Guest Post by Willis Eschenbach
There’s a discussion over at Judith Curry’s excellent blog, about peak oil. I find the whole madness surrounding peak oil to be one more example of our human love for warnings of future disaster. Few people want to hear that tomorrow will be OK, that things will work out. Instead, most folks want to hear some terrible story about what tomorrow holds, whether it’s peak oil or climate meltdown or the coming ice age. Go figure.
Figure 1. Conventional oil leaking out of the ground near McKittrick, CA.
One part of the discussion of peak oil that has always bothered me is the division of oil into “conventional oil” and “unconventional oil”. Here’s why I think that division makes no sense with regards to peak oil.
I’ve lived through much of the whole peak oil deal, which near as I can tell has turned into a half-century-long goat roping contest. During the earlier years, people were shouting that the oil would run out, that the top would be very soon now, we’d hit the peak and by gosh, at that point things would turn ugly. Of course, that still hasn’t happened, so the peak oilers were left with the question pondered by failed doomcasters throughout history, viz:
How the heck do I explain the cratering of my position and still maintain some shred of my reputation?
For the peak oil folks, salvation came in the form of “unconventional oil”. Now, we’re assured, oil is still running out, so they were right all along … You see, they say, King Hubbert was right, we’re running out of conventional oil, but as it runs out it is being seamlessly replaced by “unconventional oil”, so we still have oil even though we’re running out of oil. Got it?
The strange part is, when you open a barrel of unconventional oil to see what conventions were broken in its creation, you find it is indistinguishable from conventional oil.
What is unconventional oil? Well, we could start by considering the conventions regarding oil. For literally billions of years the convention was that oil was found in small pools and seeps like you see in Figure 1. Indeed, the discovery of oil in Oil Creek, Pennsylvania, the site of the first US oil well, came about because oil had been seeping out there for untold centuries, and had been known and utilized by the Early Asian Immigrants in the area before the later arrival of the melanin-deficient crowd.
So conventional oil, by ancient hallowed convention handed down through the millennia, is found in tar pits and oil seeps on the surface. Which means that people being so rash as to drill for oil, by definition, would be pumping up “unconventional oil” … but of course, life is not that simple.
As a result, “conventional oil” is not from the conventional method of dipping it up in a bucket from a seep, but by the decidedly unconventional and at that time unheard of method of drilling a hole in the earth to get it to come out …
Things went along just fine like that for years. Then “secondary recovery” methods started to come into use. These were a variety of physical and chemical methods used to squeeze more oil out of existing fields, including fracturing the rock to allow the oil to come out more easily.
Now, about this time, the whole “peak oil” story started to go south, because no matter how much peak oilers howled there was more oil discovered every year. Every year the proved reserves just kept growing. And that process has continued to this very day, with more proved reserves than ever. How were the peak oilers to explain it? Hey, “unconventional oil” to the rescue!
For example, thinner oils were “conventional”, but thicker, more tarry deposits, despite having been utilized by humans for centuries, were “unconventional” oil, so they weren’t counted regarding the peak.
The real laugher, however, the place where you can see the gears stripping, involves the “conventions” about fracturing the rocks to allow more oil to come out, what we call “fracking”. The fracturing technology was developed about forty years ago, and has been used ever since, mostly for secondary recovery. And for all those decades the oil coming from the fractured rocks has been “conventional oil”. But now people have learned to drill wells horizontally and fracture them … and now suddenly after forty years of fracturing the rock, which gave “conventional oil” when it was done from vertical wells, fracking now only delivers “unconventional oil” simply because the drill hole goes horizontally instead of vertically … does this make any sense to anyone?
The classification of oil from fracking as “unconventional oil” shows clearly the ludicrous nature of the dividing line when we are discussing peak oil. Regarding the putative peak, why is oil from a horizontal well “unconventional” and oil from a vertical well “conventional”? It is all gotten by technology, and none of it is any more “unconventional” than the drilling of the first oil well, a most unconventional act …
Calling oil from horizontal wells “unconventional” is crucial for the peak oil folks, however, because if the oil from fracking were classified as conventional oil, the “peak oil” claims and the “peak gas” claims would sink of their own weight …
Look, folks, the ugly truth is that the world is awash with fossil fuels. To start with, The largest single concentration of fossil energy on the planet is the Powder River coal formation in the Northern US. The world has several hundred years worth of coal. The Canadians have huge amounts of oil … of course it too is called “unconventional” oil, because it alone is enough to blow the “peak oil” claims out of the water. Plus now we have the “tight oil”, oil in the rocks that is, of course, unconventional.
Then we have the discovery of the shale gas resources all around the planet. Even Israel finally has some domestic energy resources. How unconventional is that? Australia just announced a huge find. China has massive gas resources. A preliminary assessment says including shale gas we have enough gas for the next couple of hundred years.
And finally, we have the wild card, the methane hydrates, the “ice that burns”. Estimates of the amount of these are all over the map, but all of them share one feature—they are very, very large, on the order of quadrillions of cubic feet. This is rivals the size of the global natural gas resource …
Finally, most of these forms of fossil fuels occur in combination and can be converted into one another. Coal, for example, can be converted to a liquid fuel, or to a gas.
Now, because there never was anyone hollering about “peak coal”, there’s no such thing as “unconventional coal”, despite huge changes in mining technology. Coal mining has changed as much or more than drilling for oil … so why isn’t there “unconventional coal”?
