The Oil and Gas Market
The key facts in relation to the worldwide oil market are:
- There are over 1 million exhausted oil wells in over 70,000 oil fields;
- The last major oil field discovery was the North Sea in the late 1960s (Source: A Crude Awakening – The Oil Crash (2007));
- 90% of the oil produced comes from wells that are over 20 years old, and 70% from wells that are over 30 years old (Source: The Looming Crisis In Worldwide Oil Supplies, E Hunter Herron, July 2000);
- For every four barrels used, only one new barrel is found (Source: The Looming Crisis In Worldwide Oil Supplies, E Hunter Herron, July 2000);
- The world has either passed peak oil or will pass it before 2036;
- The rapid industrial development of the Chinese and Indian markets will increase demand for oil dramatically over the coming decades.
The key facts in relation to the US oil market are:
- The US population represents 1 person in 22 of the world’s population, yet consumes 1 in every 4 barrels of oil produced worldwide;
- The US controls only 2% of the world’s known oil reserves;
- US oil production peaked in 1970 at 10.2 million barrels per day, and is currently less than 7 million barrels per day;
- There are over 285,000 exhausted oil wells in the US.
BRRTM technology has the significant advantage to investors of changing the economics of production in the EOR sector as well as in accessing oil shale deposits.
Business Model Premises
EER’s energy recovery business model is based on the following key premises:
- As identified above, there is an ever-increasing need in the US for recovery of heavy crude oil from currently “exhausted” oil wells;
- Increasing worldwide demand for oil driven by China, India and the US will exhaust existing oil reserves faster than previously estimated;
- The BRRTM Process, combined with a crude oil price of at least US$90 per barrel, makes recovery of heavy crude oil cost-effective when compared to the cost of discovery and recovery of new oil reserves;
- Heavy crude oil reserves in “exhausted” oil wells represent over a trillion barrels of converted conventional crude;
- Capturing a small percentage of this enormous market is expected to generate significant revenues.
Revenue Sharing Per Barrel
The cost of discovering new oil fields is exorbitant. Kuwait has committed to spending US$3 billion (Source: Kuwait Oil Field, World’s Second Largest, ‘Exhausted’ by James Cordahi and Andy Critchlow, published by Bloomberg, 9 Nov 2005) to discover new fields now that its largest field has peaked. In the US, where reserves are fewer and more difficult to discover, the cost of finding new reserves is even more per barrel.
Accordingly, the exhausted petroleum oil well market in the US represents a potentially highly lucrative market where EER can price its recovery systems at less per barrel than the cost of new discoveries whilst generating significant revenue per barrel.
Based on the estimated cost of discovering new oil on the Atlantic and Gulf State coasts in the US, EER can price its recovery systems at an estimated US$12 per barrel (based on a crude oil price of at least US$90 per barrel) and still represents a more cost-effective alternative to the recovery of newly discovered oil.