OGPSS - Global oil demand and Iranian production

One of the headlines this week has come from the IEA Report that suggests that the United States will be the top global oil producer in five years. Yet back in DeSoto Parish in Louisiana where the Haynesville Shale discovery in 2008 started the bonanza, revenues are now falling and school board budgets are being tightened as the end of the glory days are now beginning to appear.

Just this week Aubrey McClendon has said that Chesapeake’s prospects for oil in Ohio, where Chesapeake had high hopes for the Utica Shale, are now dim. It is easy to look at one of the large maps that the Oil and Gas Journal include in their print editions, showing all the shale deposits in the United States, and to be carried away (as the IEA apparently are) with the vast acreage that is shaded on the map. Unfortunately, as we are seeing, reality tells another story. The size of the resources have been measured in the past, and with the best plays being given preference, the recognition of decline rates, and unprofitable wells have not yet been given the prominence in the popular press that they will ultimately draw.

Figure 1. Shale Plays and Basins in the United States (Oil and Gas Journal)

It seems unrealistic to anticipate the levels of production that are now being projected for future North American production of oil. But, nevertheless, these do tend to crowd other stories on the subject out of the spotlight. And further, if the predictions for American production gains, even in the short term, turn out to be optimistic, then the impacts may be more exaggerated than is currently appreciated. Consider that OPEC now expect that North America will continue to provide the greatest y-o-y increase in supply over other nations, and there are, in fact, very few other nations that will be contributing that much more in the next year.

Figure 2. Non-OPEC supply growth expressed as a year on year change. (OPEC November MOMR)

The MOMR notes that UK oil production has fallen below 1 mbd, for the first time since 1977, while Norway’s production has fallen to levels not seen since 1990. These numbers are part of an overall revision of non-OPEC production for 2013, which OPEC now sees as coming in, as follows.

Figure 3. OPEC projections of non-OPEC production for 2013. (OPEC November MOMR)

In regard to OPEC production, the MOMR has, again, two tables for their production, with the first showing that based on secondary sources.

Figure 4. OPEC production based on other sources ((OPEC November MOMR).

The tables show that Iranian oil production continues to decline, by around 47 kbd from September to October. Yet other sources are now reporting that both China and South Korea may have been helping Iran increase oil exports. As a result production may have increased 70 kbd, instead of declining, though the overall volume remains at around 2.7 mbd, of which exports rose from 1 mbd to 1.43 mbd.

When the “as reported directly” table is compared, Iran is shown to be still producing at around 3.7 mbd.

Figure 5. OPEC production based on direct communication with the producing country ((OPEC November MOMR).

Within Iran the government has partially reduced the subsidies that it was providing for gasoline, which initially reduced demand by about 50 tb/d, and flattening internal demand. But, as we enter the colder months OPEC is estimating that demand will again start to rise.

Concurrently Turkmenistan has stopped exporting natural gas to Iran. Normally Iran would increase imports, over the winter months to around 1 billion cu.ft/day (bcf/d), although this import is partly for geographic reasons, and Iran has, in the past, exported about 80% of the equivalent volume to Turkey. Iran has, apparently, suggested that Turkmenistan increase the delivery to 1.4 bcf/d, but since Turkmenistan can now get a good price for its gas from China, there is more of a debate this year over price, without agreement at the moment. Iran also swops around 35 mcf/d of natural gas with Armenia, in return for electric power.

As a way to try and work around the current sanctions, Iran has been changing to a scenario where it can move more of its oil using its own tankers. The country had been storing millions of barrels in part of this fleet, but that volume is being sold so that the vessels can, instead, haul oil. And there is the possibility that the insurance on these vessels has been “fiddled” to get around the burden imposed by sanctions.

Internally the sanctions are having considerable effect.

Although the government maintains that the official inflation rate is 25 percent, . . . with some analysts claiming that actual figures are double the government rate. In addition, unemployment has soared, with estimates stating that between 500,000 and 800,000 Iranians have lost their jobs. . . . . ."Business is drying up, industry is collapsing. There's zero investment," said an Iranian businessman in September. . . . .the government has attempted to shield the lower classes by offering them cash handouts and subsidizing certain imported staple goods, making them relatively affordable for poorer segments of the population. But even these efforts have had a limited effect, as the price of goods such as Barbari bread went from 1,000 rials to 5,000 rials last week.

There are even suggestions that the economy could “essentially explode” by next spring. On the other hand there are ways of getting around sanctions, and these may allow the crisis to continue to simmer for some time.

All of would suggest that exports of Iranian oil will not be easily available for some time, although, with a new regime in China their commitment to maintaining current levels of trade is now not clear. China will open two new refineries one for 240 kbd in Quanzhou that is scheduled to start next June, and one for 300 kbd that is to be located in Zhanjiang, with oil for the latter anticipated to come from Kuwait. Nevertheless it may be that China, which is currently taking about half the Iranian exports might find it possible to accommodate more.

OGPSS - The top 30 oil producers, a review

These posts have been going through the EIA list of the top oil producers in the world, over the past few weeks, I thought I might just review them collectively, but briefly, before starting to look at individual countries and oilfields. Even the posts that I have written recently have become out of date with new information (Russia increased production again in February by 20 kbd over January reaching 10.23 mbd) and then fell back to 10.2 mbd in March but at this stage, rather than focusing on such details, I am trying to generate a sense of the overall picture. It should also be recognized that I am just grabbing a snapshot of data, rather than the more detailed studies that look at the longer term, which folk such as Rembrandt, Rune and Euan provide. The simplest way to do this is to place my current estimates of production for the top 30 oil producers that I have reviewed in this series against the EIA estimate of their production in 2009.

