Warning: The Green New Deal Can’t Break The Laws Of Physics 7

[1503-44]

Getting at and producing that shale oil is basically what fracking is doing. Fracturing separates layers of shale to create void spaces allowing oil to collect and flow towards the well column. Prior to fracking being applied to shale formations, some shale oil was produced by surface mining of shale, crushing, heating and washing much the same as done with tar sand oil. Unfortunately generally considered a more environmentally unsound practice as large surface areas are affected. These are also expensive because of the large volumes of materials that have to be mined and the expenses involved in rehabilitation of those large surface areas after the oil bearing materials have been removed. Tar sand oils are high density, high viscosity and considered to come with high heavy metals content, which is why pipeline leaks involving tar sand oils are so problematic. And fracturing itself is troublesome, because of the fluids injected into the shale layers used to do the fracturing, of which some may migrate a bit too far away from the well and resist cleaning attempts before oil production actually begins. Plus, in some formations, the extent and degree of fracture is more difficult to control.

So fracking, and some other enhanced oil recovery (EOR) techniques, water injection, hot water, steam, CO2 injections, etc. have liberated a lot of that "oil in the ground", that oil which could not have been produced economically prior to the advent of EOR technologies, to which you refer. Unfortunately many of the wells using EOR are experiencing faster declines in production rates than those wells that did not require the use of EOR. It is thought that more rapid declines in EOR well production rates will tend to make much of the recent increases in total aggregate world oil production, but especially the USA total, which has increased mostly due to adding many fracked shale oil wells, decline that much faster as those wells come to end of life. And of course all of that work costs money, so the breakeven oil price from EOR wells typically have floors above $60-70/BBL even in the easiest to get at locations. Additionally EOR typically requires significant amounts of water and produce at least the same amount of contaminated water and mud, a lot of which is radioactive and which all of it must be properly disposed.

All in all, the best scenario currently looks like feeding the $GDP Beast is going to get considerably more difficult and expensive during the next 10 to 30 years. Interestingly the silver lining behind the Covid cloud, if there is one at all, may be that we might be able to learn how to significantly reduce HC consumption simply by changing some of our habits. We might also think of other ways to ease the transition off of cheap, inefficient use of HC. Tax air travel to fund high efficient mag-lev hi speed trains, but only where the two have coincident routes??? That's going to get a comment or two.

Dont worry about reserving oil production for petroleum processing companies, as they are the only ones that can turn it into useable stuff anyway, even if its only turning it into a feed stock for some additional use. There's hardly anything worse than handling crude oil, bitumen and tars.

 

[JoshPlumSE]

That new tech has extended petroleum's dominance for the time being, but there is no guarantee that it can continue forever, even without considering climate change related actions.

I get what you're saying and it certainly makes sense intuitively.... And, since you're a petroleum engineer, I'll assume you know more about it than I do. But, I'd like to make a statement and ask you a question.

Statement:
I've heard a similar statement for 40+ years. That we're going to run out of oil within the next 20 years. But, then 20 years later, the world had MORE total reserves than they did 20 years before. Therefore, history suggests that statements like this have not been even remotely close to accurate. Now, I haven't seen numbers recently. But, I looked into is some years ago and the numbers were correct, the amount of total world reserves were up in a big way. This may have been due to opening certain areas up for development that were previously (certain types of off shore drilling, Russia, et cetera).

Question:
Why is this time different? Obviously, this isn't a renewable resource and eventually it will eventually run out. But, is there really evidence that the world is genuinely running out of oil/gas/petroleum?

 

[1503-44]

Oil production of late has become both a question of advancing technology and economics of the price of oil. I imagine that they used to think that smoke signals and homing pigeons were the ultimate technologies for sending messages, until the advent of the pony express, telegraph, telephone, undersea cables, satellite and email. The short answer is... We keep on inventing and applying new tech to help us get more oil out of the ground. Necessity is the mother of invention and necessity has kept us going. Nobody foresaw the advent of EOR technology, or if they did, they realised nobody could afford to do it when oil was $6/BBL and not really ever expected to go higher. As conventionally produced oil became more scarce and the price rose, it opened up opportunities to explore new technologies, which turned out to be successful, at least as long as the oil price remained high. Oil production now draws from a vast array of technologies that have each experienced tremendous advances over the last 30 years and just about each and every one managed to make oil production possible for a X more years, but none were really seen as necessary or economically viable prior to the drop in convential oil production and higher prices started to look like they would form the predominate trend line. Before that time we just had to move the drill over a bit, later to the next country, later to deeper water, and keep on drilling.

