Lecture 9: Hydrocarbon man

ER 100 / 200
ER 184 / 284

September 12, 2010

1
 Outline
A somewhat historical look at oil and society
– What role does oil play in society?
– What is the relation between oil and other fuel types
– What predictions have been made in the past about oil production?
– What do we know about the future of oil?
Coal and gas will be discussed peripherally

2
 Beginning with 100 Barrels of Crude Oil…
Product:
6 Barrels Petroleum gas - used for heating, cooking, making plastics, often liquified under pressure to make
liquified petroleum gas
small alkanes (1 to 4 C), commonly known by the names methane, ethane, propane, butane
boiling range = less than 104 degrees Fahrenheit / 40 C
3 Barrels Naphtha - intermediate that will be further processed to make gasoline
longer alkanes (mix of 5 to 9 carbon atoms)
boiling range = 140 to 212 degrees Fahrenheit / 60 -100 C
45 Barrels Gasoline - mix of alkanes and cycloalkanes (5 to 12 carbon atoms)
boiling range = 104 to 401 degrees Fahrenheit / 40 to 205 degrees Celsius
8 Barrels Kerosene - fuel for jet engines and tractors; starting material for making other products
mix of alkanes (10 to 18 carbons) and aromatics
boiling range = 350 to 617 degrees Fahrenheit / 175 to 325 degrees Celsius
22 Barrels Gas oil or Diesel distillate - used for diesel fuel and heating oil
alkanes containing 12 or more carbon atoms
boiling range = 482 to 662 degrees Fahrenheit / 250 to 350 degrees Celsius
Lubricating oil - used for motor oil, grease, other lubricants
long chain (20 to 50 carbon atoms) alkanes, cycloalkanes, aromatics
boiling range = 572 to 700 degrees Fahrenheit / 300 to 370 degrees Celsius
16 Barrels Heavy gas or Fuel oil - used for industrial fuel; starting material for making other products
long chain (20 to 70 carbon atoms) alkanes, cycloalkanes, aromatics
boiling range = 700 to 1112 degrees Fahrenheit / 370 to 600 degrees Celsius
Soid residuals - coke, asphalt, tar, waxes; starting material for making other products
multiple-ringed compounds with 70 or more carbon atoms
boiling range = greater than 1112 degrees Fahrenheit / 600 degrees Celsius 3
= 100 Barrels
 Fuel Gasses
Gas Plant Separated Gasses Aviation
Gasses Alkylation Alkylate
gasoline
Light crude
distallate Automotive
Catalytic Isomerate Gasoline
Isomerization gasoline
Sweetening
Light naphtha and blending Light Solvents and
Atmospheric

Heavy naphtha Catalytic Reformate Petrochemical

Distillation

Kerosene
Reforming Feedstocks

Middle and Cracked

gasses
heavy distallates
Kerosene
Light cracked
hydrocarbons
Distallate Jet Fuels
Tower residue Catalytic Heavy cracked
Cracking hydrocarbons Sweetening
Desalting Diesel Fuel
and blending
Heavy Solvents and
Petrochemical
Crude oil
Feedstocks

Vacuum
distallates
Coking Residual
Distillation

Asphalt fuel oils

Vacuum

Tower residue Residual

Deasphalted oils
Deasphalting Sweetening Lubricants
and blending
Dewaxing Dewaxed oils Greases
4
Waxes
5
 Energy Security Performance Index for 22 OECD Countries, 1970

Oil import Alternative Fuel Energy intensity Electricity Natural gas Nominal Nominal SO2 CO2
dependence (%) fuels (%) economy (thousand use import electricity gasoline emissions emissions
(new BTU/US$GDP)* (kWh/capita) dependence retail prices (million (million
passenger (%) prices (US$/liter) tons) tons)
vehicles (US¢/kWh)
mpg-e)

