OIL“Black gold, Texas tea….”

What is it?

Crude oil is a blanket term for a mixture of hydrocarbons; some are long chain hydrocarbons, while others are very short

Exact proportion of different hydrocarbons determines viscosityand other characteristics; big differences in crude oil from various locationsMayan crude - very thick, almost tarrySaudi crude - very thin, can almost be used directly in diesel motor

Oil Usage

Not all crude oil is used for gasoline. Over half of all crude oilused in the U.S. goes to other purposes, such as jet fuel, home heating oil, and plastics

Data from Dept. of Energy

Transportation

About 65% of crude oil (almost 13.2 MBPD) is used for transportation; of this, the majority (9.1 MBPD) is for gasoline

Vehicle Number (million)

Miles (million)

Fuel Efficiency

Fuel Efficiencyper passenger mile

Cars 136 1,670,994 22.5 35.5

Light Trucks 101 1,111,277 18.0 31.2

Motorcycles 7 13,612 56.2 71.4

Heavy trucks 9 155,043 4.2 6.1

Bus .8 6,973 6.1 129

Airlines .008 8,250 .5 36.8

BTS, 2007

Other Uses

About 6% of crude oil is used to heat homes and buildings

Another 2% is used for generating electricity

Remaining amount (26%) used by industry

3% for asphalt and road oil9% for LPG4% for coke3% for petrochemical feedstock

Even if stopped using oil for transportation, will still need itfor our modern lifestyles

Depositional Cycle

Living organisms are deposited in awater environmentafter they die

Depositional Cycle

The dead, organic matter is buried bysediment that entersthe depositional zone

Depositional Cycle

As the sediment is buried deeper, the temperature and pressure increase untilthe organic matter is converted into hydrocarbon form

Depositional Cycle

In the case of oil and gas, the fluid will migrate upward through cracks and pore spaces until it is caught in a geologic trap. If no trap exists, the fluid might leak all of the way to the surface

Trap Types

Different subsea movement can create different traps

• A - Anticlinal trap• B - Salt dome trap• C - Fault block trap

Pennwell Publishing

Exploration

With very few exceptions,fossil fuels are found in the ground under the surface

Some seams of coal intersect the surface, and some oilseeps to from the ocean bottom. These need no additional effort to find them other than looking

All other sources of fossil fuel require some method forpeering inside of the Earth

SeismicThe primary method foroil and gas is to shoot soundwaves into the Earth and to listen for echoes

Summing echoes from manyangles allows a clearer picture of the rock layers near the surface

Offshore ExplorationOne or more microphone cable towed behindboat; microphones imbedded throughout cable; length of cable can be up to 4-5 miles

Compressed air that is rapidly released frommetal tubes provides sound source

Sound travels through rock; reflections from layers sent backto surface recorded by microphones;amount of time that it takes to returndetermines distance to layer

Onshore Exploration

Onshore exploration is similar tooffshore; sound reflects off of the rock layers and returned to microphonecables on the surface

One difference is that sound source is either dynamite in holes, or“thumping” by 30 ton trucks with a large metal plate

Another difference is that paths have to be bulldozed for the trucksand cables to pass through

In swampy regions, canals are dredged, and boats towing cablesare used.

Environmental Damage

ANWR Photo

In marine environment, explosions are harmfulto animals that rely on echolocation

In swampy locations, canals are dredged to allowboats to float through; canals disrupt ecosystemand allow salt water intrusion in low lying areas

On land, bulldozed paths take a long time to recover, especially infragile ecosystems

Controlled Source Electromagnetic• Place electromagnetic detectors on ocean

bottom• Emit low frequency (~.1 Hz) E&M signal

from towed buoy. • Measure electrical

resistance of rocks• Low resolution DHI,

but not subsurface imaging for rock layers

• Still in early stages

Correlating Stratigraphic Data

If wells or outcrops inthe area, try to correlaterock data over the regionto determine whereresources might be

Other Methods

Other methods of probing theEarth look for salt and other types of rock environments that commonly are associated with hydrocarbon deposits

Gravimeters measure the local force of gravity in orderto find anomalous rock facies like salt

Magnetometers measure the local magnetic field looking for the same thing

Oil drilling

Offshore Onshore

Primary Method

The cheapest method for extracting oil is to pump it out of the ground using a well

This removes about 15-20% of the oil that isstored in the rock matrix

Secondary Method

The second cheapest method for extracting oil is to inject waterinto the reservoir at a low spot while pumping from a high spot

This removes another 15-20% of the oil that isstored in the rock matrix

Tertiary Method

The most expensive method for extracting oil is inject a surfactant like steam or CO2while pumping

This removes another 10% of the oil that isstored in the rock matrix

Moving PetroleumOnce the oil/gas gets to the surface, it must bemoved to market.

Amount of oil produced from a unit might be thousands to tens ofthousands of barrels of oil per day

Need reliable system to get oil to refinery or large holding area;boats and trucks not reliable

Solution --> Pipeline

Onshore Pipeline

Onshore, the pipeline is usually buried in the U.S. Exception is the TransAlaskan pipeline, which must be above ground to prevent permafrost melting.In other countries, done routinely.

Above ground pipelines are subjectto terrorism, theft, and drunk hunters.

Alaska pipeline leak from hunter’s bullet(Source: BBC)

Offshore Pipeline

Offshore oil rigs use pipelines running along the bottom of the ocean to get it to nearest land. Repairs can be extremely costly.

