Thursday, June 19, 2008

Heavy Oil Squeezed Harder.

"Energy Balance" seems to be entering a certain level of maturity, in the sense that what I was thinking and posting a couple of years ago (the blog only 2 1/2 years old) strikes some rather unsettling or deja vu backdrops against what has occurred since - and is threatened now, particularly. For a start, the price of a barrel of oil was around $70, or about half what it is now, and even that was more than three times its price a couple of years before then ($22). It was a mere $12 a barrel in 1999. Anyway, thinking about the recent Saudi pledge to pump more oil, and that if it does so, much of the increase could be in the form of high-sulphur "sour" heavy crude oil, rather than the "sweet" (low-sulphur) light oil that everybody wants, struck a chord with an article that I revisited inadvertently, having forgotten writing it, but which I have re-posted below as it seems relevant to current trends.

Monday, July 17, 2006

Heavy Oil Squeezed Harder.

Alternative oil sources are all up for grabs, as supplies of "light crude", the easiest form of petroleum to extract and process are set to decline, following the peak in production: "Peak Oil". We will most likely see further regions and examples of unsettledness in the world, but either way, the developed nations and their energy providers are strenuously seeking alternative sources of oil, including those whose exploitation made no economic sense during the times of plenty for light crude. Thus we see increasing mention of "oil sands", more accurately termed "tar sands", which contain bitumen, a material that can be "cracked" into oil, and hence processed into gasoline. The Alberta sands produced something like 1.1 million barrels of oil every day in 2005, and it is hoped to increase that production to the level of around 5 billion barrels daily by 2030.

We will need all of that, and much more, in 25 years, when we will have exhausted probably all the "cheap" light oil; by then, extraction costs will be considerable. Nonetheless, in terms of EROEI (Energy Returned on Energy Invested), the return on tar-oil is not great, at 1.5 (3:2), and it is thought that 3 is the limit below which extraction of an energy resource is not worth the effort or expenditure of existing resources (See previous posting "You Need Energy to get Energy - Time is Running Out."). It is a crime that almost all of this precious material is simply being burnt in the mighty fuel tank of transportation, rather than being retained as a vital chemical feedstock - when cheap oil is gone, much of the world's industry and economy in consequence, will find itself without raw materials, let alone fuel to process them with.
Much of the U.S. is well provided for in terms of oil-shale.

This is essentially porous rock which contains hydrocarbons, and by heating (which is also highly energy intensive, in similar amount to the oil-sands problem) these are expelled for processing into...yeah, gasoline and aviation fuel. There seem to be no plans to hang on to the stuff for a rainy day, the whole enterprise is aimed just to produce as much as demand will accept, at whatever costs the markets will put up with...and then burn it. It is likely that any market-driven stoicism may skid a little, as the price of oil is now around $70 dollars a barrel, and up from about $22 a couple of years back. Consequently, airport taxes and other charges are being stepped-up, for no reasons of altruism, but because the main cost of flying - fuel - cannot be otherwise born. The knock-on effect will be to make the cost of cheap flights increasingly uncompetitive with the big-boys, and that may well reduce the number of passengers overall.

Mining oil-shale, especially when it is deposited deep underground is a problem, both in terms of accessibility and energy. I have read of one suggestion, which is to use underground nuclear explosions to "break-up" such deep seated shale deposits, in order to make their extraction easier. However, I envisage "radioactive oil" being even less popular than the standard offering: two emissions for the price of one: radiation and CO2. Mmm, I think that one is some way off yet!

More likely to succeed are the Saudi's proposals to unlock their reserves of "heavy oil". Heavy oil is much more difficult to handle, and can be of the consistency of treacle (molasses?). This makes it harder to pump to the surface than light oils. The U.S. giant Chevron is investigating a technique which uses steam to mobilise sludge-like reserves in Wafra, the neutral zone between Kuwait and Saudi Arabia - both countries have an equal share of oil from the neutral zone. Heavy oils are also more heavily contaminated with metals and sulphur, and because refineries need specialist facilities to remove the impurities, it is priced lower than light oil, reflecting its lesser appeal. However, there is a growing number of appropriately equipped refineries around the world which can turn heavy oil into gasoline, aviation fuel and heating oil, and Saudi Arabia has announced plans to build more of them to capitalise on its home stocks.

For decades now, Chevron has used steam injection successfully to boost oil production in California and in Indonesia, and it could add many billions of barrels to Saudi oil stocks, obtained from the porous rock formations that are common in the Middle East. Without steam, heavy oil fields sometimes yield as little as 5% of their oil by conventional pumping, as compared with up to 35% from a light oil deposit. To extract oil from the Canadian tar-sands, very high temperature steam is used to recover the bitumen, a substance so viscous it could not be pumped out at all otherwise.

Chevron's test in Saudi Arabia is centred around one steam-injection well, four producing wells and one observation well to colect data on the way that oil and steam interact. However, the company has committed itself to an expansion phase that will involve 16 injection wells and 25 producing wells, along with the installation of facilities for water-treatment and steam-production, at a total cost of a cool $300 million.

In Oman, Occidental Petroleum Corp. is preparing to spend $2 billion on a large-scale stem-injection project in the Mukhaizna field, which contains about one billion barrels worth of oil. After four years of negotiations, Occidental has managed to persuade the Omanis to let it manage the field, in part by promising them a ten-fold increase in production to 150,000 barrels a day. Kuwait is planning a pilot project to investigate exploiting its northern heavy-oil fields, as part of meeting its goal to raise output to round four million barrels a day by 2020, from a current production of 2.6 million barrels, daily.

The world is draining the tank to the bottom, as technology permits more oil to be squeezed from the bowels of Nature, but inevitably at rising costs.... until when? ... and then what?

[I didn't put my references with the articles initially, since I was trying to present them as "newspaper-style" journalism, but I have these if anybody wants them. At the request on one "reader" I began to add them as footnotes later on, which has saved me a lot of work since! I am grateful for all the input from many people both in agreement or disagreement of what are just my own opinions, but at least I try to back them up with numbers as necessary. Chris.].

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