The world is currently pumping around 85,000,000 barrels of oil per day. Global demand is increasing as the global urban middle class triples in size from a base set in 1980. They have the money to own a car. The natural decline curves tell us that just to maintain current levels of production, we must add 30,000,000 barrels of new production over the next twenty to twenty five years.
If production cannot grow, the supply must be rationed by price. We are now seeing the first sniffs of that with oil at $90.00 per barrel. As I have been posting, price rationing will not really set in until oil climbs into the $150 to $250 range. And since it is not possible to maintain supply in the short term, this is about to happen. The next oil shock will most likely be triggered by the recognition that deliveries are persistently falling.
The fact that the Saudis finally went for full disclosure of their production capabilities is a major defensive action. Their production has been 2,000,000 barrels per day lower over the past couple of years and back in line with earlier rates after several years at at the higher rate. This is a recognition that secrecy will be dangerous in the face of oil at $200 per barrel when everyone will be demanding that they fix the problem.
The fact is is that the Saudis are saying 'don't look to us to fix this'.
We already know that further expansion of global oil production is not in the cards. The real problem is that we are just as ill placed to handle global contraction. The only strategic reserve is the oil used for the private automobile. It is even enough to perhaps carry us over.
So the question really is, can the oil industry replace 30,000,000 barrels of production over the next two decades so that we can make the adjustment and transition into an alternate fuel regime? We know that it is going to be touch and go for the duration simply because of natural lead times. And the Oil industry has to a large degree failed to find the new reserves fast enough, let alone develop them.
Another problem that must not be discounted is the sheer political orneriness faced by the Industry. I personally am aware of a billion barrel prospect onshore. I just need the screaming eagles to give me a hand. And other projects have come across my desk over the years that are also attractive geologically but impossible politically. There is just too much money for human greed not to run amok.
I am heartened however by the announcement of a major multi-billion barrel field in deep waters off Brazil. These basin remnants have always been very prospective and promise a number of major fields around the globe. The much more important observation is that they were actually able to do it.
That opens the door to a number of coastal prospects that may be as attractive. The bad news is that it will require one such field each year for the next thirty years just to maintain current production levels. The boys are good but that is a tall order.
The tar sands can increase by another two million barrels per day within the current mining regime. To do more than that will require extensive reserves of non existent natural gas. This is not a happy prospect when we are now facing a real shortage there also. The only viable alternative is the gasification of some of the bitumen to produce the necessary process energy.
Other issues will constrain the mining rate to these levels for the foreseeable future. However, that gives us a comfortable 300 hundred year reserve of this particular feedstock.
The really good news comes from the apparent success of the THAI test in Alberta. They now have three well pairs in operation for months and this can be expected to be sustained for some years.
You may recall my earlier postings on this subject. The technique consists of drilling a horizontal production well along the base of the tar sand for a distance of at least a thousand meters. A second vertical well is drilled to communicate with the end or toe of the horizontal well. Air is pumped down under pressure to initiate spontaneous combustion. This creates a flame front migrating along the the horizontal well impacting on a cross section that will reach the top of the formation and extend out to the sides. I do not know the actual area of the flame front at this time and so can not really predict the total capacity of the well. The flame front produces some char and hot bitumen and pyrolysised bitumen as process fluids. These drain the flame front and end up in the production well from which they can be pumped. We can expect a remarkable recovery rate of 70% of the oil in place using this process with all the process gases such as carbon dioxide and nitrogen been dissolved in the oil improving viscosity or exiting through the production well. This process has the effect of directly improving the gravity of the oil by at least five so that typical 12 gravity oil becomes 17 gravity oil, making it eminently transportable unlike the original bitumen.
At this time, making allowances for barriers which may not be necessary, the deeper tar sands are producible using conventional techniques with THAI at a recovery level of at least fifty percent. Most of these deeper reserves are actually fairly shallow and are simply outside the scope of mining.
All of a sudden, The Alberta tar sand reserve jumps to a trillion barrels as does the known reserves in the northern Amazon. And the environmental and other costs are already largely contained, particularly if little of the process gas escapes into the atmosphere.
This technology can also be implemented as fast as conventional oil and can also be applied to partially depleted conventional oil fields anywhere in the world. I suspect that the cost per produced barrel will be very similar to that of conventional oil. Maybe twice as much.
In other words, THAI turns two trillion barrels of heavy oil and a trillion barrels of remaining non productive light oil into a viable resource. At least that is the promise. So with this technology actually working, we have a accessible working reserve that is good for a century or two.