But in that case, since all of the coal on the planet seems to be “conventional” coal, if we convert coal to oil, are we making “conventional oil” or “unconventional oil”? Presumably it would matter whether we converted coal to oil horizontally or vertically …
In summary, once you get past the nonsense of “conventional” and “unconventional”, there’s enough coal and gas for a couple hundred years, and enough oil for a hundred years, just with what we know about now, and that’s not even counting methane hydrates. Which is why I pay no more attention to the peak oil alarmists than I do to the climate alarmists. One group claims we have too much oil and we’re gonna burn it all, the other group claims we’ll soon have too little oil to burn, and I treat those two impostors just the same.
Was the division between “conventional” and “unconventional” oil devised to cover up the failure of the peak oilers? No way. The distinction is useful in a variety of ways for analyzing the world of oil sources. I think that the concept was simply appropriated by the peak oilers because it was very useful to them, since it totally obscured the failure of their peak oil predictions. To me, oil is oil is oil, and if you claim the world will run out of oil, you can’t later say that you have redefined things, and that the oil that proves your prediction wrong is some other special kind of oil that doesn’t count as oil but walks like oil and quacks like oil …
w.
… Oh, yeah, the weather report. Late night again, two AM. The wind has changed and is blowing from the southwest, landcasting the fog and the smells of the ocean. The characteristic sea smells of iodine and dimethyl sulfide in the fog draw my thoughts back, back to the many mornings I spent getting out of bed here on the hill at 4 am and going down to the harbor, rigging the boat and setting out in the dark to have the commercial fishing gear in the water for the dawn salmon bite. Sliding out of Bodega harbor in the half-light with my gorgeous ex-fiancee and my good friend, once again motoring between the rock jetties at the harbor entrance, going out to discuss matters of life and death with the ocean. I love the ocean because it doesn’t give a damn about a man’s position and his power and his pretenses. Knowledge and experience mean nothing to the ocean. After a life at sea, if I put one foot wrong, I get just as wet as the landlubber falling off the dock … I take pleasure in that ultimate equality and justice of the ocean. I know that even if it is a California ocean it would kill me without first asking me to share my feelings, so leaving the safety of the harbor is always sobering moment …
… sneaking out between Bodega Rock and Bodega Head itself, the little shallow passage the fishermen call “between the rock and the hard place”, where once my heart almost stopped with fear, or at least it started with fear, but other emotions got involved. The channel there is shallow, the sport fishing boat “Mary Jane” was capsized in 1986 with the loss of nine souls by a sneaker wave, “full fathom five thy fishermen lie, of their bones are coral made” …
So when I heard a wave break right behind our little fishing boat one afternoon as we were coming in between the rock and the hard place, my first thought was that we were about to join the folks from the Mary Jane.
We spun around, and aaaah, dear heavens, it wasn’t a breaking wave at all, although a wave was breaking, instead it was my old friend Missus Fishbreath breaking the surface just behind the boat, and breaking my heart with the slow-moving stillness of her majestic beauty, a great gray whale dancing her way three thousand miles from the tropics to Alaska. As we turned and gaped, we were looking her right in the eye, and then she rolled our way and opened her blowhole so close to the boat we could almost look down it, it was as big as a dinner plate, we were close, close enough to count the barnacles clinging to her hull, she was the very picture of natural wildness and glorious beauty and unimaginable power, my heart leapt to see it … and she blew out a great cloud of gagging mist, a noxious enveloping adherent miasma reeking of the million vanished piscatorial souls of her most recent month’s meals, a clogging, thick effluvium that enveloped the boat and then drifted away to leeward as the lovely lady disappeared beneath the waves …
… leaving me in the strangest condition imaginable, with the boat wandering off course, my jaw hanging down to my umbilicus, a pulse rate well into the triple digits, adrenalin-shocked, awed beyond words, smelling like the dumpster behind a cheap fish restaurant, blasted by the natural beauty I had just witnessed, and uncertain whether I was going to vomit or not, but tending toward the former.
I’m not jonesing to visit that particular emotional place again, once was enough for any man. And on a cold night like tonight, I’m glad I’m not rolling out at four am. I fished the Bering Sea as well, and these days I’m just as happy to see the bergy bits and watch the Bering ice on the “Deadliest Catch” TV show from the safety of my couch … but ah, dear friends, mostly I’ve just moved my ocean madness to warmer waters, and I wouldn’t have missed it for rubies and pearls …
Sports and gallantries, the stage, the arts, the antics of dancers,
The exuberant voices of music,
Have charm for children but lack nobility; it is bitter earnestness
That makes beauty; the mind
Knows, grown adult.
A sudden fog-drift muffled the ocean,
A throbbing of engines moved in it,
At length, a stone’s throw out, between the rocks and the vapor,
One by one moved shadows
Out of the mystery, shadows, fishing-boats, trailing each other
Following the cliff for guidance,
Holding a difficult path between the peril of the sea-fog
And the foam on the shore granite.
One by one, trailing their leader, six crept by me,
Out of the vapor and into it,
The throb of their engines subdued by the fog, patient and
cautious,
Coasting all round the peninsula
Back to the buoys in Monterey harbor. A flight of pelicans
Is nothing lovelier to look at;
The flight of the planets is nothing nobler; all the arts lose virtue
Against the essential reality
Of creatures going about their business among the equally
Earnest elements of nature.
Robinson Jeffers saw it … when you read those lists of famous last words, nobody ever says “I wish I’d spent more time at the office”. Don’t mail the envelope in, push the envelope, the journey will end long before any of us wish it to. Live your most impossiblessed dreams, my friends, because any other kind is just a dream. Chance the widdershins steps of the tarantella, lift the ancient curses and look under them for old coins and lost loves and dust bunnies with a vest and a gold pocketwatch, opt for an immediate increase in the uncertainty levels, stay away from the world of adrenalin deficit spending, hold your dearest warm under your heart while you dare the icy seas of life, for the night is assuredly coming …
My very best wishes to all, I’m off to sleep.
