OGPSS - Of Egyptian Bread and Oil

The turmoil in the Middle East shows little sign of ending in the near future, and the potential lack of enough cheap fuel for the population is a warning that the levels of unrest may continue and even get worse. There is, however, some hope for enough local supply in the near term to help with some of the indigenous problems. Consider, for example, Egypt which has the largest population of the countries in its immediate vicinity, a population that has grown 200% in the last 50 years.

Figure 1. Growth in Egyptian population (Trading Economics )

By last December Egypt was populated by some 83.66 million folk, with little sign of change in the growth rate. Over that time, energy demand has grown, while domestic supplies of fuel have not kept up. The most significant change, perhaps, is in oil consumption, with recent data, as previously noted, showing that the country has now switched to one that must import oil to meet demand.

Figure 2. Egyptian oil statistics (Energy Export Databrowser )

The EIA puts consumption at 811 kbd, set against a production of 555 kbd of petroleum products and, for natural gas, the country produced 2.1 bcf , which can be set against a consumption of 1.8 bcf, but the balance there also is trending downwards as recent levels of discovery and development have failed to match the increase in domestic demand.

Figure 3. Trends in Egyptian natural gas statistics (Energy Export Databrowser)

The developing need for oil imports is made more difficult by the subsidies that have become an accepted part of the Egyptian economy, including not only fuel, but also bread. Fuel subsidies are reported to be at around $17.4 billion and about a fifth of total state spending. Bread subsidies though a similarly critical part of picture, run only at about 20% of the fuel cost. To help manage costs and encourage domestic production, the Morsi government had cut back on foreign purchases of wheat, but this has now been reversed with the take-over even as the new government works to transition away from the subsidy burden. With the change, foreign governments are now also more willing to provide fuel, the United Arab Emirates (UAE) will send around a million barrels of oil this month, and Kuwait, Saudi Arabia and the UAE are promising more aid packages.

This may help with the short–term problem, which has too many political entanglements to allow any solid predictions for longer term help from outside the country, but there are potential sources of increasing domestic supplies from both the Western Desert and the Nile Delta itself.

Egypt has been supplying natural gas to Jordan, Syria, Lebanon and Israel through the Arab Gas Pipeline with flow starting in Arish, and the leg to Ashkelon being underwater.

Figure 4. Route of the Arab Gas Pipeline with projected extensions. (hydrocarbons technology)

Because of the connection to Israel the pipeline has been the subject of a number of terrorist attacks (the latest a couple of weeks ago) . However these more often affect the flow of gas to Jordan, rather than to Israel, because of the pipeline locations, with the pipeline being vulnerable in the Sinai where it is flowing south to Taba. This problem has led Jordan to consider importing natural gas from Israel and the recently found offshore natural gas deposits being developed in that country. Flow from the Tamar field started on March 30th tapping into the estimated 8 Tcf therein, while flow from Leviathan is anticipated in 2016.

The possible presence of oil-bearing strata at a lower depth in the Levant Basin has led Noble to plan an offshore well to go down 31,200 ft to a potential field holding perhaps as much as 1.8 billion barrels of oil. However Noble estimates the chance of success at 25%.

The recent success in finding these resources within the Levant Basin suggests that the potential for other discoveries in future years, with significant possible impacts on the local economies.

Figure 5. Location of some of the discoveries and developments in the Levant Basin (USGS)

The problems limiting future exploration in the region tie in with the conflicts and internal disruption that seems to spread to most of the countries in the above map. But in the more immediate short term Egypt is reducing exports in order to meet the growth in domestic demand, while importing natural gas, currently as a gift, from Qatar.

In the longer term, as the Israeli fields come on line, it might be possible to change the direction of flow of the Arish-Ashkelon pipeline to carry Israeli gas into Egypt. There are thus potential technical solutions to getting fuel to Egypt to meet their growing need.

However this does not address the underlying problem of how Egypt is going to be able to pay for that fuel (not to mention the bread). Even with a potential glut in global natural gas prices, without a stable economy Egypt is not going to be able to pay its import bill. This was evident towards the end of the Morsi government, when a lack of cash, or hard credit made it more difficult for the country to assure itself of enough imported oil to meet demand. The continued turmoil will keep away the tourists that could provide the economy with enough funds, while the lack of international recognition of the current regime is currently keeping the IMF from providing any help.

A couple of hundred years ago deriding the people’s need for bread reputedly led one ruling family to the guillotine. In the time since the people have also come to expect that they can also get fuel. Until both demands are satisfied it may be more likely than not that rule in Egypt will remain unstable, with the presence and influence of the competing mobs making rational decisions less achievable and the situation worse. (And they are also blowing up pipelines in Iraq.)

OGPSS - thoughts on oil production from the MENA countries in turmoil

The popular protests among the countries of the Middle East and North Africa (MENA) are continuing to roil, and so, rather than the review of the countries that I have been discussing in the posts of the last few Sundays, I thought I would just briefly review the status of the countries that are now in various stages of unrest, and include their relative production and exports of oil. I am not going to discuss the natural gas situation since, in relative terms, there is currently a significant excess of natural gas available to the world market. As a result, should the MENA production falter (providing it does not spread to countries such as Qatar), any default can be made up from elsewhere.

