The Awl Bidness

The Awl BidnessLarry W. Lake

Petroleum and Geosystems Engineering

The University of Texas

The Oil Business

• Exploration

• Production

• Refining

• Transportation

• Marketing

Larry W. Lake

Petroleum and Geosystems Engineering

The University of Texas

Upstream

Downstream

A Brief Quiz…

1. What is the usual unit for a quantity of

crude oil?

2. What is the usual unit for a quantity of

natural gas?

3. How much crude oil goes into making

gasoline?

4. How much of your gasoline bill pays

for the crude oil?

A Brief Quiz (cont.)…

5. When was oil first discovered in

commercial quantities?

6. Name a transportation fuel that is not

hydrocarbon based.

7. What is the largest reservoir in the U.S.?

In the world?

8. When will we run out of oil?

Exploration…

Seal or trap

Water column or aquifer

Oil column

Gas cap

Source rock

Seismic

Onshore Seismic…

Offshore Seismic…

Offshore Receiver Spreads…

Production…

Productivity Index, PI

DrivingForce

qo =4khkro

4ACArw

2( )ln + 2s[ ]o

(P – Pwf)

Production…

Oil Rate - make as large as possible

Goal of everything we do

qo =4khkro

4ACArw

2( )ln + 2s[ ]o

(P – Pwf)

Production…

Constants - Live with them

qo =4khkro

4ACArw

2( )ln + 2s[ ]o

(P – Pwf)

Production…

Natural logarithm - makes a large number small

For example, ln(1000) = 6.9

Natural logarithm

qo =4khkro

4ACArw

2( )ln + 2s[ ]o

(P – Pwf)

qo =4khkro

4ACArw

2( )ln + 2s[ ]o

(P – Pwf)

Production…

• Make large

• God provides or doesn't

• Fracturing

Permeability - basic property of rocks

qo =4khkro

4ACArw

2( )ln + 2s[ ]o

(P – Pwf)

Production…

• Make small

• Lift with gas

• Pump (reduce fluid level)

Well pressure

qo =4khkro

4ACArw

2( )ln + 2s[ ]o

(P – Pwf)

Production…

• Make large

• Reinject produced gas

• Inject water (waterflood)

Average reservoir pressure

Production…

• Make large• God provides, etc.• Reperforating• Horizontal wells

qo =4khkro

4ACArw

2( )ln + 2s[ ]o

(P – Pwf)

Penetrated thickness

Horizontal Wells….

Aggie Drilling Engineer

From A.D. Hill

qo =4khkro

4ACArw

2( )ln + 2s[ ]o

(P – Pwf)

Production…

• Make large

• Large oil content

• Inject chemicals, CO2

Oil relative permeability

Schematic of solvent flood

Drawing by Joe Lindley, U.S. Department of Energy, Bartlesville, OK

Fig. 7-1

Typical Micellar-Polymer Flood...

Low salinityLow calciumUsually 0.5 PV

SurfactantCo-surfactantCo-solventPolymerOil (sometimes)Usually 0.1 PV

PolymerAdditives

Gradual change to water

Fig. 9-1

Production…

• Make small

• Inject heat (steam)

• Burn a little oil

Oil viscosity

qo =4khkro

4ACArw

2( )ln + 2s[ ]o

(P – Pwf)

Process variations…

Driving the Oil...Steam Drive

Steam Oil + Water

Steam Water Cold Oil

ColdOil

ColdOil

Steam

Inject(2-30 days)

Steam

Coldoil

ColdOil

HotWater

Soak(5-30 days)

Shut in

Coldoil

ColdOil

HotWater

Produce(1-6 months)

Oil + Water

Steam soak

More variations...

Burning the Oil

Using horizontal wells (SAGD)

In-Situ Conversion Process (ICP)

Perspect

ive V

iew

¢

Producer

HeaterHeater

High Temperature Causes Long, Horizontal Fractures

Overburden

• NaphthaNaphtha• JetJet• DieselDiesel• Nat. GasNat. Gas• HydrogenHydrogen• Chem. FeedChem. Feed• HeatHeat

High Value Products

What is it? • Enhancement of natural maturation of kerogen by slow heating• Results in:

• thermal cracking • in-situ hydrogenation• high sweep vapor phase production • high API oil• N,S,O content vary with resource

• Average temperature limited to boiling point of diesel, i.e. essentially no bottoms

Current target resources:• Oil Shale • Heavy Oil / Tar Sands• Coal

How is it done?• Electric resistance or, potentially, gas heaters• Underground conductive heat transport

Light Processing

4Shell Unconventional Resource Energy - White House Briefing April 11th, 2005 filename.pptSURE

Freezewall Technology For Groundwater Isolation

Water &TemperatureMonitor Wells

FreezeWells

Heater &Producer

Wells

NaturalFracturedShaleAquifers

SolidShale

Water &TemperatureMonitor Wells

FreezeWells

Heater &Producer

Wells

Water &TemperatureMonitor Wells

FreezeWells

Heater &Producer

Wells

NaturalFracturedShaleAquifers

SolidShale

Next Research Phase2 Step Process (at least) to Commercial

Freezewall Test• Football field sized test on 10 acres

near existing research

• Test robustness of freezewall barrier

• Active construction/production from late ’05 – early ’07

• Reclamation 2010

Ice Wall on Surface

Production…

• Make small

• Fracture well

• Inject acid

Well damage (skin factor)

qo =4khkro

4ACArw

2( )ln + 2s[ ]o

(P – Pwf)

Results of Quiz…

1. What is the usual unit for a quantity of

crude oil?