Jeff L says:
February 2, 2013 at 1:38 pm
It is a question of whether developing oil at $90-110/bbl is still cheaper and more economically productive (especially from an energy density standpoint) than developing other sources of energy. The reason we have found more oil, regardless of whether someone calls it “conventional” or “unconventional” is precisely because oil represents a cheaper source of direct, instant, and powerful energy in our cars and other products based upon petroleum. Where there is demand, and still money to be made, people will look for oil. It remains simply the best source of energy we have. Perhaps someday there will be no more oil to find, period. But we are not close to that day, I believe, based upon what I have seen on the subject.
Great piece, Willis.
Larry writes:
It is a question of whether developing oil at $90-110/bbl is still cheaper and more economically productive (especially from an energy density standpoint) than developing other sources of energy.
There are two problems. The first is that the marginal unconventional well will not be profitable at $110/bbl. The second is that most of the profitable unconventional plays are too small or peak too quickly to matter.
vangelv says:
February 3, 2013 at 8:06 pm
I don’t treat every barrel in any manner at all. The people making the peak oil claims were the ones that treat every barrel as if it were the same. They’re the ones that made the claim about “peak oil”. They did not make the claim about “peak of just some oil, the oil that makes lots of gasoline”. I am merely investigating their claims, and since their claims were about “peak oil”, not “peak light sweet crude”, that’s what I’m discussing.
Somewhere I have a picture of me and the SK guys who were giving me the guided tour of the SK refinery in Ulsan, South Korea, the second largest refinery on the planet … yes, vangelv, I am aware of refineries, and what they can and can’t handle. I’ve been the man negotiating directly with the refineries to buy their products, I’ve been through the Shell refinery in Singapore. I’ve had them explain the reasons for the various prices, I’ve seen them up close and personal. I know things about the processes that most folks are unaware of.
For instance, while you discuss upgrading the refineries, the other option you didn’t discuss is to upgrade the heavy oil in situ, so that you can avoid the upgrading of the refineries. This option is getting more play because the energy to do the upgrading is available where the heavy oil is produced. See here for a discussion of how this process affects the economics of the Alberta oil sands.
Now, I didn’t discuss that either … but not because I haven’t looked at it or am unaware of it. I didn’t discuss it because it is immaterial to the peak oil claims that are the subject of the thread.
So please, good sir, stop acting like I’m your student, or I’m someone who is unaware of the subject we are discussing. I may be wrong, but I am very knowledgeable, and I’ve considered these matters at great length. I say again, I made my living running the numbers on the oil industry, and made a very good profit for the company doing it—this is far, far from my first rodeo.
w.
I don’t treat every barrel in any manner at all. The people making the peak oil claims were the ones that treat every barrel as if it were the same. They’re the ones that made the claim about “peak oil”. They did not make the claim about “peak of just some oil, the oil that makes lots of gasoline”. I am merely investigating their claims, and since their claims were about “peak oil”, not “peak light sweet crude”, that’s what I’m discussing.
But it is not true that the people who make the peak oil claims treat every barrel in the same way. Most of what I wrote could have come from the pen of Simmons or Deffeyes. They merely claim that while there is a difference it really will not matter by very much. Do we really care if the peak comes at 73 mbpd or at 72 mbpd? Yes the mixture might mean that there were more high value end products created at 72 mbpd than at 73 mbpd but we don’t really care because the numbers are close enough.
What the people who make the peak oil claims tell you, if you want to listen, is that when you need a trillion dollars in new investment just to keep production flat you are pretty much at a peak. And that is what we have seen. You know Willis, depletion really does matter. Take a look at one of your examples, shale and tell me how you can keep growing production by enough to offset the depletion of conventional oil when you have $10 million wells that are losing 75% of their production in the first year and are at stripper level within 5 years. You might do it if you converted a huge portion of your economy to feed the drilling supply chain but only if the wells were self financing. I hate to break this to you but outside of a few core areas shale wells are not self financing. The shale companies have relied on an explosion of debt to stay afloat. Eventually the financing gaps will not be closed and most of the players will wind up bankrupt. You saw the graph showing how much you have to drill just to keep the well productivity from falling. You are smart enough to know that the graph would not look as it does if you were right about shale. Shale is a bubble and a great way to misallocate capital. If you want energy you are better off looking a coal or nuclear.
We have reached a period in which the aggregate data is showing a plateau. That profile was purchased by hundreds of billions in new investment in all kinds of conventional and unconventional production. Instead of ignoring the conclusion of what that means and pretending that everything is all right we need to understand what it means.
For instance, while you discuss upgrading the refinery, the other option you didn’t discuss is to upgrade the heavy oil in situ, so that you can avoid the upgrading of the refineries. This option is getting more play because the energy to do the upgrading is available where the heavy oil is produced. See here for a discussion of how this process affects the economics of the Alberta oil sands.
I have followed those developments for some time. But as I pointed out, the increase in Alberta tar sand production will not offset the decline in one of the major conventional fields. It is too small to matter and in this debate size does matter.
So please, good sir, stop acting like I’m your student, or I’m someone who is unaware of the subject we are discussing. I may be wrong, but I am very knowledgeable, and I’ve considered these matters at great length. I say again, I made my living running the numbers on the oil industry, and made a very good profit for the company doing it—this is far, far from my first rodeo.
