The Future of Oil. Max Willis Energy & the Environment 4/5/10

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1 The Future of Oil Max Willis Energy & the Environment 4/5/10

2 Darcy s Law Q = discharge A = cross-sectional area μ = viscosity L = length P = pressure κ = permeability Multiphase flow: Relative permeability of one phase to the permeability of a single phase in the medium Selley, 1998

Oil Economics 1400.0 1200.0 1000.0 800.0 600.0 400.0 200.0 0.

3 Oil Economics USGS Fact Sheet FS ; OPEC Annual Report 2008

4 Deffeyes, 2008; Hirsch, 2005 Oil Economics

5 Giant Oil Fields Two definitions: Reserves of greater than 500 million bbl 500 fields Production of greater than 100,000 bbl/day 120 fields, 3% of all oil fields 47% of worlds oil supply, 65% of total reserves 14 largest produce over 20% of worlds supply, average age is 43.5 years Worlds 19 largest produce average of 500,000 bbl/day, average age of 70 years

6 Hook et al., 2009

7 Hook et al., 2009

8 Hook et al., 2009 Field Production Profile

9 Field Decline Newer technology has increased plateau phase Higher URR produced at decline Higher depletion rates at decline Longer time from first production to decline Giant fields of future will have much high decline rates Depletion at peak is same for almost all giants, allows for prediction of onset of decline 87% of giants in non-opec countries are post-plateau with 84% of reserves in these fields OPEC fields have 50% reserves in fields in plateau phase, prolonged production will increase decline rates

10 EIA; Lynch, 2006 Well Productivity

11 Hook et al., 2009

12 Hubbert, 1956 Peak Oil

13 Discoveries vs. Production Discoveries lead production by 21 years Hubbert, 1981, Deffeyes, 2008

14 World Peak Production Predictions Sorrell et al., 2009

15 World Peak Production Predictions Hirsch, 2005

16 USGS 2000 World Petroleum Assessment Monte Carlo simulation 939 billion bbl undiscovered 83 billion in USA 730 billion bbl reserve growth What may be added between Extreme variations even in heavily explored countries Laherrere, 2000

17 Worldwide Exploration Maugeri, 2009

18 Field Growth During field lifespan, reserve revisions due to better data lead to increases (generally) in the URR Not as important outside USA where reserves are listed as 2P USGS Fact Sheet FS

19 Saudi Arabia If Saudis are actually overstating reserves, why are they doing so? Reality: Produce from only 23 developed reservoirs, 80 known ( $3/bbl) Only 70 exploration wells drilled in last 10 years Most of reserves are usually found in smaller fields (Ghawar responsible for 40% of Saudi oil, normal largest is closer to 10%) Why don t Saudis withhold production and run the price of oil up? In doing so, they would make alternatives to oil more attractive and potentially run themselves out of their own market Is Ghawar (5 Mbbl/day) peaking? No field data is released, but field has been producing for over 50 years at high levels Field begin peripheral water injection early, has produced more than 40% of URR, could have a steep decline without tertiary recovery A 10% annual decline would be difficult for the world to compensate for Similar fields have had recovery up to 70% Lynch, 2006

20 Unconventional Petroleum Reserves Tar Sands Arctic Deep Water Enhanced Oil Recovery (EOR) Natural Gas Liquids (NGL s) Oil Shale Coal to Liquids

Cost (C$/bbl) Crude Type Operating Cost Cold Production Bitumen 6-9 Cold Heavy Oil Production with Sand (CHOPS) Bitumen 8-10 Tar Sands Cyclic Steam Stimulation (CSS) Steam Assisted Gravity Drainage

21 Cost (C$/bbl) Crude Type Operating Cost Cold Production Bitumen 6-9 Cold Heavy Oil Production with Sand (CHOPS) Bitumen 8-10 Tar Sands Cyclic Steam Stimulation (CSS) Steam Assisted Gravity Drainage (SAGD) Bitumen Bitumen Mining/Extraction Bitumen 9-12 Integrated Mining/Upgrading Synthetic Crude Athabasca, Alberta 170 billion bbl remaining reserves 27.1 billion bbl under active developmen Orinoco Belt, Venezuela Estimated reserves of 513 million bbl Maugeri, 2009;

assisted gravity drainage (SAGD) Needs depths greater than 500 ft to maintain

22 Oil Sands Production Multiple methods for in situ extraction All involve heating Huff n puff Pump steam in, allow to soak, then use same well to extract viscous oil Steam assisted gravity drainage (SAGD) Needs depths greater than 500 ft to maintain pressure Toe-heal air injection (THAI) Upgrades oil in situ (increases API )

Arctic Oil ANWR: 5.7-15 billion bbl NPRA: 6.

