Max S. Dunn

Ed: Woods Seminar: The Future of Oil

Posted by: Max Dunn on October 27, 2008 08:40:24

Roland Horne spends half his time on fossil fuels and half on geothermal. He did an interesting Hubbert analysis of world oil production by moving back the 300 billion barrel OPEC jump in reserves of 1980 back to when they were probably initially discovered. With this displacement, world oil discoveries peaked in 1980. He also projected, based on intuition, that the world will never produce more than 90 billion barrels per day. We have already pumped out 1 trillion barrels, and there are probably about 1 trillion left, so we are at the halfway point and close to peak oil.

Roland N. Horne, Energy Resources Engineering

• Roland spends half his time on geothermal
• World energy use of fossil fuels: 35% oil, 245 natural gas, 29% coal, 6% nuclear, 6% hydro (B Statistical Review 2008)
• 85% of energy in world based on hydrocarbon based fuels

Product and Reserves

Peak oil

• Hubbert curve
• US lower 48 production peaked 35 years after the discovery curve peaked
• (From Lahererre 2003 http://www.oilcrisis.com/laherrere)
• Worldwide (except swing producers: SA, Kuwait, Iran, Iraq UAE), discoveries peaked in 1970, but production didn’t peak 35 years later
• In the 1980s, oil production shifted from control of the major oil companies to the national oil companies
• Discovery is based on geology, nothing we can do will change this, however production can be slowed down if desired
• New technologies like seismic and deepwater discovery techniques allowed us to discover more oil, so peak has been moved out
• Laherrere predicted in 2005 we hit the halfway point, and will peak in 2012

Business As Usual

• BP graph of world proven oil reserves:
  • In 1980 OPEC decided to allocate production based on reserves, so all OPEC countries increased reserves by 300 billion barrels of oil
  • This is not as ludicrous as it sounds because most reserve estimates are conservative and certain places have pumped 102% of their reserves
  • Saudi Aramco had many fields in excess of their reserves before this
  • In 2000, BP started counting unconventional oil (Alberta oil sands)
  • However OPEC oil that was booked in 1989 was actually discovered earlier
  • If we correct for this, then discoveries peaked about 1980
• Production
  • IEA shows production line proceeding linearly upwards
  • However EIA production shows flat productions at 85 mbd (Oil + NGL) since 2005
  • n 1980 when oil prices spiked, oil production (consumption) dropped because demand dropped
  • So maybe one reason why oil production has been flat in recent years is the spike in price

Forecasts

• Annual Energy Outlook (AEO)
  • In 1985 AEO nailed production in the US 10 years in advance
  • Many other predictions were very close
  • However, in 2004 they predicted oil production would go up but it didn’t
• Many organizations estimate that there are about 1 trillion barrels of oil left in the ground
• But we have already used 1 trillion barrels
• EIA estimates we will produce 116 mbd by 2030

Technology: How to get more out

• According to IEA there are 4.5 trillion barrels we can still produce for less than $80 per barrel, including EOR (enhanced oil recovery) oil sands and oil shale
• Largest producers are Saudi Arabia and Russia, which produce 25% of all oil
• Saudi Arabia
  • Swing producer
  • But they are working harder to produce oil than they have in the past
  • By three different measures the production of SA has gong down in the last few years,
  • However oil drill rigs have more than tripled since 2005 from 15 to 54 (Stuart Staniford, March 2, 2007, the Oil Drum)
• Cumulative oil discovered by wildcat drilling was 1.5 trillion barrels, by 2002 had only discovered 2.3 tb, even though technology improved
• Wildcat success used to be 1 in 5, now 1 in 3 because of improved technology, but they are a lot smaller.
• It is a lot easier to find large oil fields then small ones. Ghawar produces 6% of all the worlds oil
• Only 500 giant oil fields in the world (bigger than 1 billion barrels) out of 48,000 fields
• It is getting very expensive to find and deliver oil offshore, currently costs $70 per barrel
• Onshore costs have gone up to $27 per barrel
• Foreign oil costs about $20 per barrel
• Only finding 10 billion barrels a year, but we are using 30

Enhanced Oil Recovery (EOR)

• Basically injecting something in the ground to sweep out the oil
• Techniques: thermal, CO2, chemical
• Average recovery factor is 35%
• But there is a lot complexity to this: 25% recover only 20% of the oil and few percent can recover 70%
• Duri field in Indonesia: recovered between 8-11% with standard recovery, with steam recovered 50-80%
• CO2 is miscible with oil so is good at sweeping oil: 80 projects using CO2 recovery and producing greater than 230,000 b/d
• Alkaline Surfactant Polymer (ASP)
• Daqing in China: has 97% water cut today, injecting ASP hoping to get 20% more (from 30% to 50%)
• Oil sands: Surface mining or underground with SAGD techniques
  • In oil sands 2004 burned 0.7 bcf/d, which is 10% of what Canada burned overall, or 14% of what they sold to us
  • Producing 1.5 mbd, 2030 looking at 4.5 mbd but would need 2.9 Bcf/d
  • Producing all 142 Bg of oil would need 200 Tcf but Canada only has 58 Tcf
• Oil shales
  • New oil, kerogens in the pores of the oil
  • Idea is to heat it up to speed the process of turning it into oil
  • Estonia uses oil shale like coal – they burn it

Manpower: Who will work on these problems?

• Society of Petroleum Engineers SPE, members are getting older
• There are sufficient people, but not distributed. US, Canada and SA have shortage, China has surplus
• There will be peak in gas, oil and uranium
• Ultimately the fossil-fuel era will end

Prediction

• Based on gut guess
• The world will never produce more than 90 bbd

Questions

• Right now it is still easier to produce oil from oil sands than to produce it from coal
• Matt Simmons “Twilight in the Desert” – Says oil in SA will run out – which is true – but is accompanied by 400 pages of nonsense. Saudi Aramco know what they are doing and didn’t do the bad things that Simmons says they did
• There is nothing wrong with offshore drilling, but doesn’t believe we should be drilling offshore now. Better to leave oil in the ground. Keep it for 10 or 20 years so we can make better use of it. We don’t need energy sufficiency. No country has it, except SA. What we need is stable supply
• Gulf of Mexico producing 1.5 mbd. Ike damaged 17 structures, but there are 3877 structures. So this says putting in more oil structures won’t increase production much
• Stanford co-gen plant produces 30MW and uses natural gas. But it is approaching its end of life. So they are deciding what to do next taking into account gas still produces CO2
• Might not have to worry about global warming because we will burn all fossil fuels in the next 100 years anyways
• Methane hydrates is promising, but nobody has figured out how to get at it yet. One field is Russia is producing it, but only produces as much as one oil field
• Horizontal drilling increases recovery rate but not the total recovered amount