Petroleum is the most valuable commodity in the history of the world. Annual production is valued at around $450 billion with the supporting

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Basil Parsons
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1 Petroleum is the most valuable commodity in the history of the world. Annual production is valued at around $450 billion with the supporting infrastructure to produce, refine and distribute it valued at over a trillion dollars. Oil makes much of what the industrialized world does possible. Jetting around the world, bottling Pepsi, making the clothes you wear are all possible because of the availability of petroleum. 1

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11 Many solutions for the energy crisis have been proposed. An answer or answers to the US oil crisis will result from a political discussion informed by a variety of perspectives, e.g. social, economic, etc. However, the discussion would benefit immensely from some basic science and rudimentary quantitative skills. Both may also be helpful in identifying potential solutions that are compatible with the limitations or constraints the physical world imposes on all human endeavors. This morning we are going to explore how science and quantitative reasoning impact any and all discussions about petroleum. 11

12 Until the recent economic downturn, the world s demand for petroleum had been steadily increasing at about 1.5%/y since 1980, i.e. the last major global recession. As a nation, the U.S. consumes far more petroleum than any other nation. China and India, although marked by rising demand, are starting out from a very low consumption level. 12

13 Oil reserves, that is oil in the ground that can be extracted economically at the present time given the current technological and economic conditions, are not uniformly spread around the world, nor are they equally divided between the Earth s nations. The luck of geology has endowed some countries with vast petroleum reserves whereas others have virtually none. This graph shows the nations with the top seventeen petroleum reserves. Notice that most of them (lightgreen) green) aremembersof the Organization of Petroleum Exporters (OPEC). 13

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16 There are three types of organic matter important in the generation of fossil fuels. Type I is algae found in warm climate, freshwater lakes. Type II are the remains of single celled organisms, i.e. plankton, algae and bacteria, that live in parts of oceans. Lastly, Type III consists of microscopic material from land vegetation, i.e. spores and pollen. At the extreme where the plants themselves accumulate one gets coal. Type III mostly produces methane not petroleum. Type II organic matter is the most common producer of petroleum. To be buried, dead organic matter must accumulate in regions with oxygen deficiency. Low oxygen inhibits decay by aerobic bacteria. The most important geologic setting for the accumulation of Type II organic matter is restricted and stratified ocean basins and to much lesser degree poorly mixed freshwater lakes. Sedimentary rocks that ultimately produce petroleum need contain only ~1 % or less (as low as 0.5 % in some basins) organic matter. 16

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22 As the source rock is buried, it is compressed and distorted. These squeezing of the rock forces the petroleum and natural gas out of the formation. Because source rocks, shales and limestones, typically have low permeability, it is unclear what the exact process of primary migration entails. It must, however, be a slow process. 22

23 Once the oil has left the source rock, it begins its secondary migration to its final location. This movement is generally through rocks with high permeability. If the fluid never encounters an impermeable strata, it ultimately reaches the surface. Here it forms oil seeps or tar pits. The former are characteristic of temperate climates, whereas the latter are found in hotter climates where the light hydrocarbon fractions evaporate because of the high temperature. Estimates suggest that this fate is what happened to most of the petroleum formed over geologic time. 23

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25 Oil is not the only fluid that is typically present in a petroleum trap. Water is always present. In many petroleum traps, natural gas is often present as well. Because of their differences in densities, these fluid phases are typically vertically stratified in a trap. Since it is the least dense, gas, if present, will occupy the highest point of the trap, i.e. the crest. Below the gas and separated from it by the gas oil contact (GOC) is the crude oil. At the bottom of the trap is water. Although it may be freshwater, more often it has a high salt content. The oil water contact (OWC) separates the oil and water. Traps typically have a point at depth where the hydrocarbon fluids in the trap can leak out of the structure and migrate away from the trap. This point is the spill point. The vertical distance between the crest and spill point of a trap is its closure. Depending upon the amount of hydrocarbon fluids held in the trap, the combined gas and oil columns may not equal the trap closure. The closure of a trap is important because it determines how much oil and gas a particular trap can hold. 25