• 1 barrel = 1 bbl = 42 U.S. gallons

• 1+6 zeros = 1 MMbbl

• 1+9 zeros = 1 Bbbl

• 1 metric ton = 7.5 barrels

• Giant field: 100 MMbbl = 0.1 Bbbl

Results of Quiz…

2. What is the usual unit for a quantity of

natural gas?

• 1000 standard cubic feet = 1 MCF

• 1 MCF+6 zeros = 1 BCF

• 1 MCF+9 zeros = 1 TCF

• Roughly: 6 MCF gas = 1 Bbl crude

Cost of gas= 0.405 $/Ccf

Results of Quiz…

3. How much crude oil goes into making gasoline?

• Crude oil = transportation

Transportation

Residential/Commercial

Industrial

ElectricityGeneration & Transmission

Non-Fuel

Waste = 25 %

Waste = 20 %

Waste = 83 %

Waste = 68 %

Work Achieved

Work Achieved

Work Achieved

Work Achieved

23 %

15 %

23 %

39 %

Coal

NaturalGas

Nuclear

Petroleum

HydroOther

Source: LLNL/DOE

Results of the Quiz…

(American Petroleum Institute, Sept. 2008)

4. How much of your gasoline bill pays for the crude oil?

Results of Quiz…

5. When was oil first discovered in

commercial quantities?

• Drake’s Folly …1859

• Corsicana …1894

• Spindletop …1901

• Big Lake (Permian) …1923

• East Texas …1928

Texas

Results of Quiz…

6. Name a transportation fuel that is not

hydrocarbon based.

• Wind

• Solar

• Hydrogen (fuel cells)

• Coal

• Muscles

Results of Quiz…

7. What is the largest reservoir in the U.S.?

Prudhoe Bay, Alaska – 20+ Bbbls in

place

In the world?

Ghawar, Saudi Arabia – 300+ Bbbls

Results of Quiz…

8. When will we run out of oil?

USGS Est. of Ultimate Rec

UR B-BblsProbability

Low (95%)

Mean (Expected Value)

High (5%)

2,248

3,003

3,896

2026

2037

2047

2% Growth

DeclineR/P = 10

History

Mean

Low (95%)

High (5%)

70

60

50

40

30

20

10

0

Bill

ion

Bar

rels

per

Yea

r

1900 1925 1950 1975 2000 2025 2050 2075 2100 2125

Campbell-Laherrere World Oil Production Estimates, 1930-2050

2005 2037

EIA- DOE Estimates, 1900--2125

2005

When will we run out of oil?

From Jackson (JPT, 2007)

Undulating Plateau vs. Peak Oil

U.S. Production, Hubbert vs. Actual

Major Points…

• Hydrocarbons found in porous rocks

• Crude oil = transportation

• Crude oil is about 70% of gasoline price

• Hydrocarbons essential to current way of

life

• World has a 30+ year supply; delivery rate

a question

Hydrocarbons and Prosperity…

100

1,000

10,000

100,000

0.0001 0.001 0.01 0.1 1 10 100 1000

Per Capita Hydrocarbon Consumption, BOE/day

Pe

r C

ap

ita

Gro

ss

Do

mes

tic P

rod

uc

t, U

S $

AfricaAsiaCentral America/CaribbeanEuropeMiddle EastNorth AmericaOceaniaSouth AmericaSoutheast AsiaWorld

Prosperity

Consumption

USA

Trinidad and Tobago

Luxembourg

Chad

Zimbabwe

Source: CIA World Factbook (Feb. 2009)

For More Information…

• U.S. Energy Information Administration

• American Petroleum Institute

• International Energy Agency

• California Division of Oil and Gas

• Early Texas Oil (Rundell)

• www.factsonfuel.org/gasoline

• [email protected]

Chemical EOR Processes...

Process Typical Typical AgentRecovery (%) Utilization

Polymer 5 1/3-1/2 lb polymer/bbl oil produced

Micellar/ 15 15-25 lb surfactantpolymer bbl oil produced

Alkaline/ 5 35-45 lb chemicalpolymer bbl oil produced

US CO2 Emissions by Sector and Fuels 2000

Millions of metric tons per year carbon equivalent

Source: U.S. EPA Inventory of Greenhouse Gas Emissions, April 2002

0

100

200

300

400

500

600

700

Residential Commercial Industrial Transportation ElectricGeneration

Natural Gas

Petroleum

Coal

Solvent EOR Processes...

ProcessUlt. Recovery

% OOIPUtilization

Miscible 10-15 10 MCF/bbl

Immiscible 5-10 10 MCF/bbl

Results of Quiz…

4. How much of your gasoline bill pays for the crude oil?

Expense ¢ per gallon

Production 15-60

Producer profit 53-58

Refining 13

Marketing 5

Transportation 15

Retailer 6

Refining etc. profit

10

US taxes 19

Ave. state taxes 23

Total 159

1$ change in crude price causes 2.5¢ change in gasoline price

www.factsonfuel.org/gasoline

Thermal Recovery Processes...

Process Ult. Recovery

% OOIP

Utilization

Steam (drive

and soak)

50-65 0.5 bbl /bbl equivalent

Combustion 10-15 10 MCF air/bbl

SAGD ?? ??

Various EM Like steam Like steam

Undulating Plateau vs. Peak Oil

From Jackson (JPT, 2007)