Advances in geophysics and computer processing power have increased the chance of discovering smaller oil fields and lessened the risk in finding commercially viable oil reserves. Offshore exploration and production technology in deeper and deeper waters has helped. Development of more and better materials to suit higher pressure and temperature environments. EOR and all the above plus new drilling techniques have all combined to make it possible to keep adding to ever decreasing conventionally produced oil reserves. Still today 70% of world's oil is conventionally produced and in decline for many years now. 30% is produced through the use of enhanced techniques. We hope to be able to keep up with demand by utilising advancing technology, but it isn't easy to see what tech will be developed next when you're pushing every technology that you have available today to the limits already and each and every advance comes at a higher and higher cost. We have long since past the point of talking about new advances in oil production making oil cheaper. Now we're just doing everything possible to hold on to what we've got, no matter what the cost. So when the price falls, because we were so successful with one technology or another, as it has currently, it really makes it difficult to hold on while we're searching for still newer and better ways to get our hands on more.

So far we can't really say that oil will "ever physically run out", because there almost always seems to be some we left down there that we cannot produce today because of limitations of technique, material, knowledge and price. That could change tomorrow, but there is no guarantee that it can, or will. All we really know is what we know today, which is where we are and where the trends look like they will take us. So, those trends have looked for a long time now that, if our ability to buck the trends becomes impossible or difficult for any reason, we will run out of whatever oil we can produce using our existing technology within the next 15-20 to ..30-50? years. The current wisdom is that we've been rolling sevens for many years and managed to stay in the game, but the game keeps getting more difficult, farther away from home and more expensive and dangerous and the payoff looks like smaller and smaller fields to find and there's more and more work involved squeezing the rocks (expenses).

OK that's the short answer. I have to go now because my Magic 8-Ball says, "Ask again tomorrow".

PS. I'm actually not a petroleum engineer, but work in the biz. I read BP's "Yearly Energy Forecast" every Sunday morning with my breakfast.

 

[rb1957]

"when will oil run out ?" ... "not today" (GoT reference)

you need better reading material for breakfast !

another day in paradise, or is paradise one day closer ?

 

[IFRs]

IMO the world's proven oil reserves are not so much an indication of the actual proven reserves, but a geo-political-economic-influence-media game played by countries and people who don't know or care what the "actual" number is, even if it were known with an accuracy better than +/- 100%

 

[moltenmetal]

Best to look up and understand what the word "reserves" means in reference to ANY mined material.

Here is a useful quotation from the seldom-read but all-important Appendix to the USGS Mineral Commodity Summaries:

USGS Mineral Commodity Summary: Appendix C- Reserves
“ Reserves data are dynamic. They may be reduced as ore is mined and/or the extraction feasibility diminishes, or more commonly, they may continue to increase as additional deposits (known or recently discovered) are developed, or currently exploited deposits are more thoroughly explored and/or new technology or economic variables improve their economic feasibility. Reserves may be considered a working inventory of mining companies’ supply of an economically extractable mineral commodity. As such, the magnitude of that inventory is necessarily limited by many considerations, including cost of drilling, taxes, price of the mineral commodity being mined, and the demand for it. Reserves will be developed to the point of business needs and geologic limitations of economic ore grade and tonnage. For example, in 1970, identified and undiscovered world copper resources were estimated to contain 1.6 billion metric tons of copper, with reserves of about 280 million metric tons of copper. Since then, almost 500 million metric tons of copper have been produced worldwide, but world copper reserves in 2015 were estimated to be 720 million metric tons of copper, more than double those of 1970, despite the depletion by mining of more than the original estimated reserves. Future supplies of minerals will come from reserves and other identified resources, currently undiscovered resources in deposits that will be discovered in the future, and material that will be recycled from current in use stocks of minerals or from minerals in waste disposal sites. Undiscovered deposits of minerals constitute an important consideration in assessing future supplies. USGS reports provide estimates of undiscovered mineral resources using a three-part assessment methodology (Singer and Menzie, 2010). Mineral-resource assessments have been carried out for small parcels of land being evaluated for land reclassification, for the Nation, and for the world.
Reference Cited: Singer, D.A., and Menzie, W.D., 2010, Quantitative mineral resource assessments—An integrated approach: Oxford, United Kingdom, Oxford University Press, 219 p.”

 

[JoshPlumSE]

Still today 70% of world's oil is conventionally produced and in decline for many years now.

Thank you (and others) for indulging my trip down this rabbit hole. I included this one sentence from your response because I think this likely gets to the heart of what you're saying.

When I was referring to the 1980's and such when oil reserves were constantly increasing despite many anti-petrochem folks talking about it being a dying industry for 20+ years....I realize that this was likely when those reserves and oil production was pretty conventionally extracted.

Your point with the quote above is that conventional extraction is going down significantly and that we've been developing alternative means from conventional extraction.... Which is an indicator of how much more difficult and expensive extraction is becoming.

I accept that and believe it to be a good argument. While I will never be much of an expert on this subject, it gives me enough insight to continue to have intelligent conversations on the subject.