24 Arctic Oil ANWR: billion bbl NPRA: Total arctic: 90 billion bbl oil, 44 billion NGL s USGS Factsheet

Deep Water Oil Oil fields in water deeper than 200 m One of largest finds is Tupi in Brazil, 4000-5000 m below sea floor in, in more than 2000 m of water Each

25 Deep Water Oil Oil fields in water deeper than 200 m One of largest finds is Tupi in Brazil, m below sea floor in, in more than 2000 m of water Each well costs $100 million ($ billion total for field), take up to a year to drill Cost up to 10x more than normal offshore fields, take much longer to develop

generally are reproduced and reinjected and will remain in the formation

26 Enhanced Oil Recovery (EOR) New technology generally doesn t increase URR, but increases depletion rate, causes faster decline Injected gases generally are reproduced and reinjected and will remain in the formation relatively indefinately once production is ceased USGS Fact Sheet FS ;

27 Cantarell Example Discovered 1976, producing 1.6 Mbbl/day in 1981 Nitrogen injection started in 1997, currently producing at 600 kbbl/day Nitrogen plant largest in world, 10x the next largest

28 Natural Gas Liquids (NGL s) Heavy hydrocarbons which condense out of produced natural gas at the surface once temperature is reduced below the hydrocarbon dew point Propane, butane, pentane, etc.

30 Oil Shale Green River Formation, Colorado Total in place oil trillion barrels Much of this is low grade Processing Oil shale must be heated to F to refine kerogen into crude oil and natural gas Using electric heaters and a freeze wall for in situ upgrading (requires 1.2 GW for 100,000 bbl/day) Rock can be mined and heated in a retort 3-4 times energy out per energy in according to Shell s in situ method Nuclear weapons? Huge water requirements (up to 10 bbl/h2o per bbl oil produced) Problem with producing large tailings if retorted

31 USGS Fact Sheet

32 Hirsch, 2005 Feasibility

33 Coal to Liquids Fischer Tropsch South African company Sasol has produced since 1970, produces 150,000 bbl/day Economically viable at $40-55/bbl (China has started), feasible around $70/bbl 1 ton of coal yields between 1-2 bbl diesel 5 bbl H20 / bbl Oil 50% upper limit efficiency

34 Sources EIA Annual Energy Review 2009 EIA Annual Energy Outlook 2009 IEA World Energy Outlook 2009 OPEC Annual Statistical Bulletin, 2008 Alberta s Oil Sands, Alberta Department of Energy, June Attanasi, E., and Root, D., 1994, The enigma of oil and gas field growth: American Association of Petroleum Geologists Bulletin, v. 78.3, p Bird, K., and Houseknect, D., 2002, U.S. Geological Survey 2002 Petroleum Resource Assessment of the National Petroleum Reserve in Alaska (NPRA): USGS Fact Sheet Bird, K., and Houseknect, D., 2001, Arctic National Wildlife Refuge, 1002 Area, Petroleum Assessment, 1998, Including Economic Analysis: USGS Fact Sheet Bird, K., and Houseknect, D., 2008, Circum-Arctic Resource Appraisal: Estimates of Undiscovered Oil and Gas North of the Arctic Circle: USGS Fact Sheet Charpentier, R., and Klett, T., 2005, Guiding principles of USGS methodology for assessment of undiscovered conventional oil and gas resources: Natural Resources Research, v. 14.3, p Deffeyes, Kenneth. Hubbert s Peak: The Impending World Oil Shortage. Princeton: Princeton University Press, Demaison, G. J., 1977, Tar sands and supergiant oil fields: American Association of Petroleum Geologists Bulletin, v , p Dyni, J., 2005, Geology and resources of some world oil-shale deposits: USGS Scientific Investigations Report Hirsch, R., 2005, The inevitable peaking of world oil production: The Atlantic Council, v. 16.3, 1-9 Hook, M., Hirsch, R., and Aleklett, K., 2009, Giant oil field decline rates and their influence on world oil production: Energy Policy, v. 37.6, p Hook, Soderbergh, B., Jakobsson, K., and Aleklett, K., 2009, The evolution of giant oil field production behavior: Natural Resources Research, v. 18.1, p Hubbert, M. K., 1956, Nuclear energy and the fossil fuels: Shell Development Company Publication No. 95 Hubbert, M. K., 1981, The world s evolving energy system: American Journal of Physics, v Jarrell, J., 2005, Another day in the desert: A response to the book, Twilight in the desert : Geopolitics of Energy, Oct 2005 Johnson, R., Mercier, T.J., Brownfield, M., Pantea, M., and Self, J., 2009, Assessment of In-Place Oil Shale Resources of the Green River Formatuion, Piceance Basin, Western Colorado: USGS Fact Sheet Laherrere, J., 2000, Is USGS 2000 Assessment Reliable?: cyberconference, WEC Lynch, M., 2006, Crop circles in the desert: The strange controversy over Saudi oil production: ICEED, p Maugeri, L., 2009, Squeezing More Oil From the Ground: Scientific American Oct: 2009, Schenk, C., Cook, T., Charpentier, R., Pollastro, R., Klett, T., Tennyson, M., Kirschbaum, M. Brownfield, M., and Pitman, J., 2009, An Estimate of Recoverable Heavy Oil Resources of the Orinoco Oil Belt, Venezuela: USGS Fact Sheet Selley, Richard C. Elements of Petroleum Geology. London: Academic Press, Simmons, M., The World s Giant Oilfields, White Paper, Simmons & Company International Sorrell, S., Speirs, J., Bentley, R., Brandt, A., and Miller, R., 2009, Global oil depletion. Verma, M., 2000, The Significane of Field Growth and the Role of Enhanced Oil Recovery: USGS Fact Sheet Wennekers, J., 1981, Tar Sands: American Association of Petroleum Geologists Bulletin: v , p

The Future of Oil. It s a Fossil-Fueled World

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