You are still missing my point. Much of what you know is simply wrong. And I do not try to treat you as a student because I am very aware of my own limitations. But as my grandfather used to tell me, all you need to do to be the smartest man in a room is to remember that most of the things that you know are wrong. I am only trying to hold up a mirror to suggest that your information is no better than the information that all of the ‘knowledgeable’ people who defend the AGW theory use in the arguments that I have with them. The biggest danger that you face is not a lack of intellectual horsepower or a lack of effort when doing research. It is simply that what you think you know is not so.
You are a smart guy so I will give you the one thing that you need to see that your shale argument is totally wrong. This (http://tinyurl.com/cefyc6f) graph is all that you need. Each well costs around $6-$10 million depending on the formation. (Most are closer to $10 million.) Think of the number of wells that you will need to drill every year to offset the depletion of around 5 mbpd that comes from conventional sources plus the 75% depletion from the wells drilled the previous year.
You see the problem? The math does not work. Shale production peaks very rapidly and is incapable of producing the positive cash flows that are required for sustained drilling activity. That’s all we need. If you need to borrow money to produce oil that costs more than the price that you get for it you don’t have a sustainable business model. Shale oil is profitable in small core areas but those are immaterial when you look at the big picture. The only way to argue that shale works is to project the results from the few profitable wells on the entire industry. But that is a fool’s game and I do not believe that you want to go there.
jrwakefield says:
February 3, 2013 at 7:47 pm
The question is unanswerable as posed, since we don’t know how many barrels of oil a field has to hold to be on your “super giant” list …
Also, please specify which reference we are to use to look up the size of the field, as these estimates can vary by a factor of five depending on the source …
Once we know that, we can answer your question.
Thanks,
w.
TimTheToolMan says:
February 3, 2013 at 7:19 pm
It appears you are implying that Exxon doesn’t care if they waste a half billion because it’s only a small part of their annual profit?
I assure you that they are deadly serious about that kind of money, and that if they didn’t believe there was a good chance it would bear fruit they wouldn’t invest it. The money for their algae project is six hundred times what they spent on political contributions, it’s ten times what they spent on lobbying.
Clearly, they don’t care in the slightest that you think algae doesn’t pass the smell test, Tim. I can see that that galls you, so you want to minimize their half billion dollar investment, try to figure some way to make light of it … but that’s a tough row, it’s hard to make light of a half billion dollar investment, no matter how big the company is. Exxon got as big as they are by being careful with their money.
w.
I think we need to kill the ERoI fallacy before this discussion goes much further.
There is no law of economics that says that there needs to be a positive return at that level. It is just one input into the final product that the consumer (whether individual or commercial) buys.
It is the aggregate cost of the final product that matters, and whether consumers are prepared to pay it. As I said way above, even if the real cost of the stuff that we put in cars has gone up, what matters is our willingness and ability to pay it. In a competitive market, others in the same business or alternative products will all be jostling for our dollar.
“Oil” does not equal “energy”, so faux equations based on it are nonsense, as E.M. Smith has eloquently demonstrated.
Willis writes “it’s hard to make light of a half billion dollar investment, no matter how big the company is.”
You use sniff tests all the time. How about addressing the actual calculation instead of arguing that if they’re doing it then it must by worthwhile? I can think of several reasons why Exxon might invest money in alternative forms of energy that dont require an actual viable result. Tax breaks and goodwill being two of the more obvious ones.
The nonsense hair splitting continues as does the ignoring of facts.
Every oil field has different characteristics, different cuts: in distillation. In the old days, not only was building a refinery expensive it was constrained by technology. Thus they built it to process a specific crude t5ype. the output thus was known and controlled. some produced more kerosene, some more gas oil etc.
Not any more
Either crudes can be blended to give the correct feedstock or hitech processes such as hydrocrackers and other similar technologies produce “cut” to order. An example being shells gas to liquid technology.
Thus running a heavy oil can result in virtual 100% petrol finished product. the feedstock matters not. but of course it does in an older unmodified refinery.
What matters is that cars, ships, planes, trains need to have fuel. The problem has been resolved by adding fuels to the mix, i.e. look at cars before diesel or petrol. Now look at what you can use from ethanol to cng to high octane petrol’s. Plus the same has been done to all the various sources, they can all be virtually mixed and matched from Alberta oil sands to the lightest condensate fields and gas fields.
TimTheToolMan says:
February 3, 2013 at 10:26 pm
That’s not my argument, Tim. My argument is not that it must be worthwhile, it is that Exxon thinks it is worth doing, enough so to put half a billion in. Doesn’t mean it must be worthwhile, just means that they think it is worth a half billion dollar gamble
A company that spends fifty million on lobbyists isn’t going to spend six hundred million on “goodwill”, Exxon didn’t get rich by that kind of foolishness. Nor did it get rich by spending money to get “tax breaks”, I’ve worked as a tax accountant, that nonsense doesn’t fly.
Tim, I don’t understand what you think you are proving here. Algal oil is possible. It is not guaranteed. You think it doesn’t pass the sniff test. Exxon begs to differ, to the tune of half a billion. I know whose judgement about oil I’ll take, and even if I didn’t I’ll trust the man with the most skin in the game, which isn’t you … but what’s left to dispute? What’s left to discuss?
Like I said … what is it you’re out to prove w.r.t. algae? It seems you want me to take a position regarding algae, but I’ve already done that—I think it’s possible, particularly with Ventner in the equation, he tends to pick winners, but that doesn’t mean algae is the fuel of the future. I take no position on what that might be, I suspect it’ll be artificial photosynthesis, but I don’t know …
w.
