Digital Globe satellite image of an oil storage facility. The company takes satellite images of oil production and storage facilities for use by oil companies and oil market analysts. (image: digitalglobe.com)

CNBC reported Tuesday on Digital Globe, a private satellite company that sells birds-eye-view photos to oil companies, oil analysts, and investors.

The company, which operates three satellites at altitudes of between 300 and 600 miles, can take images of basically anything that is visible from the air. US intelligence agencies are top Digital Globe clients, but civilian industries are finding more ways to use the images. Common private-sector applications of the satellite images are urban planning, land use, agricultural analysis, location-based services on cell phones and other handheld devices, and of course evaluating oil production and shipping.

The company’s images can help oil analysts determine how much oil is actually being produced at a certain extraction sites like offshore platforms. While using satellite pictures to count the number of trucks or tankers going to or from an oil well may seem like a haphazard way of gauging oil supplies, it makes a lot of sense when one considers the notorious inaccuracy of official oil supply data released by the American Petroleum Institute (API), the US government’s Energy Information Administration (EIA) and the International Energy Agency (IEA). Just this week, the API report showed a 5.86-million-barrel increase in US crude oil stockpiles during the previous week, while the EIA report showed an 800,000-barrel decrease over the same period.

It’s hard to say how the use of more sophisticated analytical tools like Digital Globe’s images will affect the oil market. But if it brings a bit more certainty to the task of accurately measuring supply and demand, it could help create a more stable market that is truly grounded in fundamental forces.

To watch a video of CNBC’s report from Digital Globe “Mission Control,” visit the CNBC website.

Caption: (image: Mike Lester, Rome News-Tribune via cagle.com)

Opposition to offshore oil drilling has swelled in the aftermath of the BP oil spill in the Gulf of Mexico, but environmental risk may not be the only argument against offshore drilling, points out Glenn Morton at The Oil Drum blog. Morton looks at BP’s Thunder Horse drilling platform (not the Deepwater Horizon platform that collapsed and spilled) and finds that it is not performing nearly as well as expected, which could be another reason to recalibrate the cost-benefit analysis of offshore drilling.

If you own a large building and you want to save $100,000 a year, here’s a tip: don’t run your heating and cooling systems at the same time. That’s the sort of fix that can be found through “building commissioning,” the surprisingly little-used practice of having an outside expert test a building’s climate control and energy systems, reports Richard Conniff at the Yale Environment 360 blog. If applied to all non-residential buildings, commissioning could save $30 billion dollars by 2030.

Building-top turbines seem like a neat way to add some self-sufficiency to a home or building and cut down on energy bills in the process. Now just imagine how cool they would be if they worked. The trouble is, they usually don’t, as the Museum of Science in Boston found out. Martin LaMonica of CNET tells the story of how the museum is taking advantage of its failed urban wind effort to learn more about the challenges of small-scale wind energy.

Buying oil exports from Iran is legal, but it’s a secretive trade nonetheless, says the Wall Street Journal. Sanctions against Iran only apply to selling oil to Iran, but oil majors like Shell and Total still alter ship-tracking data and turn off electronic transponders when doing business with the ostracized country.

This map of Continental Resources drilling operations in North Dakota centers on the potentially massive Bakken and Three Forks shale formations. (image: contres.com)

New drilling technologies, such as the controversial method of hydraulic fracturing (hydrofracking), have opened up vast resources of oil and natural gas once thought to be irretrievably locked in underground shale formations. The most notable example is the Marcellus Shale, which stretches from Tennessee to New York and could contain as much as 500 trillion cubic feet of natural gas, but in North Dakota the prize is not shale gas but shale oil.

North Dakota’s shale oil resources are found primarily in the Bakken and Three Forks formations. The Bakken could hold up to 169 billion barrels, but when it comes to recoverable oil the Three Forks shale may be just as productive, reported the Bismarck Tribune on Friday. A report from the North Dakota Department of Mineral Resources estimated that 2 billion barrels of oil are recoverable from the Three Forks, the same number estimated to be recoverable from the Bakken. The number of recoverable barrels could increase as technology improves.

A representative from the Energy Information Administration cautioned that the new estimate does not add to the proven reserves held by the US, because the Three Forks potential remains unproven. Yet at least one inside source believes the estimate that the Bakken and Three Forks formations hold 4 billion recoverable barrels is too conservative. Harold Hamm, chairman and CEO of Continental Resources, Inc., which owns nearly half the wells working on the Three Forks formation, believes that North Dakota is sitting on 8 billion barrels of oil.

These preliminary estimates could one day lead to huge oil extraction projects in the Bakken and Three Forks region, but if that day does come, it is decades away. If the 4-billion-barrel estimate is even close to accurate, the reserves could contribute significantly and bring down oil prices. Despite the oil industry’s enthusiastic announcement of the oil finding, government approval, legal challenges and sophisticated construction requirements would likely delay any drilling for at least 10 years.

Desire Petroleum’s oil platform offshore of the Falklands has yet to find a commercially viable oil field. (image: drillingcontractor.org)

When Desire Petroleum made the decision to drill for oil off the shores of the Falkland Islands, some observers thought the British oil company’s push for natural resources could reignite the longstanding conflict between Britain and Argentina over the sovereignty of the islands. Now the first results of Desire’s drilling are in, and are so disappointing that the company could abandon the well altogether, the Times of London reported on Sunday.