26 The petroleum industry is a global enterprise with many diverse segments. It is divided into upstream and downstream segments. Companies that perform the entire range of operations are referred to as vertically integrated. These are typically the large multinational corporations. There are far more companies that focus on a particular segment of the industry. For instance, upstream companies that carry out many task in the production of oil are called field services companies. Examples include Schlumberger and Halliburton. Despite focusing on only a portion of the industry, these are still large internationalcompanies with operations all over the world. More recently, national oil companies have come to control the larger portion of the world s oil resources. Examples of NOCs include Saudi Aramco, Nigerian National Oil Company, Petrobras (Brazil), Pemex (Mexico), etc. These companies have very different goals and business models than the multinationals. 26

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31 Once crude oil and/or natural gas is discovered, it is extracted by drilling a well to intersect the fluid layers in the trap. Historically, vertical wells were the primary means of drilling. Because a vertical well intersects the reservoir over a small vertical interval, there are limits on how much and how fast the fluid can be produced. As production moved to offshore fields, vertical wells weren t optimum because it isn t economically to build a lot of platforms. Thus, directional drilling, i.e. drilling at a pre determined angle to hit some target not directly under the surface entry point. A horizontal well is one in which a portion of the borehole is horizontal and drilledalong the producing strata. These wells can have cumulative production 5 20 times greater than vertical wells and will produce at higher rates. Multi lateral wells are vertical wells with short horizontal segments drilled along paying zones. Extended reach wells have a single, low angle bend in the well and the bottom of the well is thousands of meters horizontally from the well s entry location. 31

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33 A borehole may penetrate may, in fact, intersect multiple hydrocarbon bearing strata. Thus, there is the opportunity to produce from multiple reservoirs. In a single completion well, hydrocarbons are pumped from a single zone. Multiple completions pump from multiple zones. Each zone is isolated from the others by packers and brought to the surface in separate production tubing. This prevents the fluids from mixing. 33

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37 Some wells have enough pressure in the reservoir to lift the petroleum all the way to the surface. These are free flowing wells. They only need a means of controlling flow rate at the surface. Fitted with a Christmas tree value. With time, reservoir pressure declines and the oil no longer makes it to the surface. In these cases, artificial lift must be used to get the oil to the surface. Nearly 96 % of the wells in the U.S. require artificial lift. 37

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41 Oil always contains some water dissolved in it. As oil is produced, this water is separated at the surface. Early during well s life, amount of produced water is small. As a well matures, the oil column shrinks. Because the well produces from a continually shrinking vertical distance, oil production falls. Ultimately, the water column below the crude may rise to the point where it intersects the perforated zone of the well. Now the well starts to produce fluids from both the oil and water columns. Over time as the vertical extent of the oil column decreases and that of the water column increases, the amount of oil produces falls as the volume of produced water increases. This not only cuts into profits because of reduced oil volumes, but the produced water must be disposed of safely because it often has high TDS. Eventually, the increasing water cut makes a well uneconomic and it is abandoned. 41

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53 Final products total 44.6 gallons compared to 42 gallons in the original barrel. This increase in volume is due to the change in physical state of the crude oil, i.e. gas exsolving out. Obviously, based on mass there is no change during refining. 53

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55 Designed to produce more valuable range of refined products. These refining processes involve changing the size and/or shape of the hydrocarbon molecules. 55

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64 Along the Arctic coast of Alaska, there have been 36 petroleum discoveries with another 48 in Canada s Mackenzie River delta to the east. The Alaska coast has commercial petroleum production at Prudhoe Bay, which has been shipped south through the Trans Alaska Pipeline System (TAPS). This region of Alaska has an estimated 15 billion barrels of recoverable oil and 45 trillion cubic feet of gas. Along the coastal plain, some 23 million acres of land have been set aside as the National Petroleum Reserve Alaska (NPRA). To the east is the Arctic National Wildlife Refuge (ANWR), a region encompassing 19 million acres. It was established in 1980 by the passage of the Alaska National Interest Lands Conservation Act. The act designed 8 million acres of the Brooks Range as wilderness. Another 1.5 million acres of the coastal plain was designated the 1002 area. Because it has potentially large oil and gas reserves as well as significant wildlife habitat, a decision on how this area is to be managed for resources was deferred to the future. 64