GL writes:
Either crudes can be blended to give the correct feedstock or hitech processes such as hydrocrackers and other similar technologies produce “cut” to order. An example being shells gas to liquid technology.
This is not free. If you are using energy to improve an inferior grade so that it can behave as the better grade of crude you still need to account for the energy that you spent on upgrading.
The Alberta Oil sands is just one new suoerfield, it is bigger than all the old ones put together. Live with it.
It is being developed and operated now
Willis writes “Like I said … what is it you’re out to prove w.r.t. algae? It seems you want me to take a position regarding algae, but I’ve already done that”
You are certainly taking a strong position on an energy source that is only around 20% efficient in an internal combustion engine.
Johanna wrote,
“There is no law of economics that says that there needs to be a positive return at that level. It is just one input into the final product that the consumer (whether individual or commercial) buys.”
It depends at what level. Of course, you can have an individual field able to profitably produce with a low, or even < 1 EROEI. It is quite possible that an oil company in Canada can profitably extract the lowest grade of shale oil using cheap US gas. EROEI only becomes important on the global scale.
Today, global EROEI is around 20 or 25:1, which is pretty good, as it means that civilization only has to reinvest 4% of its economic output into the energy process, and it allows fields with very low EROEIs to be brought into production.
On a purely theoretical level, it would be nonsense to suggest that the world on average does not need to make a positive return in energy invested. Some people talk about adding nuclear to power oil extraction. That would be fine. You invest a certain amount of energy to run the nuclear, and at the other end of the chain you get the oil. The nuclear "lift" has made the return positive and increased EROEI.
Now, I am quite willing to entertain the idea that human ingenuity can allow economic energy extraction – eg Willis's sea water filtering sponges. I am quite willing to entertain the idea than nuclear can play a great role in "lifting" EROEI. But I am dubious when people claim that you can have EROEI continuing to fall and it makes no difference. Even the sponges don't alter the EROEI equation because if the sponges give us uranium then that uranium is available for use and will increase the EROEI overall, just as would be the case if the uranium were unexpectedly found in a cave in Utah.
What you absolutely can't have, is nothing but shales and tar sands, with no extra nukes, because the EROEI of the entire world would be so low that vast amounts of economic resources would be required to obtain this energy, leaving so little for normal consumption that life would become "not as we know it." So nukes, sponges, human ingenuity, yes, but let us at least acknowledge that these work by lifting EROEI overall.
TimTheToolMan – I don’t know if ‘Joule Unlimited’ are anything to do with Exxon, but it appears that their algae (like others’ I have heard of) are being used as a form of solar energy.
http://thetechjournal.com/science/genetically-modified-algae-could-produce-the-fuel-of-the-future.xhtml
I suspect that Exxon’s would be similar.
One possible reason for Exxon’s investment could be governments’ insane pursuit of “carbon” capture and storage (CCS). But it would only be worth Exxon’s while if there’s going to be a lot of government subsidy:
“Joule Unlimited hopes to eventually put its operation near a coal or natural gas power plant, so that it can use the carbon dioxide captured by said plant. The company has already raised $30 million in second-round financing, and predicts that it could create 25,000 gallons of ethanol per acre each year — much higher than production from other biomass sources.“. That’s 1.63 barrels per acre per day.
Another possible motive for the research is the thought that the algae might be able to do a lot more than just convert energy, for example they might be able to play a part in clearing up oil spillages.
A third possible reason is that Exxon recognise that oil supply is plateauing and a few billion on research into other energies may help Exxon to remain energy leaders in future.
Maybe the best suggested reason so far is it makes them look green.
Mike writes “That’s 1.63 barrels per acre per day.”
Yep, so “only” 613,000 acres per 1% of oil substituted.
Mike then goes on to suggest “Maybe the best suggested reason so far is it makes them look green.”
…and I concur.
“Oil is oil. It is Alberta Oil sands not bitumen. Even bitumen is oil. ”
Is there oil in the Green River shales?
“The Alberta Oil sands is just one new superfield, it is bigger than all the old ones put together. Live with it.”
It’s not new. It’s been known about for more than 100 years.
Willis: “The question is unanswerable as posed, since we don’t know how many barrels of oil a field has to hold to be on your “super giant” list …
Also, please specify which reference we are to use to look up the size of the field, as these estimates can vary by a factor of five depending on the source …
Once we know that, we can answer your question.”
Google exists to look this up.
http://www.aspo-australia.org.au/References/Aleklett/GOF_decline_Aleklett.pdf
A new book has just been published on the ERoEI of photovoltaics in Spain.