Most failure incidents are caused by corrosion; most large spillsare caused by anchors (about 3,000 bbls oil spilled per incident)

Mineral Rights

• Cannot go exploring and digging/drilling everywhere.

• Disruptive exploration requires landowner’s permission.

• Drilling/digging requires mineral rights owner’s permission

• Landowner NOT necessarily mineral rights owner

• Mineral rights owner might be state/federal government

Federal Government

• Minerals Management Service (MMS) - Division of Interior Dept. manages the nation's natural gas, oil and other mineral resources on the outer continental shelf (OCS)

• Bureau of Land Management (BLM) - Division of InteriorDept.; manages 264 million acres of public lands in the 12 Western States, including Alaska; also an additional 300 million acres of below ground mineral estate located throughout the country.

Once lease is given, mineral resources are owned by company;can be sold to anybody or any country.

OffshoreStates own rights out to 3 miles from shore

Feds own rights out to 250 miles from shore

Where legal to drill, area is broken into 3 mileby 3 mile leased blocks

Feds get money for leasing and percentage of royalties

Map courtesy of MMS Red lines – Oil; Blue lines – Gasl Black dots - Structure

TankersOil is an international commodity.To cross the ocean or seas, oil tankers are used.

Amount of oil in transport by tankeris quite large, as the world consumesover 75 million barrels per daySource: BBC

Persian Gulf alone accounts for 15 million barrels per day exported

Tanker spills account for 29 million gallons of oil spill per year

Oil refining

Crude oil is a mixture of different hydrocarbons

Different hydrocarbons have different boiling

points

Separate by heating to various temperatures

Can change the percentage of various hydrocarbons by “cracking” (thermally or chemically) them into smaller ones

Environmental DamageOil wells produce radioactive water

Oil spills from wells, tankers, and pipelines occur frequently; usually small, but can be quite large

Fumes emitted by refineriesare toxic; linked to cancer,lung disease, and host of otherproblems

Sometimes, refineries blow up

Oil Shale and Tar SandOil shale - kerogen trapped within the low permeability shale;may be up to 40% of shale

U.S. has about 130 billion barrels of oil in this form (2/3 of world total; no production facilities, though; requires miningshale, crushing it, and then passing steam through it to captureoil

Tar sand - heavy, asphalt-like crude trapped in sandstone; worldreserves possibly 3 times that of conventional oil

Can heat the oil in place to low viscosity and remove it; cheaperto mine it like oil shale

U.S. Reserves

U.S. Proven Reserves

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U.S. reserves have been in a steady decline for almost40 years. At the sametime, our productionhas also decreased

Addition of Alaska

U.S. Production

Data from the Department of Energy

While consumption of oil in the U.S.has been increasing for 30 year, domestic production peaked in 1970.

Majority of U.S. oil from the Gulf of Mexico (mostly Texas and Louisiana),Alaska, and California. North Dakota production has increased 300% over thelast decade

U.S. Imports

U.S. oil imports by source (DOE)

Common perception is that all of our oil comes from Saudi Arabia

Both Mexico and Canada provide as much as Saudi Arabia

Nigeria and Venezuela also provide large quantities

By how much would fuel efficiency of cars have to increase so that could replace Saudi Arabia contribution?

World Oil Reserves

Current estimates of oil reserves show that Arabia andEurasia have over 75% of the world’s oil

Data from DOE , 2008 and Oil & Gas Journal, 2007

  Oil Production (MBD) Oil Reserves (MB)

Persian Gulf Nations 20.6 739,200Venezuela 2.3 80,012Nigeria 2.2 36,200Angola 1.9 8,000Canada 2.6 179,210China 3.8 16,000Mexico 2.6 12,352Norway 2.1 7,849Russia 9.4 60,000United Kingdom 1.3 3,875United States 5.2 20,900Other OPEC 3.9 58,251Other Non-OPEC 14.4 94,813World 72.4 1,316,662

World Consumption

How Much Do We Have?

Just because hydrocarbonsare found does not meanthat they can be produced

Reserves - those resourcesthat we are fairly sure exist and that can be produced economically

As new discoveries are made and the price of energy changes,the amount of reserves changes

McKelvy Diagram

How Long Do We Have?Some experts expect a decline in oil and gas production within 10 years; Others think that it will last for hundreds ofyears

Behavioristic Approach - While abundant, cheap prices will cause

a huge increase in usage; as resources are harder to find and extract, raising prices will cause a reduction in usageTechnological Approach - Improvements in exploration and production will allow prices to remain reasonable and extendthe amount of time for using oil

Hubbert CurveNamed for Shell geophysicistDr. King Hubbert; bell-shaped curve that describesusage of resource over time

Initially, resource is cheap(easiest produced first) and production increases fast

As resource reaches midpoint of usage, it becomes harder and moreexpensive to produce, which causes price to increase and production to decrease

Some Factors Affecting Predictions1. New technologies affect cost of recovery and the rate at which

energy is used; Ex.: computers increased the amount of electricityused, but also aid in recovery of oil and gas from wells

2. New discoveries of fossil fuels are always being made3. Cost of other energy sources changes position of profitably-

recoverable line on diagram; wind energy at $.03/kwhr rivals coaland natural gas

4. Changes in demand worldwide affect price, which affects profitably-recoverable line

5. More people in the world means more usage

How Long?The question is not how much long will we have oil, but how longwill we have cheap oil?

How will international politics change if this situation plays out?

Source: C.J.Campbell, 2004 Source: DOE