Very heavy crude are hydrocarbons with an API grade of about 15 or below. The most extreme heavy crude currently extracted is Venezuelan 8 API crude, e.g., in eastern Venezuela (Orinoco basin). If the reservoir temperature is high enough, the crude will flow from the reservoir. In other areas, such as Canada, the reservoir temperature is lower and steam injection must be used to stimulate flow from the formation.

When reaching the surface, the crude must be mixed with diluents (often LPGs) to allow it to flow in pipelines. The crude must be upgraded in a processing plant to make lighter SynCrude with a higher yield of high value fuels. Typical SynCrude has an API of 26–30. The diluents are recycled by separating them out and piping them back to the wellhead site. The crude undergoes several stages of hydrocracking and coking to form lighter hydrocarbons and remove coke. It is often rich in sulfur (sour crude), which must be removed.

Tar sands can often be strip-mined. Typically, two tons of tar sand will yield one barrel of oil. Typical tar sand contains sand grains with a water envelope, covered by a bitumen film that may contain 70% oil. Various fine particles can be suspended in the water and bitumen.

This type of tar sand can be processed with water extraction. Hot water is added to the sand, and the resulting slurry is piped to the extraction plant where it is agitated and the oil skimmed from the top. Provided that the water chemistry is appropriate (the water is adjusted with chemical additives), it allows bitumen to separate from sand and clay. The combination of hot water and agitation releases bitumen from the oil sand, and allows small air bubbles to attach to the bitumen droplets. The bitumen froth floats to the top of separation vessels, and is further treated to remove residual water and fine solids. It can then be transported and processed the same way as extra heavy crude.

It is estimated that around 80% of tar sands are too far below the surface for current open-cast mining techniques. Techniques are being developed to extract the oil below the surface. This requires a massive injection of steam into a deposit, thus liberating the bitumen underground, and channeling it to extraction points where it can be liquefied before reaching the surface. The tar sands of Canada (Alberta) and Venezuela are estimated at 250 billion barrels, equivalent to the total reserves of Saudi Arabia.

Most oil shales are fine-grained sedimentary rocks containing relatively large amounts of organic matter, from which significant amounts of shale oil and combustible gas can be extracted by destructive distillation. Significant shale "plays" have been discovered in the last decade, such as the Marcellus in the northern US and Canada, Eagle Ford on the US east coast and Bakken in south Texas.

Oil shale differs from coal in that organic matter in shales has a higher atomic hydrogen to carbon ratio. Coal also has an organic to inorganic matter ratio of more than 4, i.e., 75 to 5, while oil shales have a higher content of sedimentary rock. Sources estimate the world reserves of oil shales at more than 2.5 trillion barrels.

Oil shales are thought to form when algae and sediment deposit in lakes, lagoons and swamps where an anaerobic (oxygen-free) environment prevents the breakdown of organic matter, thus allowing it to accumulate in thick layers. These layers were later covered with overlying rock, to be baked under high temperature and pressure. However, the heat and pressure were lower than in oil and gas reservoirs.

Shale can be strip-mined and processed with distillation. Extraction with fracturing and heating is still relatively unproven. Companies are experimenting with direct electrical heating rather than steam injection. Extraction cost is currently around $25–30 per barrel.

Oil shales are also becoming an important source of shale gas, and some analysts expect that this source of natural gas can supply half of the gas consumption in the US and Canada by 2020. Shales normally do not have the required matrix permeability for the gas to be produced, and in the past, gas could be produced only from source rock with significant natural fracturing. The natural gas comes from decomposition of shale oil and is held in natural fractures, some in pore spaces, and some adsorbed onto organic material. Recently, there have been strong advances in extraction technology, which uses a combination of horizontal wells and hydraulic fracturing in a way that maintains fracturing (see chapter 3.7) and flow of gas much better than before. Even so, production typically requires a high number of wells with limited lifetimes, so continuous drilling of new wells is required to maintain output. Methane is a potent greenhouse gas, and emissions from leaking capped wells and fractures is a potential problem due to the large number of wells.

This form of production is different from oil shale gas, which is produced by pyrolysis (heating and hydrocarbon decomposition) of mined oil shale.