Spain’s Photovoltaic Revolution: The Energy Return on Investment
http://www.amazon.com/Spains-Photovoltaic-Revolution-Investment-SpringerBriefs/dp/144199436X
The Energy Return on Energy Invested (EROI or EROEI) is the amount of energy acquired from a particular energy source divided by the energy expended, or invested, in obtaining that energy. EROI is an essential and seemingly simple measure of the usable energy or “energy profit” from the exploitation of an energy source, but it is not so easy to determine all of the energy expenditures that should be included in the calculation. Because EROI values are generally low for renewable energy sources, differences in these estimates can lead to sharply divergent conclusions about the viability of these energy technologies. This book presents the first complete energy analysis of a large-scale, real-world deployment of photovoltaic (PV) collection systems representing 3.5 GW of installed, grid-connected solar plants in Spain. The analysis includes all of the factors that limit and adjust the real electricity output through one full-year cycle, and all of the fossil fuel inputs required to achieve these results. The authors’ comprehensive analysis of energy inputs, which assigns energy cost estimates to all financial expenditures, yields EROI values that are less than half of those claimed by other investigators and by the solar industry. Sensitivity analysis is used to test various assumptions in deriving these EROI estimates. The results imply that the EROI of current, large-scale PV systems may be too low to seamlessly support an energy and economic transition away from fossil fuels. Given the pervasiveness of fossil fuel subsidies in the modern economy, a key conclusion is that all components of the system that brings solar power to the consumer, from manufacturing to product maintenance and life cycle, must be improved in terms of energy efficiency. The materials science of solar conversion efficiency is only one such component. Sunny Spain represented an ideal case study as the country had the highest penetration of solar PV energy at 2.3 percent of total national demand as well as state-of-the-art expertise in solar power including grid management of intermittent, modern renewable systems. This book, written by a uniquely qualified author team consisting of the chief engineer for several major photovoltaic projects in Spain and the world’s leading expert on the concept and application of EROI, provides a comprehensive understanding of the net energy available to society from energy sources in general and from functioning PV installations under real-world conditions in particular. The authors provide critical insight into the capacity of renewable energy sources to fill the foreseeable gap between world energy demand and depletion rates for fossil fuels. · Presents the first comprehensive study of the EROI of large-scale solar PV systems in a developed country · Uses real-world operational data rather than laboratory approximations and extrapolations · Describes the dependence of one alternative energy source on the goods and services of a fossil-fueled economy · Has global implications for the potential of renewable energy sources to replace dwindling reserves of fossil fuels · Written with the first-hand knowledge of the chief, on-site engineer for many solar installations in Spain together with the leader in the development and application of the concept of EROI
Great post – just a couple of additions. The first oil well was drilled by Edwin Drake in Titusville, PA in 1859. Prior to the use of conventional and horizontal fracking, oil wells were “shot” for nearly 100 years using a torpedo shaped device filled with nitro-glycerine that was lowered to the bottom of the well and then detonated, which enlarged the chamber and fractured the surrounding rock face.
This evasive goal-shifting behavior of yours is exactly the subject of the post. You will claim anything to avoid noticing that despite all of your screaming, OIL PRODUCTION CONTINUES TO INCREASE.
But does it continue to increase? Just how much more oil do you think we are producing today then we did in 2005? How much capital did that increase require? Is that capital creating wealth or being destroyed because the new projects that allow us to produce more oil are not self financing? You know Willis, I have been fighting with the shale gas promoters for nearly a decade now. For years they were talking up shale, pointing to rising production and telling me to look at the producers stock.
The funny thing is that the more I looked to where the promoters pointed the more it became obvious that shale gas was a scam. The 10-Ks were very clear. The investments were not self financing and new production was purchased through capital destruction. The debts on the balance sheets were growing rapidly but there was no positive cash flows generated from the wells that were being drilled. When we looked into the details we found that companies were reporting some profits because they made assumptions about decline rates that were not justified by the production data. The analysts who pointed this out were pushed aside by the industry ‘experts’ and government bureaucrats who issued their own analysis. But now we see that the skeptics were right. There was no shale gas miracle. Yes, production did go up and yes, it was stimulative to consumers of gas. But the stimulus came at a cost–the destruction of capital.
Now we see those same promoters talking up shale liquids. They tell us that Peak Oil is Peak Stupidity because shale and tar will ride in and save the day. What they miss is the huge depletion rate in shale and the very material depletion rate for conventional fields. If anything new technology has made things worse. When Hubbert was working producers did not use enhance recovery techniques to borrow production from the future. They did not have horizontal wells with a water drive that was pushing the oil towards them. That meant that fields that had peaked were well behaved and had a nice hyperbolic decline rate that ensured that the lower production rate would continue falling for years. That is no longer the case. In an era of water drives once the water gets to the horizontal pipes the output from those pipes collapses immediately. You go from a 5% water cut to a 95% water cut in a matter of days or weeks. And the field has a stepwise reduction.
That was for conventional fields, which are much better than the unconventional sources. Those don’t need much help from enhanced recovery techniques to cause production to fall off a cliff because their natural decline rates is all that is needed. You have $10 million wells that start off at 300-600 bpd, lose almost half of that IP in the first month, and are down to 20% of IP by the time 12-18 months have passed and down to stripper conditions by the end of five years. And that is the good wells in the sweet spots of the core of the better formations. Such wells cannot replace their own production three to five years after the field has begun operations let alone replace the nearly 5 mpbd of conventional production that is lost to depletion.
If you look at this very simple chart (http://tinyurl.com/cefyc6f) you find exactly what the problem really is. All of that drilling has been unable to improve well productivity. That means that you need to keep drilling thousands of new $6-$10 million dollar wells (depending on where you are in the formation) just to keep production from falling. But the math tells us that we cannot keep production from falling. When I was arguing about shale gas some of my critics would point me to the Elm Coulee field in Montana and argue that the same miracle could happen with oil. The funny thing is that they soon stopped mentioning that field. Here (http://tinyurl.com/cv3eyfv) is the reason why.
Now you are a smart guy and is more than capable of understanding the very simple math that is involved in this argument. I suggest that you hold the views because you really have no idea what the debate is about and about the various factors that will settle it. I am confident in my position because I already see the peak in the rear view mirror. The EIA and IEA along with CERA and a few other consulting groups were already shown to have underestimated the real decline rates. They did as you have done and assumed that if the demand was there the supply would follow. But that does not have to be the case. Before we get from A to B we could have the market ration falling demand through the price system. I suggest that is what we will see. Economic growth will remain low as the supply of crude continues to stagnate. Once the financial institutions stop lending money to shale producers who cannot sell their product at more than cost you are likely to see the panic begin. All kinds of pipelines that bring stranded oil and gas to the market will happen. I suspect that the national oil companies in the Middle East will finally get their act together and drill deep enough to find the natural gas that has to be found in deeper reservoirs. I suspect that a new economy will develop around converting some of these reserves into liquid fuels. There should also be a lot more interest in nuclear, hydrates, and other sources. But that will not change the fact that petroleum production has peaked.