I am going to take a quick look at Libya, Yemen, Syria, Algeria, Morocco, Bahrain and Jordan, as counties that are looking less than stable. The list is my estimate of the order in which they will fall, or not, in the sequence shown (my unapologetic dominoes). I am not going to talk about Tunisia and Egypt since, optimistically, they are now in transition with little impact, in the short term, for their hydrocarbon statistics. (And Schlumberger would add Ivory Coast to the list.)

Let me start with Libya, since I was struck by a comment by a Guardian reporter on the current situation there.

Everywhere, there are long queues at petrol stations, sometimes with hundreds of vehicles stretching down the road as they wait. At one queue, drivers were relieved when a tanker finally delivered a load of fuel, but then reacted with frustration when there was no electricity to operate the pumps.

If there is no fuel within the country, then the time it will take to bring the oil refining and distribution system back into operation will get longer, as the crisis continues. And since domestic demand will be met before exports restart, the length of time that Libyan oil will be off the world market continues to grow.
Just as a reminder of the balance between exports and domestic use, here is the EIA plot of that balance.

Libyan oil statistics (Source EIA )

The impacts of the protests in Libya was almost immediate and the world market has lost 1.4 mbd of oil. The impacts in other countries will be more or less drawn out, depending on the nature of the change.

Yemen appears to be the next shakiest in my rather murky crystal ball. With Yemen, although the President there just withdrew his promise to resign, the protests are beginning to follow the Libyan model in that the protesters have taken over part of the country, and fighting has started. Yemen produces some 260 kbd of oil, but exemplifies the Export Land model in that production as now declining, and domestic consumption rising, the volume available for export is rapidly diminishing. The EIA report that it was 125 kbd in 2009, and mostly went to Asia.

Yemeni oil statistics (Source EIA )

It is beginning to look as though Syria might collapse along the same path. The precursors are starting to happen, in the same way as for Libya, and if it goes there is another 368 kbd of production that may be lost. Of this some 148 kbd is exported, mainly to Germany, Italy and France. Internal consumption, on the order of 200 kbd, may decline, which will, in itself, likely foment unrest.

Syrian oil statistics (Source EIA)

While the protests in Algeria have died down, for now, should more governments topple (as seems increasingly likely, vide the above) then protests may return to more public visibility, since the causes of the unrest largely remain. However we are now moving from the countries where significant change is beginning to seem probable, to those where it is increasing unlikely. Algeria is, I suspect, right in the balance on this. There is less motivation to get back into the troubles that preceded the French leaving the country back in 1962, when a million people died, and then there was a civil war that ended in 1999 that killed another 150,000. As a result there is more of a chance for the current President to make enough changes to survive.

I wrote about Algeria, which produces more than 2 mbd, earlier in the series and for now will presume that the production of both oil and natural gas will continue.

Algerian oil statistics (Energy Export Databrowser)

Morocco, which produces only around 4 kbd of crude, needs to import around 191 kbd to meet domestic needs. It is also a country where, after some initial unrest, the king took some actions and has promised reforms. Whether these will come to pass and will be sufficient remains in question, but for the present it moves the country over more toward stability, and I will accept that for now.

Bahrain, produces around 40 kbd of oil, with recent investments of $15 billion being projected able to increase that to 100 kbd by 2017. This is expected to require an additional 3,500 wells be drilled.

Bahrain has seen more turmoil than some adjacent countries and had seemed to be heading along the Egyptian path. However it lies close to Saudi Arabia, and there has been sufficient intervention from tanks and troops from there that the unrest seems to have been quashed. Unfortunately the economy has nose-dived, but this is unlikely to affect the oil production.

Jordan follows along the same lines as Morocco, in that the king remains relatively popular, and the unrest is more directed at the government. The recent protests demonstrated the conventional use of the police water cannons for riot suppression, as opposed to cooling spent nuclear fuel piles (as in Japan recently). In terms of oil production, Jordan sensibly stopped producing oil around 1992, and has imported around 100 kbd since then. Thus with a low probability of the monarchy falling, and no oil production, there is likely to be little impact from Jordan, at the present.

Given the concern by Schlumberger let me end with a quick glance at the Ivory Coast. The EIA page for the country is currently down, and to remind you of the problem there – there was an election and the incumbent President was defeated. He has, however, refused to step down, and so unrest is growing as the winner would like his job. The more immediate impact may come in the price of cocoa, since this is the major export, but there is an oil component. The concern comes because the Ivory Coast is along the off-shore trend from Nigeria, through Ghana, that is now being followed by international exploration. Results haven’t been particularly promising, but the ongoing violence is reducing exploration drilling to validate potential.

To summarize the situation therefore it would seem that, for just the MENA countries, the developing unrest could take Libyan (1.4 mbd); Yemeni (125 kbd); and maybe Syrian (148 kbd) oil from the export market. The domino that is starting to look a little unstable is Algeria at 2 mbd, but at the moment I doubt that it will go.

