about 1/74th of the area needed for the hypothetical green crude farm.

The numbers don’t lie. It’s time to double-down on the unconventionals that are energizing the world and “let it ride”. Not only does it make financial sense, but it makes environmental sense too. Thanks to the natural gas explosion, we have been able to retire a number of coal fire power plants over the last 6-8 years. As a result, the United States has already returned its greenhouse gas emissions to pre-1992 levels, without adopting the Kyoto Protocol. If our pipeline infrastructure can keep up with the oil and gas output load from fully utilized unconventionals, we could put a significant dent in our oil imports and, in turn, greatly cut our trade imbalance. We could then start working on our crippling debt. And, once that’s all taken care, it might finally be time to say, “Let’s go green!”

What do you think? Can renewables make sense with today’s economy and technology? Is there a viable market for green crude today? Or, are companies like Sapphire wasting precious capital in the energy economy? Leave your thoughts in the comments below.

David Anderson is Drillinginfo’s Senior Technical Advisor for Engineering Products. He works with our development teams to help ensure we create quality products that meet the rigorous demands of engineers in the patch. In his nearly 30 years in Oil & Gas, he has worked onshore and offshore in Wireline Logging, Post Logging, Reserves Management and International Business Development. David received his Bachelor of Science in Geology from Grand Valley State University. Follow him on Twitter @SportzDavid

The following two tabs change content below.
Enverus
Creating the future of energy together.