History and Use of Petroleum American Shale Oil, LLC 110 East 3rd Street Rifle, CO 81650 www.amso.net info@amso.net May 2011 1 Oil is our primary transportation fuel 2 Our Nation depends on imported crude oil Transportation requires liquid fuels It will take decades to replace a significant fraction with electricity, natural gas, or non-corn biofuels We import more than half our petroleum product needs Colorado produces only 1/3 of its needs Cushing OK Future Contract Price: $/bbl In 2008, imported oil cost ~$400B 160 ~50% of the US trade deficit 3% of the US GDP 120 World events have pushed crude oil prices above the 2008 average price of $95/bbl 80 40 0 1996 1998 2000 2002 2004 2006 2008 2010 2012 3 80 8 60 6 40 4 20 0 1960 2 1970 1980 1990 Year 2000 0.10 0.20 0.08 0.16 0.06 0.12 0.04 0.08 1.2% decrease/yr 0.02 0.00 1960 0 2010 0.04 1970 1980 1990 Year 4 2000 0.00 2010 Stagflation, fraction 10 Energy, Fraction of Personal Spending 100 Unemployment rate, % Crude oil Price, 2010 dollars Energy costs affect our standard of living Petroleum and War (1) Oil catalyzed the Japanese attack on Pearl Harbor In the 1930’s, Japan depended upon Shell and Standard Oil for oil, and there were tensions with the US over Japanese expansion In 1940, the US cut the export of iron and steel to Japan and debated cutting off oil In 1941, the US froze Japanese assets to restrict the purchase of oil, which caused great concern for Japanese military operations Moving the Pacific fleet to Hawaii caused Japanese concern about access to East Indies oil The attack on Pearl Harbor was only one of several attacks in the Pacific aimed at conquering and controlling Borneo and Sumatra. Source: The Prize, Daniel Yergin, 1992 5 Petroleum and War (2) Germany lost WWII in part because of lack of oil Germany has little native crude oil but had a significant, albeit expensive, coal liquefaction effort Blitzkrieg was conceived in part to minimize fuel requirements Capturing oil supplies was a major consideration in Hitler’s strategy against Russia. The Russians used diesel, which when captured, did not help Germany’s forces, which ran on gasoline. British destruction of fuel supplies helped defeat Rommel in North Africa In 1944, the US Air Force targeted the synthetic fuel industry and oil supplies, so the Luftwaffe had only 10% of needed fuel Capturing fuel in Belgium was a major objective of the Battle of the bulge, and when it failed the German tanks ran out of fuel 6 Petroleum and War (3) Middle East oil supplies are often entangled with war OPEC instigated an oil embargo to the US in 1973 in response to US support of Israel in the Yom Kippur war The Iranian revolution in 1979 and subsequent Iran-Iraq war caused a shortage of oil and sharp increase in price • In 1980, President Carter issued the Carter Doctrine, which declared that any interference with US oil interests in the Persian gulf would be considered an attach on the vital interests of the US Iraq invaded Kuwait in 1990 due to dire economic straits from the war with Iran, aggravated by alleged production quota violations and slantdrilling across the border into Iraq’s Rumaila field • Would the US have liberated Kuwait if it were not for oil? Although the initially stated reason for the second Gulf War was fighting terrorism and WMD, then later human rights and democracy, ensuring oil supplies probably played some role 7 Petroleum is formed by burial of organic-rich rocks to depths of at least a mile 8 Relationship among various petroleum forms Oil shale is an immature petroleum source rock that didn’t get buried deep enough to generate oil Tar sands are the remnant of an oil reservoir that lost the light ends by water washing and bacterial action Gilsonite (Utah) is a bitumen expelled from a rich source rock at very low maturity Shale gas is residual gas in a mature petroleum source rock that did not get expelled to a conventional reservoir (e.g., Marcellus) Tight oil, sometime misnamed shale oil, is oil reservoired in the partially mature source rock or a neighboring tight rock (e.g., Bakken) Deep gas is gas formed from kerogen and oil cracking at depths greater the normal stability level of oil 9 Petroleum seeps are ubiquitous Most oil and gas generated over history has seeped to the surface—reservoir half-life of about 30 million years The La Brea Tar Pits preserved many prehistoric animals Bitumen was used in prehistoric times as a binder and waterproofing agent Bitumen was part of the Egyptian mummification process Natural gas seeps were used for heating and lighting BC Roads were paved with bitumen in 8th century Baghdad Early explorers mapped and used the Pitch Lake in Trinidad, the Athabasca tar sands, the oil springs of Pennsylvania, tar geysers in California Gilsonite mining started in 1888 and is used in lacquers, inks, drilling muds, and paving and roofing materials 10 Numerous petroleum seeps occur in Southeast Asia and the Middle East From Hunt, Petroleum Geochemistry and Geology, 2nd Edition, 1995. From MacGregor, Marine and Petroleum Geology, 1993. 