Australia 67% 3.9% 17.2 13.7 3,919 0% 3.7 0.26 1.6 143
Austria 57% 5.7% 23 9.1 3,302 34% 18 1.32 0.4 49
Belgium 100% 1.6% 23 13.7 3,399 99% 18.5 1.74 1.2 118
Canada 46% 2.7% 23 23.5 9,529 1% 3.7 0.37 4.1 340
Denmark 99% 1.9% 23 8.2 3,211 0% 9.5 0.42 0.3 56
Finland 100% 2.3% 23 13.1 4,885 100% 5.3 0.53 0.4 40
France 98% 3.7% 27 9.6 2,882 35% 7.9 0.74 3.5 435
Germany 92% 3.6% 21 9.8 2,962 24% 15.9 1.16 6.9 984
Greece 99% 1.7% 23 8.9 1,118 0% 2.1 0.58 0.3 25
Ireland 98% 2.8% 23 9.8 1,956 0% 6.9 0.58 0.2 22
Italy 97% 1.3% 29 8.2 2,262 0% 6.3 0.42 2.6 295
Japan 100% 1.8% 23 5.4 3,445 32% 48.6 1.27 5.1 743
Netherlands 97% 2.0% 23 14.4 3,110 0% 15.3 1.00 1.4 130
New Zealand 100% 4.4% 23 16.6 4,941 0% 3.17 0.48 0.1 14
Norway 100% 2.5% 23 14.6 14,785 0% 2.6 0.42 0.2 24
Portugal 99% 2.0% 23 7.0 830 0% 20.6 1.59 0.1 15
Spain 99% 2.7% 23 9.6 1,623 85% 5.8 0.37 1.1 121
Sweden 100% 2.5% 20 13.1 8,048 0% 3.2 0.32 0.9 831
Switzerland 100% 3.1% 23 6.4 4,693 100% 4.0 1.59 0.1 39
Turkey 53% 2.3% 23 12.3 241 0% 21.1 0.11 0.8 42
UK 100% 2.3% 21 10.1 4,489 7% 5.3 0.58 8.6 630
United 22% 4.9% 13.5 15.1 8,022 4% 7.0 0.42 31.2 4,200
States

6
 Energy Security Performance Index for 22 OECD Countries, 2007

Oil import Alternative Fuel Energy intensity Electricity Natural gas Real Real SO2 CO2
dependence (%) fuels (%) economy (thousand use import electricity gasoline emissions emissions
(new BTU/US$GDP)* (kWh/capita) dependence retail prices (million (million
passenger (%) prices ($/liter) tons)* tons)
vehicles (US¢/kWh)
mpg-e)
Australia 37% 1.7% 32 12.1 11,309 0% 12.5 1.24 2.6 395
Austria 91% 3.7% 42 7.4 8,090 95% 22.6 1.81 0.2 73
Belgium 99% 1.9% 42 10.4 8,688 100% 16.5 2.20 1.3 117
Canada 0% 1.2% 29 17.4 16,766 0% 7.6 1.08 2.9 539
Denmark 0% 2.3% 42 4.8 6,864 0% 38.2 2.05 0.1 55
Finland 96% 1.9% 42 9.2 17,178 93% 17.1 2.12 0.3 67
France 96% 1.9% 42 8.0 7,585 97% 17.3 2.03 1.3 378
Germany 94% 1.9% 42 7.4 7,175 79% 23.1 2.10 2.4 823
Greece 99% 1.9% 42 10.0 5,372 99% 13.0 1.19 0.8 94
Ireland 100% 1.9% 42 5.3 6,500 86% 24.7 1.77 0.1 45
Italy 93% 2.5% 42 7.1 5,762 85% 27.2 2.06 1.5 448
Japan 97% 1.8% 41 4.5 8,220 93% 17.8 1.46 2.6 1,213
Netherlands 91% 1.9% 42 10.9 7,057 59% 24.2 2.28 1.0 178
New Zealand 69% 2.9% 42 13.8 9,746 0% 17.8 1.35 0.1 37
Norway 0% 1.9% 42 11.4 24,295 0% 17.5 2.32 0.6 37
Portugal 98% 1.9% 42 9.6 4,799 100% 23.3 2.07 0.2 56
Spain 98% 1.9% 42 9.7 6,213 100% 18.7 1.64 2.1 328
Sweden 99% 1.9% 42 8.7 15,230 100% 12.7 1.99 0.3 48
Switzerland 99% 1.9% 42 4.9 8,279 100% 15.6 1.65 0.1 44
Turkey 94% 3.7% 42 15.1 2,053 97% 15.8 2.60 2.1 240
UK 4% 3.7% 42 6.1 6,192 8% 22.7 2.07 1.6 536
United States 59% 2.9% 25 9.1 13,515 17% 10.3 0.82 17.8 5,697

7
 Current excitement
Current prolonged increase in oil price
– Longer than many previous oil shocks
– No apparent single precipitating cause
– Seems to be a case of demand vs constrained supply
Much interest of late in the coming “peak” in global oil production
This has lead to a flurry of semi-scholarly and popular books on the
subject.