Coal deposits also contain large amounts of methane, referred to as coal bed methane. The methane is absorbed in the coal matrix and requires extraction techniques similar to shale gas. Often the coal bed is flooded, so after well completion and fracturing, the coal seam (layer of coal) must be dewatered. A common solution is to extract water through the well tubing. Generally, the water needs to be pumped out and therefore control is needed to prevent the gas from entering the water in the tubing (the well becomes gassy). This reduces the pressure and allows methane to desorb from the matrix and be produced through the casing.

Coal is similar in origin to oil shales, but typically formed from the anaerobic decay of peat swamps and relatively free from non-organic sediment deposits, reformed by heat and pressure. To form a 1-meter thick coal layer, as much as 30 meters of peat was originally required. Coal can vary from relatively pure carbon to carbon soaked with hydrocarbons, sulfur, etc.

(For synthesis gas, see also chapter 7.3). It has been known for decades that synthetic diesel could be created from coal. This is done, first by creating water gas as synthesis gas by passing steam over red-hot coke. The reaction is endothermic and requires heating:

More hydrogen is produced in the water gas shift reaction:

Often two stages are used: a high temperature shift (HTS) at 350 °C with catalyst iron oxide promoted with chromium oxide, and a low temperature shift (LTS) at 190–210 °C with catalyst copper on a mixed support composed of zinc oxide and aluminum oxide.

These synthesis gases are then used in the Fischer–Tropsch process:

This process runs at a pressure of 2–4 MPa. With iron catalyst a high temperature process at 350 °C will yield a diesel fuel quite similar to normal diesel with an average carbon number of 12, and a certain content of unwanted aromatics. The low temperature process uses a cobalt catalyst and a temperature of 200 °C and yields a pure synthetic diesel composed of alkanes with a carbon number of 10–15 and an average carbon number of Synthesis gas can also be created from natural gas by lean combustion or steam reforming:

This can be fed to the water shift reaction and to the F-T process. This process, together with the following application, are often called gas to liquids (GTL) processes.

An alternative use of the synthesis gases (CO and H₂) is production of methanol and synthetic gasoline:

Then, the methanol is converted to synthetic gasoline in the Mobil process.

The second stage further dehydrates the ether with ceolite catalyst to yield a synthetic gasoline with 80% carbon number 5 and above.

Methane hydrates are the most recent form of unconventional natural gas to be discovered and researched. These formations are made up of a lattice of frozen water, which forms a sort of cage around molecules of methane. Hydrates were first discovered in permafrost regions and have been found in most of the deepwater continental shelves tested. The methane originates from organic decay.

At the sea bottom, under high pressure and low temperatures, the hydrate is heavier than water and cannot escape. Research has revealed that this form of methane may be much more plentiful than first expected. Estimates range anywhere from 180 to over 5800 trillion scm.

The US Geological Survey estimates that methane hydrates may contain more organic carbon than all the world's coal, oil, and conventional natural gas — combined. However, research into methane hydrates is still in its infancy.

Biofuels are produced from specially-grown products such as oilseeds or sugars, and organic waste, e.g., from the forest industry. These fuels are called carbon neutral, because the carbon dioxide (CO₂) released during burning is offset by the CO₂ used by the plant when growing.

Ethanol alcohol (C₂H₅OH) is distilled from fermented sugars and/or starch (e.g., wood, sugar cane or beets, corn (maize) or grain) to produce ethanol that can be burned alone with retuning of the engine, or mixed with ordinary gasoline.

Biodiesel is made from oils from crops such as rapeseed, soy, sesame, palm or sunflower. The vegetable oil (lipid) is significantly different from mineral (crude) oil, and is composed of triglycerides. In these molecules, three fatty acids are bound to a glycerol molecule shown in the following picture (The wiggly line represents the carbon chain with a carbon atom at each knee with single or double bonds and two or one hydrogen atoms respectively):

The glycerol backbone on the left is bound (ester OH binding) to three fatty acids, shown here with palmitic acid, oleic acid and alpha-linolenic acid and a total carbon number of 55.

This molecule is broken down to individual alkyl esters through a chemical process called transesterification, whereby the glycerin is separated from the fatty acids. Methanol (CH₃OH) is added to the lipids and heated. Any strong base capable of deprotonating the alcohol, such as NaOH or KOH is used as catalyst.

The process leaves behind methyl esters (with a CH₃ group on the ester binding) and glycerin (a valuable byproduct used in soaps, explosives and other products).

