Thursday, October 02, 2014

Is Peak Oil Now a Phantom?


While this edited article of mine (on page 4) was published in The Professional Engineer a while ago, I have only just discovered its existence http://www.professionalengineers-uk.org/pdfs/newsletters/ProEngSpr13-issue79.pdf!I remember being asked to write a piece for them, by someone in the audience at a talk that I gave to the Guildford, Cafe' Scientifique a while back on "What happens When the Oil Runs Out?", but I had heard nothing further. However, it provides a reasonable summary of the oil situation, which is probably worth emphasising here.

All engineers should recognise the formula m.g.h as representing potential energy. Oil is one of the most used sources of such energy, and once it has been released from the form in which it is found, it is gone. Professor Rhodes’ article relates to his concern that the rate of finding new sources of energy may not keep up with the rate of diminution of existing sources, and this concern ought to be of the greatest interest to Professional Engineers.
It has been claimed that the United States has enough natural gas to last for 100 years, and that by 2017 the nation will be producing more oil than Saudi Arabia. Much of this bounty, it is asserted, will come from horizontal drilling, combined with hydraulic fracturing (“fracking”). Therefore, so runs the rhetoric, peak oil can now be relegated to a myth. Indeed, to quote from an article in The Daily Mail (8-12-12):

“…the Earth can now provide us with about 250 years’ worth of gas supplies.
The so-called ‘peak oil’ theory, which suggests that within the foreseeable future the world will run out of fossil fuels — coal, oil and gas — has never looked more absurd.”

Peak oil does not mean we will abruptly “run out of oil”, but that the rate of production will reach a maximum and thereafter relentlessly fail demand for it. For a global civilization, entirely dependent on crude oil for its food, materials, transportation, and economy, the unplanned consequences could be dire. Many of the more cornucopian conclusions are arrived at by confounding resources with reserves, and ignoring the fact that it is not only the quantity that might be available, which determines “peaking”, but the rate at which it can be recovered, over time. A useful analogy is that it is the size of the tap not the size of the tank that matters. In gauging a resource, all known, proved, probable and theoretical quantities are tallied together, not only ignoring technical and economic factors, but the uncertainty of whether the material is there to be had in the first place. Thus resources are considerably “larger” than reserves.

While oil or gas is not going to “run out” any time soon, continuing to produce 30 billion barrels of conventional crude oil every year is unlikely to be possible for very much longer. We have already run out of cheap oil, and at some near point, production will reach a maximum, and then fall relentlessly. It must – this is the nature of a finite reserve. So long as the enlarging “hole” in the supply of conventional crude oil can be filled from unconventional sources, all is well, but once it exceeds them, the overall sum will pass into the negative; i.e., global oil production will have peaked.

New technologies – horizontal drilling combined with fracking – have made it both practically and economically viable to exhume gas and oil from previously inaccessible reservoirs. In principle, shale gas can be recovered all over the world, although until an actual well is drilled, both the quantity and quality of it are unknown – e.g. from nine such wells drilled in Poland, came a gas so heavily contaminated with nitrogen that it wouldn’t burn. Both shale gas and shale oil wells tend to play-out more rapidly than their conventional counterparts, and after two years, production has typically decreased by 80%, meaning more wells must be drilled continually to maintain the overall output of a field. If shale gas production is to be enhanced, they must be drilled even faster, and at a typical unit cost in the region of $5-10 million. Ultimately, the strategy must run up against material limits in financial investment, infrastructure, equipment and trained personnel that can be brought to bear in the effort.

As to how much shale gas the United States has, detailed inspection of the available figures reveals the “100 years worth” claim to relate to a resource – i.e. the most optimistic set of accounts – while the reserve (proved plus probable) is enough for only 20 years. To surpass Saudi Arabia, by 2017, a total production of 11 million barrels a day (mbd), ramped up from just under 6 mbd currently, would be necessary. The projected production of shale oil (for which the correct term is “tight oil”) falls far short of this. The term “liquids”, is now often used, by which biofuels, natural gas plant liquids (NGPLs) and refinery gains are reckoned together with crude oil. This obfuscates the truth, since the other liquids have different properties from crude oil - in particular, a lower energy density. While world production of liquids has increased by around 3 mbd since 2004, actual production of crude oil has remained almost flat at 72 mbd, and so the global production limit may have been reached.

It is claimed there are two trillion tonnes “oil” under the U.S., in the form of oil shale, but really, this refers to a resource. Moreover, oil shale is not the same thing as shale oil. Shale oil (tight oil) is actual crude oil that if recovered, e.g. through horizontal drilling and fracking, can be refined in the normal way. Oil shale does not contain oil as such, but a solid organic material called kerogen, which is heated to around 500 oC, in order to crack it into liquid form. The process also uses large amounts of freshwater, and churns-out an equal volume of contaminated wastewater which needs to be dealt with.

There is, as yet, no commercial scale production of oil from “oil shale”, and there may never be, since it takes almost as much energy to get oil from it as will be delivered by the oil itself, i.e. pointless. The returns are better on “oil sands”, maybe 3 to 1, in energy terms - once the material has been “upgraded” to provide a liquid fuel - but here too, vast quantities of water are needed, and sufficient energy is required to extract the bitumen in the first place, that installing nuclear reactors in such locations is being considered seriously as a source of heat, currently generated  by burning natural gas.

Since the total “oil” contains five times the amount of carbon reckoned to raise the mean global temperature by 2 oC - modelled as the limit, to avoid dangerous climate change - even if it could all be accessed and burned, the effect on the climate would most likely be catastrophic.

Professor Rhodes has outlined a problem on which Professional Engineers are in an eminently well qualified position to hold a view.



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3 comments:

Keith McClary said...

"New technologies – horizontal drilling combined with fracking – have made it both practically and economically viable to exhume gas and oil from previously inaccessible reservoirs."

As ROCKMAN on peakoil.com keeps remindinding us, horizontal drilling and fracking have been available for decades. They were just too expensive to use until the recent oil price runup.

Professor Chris Rhodes said...

Hi Keith,

true, fracking was first done in 1947 in a gas-field in Kansas. The technology has improved since then, and the combination of multi-stage fracking and horizontal drilling is the recent innovation.

You are quite correct that if the price of oil were not as high as it is now, no one would be using this kind of technology because it would cost more to produce the oil than it can be sold for.

That said, the interesting situation has emerged that the oil prices has fallen, and oil companies are now losing money on oil, and are generating cash flow by selling assets.

In essence, the price of oil has to rise again, or production will wane - that, of course would push the price up, once the surplus had evaporated.

A downturn in the Chinese economy is being blamed for the fall in the oil price, which has led to a temporary "glut". This is only temporary, however, and the price will rise - it must!

Some companies say that they need a barrel of oil to cost $130 or so, to be profitable again.

Regards,

Chris

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