Do yourself a favour and read a book or two on the subject. Try picking up the books that actually deal with the logic and the data and make up your own mind by following where the math leads you. I suspect that you will be very surprised.
MorningGuy says:
Solar has dropped in price so much over the past few years that it already pass the cross over with nuclear, see here
http://cleantechnica.com/2011/05/29/ge-solar-power-cheaper-than-fossil-fuels-in-5-years/
Problems:
The site is called Clean Technica, clearly, they are biased, you can see that just from the name. They are likely to select sources for their information that support the idea that ‘clean’ power is good and ignore those that show it’s flaws.
“Solar power may be cheaper than electricity generated by fossil fuels and nuclear reactors within three to five years because of innovations, the word here is MAY. A site called cleantechnica will assume MAY means WILL because they are paid to say so. Look at their ending sentence Expect more good news along these lines soon., yes, I’m absolutely sure we can expect more good news, and nothing but good news. Well, perhaps the word ‘news’ is stretching things a bit.
They are, however, right that solar panel price is dropping. See, the subsidies have dried up (debt, lots of debt, and the choice of bureaucrats supporting their own pensions or this, easy choice), and with subsidies gone, there is now a glut of solar panels, and the manufacturers are dumping them. If solar power was so cheap, the manufacturers would use solar power to sun the factory to make solar panels, instead, China is currently choked with the coal power used to actually manufacture them.
Also, the reason nuclear is expensive, and other power generation is outstripping it is not because it really is expensive, but because of peoples irrational, artificially manufactured fear of small amounts of radioactivity, and governments taking advantage of that to load the cost with tons of bureaucratic red tape. Maybe someday people will notice that the UN has stated that small amounts of radioactivity has been proven to be completely harmless.
I expect mankind can develope cheap power, however, the way things are now it will probably be banned , like nuclear is basically banned.
Given this field has consumed my life for well over thirty years now and one of my doctoral supervisors worked with King Hubbert at the Shell Research centre and offered considerable insite on a number of Hubberts theories (this being a couple of decades before the topic became popular) I’m in a bit of a unique situation to comment on some of what I see as being misconceptions. At least one poster Geo noted some of this as well.
First the Concept of Peak Oil is only tangentially related to ultimate reserves, it is about the peak of oil production. That peak is influenced by a plethora of issues including, price/economics of discovery and extraction concerns and to a lesser extent political issues. Because so much of current production rates still hinges on OPEC and especially Saudi Arabia and those fields are getting to a point where they are likely past the halfway mark of EUR it doesn’t take much slow down in discovery and bringing such discoveries on stream for peak production to appear. It needs to be understood that discovery rate isn’t as important as is the speed by which production can be achieved. In the case of offshore discoveries in West Africa it has taken on average 10 years from first discovery to first production which definitely impacts assumptions regarding peak. The difference will be in the way that the peak looks. In the Hubbert Gaussian models it appears as a distinct pinnacle but was not influenced by external factors (i.e. the assumption was that fields were brought on stream and produced with no influence from economic factors). When you consider economic and political pressures the peak will more than likely look like a bit of a roller coaster, a long flat plateau with a lot of ups and downs.
It only takes a minute or so after someone posts a new discussion about peak oil for someone to bring up the idea of abiotic oil and Gold or some of the other Russian scientists. This theory has been proven to be incorrect many, many, many times. On the PEAK OIL website I gave up a long time ago explaining to people why the science doesn’t support abiotic oil and the significant number of scientific arguments in support of organic origins (I have an academic background in organic geochemistry). About 20 years ago there was a special conference of the AAPG held to allow a number of the Russian scientists to argue their points with other organic geochemists from around the world, the abiotic theory was a clear loser. I could list all of the reasons supporting an organic origin and point to all of the arguments that the abiotic crowd make and why they iare ncorrect but it would take up too much space. This sort of discussion has been handled on a number of discussion websites such as the oil drum or peakoil and that would be a good place to look for the appropriate arguments. The fact of the matter is oil and gas are non-renewable commodities in any time frame that is of importance to man.
The idea of conventional vs unconventional is a bit misused by many. A number of years ago the term conventional oil and gas was used to describe any hydrocarbons that sat in pore spaces with interconnected pore space creating permeability such that simply drilling a well into a reservoir and creating a pressure drop across the sandface would result in production. Unconventional hydrocarbon reservoirs 20 years ago (before we really understood much about shale reservoirs) included fractured carbonates and sands which had little in the way of porosity, volcanic reservoirs such as the tuffs which produce in Utah and heavy oil reservoirs. The concept of shale as a reservoir has been around for sometime but only came to forefront due to a combination of technological change, higher commodity prices and the recognition that costs needed to be properly managed through appropriate planning. What makes it special is that you do not have to seek out a trap or closure that has all of the risk associated with migration and preservation but rather the entire deposit (within a certain range of burial depth) is the reservoir…it just needs a lot more horizontal wells and a lot more fracs. So the term conventional or unconventional was more to do with the effort of extraction rather than the type of hydrocarbon. In the case of heavy oils the two were somewhat entwined simply because the 4000 cp viscosity of mineable oil sands in Canada required extraction methods that were not the same as applied in typical oil fields and the resultant product wasn’t the same either. That isn’t the case for all heavy oils, as an example in Colombia many of the oils that have low gravities (10 – 15 API) also have low viscosity and are hence thought of as being conventional reservoirs.