Thank you again!

 

[LionelHutz]

OK, so 30% of the oil comes from non-conventional methods because those methods have been refined until they are cheaper than the conventional methods. But did the conventional extraction cost rising drive this or did ongoing research into cheaper and better extraction methods drive this. Producers are always trying to figure out faster and cheaper means of extraction regardless of the current extraction costs, it'd be silly to try and argue the opposite.

The price of a barrel of crude seems to vary more due to stock market and political pressures than possible availability.

 

[1503-44]

Many shale and EORed fields could already be in decline. There has been notable drops in some output already, but it can take 5 years or so for long term trends in fields to get confirmed.

Attached file is BP's current global production forecast. Declines are indicated in both conventional and tight oil, well production from fracked or other more difficult to produce oils. Tight oil production appears to have been in decline since 2018.

I built a pipeline to an offshore platform in 1980 at Galveston Block 144. In 1990, while working for a different company, I needed to build an offshore platform so we could join several pipelines together and build a metering station offshore Louisiana. Galveston 144 had stopped producing by then and the equipment was for sale. I arranged to buy the platform and have it towed to Lousiana. We pulled it up and floated that platform to Louisiana and reinstalled it there. We set up our pipeline junction on top. So I know that some fields definately run out. I also it can be an eventual outcome for any of them. That made me believe that sooner or later we will be dealing with a finite resource. But we don't actually have to run totally dry to have a problem. All that has to happen is for demand to significantly exceed supply for a significantly long time. That's when the oil price goes ballistic and the economy goes bad for 5 years afterwards while we learn how to get more oil at the new higher price. I also figure we'll know when we're running out of oil for sure when the economy has been bad for 10 consecutive years and nobody has enough money to buy it.

 

[IRstuff]

so 30% of the oil comes from non-conventional methods because those methods have been refined until they are cheaper than the conventional methods.

Only when the prices stay relatively high, since the marginal cost is still much higher than with the more easily accessible oil that OPEC and others have; OPEC has attempted a couple times already to kill US production, by allowing prices to drop, but many producers were able to stay afloat, and most of OPEC are loathe to sell their oil at such low prices, so they cut back on production.

TTFN (ta ta for now)
I can do absolutely anything. I'm an expert!

https://www.youtube.com/watch?v=BKorP55Aqvg

faq731-376 forum1529 Entire Forum list

http://www.eng-tips.com/forumlist.cfm

 

[LionelHutz]

If 30% of oil produced today is from non-conventional means then that would logically mean the methods used for these non-conventional extraction means have been refined to the point they're competitive with the conventional extraction means. Otherwise, they wouldn't be in use. Further, the current "in the dumpster" crude oil prices would also logically means these alternative methods have gotten rather cheap to use or they wouldn't be in use today. Yet, they still are.

Maybe a better question would be did the non-conventional means become competitive and take over 30% of crude production because crude prices went up or did they become competitive and take over 30% of crude production because companies developed them trying to make more money from the oil rights they have access to?

 

[Compositepro]

Lionel, your logic is flawed. The market price of oil is determined by supply and demand and not the cost of production. Buyers do not care how much it costs to produce oil. Enhanced oil recovery always cost more than non-enhanced. EOR has increased the supply of oil and that is what has lowered the price, even though costs have gone up. Profits of oil producers have gone down. Producers cannot just stop producing because prices are down. OPEC did that, and it worked back in the 70's, but there are many other suppliers now and they all have to eat. And when OPEC cut supply they only cut it slightly less than demand. The supply chain cannot just be shutdown or else it will collapse and cannot be easily restarted. Sometimes producers sell at a loss because shutting down will result in greater losses in the short term.

Same thing applies to the price of toilet paper, and to electricity in California. If the demand exceeds the supply by 1% the price of the entire commodity market can skyrocket.

 

[JoshPlumSE]

Oh, we're still in the rabbit hole. I have a slightly different take on this.
a) I believe the non-conventional means are STILL more expensive than conventional means of extraction.
b) The oil, gas and petrochem companies will invest in this type of extraction when oil prices are high. That's when they have money to invest in these types of more expensive techniques.
c) When oil prices come down significantly, they will stop investing in expansion of shale oil. But, they've already invested enough that a good amount can be produced at a reasonable MARGINAL rate. But, not at a rate high enough to justify further investment in equipment and land and such. I'll also point out that this shale oil and such benefits from being much more local. You have cost benefits that are unrelated to extraction (i.e. reduced transportation costs, no tariffs, no foreign taxes) and political benefits (employment, not pouring money into countries that hate America and Canada). So, while it's probably still a more expensive procedure, it still makes sense (to some degree) after the initial investments have been made. However, the output will go up much more quickly when prices rise again.

 

[1503-44]

Pretty much true Josh.