11 Oil seeps are common in offshore US oil provinces Hundreds of seeps in the Gulf of Mexico leak 1-5 million barrels of oil/yr Macondo blowout leaked ~5×106 barrels in 2010 Ixtoc blowout leaked ~4×106 barrels in 1979 Numerous seeps occur offshore Beaches near Santa Barbara have wipe dispensers to clean your feet Natural gas is collected via steel pyramids (350×106 cf of gas/yr) The Coal Point seep leaks ~50,000 bbl/yr The Unocal blowout spilled ~90,000 bbl in 1969 12 Gilsonite exists in vertical cracks oriented according to regional tectonic stresses Vernal Rangley Grand Junction 13 Petroleum seeps take various forms McKittrick tar seep near Bakersfield, CA Petroleum seep at Rozel Pt, UT, on the mud flats of the Great Salt Lake Petroleum seep near Korňa, Sovokia 14 Petroleum seeps drove early exploration Production of kerosene from petroleum seeps in the mid-19th century catalyzed usage The first “rock oil” mine was build in eastern Europe in 1952 First commercial oil well was drilled in Poland in 1853 First North American well drilled at Oil Springs, Ontario, in 1858 First US oil well at Oil Creek, Pennsylvania, in 1859 Drake’s well, 1959 Col. Drake 15 Historical price of crude oil (annual avg) Oil shale predicted to become a major source Oil shale predicted to become a major source Source: 2010 BP Statistical Review of World Energy 16 Oil shale makes another run We are using oil faster than we are discovering it From http://planetforlife.com/oilcrisis/oilsituation.html However, this plot is misleading, because it does not include reserve growth 17 But most of the reserve additions are in the Middle East–the US has declined Proved Reserves (Billions of Bbls) 10000 World OECD (N. America, Europe, Australia&NZ) United States 1000 100 10 1980 1985 1990 1995 2000 2005 Source: 2010 BP Statistical Review of World Energy 18 2010 Maintaining production means continuously bringing reserves on line Source: TOTAL 2010 Results and Outlook 19 The predicted year for peak oil production varies with source, but it will eventually peak 20 Oil production has already peaked in the US Prudhoe Bay (not incl Fed Gulf) Note! 21 The Bakken and deep offshore Gulf of Mexico have reversed US oil production declines Oil production, 1000 bbls/day 10000 Total US Federal Gulf of Mexico Alaska Texas North Dakota 8000 Source: USDOE EIA 6000 4000 Katrina Ike 2000 0 1980 1985 1990 1995 22 2000 2005 2010 Shifts in primary energy sources happen over several decades Similarly, any substantial contribution of wind, solar, non-corn biofuels, and oil shale will be 2030 and beyond 23 Running fleet vehicle fuel efficiency lags new vehicle efficiency by about 10 years 35 Truck MPG 30 Car MPG 25 CAFE standard Fleet average New sales 25 20 15 20 CAFE standard Fleet average New sales 10 15 1975 1985 1995 1975 2005 1985 1995 2005 The half-life of automobiles is about 8 yrs—longer for trucks Between 1980 and 2005, truck share increased from 20% to 50%, which partially negated the increases in cars and trucks individually During this period, individual vehicle weight increased by 15% and performance increased significantly, which means that engines did become more efficient even if MPG did not increase 24 Ethanol has increased rapidly but is still only 5% of consumption—corn can’t get us there Source: USDOE EIA Millions of barrels per day 10 8 6 4 2 US crude oil production Net crude oil imports NG C5+ condensate NG plant liquids Ethanol 0 1944 1955 1966 1977 25 1988 1999 2010 Energy production uses water More water per kWh is evaporated from hydroelectric facilities than from thermoelectric plants (NREL, 2003) 1.8 L/kWh for thermoelectric (cooling towers) 68 L/kWh for hydroelectric (evaporation from reservoirs) Petroleum is the least water-intensive source of energy Source: R. Service, Science 326, 517-518 (2009) Oil shale retorting was assumed to consume 3 bbl of water per bbl of shale oil, which is three times our current estimate 26 DOE’s most recent projection (2011) indicates only modest change in energy sources by 2035 27 Colorado is a net exporter of energy BTUs but a net importer of liquid fuels and energy $ 2008 liquids production totaled 189,000 bbl/day Crude oil = 66,000 bbl/day Condensate = 19,000 bbl/day Natural gas liquids = 104,000 bbl/day (but propane is only 6% of consumption) 2008 liquids consumption totaled 228,000 bbl/day (2.2× refinery capacity) Gasoline = 132,000 bbl/day Aviation fuel = 32,000 bbl/day Diesel, fuel oil, and kerosene = 54,000 bbl/day 2007 natural gas production exceeded consumption 2007 processed natural gas = 1,204 BCF/yr 2007 natural gas consumed = 505 BCF/yr 85,000 bbl/day of oil ≈ 190 BCF/yr of gas in energy content $1.5B/yr shortfall for liquids and $0.9B export for gas Produced 32 million and consumed 20 million tons of coal, for a next export value of $0.4B 28