Unconventional Fossil Fuels

We use the term unconventional fossil fuels in two senses. In the first instance, we’re referring to feedstocks or primary resources which are not being intensively exploited at present. These would include heavy oils, oil shale, coal bed methane, tight gas, deep gas, methane hydrates, and peat—all described elsewhere on this Website. The second definition applies to the use of a particular feedstock to produce fuels not normally associated with it. Examples would be gasoline and diesel fuel produced from coal or natural gas. Incidentally these separate meanings are not mutually exclusive. One can, for instance, produce gasoline, representing an unusual usage, from peat which is an unusual feedstock.

So what’s so special about unconventional fossil fuels, and why should investors monitor this emerging industry?

In toto, unconventional feedstocks contain several times the energy content of all remaining conventional fossil fuel resources. In the context of declining reserves of conventional fossil fuels, they provide industrial societies with a space of decades in which to effect an orderly transition to renewable resources. For this reason alone they will almost certainly be used on a massive scale in the years to come, and huge profits will accrue to those companies successful in capturing this market.

The other kind of unconventional, that which applies to unusual transformations and processing technologies, is almost equally important. If, for example, much more abundant coal is substituted for petroleum as a feedstock for gasoline, then a critical shortage of motor fuel may be averted in the future.

So ultimately unconventional fossil fuels are all about energy security. Collectively they provide the means for managing uncertainty regarding conventional energy resources.

The Business Case for Odd Fossils

Ultimately, each feedstock and each production process has to be considered separately, but, very generally, prospects for unconventional fossil fuels appear uncommonly good. Simply put, they’re the most abundant remaining source of hydrocarbons, and several well established technologies exist today for producing familiar products, i.e. gasoline, kerosene, and diesel, from several of these feedstocks.

So why aren’t more companies exploiting these resources and these technologies right now?

Until quite recently unconventional fossil fuels in either sense were simply not cost competitive. (Relentlessly rising prices for petroleum and natural gas are changing that today though.) Furthermore, mature extraction techniques scarcely existed for several of the unconventional feedstocks, including coal bed methane, oil shale, and methane hydrates. Finally, none of these resources or the products derived from them can be considered “green” although it must be said that diesel and gasoline produced from coal and natural gas tend to be cleaner burning than petroleum based motor fuels.

Still, we’re very bullish on unconventional fossil fuels, and we believe that they will play a considerably larger role in providing heating and motive power than bio-based fuels, the other major segment of alternative fuels.