The thought that the fraccing we did twenty some years ago is anything at all like the type of fracs that happen on a daily basis now is incorrect. In the old days a frac might be created simply to get past reservoir damage created near the borehole due to invasion of muds used during drilling. In this case the water column pressure simply needs to be raised above the lithostatic pressure of the formation (or close to it in the case of pre-existing fractures) and a fracture is created through the damaged zone to the undamaged reservoir which allows for production and eventual cleanup. The newer fracs are often conducted in wells with as much as several kilometres of horizontal section at depth of several km. The fracs are created in stages with seven stages being common, each requiring increasing hydrostatic pressure to the point at which rock failure occurs. The science and technology involved is considerably more advanced and continues to evolve. In the old days a frac might cost a few hundred thousand in a well that cost 5 – 10 million, nowadays the drilling costs have been managed down but fraccing costs remain high such that often it costs as much to frac a well as drill it.
Although I understand the rationale the EIA has for reporting all liquids produced as being the same I think it is wrong to think of them all as being completely fungible. There are certainly some heavy oils that could not be used for much other than asphalt without some form of cracking, much of the NGL’s produced could be fuels but practically aren’t simply because vehicles aren’t set up to run on them. As a consequence all of the ethane and propane produced is somewhat meaningless when we are worried about how much oil will be available to refineries to create gasoline. So when arguing that we will have lots of liquids available to us in the future one also has to consider what those liquids could be used for and how important they are to us (eg. is having fuel for your car as important as having fake creamer for your coffee?).
Finally the main issue I think is that because oil and gas are not infinite resources and are becoming harder and harder to find and costs for discovery and extraction continue to increase there is continued upward pressure on commodity price. A number of economists have blamed the 2008 economic crash at least in part due to the period where oil prices (both WTI and Brent) were well over $100. If global economies can’t support $100 oil (and I believe it is safe to say that economies aren’t improving much currently) but supply/demand issues determine the price needs to be there then I think we need to consider we are in trouble.
Last year, for the last three months compared to the same period a year earlier (EIA STEO data), US oil production was up 780 kbpd; Canada was up 270 kbpd. This increase was all from shales or oil sands. Global oil production was up 940 kbpd. Thus, all other global production ex-Canada and ex-US was in decline. Global upstream investment was approximately $640 bn, twice what it had been in 2005.
Now, a million barrels of productive capacity costs aboutn $100 bn. So of that $640 bn, perhaps $400 bn had to go just to offset declines (a portion went to various gas projects).
This is not a pretty story.
Vangelv, May i make a small suggestion? Read wills posts, and then prepare your deepest and most abject apology. You will need it.
Vangelv, May i make a small suggestion? Read wills posts, and then prepare your deepest and most abject apology. You will need it.
Perhaps I might owe him an apology for something. But that does not change the fact what what he thins he knows isn’t correct. Many people here have been very kind to Willis and have given him plenty of information that would allow him to see exactly why his conclusions are wrong. It is up to him to pay attention to the arguments, look at the facts, and draw his own conclusions. I may not be as intelligent as Willis but on this issue I am right and he is wrong. While intellectuals can be very clever at times that does not mean that they always know what they are talking about or that their information is correct.
It is ironic that people see this when the AGW promoters tell us things that are clearly wrong but tend to gloss over it when someone who they respect and likes makes a similar error or when they themselves cannot support their own positions with facts as they are. I am sad to conclude that we now tend to live in a politicised post-truth world. When people who are obviously intelligent refuse to look at all of the facts and draw clear conclusions that are supported by those facts what hope is that the less intelligent or less knowledgeable among us will draw the proper conclusions?
Kopits, you too need to learn to read. My early posts here, a brand new Saudi Super field, fully documented by the BBC. Building to two million barrels per day, cost of production, now USD 1.00 per barrel. In case you cannot read the number ONE DOLLAR
Stop talking patent rubbish.
Wakefield
Quote
In mid-2006, the National Energy Board of Canada estimated the operating cost of a new mining operation in the Athabasca oil sands to be C$9 to C$12 per barrel, while the cost of an in-situ SAGD operation (using dual horizontal wells) would be C$10 to C$14 per barrel.[94] This compares to operating costs for conventional oil wells which can range from less than one dollar per barrel in Iraq and Saudi Arabia to over six in the United States and Canada’s conventional oil reserves.
The capital cost of the equipment required to mine the sands and haul it to processing is a major consideration in starting production. The NEB estimates that capital costs raise the total cost of production to C$18 to C$20 per barrel for a new mining operation and C$18 to C$22 per barrel for a SAGD operation. This does not include the cost of upgrading the crude bitumen to synthetic crude oil, which makes the final costs C$36 to C$40 per barrel for a new mining operation.
http://en.wikipedia.org/wiki/Athabasca_oil_sands#Estimated_oil_reserves
Unquote
If you read the rest of the report you will find, the three fields total reserves is approximately equal to the rest of the world combined. They base recoverable estimates on 10% recovery but 60% has been achieved.
Note unlike conventional oil, processing includes partial refining, thus processing cost is actually less than that stated, to use your expression, comparing apples with apples.
Grey Lensman wrote:
If you read the rest of the report you will find, the three fields total reserves is approximately equal to the rest of the world combined. They base recoverable estimates on 10% recovery but 60% has been achieved.
But if you also read about the tar sands you will find that production is estimated to peak at around 5 mbpd. That little fact matters in a discussion about peak oil.