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April 21, 2006

Comments

Ender

"(I am a little wary of this number as the percentage could easily be reduced by counting the tremendous unproven reserves of heavy oil in Venezuela and Canada)."

You should not be confusing heavy sour crude with unconventional crude. Heavy sour is still a liquid at room temperature and still flows like normal oil and requires almost no processing to deliver it to a refinery.

Unconventional and extra heavy oil is not really oil at all and requires LARGE amounts of energy , presently in the form of natural gas, and water to be processed into a form suitable for refining. It takes 1000 cu feet of gas to produce one barrel of crude oil from the Alberta tar sands. The water used to wash the sand from the oil is rendered toxic and has to be kept in huge tailing dams.

In short no natural gas no unconventional oil.

JN2

Ender, re tar sands: I thought they recycled the water? And there are proposals for nuclear in Alberta (bad idea). Maybe they could burn their own product for energy? Best of all of course is to leave it in the ground and live off current solar income.

Brian

Today I saw a graph in the Volkskrant (a Dutch national newspaper) plotting the price of Brent crude per barrel from the start of 2004. Brent is light sweet crude oil. (there is a similar graph in the washington post at https://www.washingtonpost.com/wp-dyn/content/article/2006/04/13/AR2006041300170.html)

What is clear from both graphs is that although there may be a momentary peak for the well know geo-political reasons there is an underlying gradual upware trend. Simply fitting a straight line by eye I'd say that Brent crude appears to be about $6 dollars above what you would expect based on this steady growth. That's not a hugh peak.

I expect people will pick me up and say this analysis is over simplistic. Nonetheless I think the numbers are evidence of an underlying inexorable rise in the price of oil. Seen against this background the current prices are in fact structural not incidental.

If the trend were to continue it suggests a structural oil price of $90 by end 2008. Interestingly the oil futures market (see https://futures.tradingcharts.com/marketquotes/index.php3?market=CL) is currently estimating about $71 for the same Dec 08 period. It will be interesting to see how this market prediction develops over the coming 6 months - 1 year.

Jim's analysis could about the oil mix may indeed be the root cause - I must admit I don't know enough to judge.

ProcessingHeavy

And what is the key element you need to process this heavy crude? You need lots and lots of hydrogen. Massive quantities of it.

BegsTheQuestion

Which now of course...begs the questions...why not save massive amounts of energy and expense an instead utilize the hydrogen directly as fuel?

There in lies the rub.

Thomas

Hydrogen is a bad fuel to handle and store. Adding hydrogen to tar sands/heavy oil gives much higher yeilds.

But this solution gives massive pollution and possibly climate change :-(

Natural gas is the best fossil fuel for stationary applications and therefore too good as source of hydrogen for upgrading. It's also much too good for home boilers producing luke-warm water, but that's a whole other debate...

-Thomas

Alex

In the short run, what difference would it make to use unconventional gunk as the feedstock for a Fischer-Tropsch process rather than upgrading'n'refining?

amazingdrx

"Conventional oil now receives a price premium of $10-$16 over heavy sour oil."

The cheaper feedstock should more than take care of the extra refining costs, that is how it would work in an unmanipulated market.

But in a monopoly gaming world oil market it will be an excuse for boosting gas prices once again. This is in fact positive proof of the manipulation.

Boost it to 10 bucks per gallon OPEC. It's the only course left to stop global climate disaster. Who knew that oil war/terrorism by facilitating market manipulation would actually help stop global climate problems by making oil price soar?

The Bush administration is actually encouraging the end of oil based transportation energy with it's neoconservative colonial empire fighting for oil.

Bush an agent of change? Yep. By ruining everything the status quo depends upon.

Engineer-Poet

I'll bet that F-T isn't as efficient as more-conventional processing for heavy crude and bitumen.  It may yield a cleaner product, but if you are dealing with anything other than a free feedstock you have to consider how much is required for a given amount of product.

Jim from The Energy Blog

I did say that this was one of the causes for increased oil prices, not the only cause. One of the main points that I meant to say was that using the Brent or WTI prices as the only indication of the price of oil was misleading with so much heavy sour crude being used.

The Washington Times article clearly made the point that the $10-$16 premium for conventional oil allowed refineries that could process heavy sour crude to make unusually large profits dispite the more expensive equipment.

I did mean that the Saudi's could be counting unconventional oil, or part of it, as their definition of remaining oil reserves. Although it does not flow at ambient temperatures it is processed and sold as oil. Part of Canada's tarsands oil has been officially counted as oil reserves. This is a major point of dispute when talking about remaining reserves and an official definition is needed to clarify this. It could easily be interpreted, as I have, that EIA counts unconventional oil as part of reserves or they could not forecast future production rates as high as they have. In my mind the question is at what price and how soon could these reserves be used.

Using heavy sour crude indirectly contributes to the steady cost growth, not the peak. The peak is largly caused by geopolitical problems.

The refinery part of the oil business suffers from having a relatively low ROI and the need to invest more in capital cost is not desirable.

The peak in gasoline price is exacerbated by the transition from MTBE as an oxygenate to ethanol. Domestic ethanol is not especially expensive, but we have to import about 1/3 of the required ethanol from Brazil and, although it is cheaper, their is a $0.51/gallon import tarrif on it. Their is also a short term infrastructure problem with the distribution of ethanol that is causing occasional local shortages of gasoline. The later is because we do not have enough tank trucks and gasoline with ethanol in it cannot be delivered by existing pipelines because it is hydroscopic and causes corrosion of steel pipelines. This problem will eventually be solved by some combination of more tank trucks, composite pipelines and more distributed production of ethanol.

Natural gas should not be used to make hydrogen. It can be made just as or more efficiently from coal and it is a cheaper feedstock. The problem is the capital costs are higher and it contributes to global warming if sequestration is not used.

amazingdrx

Good points Jim.

Have you heard of the Israeli solar powered refinery?

And plasma and microwave extraction and refining, wind electricity could do the processing. As well as provide hydrogen.

https://www.rexresearch.com/coal/elxcoal.htm

Plasma can also turn biogas (methane) into methanol, and string methanol into hydrocarbon feedstock for plastics and other chemicals normally obtained from oil.

Ultra cheap wind electricity produced from high wind great plains locations could be used when peaking to refine fuel, then fuel operations could shut down when wind is diminishing. This would smooth out the wind power component of the grid.

Nguyen Thu

My think way I will be to try to research about petrochemical technology. in vietnamese, all documents is old and i had to read informations on networld. I need to have technical document to research.
Thanks!

Nguyen Thu Mr
Hanoi University of Technology
Organic and Petrochem

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