Biodiesel contains no petroleum, but it can be blended at any level with petroleum diesel to create a biodiesel blend. It can be used in compressionignition (diesel) engines with little or no modification. Biodiesel is simple to use, biodegradable, non-toxic, and essentially free of sulfur and aromatics.

Although biofuel is carbon-neutral, concern has been raised about diverting agricultural areas away from food production. Recently, research has shown potential for growing certain strains in arid regions that could not otherwise be used for producing human food.

An alternative to the above process that is still at the research stage is genetically modified E. coli bacteria. E. coli can produce enzymes to break down cellulose to sugar, which can then be used to produce biodiesel. This method allows use of general biological waste and limit competition with human food resources.

Although not a hydrocarbon resource, hydrogen can be used in place of or as a complement to traditional hydrocarbon-based fuels. As an "energy carrier", hydrogen is clean burning, which means that when hydrogen reacts with oxygen, either in a conventional engine or a fuel cell, water vapor is the only emission. (Combustion with air at high temperatures will also form nitrous oxides).

Hydrogen can be produced either from hydrocarbons (natural gas, ethanol, etc.) or by electrolysis. Production from natural gas is often done via syngas (see chapter 9.1.5) with up to 75–80% efficiency. Its advantage over methane gas is that carbon dioxide can be removed and handled at a central location rather than by each consumer, providing a cleaner energy carrier.

Hydrogen is also produced from water by electrolysis with an efficiency of about 25% at normal conditions, to about 50% in high temperature, high pressure processes, or in various recycling processes in the chemical industry. (e.g., hydrochloric acid recycled in the polyurethane process). The energy supply can then come from a renewable source such as hydroelectric, solar, wind, wave, or tidal, where hydrogen acts as an energy carrier replacing batteries, to form a fully clean, renewable energy source supply chain.

In both cases, the main problem is overall economy, distribution and storage. Hydrogen cannot easily be compressed to small volumes, and requires quite bulky gas tanks for storage. Also, hydrogen produced from electricity currently has an end-to-end efficiency that does not compare well with gasoline or electrical battery vehicles.

Emissions from the industry can be divided into several types.

Discharge:

Mud, shale, silt, produced water with traces of hydrocarbons. Ballast water, polluted wastewater with detergent, sewage, etc.

Accidental spills:

Blowout, shipwreck cargo and bunker oil, pipeline leakage, other chemicals, traces of low level radioactive isotopes.

Emissions:

CO₂, methane, nitrous oxides (NO_x) and sulfur from power plants and flaring

Exposure:

Toxic and/or carcinogenic chemicals.

Locally, these emissions are tightly controlled in most countries by national and international regulations, and during normal operations, emission targets can be reached with the systems and equipment described earlier in this document. However, there is continuing concern and research into the environmental impact of trace levels of hydrocarbons and other chemicals on the reproductive cycle and health of wildlife in the vicinity of oil and gas installations.

The major short-term environmental impact is from spills associated with accidents. These spills can have dramatic short-term effects on the local environment, with damage to marine and wildlife. However, the effects seldom last for more than a few years outside Arctic regions.

The most effective greenhouse gas is water vapor. Water naturally evaporates from the sea and spreads out, and can amplify or suppress the other effects because of its reflective and absorbing capability.

The two most potent emitted greenhouse gases emitted are CO₂ and methane. Because of its heat-trapping properties and lifespan in the atmosphere, methane's effect on global warming is 22–25 times higher than CO₂ per kilo released to atmosphere. By order of importance to greenhouse effects, CO₂ emissions contribute 72–77%, methane 14–18%, nitrous oxides 8–9% and other gases less than 1%. (sources: Wikipedia, UNEP)

The main source of carbon dioxide emissions is burning of hydrocarbons. Out of 29 billion tons (many publications use teragram (Tg) = million tons) of CO₂ emitted in 2008, 18 billion tons or about 60% of the total comes from oil and gas, the remainder is coal, peat and renewable bioenergy, such as firewood. 11% or 3.2 billion tons comes from the oil and gas industry itself in the form of losses, local heating, power generation, etc.

The annual emissions are about 1% of total atmospheric CO₂, which is in balance with about 50 times more carbon dioxide dissolved in seawater. This balance is dependent on sea temperature: Ocean CO₂ storage is reduced as temperature increases, but increases with the partial pressure of CO₂ in the atmosphere. Short term, the net effect is that about half the CO₂ emitted to air contributes to an increase of atmospheric CO₂ by about 1.5 ppm annually.