Nonconventional oil (NCO) needs $60/BBL minimum, that's why 200 USA companies specializing in NCO have declared bankruptcy the last 2 years. That may also be responsible for some of the production decline experienced since 2018. Some production is shut in because there was no place to put it, even though they've been building tanks in Cushing, OK as fast as possible for years. All of which when combined with Covid demand reduction in March, caused the price to drop to $-20/BBL for a week or so.

Saudi crude ,mostly all CO found at shallow depths, can de delivered FOB in the Arabian Gulf for as little as $8/BBL.

It is thought that both Saudi Arabia and Russia are trying hard to bankrupt North American shale oil producers, not that they needed much help. They were well on their way beforehand from their own actions of producing at rates over previous demand levels.

During the oil/gas glut of the early 80s I worked for the largest producer of natural gas in the USA. Prior gas prices were over $6/1000 CF in some US states. Spot market price then hit $1.50 It was an independent oil company, not a major, that had been in bankruptcy for 11yrs (related to refinery operations). There were a lot of bills to pay and we could fuel all of NYC if we wanted to. Instead of shutting wells in while we waited for prices to rise, all those bills in the mailbox and the long line of creditors knocking on the door worked against us. We had to open up more of our wells to reach our max flow to keep our required cash flow going. The price dropped down further to 1.18 and we still kept drilling... for a little bit longer. It did not end well.

Some Mideast countries may be reaching the same predicament. Saudi Arabia has already completed an IPO of an offering of a few % of SaudiAramco and has borrowed several hundred billion dollars over the last couple of years. Oman and UAE are considering the introduction of sales taxes! UAE just sold its pipeline system to generate some additional cash. Many other active projects have been put on hold or completely shut down due to low price and other C19 related reduced demand issues. C19 complications being the ultimate trigger.

The future reduction of petroleum supplies looks to me like it will be accompanied by a series of ever increasing price spikes, caused by smaller and smaller disruptions in any part or point in the supply chain, becoming more ond more frequent and of longer duration, until they eventually merge together into one big mother of them all and ... "Ask again tomorrow".

 

[LionelHutz]

My logic may be flawed, but claiming that 30% of oil being produced today is done at a $20+ per barrel loss also has a flaw in it.

Compositepro - You seem to be claiming that very little production shuts down when the price drops and there is no longer profit. That logic is also flawed.

 

[1503-44]

First of all I'm not claiming anything.

Those that can wait for money shut in wells when price is lower than their production cost. Those that need cash flow don't always have that option.

Saudi is making money. Others are not. Others are breaking even. That depends on the production cost and their sales price.

Selling at a loss isn't fun, but it puts money in your pocket. After you've paid the geologists and drillers and for all bells and whistles you'd like to make your money back, but sometimes you have to sell at any price just to be able to pay the rent.

 

[JoshPlumSE]

Producers cannot just stop producing because prices are down. OPEC did that, and it worked back in the 70's, but there are many other suppliers now and they all have to eat

This is an argument against the basic concept of supply and demand. When prices go down the produces will extract less oil. They'll shut down the more expensive operations, they'll stop paying overtime for workers, they'll use that time for needed maintenance that temporarily close facilities and such. They'll "trim the fat" from their organizations to be more cost effective. All that results in a lower supply.

Now, I do understand what you're saying... That this is a highly competitive industry with many suppliers. And, once the wells and such are drilled and all the equipment is set up, a lot of the money has been spent. As such, the supply side isn't as vulnerable to wide fluctuations as most other industries.

 

[ACtrafficengr]

Even if they aren't making a profit, it can make senses to keep operating. If the variable costs are covered, production will offset some of the fixed costs. Reducing losses isn't as good as making money, but it's better than nothing.

Forcing the fossil industries to internalize their external costs would have a huge impact on the market, though.

My glass has a v/c ratio of 0.5

Maybe the tyranny of Murphy is the penalty for hubris. -

http://xkcd.com/319/

 

[Compositepro]

The "cost" of oil in mainly the capital investment that was made to find the oil, drill for it, fracture the rock, build pipelines and storage facilities. When this is done with borrowed money, you cannot stop making payments on the loans by stopping the pumps. All that does is stop the cash flow needed to keep up with payments. As noted by others the cost of pumping oil from existing wells is ridiculously low, and therefore,so is the amount saved by not pumping. If you need cash to avoid bankruptcy every dollar is golden.

New projects and exploration will be put on hold.

 

[1503-44]

There is an additional problem with shutting in production, especially fracked shale wells. Many wells cannot be restarted easily and some wells sustain permanent damage and never recover to their previous production levels. Since there is little experience in shutting in shale wells, nobody is certain what might happen on a restart. Its still unknown territory.

The-Major-Problem-With-Shutting-Down-Oil-Wells