Is this the END of oil? [wrong question]

8
 Hydrocarbon man
Yergin‟s chapter: Hydrocarbon Man
Documents the rise of petroleum and fall of coal between WWII
and 1970‟s oil shock
This provides an incomplete picture
– Fossil fuels had already radically altered western society
– Oil had already become strategic (Yergin, 1991)
• WWI naval battles decided decisively by Churchill and transition to oil – no going
back
• WWII further illustrated this - oil starved Nazi Germany was desperate
– ME/N. Africa drive for Baku (Caspian) for oil resources
– Developed processes to turn coal into oil

– This difference was an increase and change in scale of oil use

• The true difference is the effect on everyday life for MAJORITY of Americans
• Effect on the infrastructure - lasting changes in how we live
– US production was increasing consistently during this period

9
 Early Oil Days

Transportation had already been transformed by railroad and coal

Original use of oil was kerosene for lighting – gasoline was an
unwanted byproduct – river disposal!
Early oil production centers: US East and Caspian region (under
Russian control).
Modern production began in August of 1859, under “Colonel” Drake
(Yergin).
– Oil was struck at 69 feet
– “On Monday, when Drake arrived he found Uncle Billy and his boys
standing guard over tubs, washbasins, and barrels, all of which
were filled with oil”

10
 Moving forward
What followed was boom and bust cycle
– Boom in prices caused more exploration
– Large finds would destroy the price
– Oil companies working to find markets
Oil gained slowly in importance at first
– Automobile revolution well underway by 1920‟s in US
• The Automobile Age by James Flink
– Power generation by oil increasing
Strategic need for oil became more apparent in World War I and II

11
 Resource consumption: exponential
Q = ∫ P dt

If production, P(t) is exponential, (P(t) = P0ert ) then the quantity, Q, produced

is:

Q = ∫ P dt = ∫ P0ertdt = (P0/r)ert

Which has the solution for T, the time to produce an amount Q:

T = (1/r) ln[(rQ/P0)+ 1]

Example: World coal production in 1995 was 5 billion tons and the estimated
total reserve is 1.1 trillion tons. Annual production growth is 1.5%/year. How
long to exhaust the resource?

At current production (fixed) rates:

(Reserves/Production) = (1.1 x 1012 tons)/(5 x 109 tons/year) = 220 years
If 1.5%/year (exponential) growth continues, then only 97 years.
12
 Hubbert‟s prediction
In 1956, M. King Hubbert made a prediction
– Hubbert was at the top of the Research unit of Shell
– Presented findings at API conference in San Antonio paper called
“Nuclear Energy and the Fossil Fuels”
– Rumored that Shell did not want him to go forward
– Used a new model – the “bell curve” or Normal Curve –to predict
production
– If symmetrical bell curve, production would peak at 50% depletion

13
 Hubbert‟s curve
(Hubbert, Shell Development Company document #95, June 1956)

14
Hubbert - Production of a non-renewable
Annual Production resource

Pm

Area Under the Curve

Equals Total Resource

P0
Time
15
Tm = time of maximum production
 Resource Depletion

Hubbert (1956) argued that production would begin with

exponential growth, then plateau, then decline (symmetrically)
as in bell curve:
 1  t  tm  2 
P  Pm exp    
 
2 s  

Where P = production of the resource

Pm= maximum production rate
tm = time of maximum production
σ = standard deviation
So the total amount (over all time) produced would be:
 
 1 t  t 2 
Q   Pdt   Pm exp   m  dt
 2  s  
 
Q  sPm 2
16
 Resource Depletion
 1  t  tm  2 
P  Pm exp    
 2  s  

•We can make quick calculations using σ (SD)

•Cumulative area under the curve is easy to calculate using SD
Annual Production
50%
16% 84%

s s

95%
2.5%

Time
17
 U.S. LOWER-48 OIL
PRODUCTION PEAKED &
DECLINED
3.5
3.0 Actual (EIA)
2.5
Approximation
Production 2.0
(Billions of
1.5
Barrels per Year)
1.0
0.5

0
1950 1960 1970 1980 1990 2000
Year

A huge, complex & geologically varied oil province.

A surrogate for the world. 18
SAIC / MISI
 EXPERIENCE: U. S. LOWER 48 OIL
PRODUCTION
Dramatic
Improvement in Oil
3.5
Production Field Technology
3.0

2.5 80
PRODUCTION 2.0
(Billions of
Barrels per PRICE
1.5 (2003 $ per
Year)
Price barrels)
1.0

0.5

0 0
1950 1960 1970 1980 1990 2000

High prices & advanced technology did not reverse trends!