The rolling blackouts in Japan are a warning of what will happen in other countries that start to come up short in energy production. It makes industrial production difficult, and thus plans for load shedding will become more important. Wonder which companies are working on them? Because the numbers are beginning to look worrisome in terms, not just of price, but also of availability of oil at the time that it is needed in the non-too-distant future.

The Future of Oil Shale

I have spent some time over the past few weeks writing about various different ways of producing oil from oil shale. While it is now about time that I move on to other topics, David Hagen was kind enough to post the website that gives access to the presentations from the Oil Shale Symposia that I mentioned at the beginning of this mini-series.

The papers from the 28th Symposium in 2008 illustrate that while the current price of oil may not currently justify the development of large oil shale operations, it can justify the investment of research dollars to seek better ways of producing oil from these fields. This is particularly true if one accepts one of the criteria that Exxon used to justify their ongoing interest, namely that they project that world energy demand will be 40% higher in 2030 than today, with more than 80% of that energy still being supplied by fossil fuels. Exxon believes that the oil from oil shale will play a significant role in that supply.

And so I am going to skip lightly through the papers, and highlight anything that catches my eye.

Exxon Mobil, for example, are looking into Electrofracking the shale. The idea of using electrical power directly to break rock has been around for some time. Erich Sarapuu wrote his doctoral dissertation on this in the 60’s as I recall, unfortunately before the internet made it easy to find much information, though he went on to form Electrofrac Corp. And there have been more recent papers. However it appears that by putting electrically conductive materials into the fractures and passing current through them, Exxon Mobil both limits the surface footprint, and the amount of material that has to be heated to achieve the transformation of the kerogen. Higher rock stress can apparently also lighten the oil produced, based on lab tests. Since the time of the Symposium, Exxon Mobil has run a successful field test at their Colony Mine site. but has been quoted as commenting:

ExxonMobil sees tantalizing prospects for shale: up to 162,000 barrels of oil per surface acre at a 50 percent recovery rate. The results suggest a 3-to-1 ratio of energy recovered over energy expended to obtain it, McGinn said...It appears ExxonMobil can make its process work using about 1.5 barrels of water for each barrel of oil produced, he said.
Even under the most optimistic of scenarios, ExxonMobil sees no production coming from oil shale for 10 to 24 years, McGinn said.

Exxon Mobil plan for oil production from oil shale

Shell have also reported that the ground conditions can change the quality of the oil produced, and that slower heating increases oil quality, while higher pressures increase the hydrogen content of the oil. Field tests confirmed the lab information. (And for those who wondered about the ability to make jet fuel from oil shale, they also added this table:

Jet fuel from oil shale (Courtesy of Shell and DoD) (the table has additional pages)

In contrast Chevron has looked at sending hot gases that are surface generated down and through induced fractures:

Chevron concept for oil shale development (NETL )

The U.S. Bureau of Mines did look at fragmenting the oil shale beds in place and then igniting them for an in-situ variation on the Ecoshale process I described last time (in the sense that the shale is heated within a geological retort).

Bureau of Mines test at Rock Springs (NETL )

And I have previously written about the paper on the ground freezing test that Shell has carried out:

Shell freezing test

There is work being done by Total (who slipped in a comment that oil supply may peak before 2015. They see the world potential supply from oil shale as being measured in trillions of barrels of oil. They are collaborating with Petrobras in surface retorting programs and along with other companies encouraged by the Jordanian government evaluating deposits in Jordan, which is also examining microwave heating and Morocco. They are collaborating with Independent Energy Partner on geothermal fuel cells for in-situ heating and looking at downhole radio-frequency heating. There has been a subsequent paper on the Moroccan oil shale development.

The use of radio frequency heating was described, with the Bechtel/Parsons conclusion that the process could yield an EROI of greater than 3. And the potential for using wind energy to power the microwaves was advanced.

The program being developed by EGL where the heating is supplied around the outside of a series of wells was also included.

Representation of the EGL plan

There is a report available on unconventional fuels that looks at oil shale, transmitted in December 2008. There was also, from August of that year, a complimentary list of companies carrying out research into oil shale and tar sands.

The Power Engineering Institute in Moscow discussed some of the work being done in Russia on both their deposits and those in other parts of the world. The Narva thermal refinery in Estonia has, for example, increased production to over a million barrels exporting about 40% of the product. The plant uses ash as a pre-heating step, and used automobile tires as part of the feed stock. A better list of some of the oil shale projects can be found at the Oil Shale Association.

One thing is clear from perusing both the Proceedings and the additional papers that I have chased up to try and update some of the information. The Oil Shale resource around the world will become an increasingly viable one as the price and availability of conventional oil become more of a strain on the world and individual nations. This is being recognized by countries such as Jordan, China and, Thailand. Plans range from continued examinations of more exotic methods for oil recovery, to the more conventional mining and surface retorting. The level of activity appears to be rising again, and thus while the continuous posting on the topic will now halt, I will come back to the subject intermittently in the future. It is a comment on the perceived future scarcity of conventional oil, that this subject is receiving so much attention.