According to the Times, Desire’s results were “technically successful” but “non-commercial”—that means they found oil, but not enough to make it worthwhile. Prompted by the Times’ report over the weekend, Desire released a statement on Monday that confirmed the lackluster results and said that more testing would be required before the company decided “whether the well will need to be drilled deeper, suspended for testing or plugged and abandoned.” Desire still has rights in other fields near the Falklands, and could still find a productive oil field elsewhere.

The political conflict between Britain and Argentina could be eased if drilling continues to produce unpromising results. In the meantime, Desire Petroleum is the clear loser—the AP reported Monday morning that on the London Stock Exchange the price of the company’s shares had fallen by 48 percent.

For some environmental groups, the earth-smashing ubobtanium mining in Avatar (top) perfectly parallels the excavation of Canada’s tar sands (bottom) in pursuit of crude oil. (images: gawker.com and whitepinepictures.com)

On Sunday Avatar fell short of winning the coveted “Best Picture” Academy Award, but it continues to rule box offices around the world as the most profitable movie ever made. While the film’s dazzling three-dimensional special effects and fantasy-world setting are likely the main drivers of its massive popularity, there is another element of Avatar that has lot of people talking: its environmental message.

In the film, a corporation intent on extracting an invaluable mineral called “unobtanium” from the lush green planet of Pandora meets resistance from the planet’s inhabitants, who want to prevent the environmental destruction that the excavation of unobtanium brings. For many, the heroic natives’ struggle against the greedy invaders amounts to a powerful environmental allegory that urges humanity to deny greed and respect the pristine harmony of the natural world.

As the CBC reported on March 5, a coalition of environmental groups took the allegory one step further, placing an ad in the film industry publication Variety that cast Canada’s Alberta tar sands as the real world’s unobtanium. The ad, paid for by 50 environmental groups, featured an aerial photograph of a massive oil sands site, where excavation had removed all signs of life, leaving only a huge field of brown sand dotted with man-made hills and pits. Title text labels the photo “Canada’s Avatar Sands.” For the groups who took out the ad, the bitumen (a chemical precursor to crude oil) trapped in the tar sands of northern Alberta is real-life unobtanium, and the environmental destruction it has brought to the plains and forests of Canada parallels the tragic and heartless plundering of Pandora.

Despite the engineering inaccuracies of Avatar’s mining equipment, it is hard to deny that the destructive mechanical behemoths used to mine unobtanium in the film bear a striking resemblance to the massive drilling machines and dump trucks used to excavate Canadian tar sands. But to draw so direct of a comparison between the real world and a fictional one goes a bit further than most green-minded citizens are willing to allow.

In any event, the public “shame on you” directed at oil companies excavating oil sands have successfully attached (at least for now) the issue to a global blockbuster that nearly every citizen of the world has at least heard of, if not seen. But so long as Canadian tar sands keep providing a steady supply of oil to the US and other major consumers, projects will continue to expand. And as global crude demand recovers, other tar sands sites like the massive fields in Venezuela’s Orinoco belt will likely be dug up as well.

So long as the world thirsts for oil and squeezing it from tar sands it is a profitable enterprise, all the environmentally friendly movies in the universe won’t stop the digging.

Watch the trailer for Avatar below (it begins at 0:44):

[There is a video that cannot be displayed in this feed. Visit the blog entry to see the video.]

For Exxon Mobil and the rest of the oil industry, much of their future production will come from unconventional sources like the oil sands of Alberta, Canada. (image: cdecard.com and The Co-operative campaigns via flickr.com)

In a presentation to the New York Stock Exchange, Exxon Mobil laid out plans for future oil and gas projects that show an increasing reliance on harder-to-reach oil and gas reserves, CNN Money reported on Friday. Exxon, the world’s largest publicly traded oil company, will begin new projects aimed at extracting crude oil and natural gas from deep ocean waters, from a remote area of the Arctic, and from tar sands in Canada. All of those sources, deemed “unconventional,” require substantially larger investments of money and resources to extract than do the “conventional” reserves of crude oil and gas relatively close to the earth’s surface. As reservoirs of easy-to-reach oil, such as those found in abundance in Saudi Arabia, deplete, oil companies big and small will increasingly turn to unconventional sources such as those identified by Exxon.

Exxon CEO Rex Tillerson, doing his job to keep up appearances of a rosy future for his company, noted that the definition of unconventional oil is subjective, and insisted that just 10 percent of its future projects will tap unconventional sources. Unconventional oil and gas that is difficult to access is more expensive to extract and process, meaning higher costs for oil companies that would likely lead to lower profit margins and/or higher consumer prices that could cut into future demand. Even Tillerson acknowledged that increased reliance on unconventional sources is the inescapable future of the industry, and offered his company a pat on the back for preparing for that future: “We anticipate it will grow in the future, and we hope it will grow with the positions we’ve taken,” he said.

There are some bright spots in the future of conventional oil, most notably expectations of prolific conventional oil production in Iraq as the nation becomes more stable. However, the quantity of conventional oil expected to come from these bright spots will not be abundant enough to offset the depletion of other conventional supplies.

Although oil executives like Tillerson would probably deny it, the industry’s shift toward unconventional sources will, sooner or later, bring higher prices for consumer goods like heating oil, gasoline, and natural gas. For economist Jeff Rubin, the shift toward unconventional energy sources is the most important factor in his extreme vision of $225-per-barrel crude oil in two years and a subsequent demise of the global economy.

While an economic downturn, booming economies in the developing world, and a host of other factors have sent oil prices on a wild rollercoaster ride over the last couple years, the future is clear: the prices of oil and natural gas will continue to increase—the only question is how much and how fast. One cannot escape the simple logic that a product that is more expensive to produce is more expensive to buy.