This does not solve the CO2 problem, but it allows high oil prices to shift us onto alternative options that are CO@ neutral.
If production cannot grow, the supply must be rationed by price. We are now seeing the first sniffs of that with oil at $90.00 per barrel. As I have been posting, price rationing will not really set in until oil climbs into the $150 to $250 range. And since it is not possible to maintain supply in the short term, this is about to happen. The next oil shock will most likely be triggered by the recognition that deliveries are persistently falling.
The fact that the Saudis finally went for full disclosure of their production capabilities is a major defensive action. Their production has been 2,000,000 barrels per day lower over the past couple of years and back in line with earlier rates after several years at at the higher rate. This is a recognition that secrecy will be dangerous in the face of oil at $200 per barrel when everyone will be demanding that they fix the problem.
The fact is is that the Saudis are saying 'don't look to us to fix this'.
We already know that further expansion of global oil production is not in the cards. The real problem is that we are just as ill placed to handle global contraction. The only strategic reserve is the oil used for the private automobile. It is even enough to perhaps carry us over.
So the question really is, can the oil industry replace 30,000,000 barrels of production over the next two decades so that we can make the adjustment and transition into an alternate fuel regime? We know that it is going to be touch and go for the duration simply because of natural lead times. And the Oil industry has to a large degree failed to find the new reserves fast enough, let alone develop them.
Another problem that must not be discounted is the sheer political orneriness faced by the Industry. I personally am aware of a billion barrel prospect onshore. I just need the screaming eagles to give me a hand. And other projects have come across my desk over the years that are also attractive geologically but impossible politically. There is just too much money for human greed not to run amok.
I am heartened however by the announcement of a major multi-billion barrel field in deep waters off Brazil. These basin remnants have always been very prospective and promise a number of major fields around the globe. The much more important observation is that they were actually able to do it.
That opens the door to a number of coastal prospects that may be as attractive. The bad news is that it will require one such field each year for the next thirty years just to maintain current production levels. The boys are good but that is a tall order.
The tar sands can increase by another two million barrels per day within the current mining regime. To do more than that will require extensive reserves of non existent natural gas. This is not a happy prospect when we are now facing a real shortage there also. The only viable alternative is the gasification of some of the bitumen to produce the necessary process energy.
Other issues will constrain the mining rate to these levels for the foreseeable future. However, that gives us a comfortable 300 hundred year reserve of this particular feedstock.
The really good news comes from the apparent success of the THAI test in Alberta. They now have three well pairs in operation for months and this can be expected to be sustained for some years.
You may recall my earlier postings on this subject. The technique consists of drilling a horizontal production well along the base of the tar sand for a distance of at least a thousand meters. A second vertical well is drilled to communicate with the end or toe of the horizontal well. Air is pumped down under pressure to initiate spontaneous combustion. This creates a flame front migrating along the the horizontal well impacting on a cross section that will reach the top of the formation and extend out to the sides. I do not know the actual area of the flame front at this time and so can not really predict the total capacity of the well. The flame front produces some char and hot bitumen and pyrolysised bitumen as process fluids. These drain the flame front and end up in the production well from which they can be pumped. We can expect a remarkable recovery rate of 70% of the oil in place using this process with all the process gases such as carbon dioxide and nitrogen been dissolved in the oil improving viscosity or exiting through the production well. This process has the effect of directly improving the gravity of the oil by at least five so that typical 12 gravity oil becomes 17 gravity oil, making it eminently transportable unlike the original bitumen.
At this time, making allowances for barriers which may not be necessary, the deeper tar sands are producible using conventional techniques with THAI at a recovery level of at least fifty percent. Most of these deeper reserves are actually fairly shallow and are simply outside the scope of mining.
All of a sudden, The Alberta tar sand reserve jumps to a trillion barrels as does the known reserves in the northern Amazon. And the environmental and other costs are already largely contained, particularly if little of the process gas escapes into the atmosphere.
This technology can also be implemented as fast as conventional oil and can also be applied to partially depleted conventional oil fields anywhere in the world. I suspect that the cost per produced barrel will be very similar to that of conventional oil. Maybe twice as much.
In other words, THAI turns two trillion barrels of heavy oil and a trillion barrels of remaining non productive light oil into a viable resource. At least that is the promise. So with this technology actually working, we have a accessible working reserve that is good for a century or two.
This does not solve the CO2 problem, but it allows high oil prices to shift us onto alternative options that are CO@ neutral.
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