19
SAIC / MISI
New technology „effort‟

20
New technology „effort‟

21
New technology „effort‟

22
 Hirsh‟s conclusion:
MAJOR OIL INTERRUPTIONS
• Impacts of world oil production peaking are exemplified by the
1973 & 1979 oil interruptions.

+ Inflation + Recession
+ Unemployment + High interest rates

• 1973 & 1979 were relatively brief.

• World oil peaking impacts could last a decade or more.

The world has never faced a problem like oil peaking.

23
SAIC / MISI
Results of Hubbert‟s US prediction

24
 1970‟s
Despite being somewhat off, Hubbert was still roughly correct.
US peak occurred as demand growth (5-8%) continued
– ME share of exports grew from 13% to 21% from 1970 to 1973

Result – incredible tightness in oil market (“energy crisis” actually entered the
political vocabulary even before 1973 (Yergin, 1991))
October 6th 1973, Egypt and Syria attacked Israel on Yom Kippur
Pressure from OPEC members and Egypt to use the “oil weapon,” Saudi King Faisal
went along reluctantly

25
 Real oil prices (GDP deflator EIA, Aug. 2005)
Major Events and Real World Oil Prices, 1970-2005
(Prices Adjusted by Quarterly GDP deflator, 2Q 2005 Dollars)

$90

$80
Iran-Iraq War Begins;
oil prices peak
$70

Prices spike on Iraq war, rapid

$60 demand increases,
Constant $2004 per barrel

Saudis abandon "swing constrained OPEC capacity,

producer" role; oil prices low inventories, etc.
$50 collapse
Prices rise sharply
Imported RAC on OPEC
$40 cutbacks,

Gulf War
Ends
$30
Saudi Light
$20 Iranian
Revolution;
Shah Deposed
$10 Prices fall sharply on
Asian economic crisis;
1973 Arab Oil Iraq 9/11 attacks;
oil oversupply; prices
Embargo Invades economic weakness
fall sharply
$-
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20
26
70

72

74

76

78

80

82

84

86

88

90

92

94

96

98

00

02

04
Source: EIA
 Alternatives studied
(Federal energy research budget tripled in 4 years)

Why don‟t we fuel our cars with wood or coal?

4.6 MPG

27
 Alternative
Lots of money poured into alternative fuels
– Coal based liquid fuels
– Direct coal gasification
– Oil shale and other low-grade petroleum resources
– Electriicty
These only illustrate the superior qualities of oil
Transport and movement by pump and tank
– Fluid at ambient temperature and pressure
– Clean
– High energy density per-unit-mass and per-unit-volume
– Comparing energy density per unit mass:
• 110 lb Wood = 750 MJ
• 110 lb Coal = 1465 MJ
• 110 lb Oil = 2400 MJ
28
 Energy Density per Unit Mass
• Electricity
– -Batteries suffer from poor energy per unit mass
– Must carry around electrodes, casing, etc.
• Coal and wood unfavorable – especially given gasifier losses
• Sets up unfavorable feedback loop in engineering automobiles!
• Petroleum is at a natural strategic advantage with respect to
transportation
Percentage of Transportation Energy Provided by
Fuel

1973 2003
Petroleum 95.8 96.4
Natural gas 4 2.5
Renewable 0 0.9
Electricity 0.1 0.2

29
 Second crisis
End of 1978 – Iranian revolution – oil exports temporarily ceased
November 1979 – Iranian hostage crisis – chaos
American citizens held as US embassy for 15 months
America felt humiliated and powerless
Political end for President Carter

30
Carter:
Oil resource control
have become the
„moral equivalent of
war‟.

“Carter Doctrine”

Termed by the press:

MEOW.

31
 Post crisis: mid 1980‟s - 2000
After crisis got worse in 1979, major incentive for new supply
Massive new oil coming on – North Sea, Mexico, Africa…
everywhere but ME
OPCE strained under weight – SA forced to keep cutting production
to maintain prices
1986, SA production raised and prices fell
No significant movement in the next 15 years
– Fuel economy improvements stopped in late 1980‟s
– Significant backsliding with move to “light trucks” and SUVs
– Oil price is low and largely stable

32
33
34
 New interest in depletion
• Colin Campbell and Jean Leharrere, The End of Cheap Oil
(Scientific American, 1998) use Hubbert‟s methods to predict the
peak in global production (2005-2007)
• Set off increased interest in oil depletion
• Everyone is making projections
• Use various methodologies
• Mason (The 2030 Spike, 2003: p. 4)
– “the most reliable estimates put reserves at under 1 trillion barrels,
and world consumption at 28 billion barrels a year, indicating
exhaustion in, at most, 34 years.”