For methane, the largest source of human activity-related methane emissions to atmosphere is from rice paddies and enteric fermentation in ruminant animals (dung and compost) from 1.4 billion cows and buffalos. These emissions are estimated at 78.5 Tg/year (source: FAO) out of a total of 200 Tg, which is equivalent to about 5,000 Tg of CO₂. Methane from the oil and gas industry accounts for around 30% of emissions, mainly from losses in transmission and distribution pipelines and systems for natural gas.

There are many mechanisms affecting the overall balance of greenhouse gases in the atmosphere. CO₂ has been measured both directly and in ice cores, and has increased from a pre-industrial value of around 250 ppm to 385 ppm today. Methane has increased from 1732 to 1774 ppb (parts per billion).

There is no full model that describes the net effect of these changes. It is well accepted that without CO₂, methane and water vapor, the global average temperature would be about 30 °C colder. The current data correlates well with a current global average temperature increase from a pre-industrial global average of 13.7 °C to 14.4 °C today. The atmosphere and seas have large heat trapping capacity, which makes their temperatures rise. These temperature rises lag behind greenhouse gas temperature increases. It is therefore predicted that the temperature will continue to rise by about 1 °C even if there were no further increase in levels of CO₂ and methane.

The heat capacity of the atmosphere and seas also means that when the temperature increases, there will be more energy stored in the atmosphere, which is expected to drive more violent weather systems.

The main contribution to sea level change in the short-to-medium term is thermal expansion of the oceans, currently predicted to have reached about 0.15 m over pre-industrial standards, and currently rising some 3 mm/year. Although the melting of inland ice in Greenland and Antarctica is reported, this will mainly have local effects, as this ice will possibly take 15–20,000 years to have any significant contribution to sea levels. However, polar glaciation and sea ice is an important indicator of global warming, and in particular, Arctic summer temperatures have risen and sea ice has been significantly reduced in area and thickness.

Due to these effects and the long-term concerns, it will be a high priority to reduce the amount of carbon dioxide and methane released into the atmosphere, and to develop more sustainable energy sources. The main problem is that as much as one third of all emissions come from planes, cars and ships, which account for about 45% of emissions from hydrocarbon fuels that are not replaceable by other known energy sources at this time.

There are three main problem areas:

• There are losses in production: Only about 70% of hydrocarbons extracted from the ground reach the private or industrial consumer. The rest is lost from production systems, transportation and through the refining and distribution of oil and gas.
• There are losses in consumption: Much of the oil and gas is converted to work with an efficiency of 30% in cars, for example, to 60% in the best power plants.
• Better methods for capturing and storing emissions must also be found.

Efficiency will be improved by maintaining and operating facilities to reduce losses, and by converting to more efficient systems. For example, it can be argued that conversion to electrically-driven equipment in place of gas turbine-driven equipment could reduce CO₂ emissions by more than 50%, even if power is generated by a gas turbine and steam combined cycle unit. This also moves the emissions to a centralized unit rather than distributing to a larger number of smaller gas turbines.

To reduce overall emissions, carbon will have to be separated from other emitted gases (such as water vapor) and stored. Current plans call for reinjection into empty reservoirs, or reservoirs that need pressure assistance for oil extraction.

Capturing CO₂ can be done at large point sites, such as large fossil fuel or biomass energy facilities, industries with major CO₂ emissions, natural gas processing, synthetic fuel plants and fossil fuel-based hydrogen production plants:

Overall there are three types of processes:

• Pre-combustion systems, where the fuel is gasified and processed before combustion, and carbon dioxide can be removed from a relatively pure exhaust stream.
• Post-combustion systems, where carbon dioxide is extracted from the flue gas, e.g., using an amine process.
• Oxyfuel consumption, where fuel is burned as relatively pure oxygen, so the hydrocarbon is burned in oxygen instead of air. This produces a flue gas consisting of only carbon dioxide and water vapor, which is cooled and condensed.

For storage:

• A system to store, transport and inject gas into existing reservoirs. This is done by a pipeline, which is generally the cheapest form of transport, or by ship if pipelines are not available
• Alternatives to storage include carbonatization, deep sea deposit, and planting of photosynthetic plants in otherwise infertile areas.

Currently these processes could remove around 90% of CO₂ at a cost of $35–90 per ton, including injection and storage in a reservoir. This is about 2–3 times the long-term expected emission quota costs.