65 In 1987, the U.S. Geological Survey submitted a report to Congress describing the resources, including oil, in ANWR s area Since the time the refugee was established, additional wells outside of ANWR had been drilled. Using new data from these wells as well as pre existing well data and seismic results, 40 U.S.G.S. scientist conducted a three year study to re evaluate the resource potential of the area. The new study also reanalyzed 1,400 miles of seismic data collected in 1984 and 1985 by an oil and gas consortium. Because conducting seismic surveys in the area requires an act of Congress, this survey is the only one performedin area

66 Not all the oil in a petroleum trap can be extracted at a profit. When estimating the oil in a reservoir, three different quantities are considered. First and largest in volume is the original oil in place (OOIP). Only a portion of this is, however, actually recoverable. This quantity, the technically recoverable oil, is determined from the OOIP by multiplying it by an estimated recovery factor. This typically reduces the oil volumes by anywhere from 50 to 70 %. Finally, economic factors must be considered. This further reduces the volume of recoverable oil. 66

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69 If ANWR is opened for oil production, the produced oil must somehow be transported to market. Currently, production from Prudhoe Bay is moved via TAPS is the Trans Alaska Pipeline system. It is a 800 mile long, 48 inch diameter pipeline running from the Prudhoe Bay (oon the North Slope) to Valdez, the northernmost ice free port in North America. The pipeline was constructed between March, 1975 and June, 1977 at a cost of $8 billion and was at the time the most expensive privately funded infrastructure project every built in the U.S. Over its lifetime, the pipeline has moved 15 billion barrels of oil. In 2010, the pipeline moved 650, bpd, which is considerably less than the maximum of 21mbpd 2.1 in With the continued decline in production, it will soon reach the point where operating the pipeline is no longer economic. By opening ANWR and building a pipeline from it to TAPS, the pipeline can be used for a longer period. 69

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73 This production curve is Hubbert s classic Peak Oil curve. Although we know its basic features, there are many shapes the curve could have and the area under the curve is unknown. 73

74 As Mark showed earlier, the published Peak Oil curves are all over the board. Given this variability, two logical questions can be asked. First, how can there be so much variation in the results of different researchers. Second, are these curves of any value other than as academic exercises? 74

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78 The consequences of these constraints are clearly illustrated by considering UK s North Sea oil fields. This graph depicts the production from over 100 fields as separate colors. In the beginning, production comes from a small of number of large fields. These fields ultimately peak and are replaced by a larger number of small fields. However, even these greater number of fields cannot offset the declining production of the big fields. 78

79 Not to worry somehow the UK is different than the rest of world. 79

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85 Clearly, calculating the timing of Peak Oil is a complex process that requires estimating several parameters and fitting the first differential of the production curve. This complex mathematical exercise probably is only appropriate for advanced high school math courses. So how can we bring this important concept with profound ramifications for today s students into the classroom? Fortunately, there is a simpler mathematical approach that allows us to investigate this important issue quantitatively while connecting it to students lives. That is the concept of R/P or resources divided by production. What is useful about this approach is that it can be applied to any finite or non renewable resource, e.g. gold, copper, uranium, etc. 85

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90 Are some of these nations really important players in the global oil picture? Which ones aren t? Vietnam, Peru and Congo. 90

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93 BANANA = Build Absolutely Nothing Anywhere Near Anything 93

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95 It is interesting that these authors did not view biofuels as a viable option for replacing significant amounts of liquid fuels produced from petroleum. 95

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101 Each replacement wedge is marked by different delay or lead time and the ultimate amount of liquid fuel it can produce at full capacity. Fifteen years after mitigation is begun, these substitutions can replace the daily 2007 U.S. consumption of petroleum. 101

102 However, the question is how soon must we begin mitigation relatively to peaking of oil production to avoid serious supply disruptions and its resultant economic down turn. If mitigation is begun simultaneously with peaking, there will be immediate and significant shortage of liquid fuels. 102

103 If mitigation starts 10 years before peaking, a shortage only develops about 11 years after peaking and is not as severe. 103

104 A successful mitigation effort must start 20 years before Peak Oil arrives. Since most production models place the timing of the peak between now and 2030, we don t have much time to wait before a serious mitigation effort is started. 104

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Overview of Chapter 11

11 Fossil Fuels Overview of Chapter 11 Fossil Fuels Coal Coal Reserves Coal mining Environmental Effects of Burning Coal Oil and Natural Gas Exploration for Oil and Natural Gas Oil and Natural Gas reserves