35
 New movement in depletion
• Everyone is making projections

36
 New movement in depletion
• Everyone is making projections

37
Strong Chinese presence in Africa

38
 World Production Peak
• There are a variety of estimates of the date of peak production
Author Source and Date Estimate of Peak Year

Campbell (Campbell and Sivertsson 2003) ~2011

Deffeyes (Deffeyes 2001) Before 2009

Hallock et al. (Hallock, Tharakan et al. 2004) 2004- 2051*

Wood (Wood, Long et al. 2000) 2026 -2047**

Odell (Odell 1999) ~ 2030 / 2060***

* A Large number of scenarios (36) are described in this model, with greatly differing assumptions and
peak dates
** Based on USGS High (95%), Mean (50%) and Low (5%) probability estimates of ~2200, 3000,
4000 Gbbl EUR
*** Conventional-only peak / Conventional + Non-Conventional Peak
39
 THE PROBLEM: PEAKING OF WORLD
CONVENTIONAL OIL PRODUCTION
(Not all of the latest forecasts)
Projection Source
2000
2006-2007 Bakhitari, A.M.S.

2007-2009 Simmons, M.R.

After 2007 Skrebowski, C.

2010 2008 Campbell / ASPO

Before 2009 Deffeyes, K.S.

Before 2010 Goodstein, D.

After 2010 World Energy Council

2020
2010-2020 Laherrere, J.

2016 EIA nominal case

After 2020 CERA

2030 2025 or later Shell

---------------------------------------------------------------- 40
SAIC / MISI No visible peak Lynch, M.C.
The end of oil?

41
The end of oil?

42
 Growth in Consumption -two worlds
(BP 2005)
Developed World
US especially has made no progress on fuel economy
Incentives worldwide have been low – no price push
Bigger profits on bigger cars- no political traction to change it
Developing world
China produced more than it consumed until 1993, after that, became
importer
China total consumption
– 1992: 2.6 Million barrels / day
– 2004: 6.68 Million barrels / day
Consumption more than doubled (almost 3X) in 12 years.
Growth rate of almost 8% per year

43
 Decline in discoveries, and many peaking nations
This growth in consumption is colliding with declining discoveries
and aging fields all over the world
North Sea production has peaked and has entered irreversible
decline
– Large decline rates, 10-15% per year (Croft, 2005)
Many nations are showing falling discovery/production trends

44
China‟s oil balance (PFC, 2004)

45
We are running out of atmosphere much faster
than fossil fuels … at all price points

Source: Brandt and Farrell (2006) Environmental Research Letters (erl.iop.org)

46
Result of these trends colliding…

47
 Alternatives to conventional oil
Synthetic fuels
– Coal-based fuels (coal-to-liquids, or CTL synfuels)
– Natural gas based fuels (gas-to-liquids or GTL synfuels)
Already made in South Africa, Malaysia
Large GTL plant under construction in Qatar (Exxon-Mobil)
China has plans for large CTL plant ($6 Billion, 150,000 bbl/d)

48
 Alternatives to conventional oil
These are already quite prevalent
– Tar Sands 2004 1 million barrels per day (NEB, 2004)
– Extra-heavy 2000 600,000 barrels per day (Venezuela only)
– GTL and CTL 2000 165,000 barrels per day (Fleisch, 2002)
– Shale oil 2007 50,000 barrels per day (Utah)

So total production ~ 1.5-2 Mbbl/day in 2004

This is 2 to 2.5% of total production already

49
 Returning where we came from?
So, the new direction for hydrocarbon man may be increasingly
intensive extraction
Use of dirty, plentiful, high carbon fuels (coal, oil shale)

There is NO shortage of fossil fuel, if we want to use coal,

we have enough for many years to come.

The question: can we handle the environmental consequences?

50
 51
Hubbert, National Academies Report, 1962
 Peak Oil
A commonly discussed scenario
• The peak is more like a plateau
• There is an opportunity to develop alternatives but
– none are as cheap as oil has been
– some worsen climate change
– new investment can‟t keep pace with growing global energy demand
• There are no easy alternatives for some uses of oil (plastics?)
• The cost of food and transport increases, with inflationary effects throughout
the economy and lifestyle impacts
• Combination of peak oil and climate change leads to global economic crisis
• Countries with oil reserves become even more powerful global players
• How bad it gets depends on how we respond now and in the future
• Or …

12 May 2008 52