Top 30 oil producing countries (those increasing production over 2009 are shown in red). (Click on the table to enlarge it)

It is significant to note that while Saudi Arabia was producing 8.05 mbd of crude in 2009, this has risen to 8.869 mbd on average for February as the Kingdom increased production to match the shortfalls in oil exports from Libya, inter alia. (With roughly 1.8 mbd in “other liquids” this takes total KSA production to 10.67 mbd and moves it back to the top of the League. However those numbers were from the March MOMR, which reports on February, In that report Libya was still being recorded as producing around 1.3 mbd). It is now reported that overall OPEC was not able to match the Libyan decline in March, falling about 350 kbd short, while KSA production has now reached 9 mbd, (10.8 including other liquids).

Contrary to President Obama’s recent remarks the EIA are anticipating a decline in US crude oil and liquids production over the next two years, part of which has been blamed on the change in GOM regulations. As a result it would be optimistic to anticipate much more than a US production of 8.3 mbd (and the EIA project it will be down to 8.2 mbd next year). It is unlikely that US production will increase beyond that point.

US crude and liquid fuels production – (EIA )

With China, Iran, and Canada holding relatively steady in the short term, this gives an updated total of 39.83 mbd for the top six, which is about 1.4 mbd higher than when I wrote the initial post back in February, but 500 kbd below the EIA estimate for their 2009 production. (While Russia and the KSA increased, the USA and Iran declined). Of these it is likely that only the KSA can continue to increase production much more.

In the second tier, Mexican production continues to fall, and was down to 2.556 mbd in February, with reports that it will now be an oil importer well before 2020. Exports have already fallen to 1.23 mbd, which does not bode well for customers. The United Arab Emirates (UAE) have, like the KSA, increased production to help out, though so far this has only been up to 2.394 mbd from 2.3 mbd for most of last year. (They also produce roughly another 500 kbd of other liquid fuels). By 2020 they should be able to produce up to 3.5 mbd. And in similar vein Kuwait, now producing at 2.368 mbd, up from 2,3 mbd. Kuwaiti plans are to reach 3.5 mbd by 2015, and be at 4 mbd by 2020.

The current political turmoil has even persuaded Venezuela to increase production, with OPEC reporting levels of 2.39 mbd for February, a gain of around 100 kbd. Though how long that is sustained depends on the success of the many investors that have been persuaded to invest in the Venezuelan oil sands.

In the third group Norway is declining, being now at just over 2 mbd, and even though it has just announced a major new discovery that will not come on line for at least 5 – 10 years, and in the meanwhile production will continue to fall. Norway needs more discoveries similar to this, however, to be able to sustain production levels extending into the future, since without them production will collapse.

Brazil was touted, by President Obama in his remarks about the Energy Blueprint last week, though the increasing volumes of oil that they will produce remain foreign to the United States, and though they will likely increase production up to around 4 mbd by 2020, rising domestic consumption may well take much of that increase.

Which brings us into the states that has some political turmoil. Iraq has been able to bring production back to around 2.64 mbd (according to OPEC) with the hope of reaching 3 mbd by the end of this year. At the moment about 1.2 mbd of this is exported. One of the great questions of the decade is just how close to a projected 10 mbd by 2020 that Iraq will be able to get. Sadly the continuing conflicts there, though reduced in scale, make it difficult for me to see much beyond 5 mbd by 2020.

Nigeria, which has had its own internal conflicts for some time, is going to the polls as I write this, and the expected winner is planning to overhaul the oil industry. However, if stability continues, then it might be possible to resurrect some of the older fields and perhaps increase overall production by some 350 kbd.

Algeria, which has had some turmoil, but may emerge from the ongoing protests without much change, is producing around 2 mbd of liquids. That has not changed as OPEC has moved to match the decline in volumes from Libya and other countries facing protests, and may reflect the current maximum that the country can produce. In the stability stakes I suspect that Algeria may survive without much change, although the plot I put up from Energy Export Databrowser does suggest that production may have peaked.

Algerian oil statistics (Energy Export Databrowser)

Angola is currently producing 1.7 mbd but may add some 650 kbd this year, for a total of 2.35 mbd. And that brings us to Libya, where the increased fighting, particularly over the oil refinery town of Ras Lanuf, makes it increasingly unlikely that the 1.7 mbd which came from Libya will be available again soon.

The United Kingdom is in significant decline, but recent moves to further tax the oil industry have made it possible that the decline may steepen. This because the new taxes proposed will likely reduce the profitability of the field developments proposed, discouraging their development. Recently production has run at 1.35 mbd of liquids, which is scheduled to drop to 1.3 mbd this year, and 0.94 mbdoe of natural gas, anticipated to fall to 0.85 mbdoe this year. The criticality of investment is shown in the projected production over the next 5 years, with the different colors showing the likelihood of success. Note that the grey of current production is declining at about 10%.

UK Projected Oil production (2011 UK Oil and Gas Activity Survey )

UK Projected Natural Gas production (2011 UK Oil and Gas Activity Survey )


Moving to the next tier down, Kazakhstan is now at 1.6 mbd and slowly increasing production toward a target of 3 mbd by 2020. Qatar is running at 1.4 mbd, but with almost 0.6 mbd of that in NGL. Indonesia is producing right around 1 mbd and may maintain that in the short term. It is being challenged in rank by Azerbaijan which has just incremented up to 1 mbd, a volume that is expected to continue to rise until it reaches about 1.25 mbd in 2014.

The tier that lies below 1 mbd starts with India, which is currently holding a production of around 878 kbd, and having to import increasing amounts of oil to meet demand. Given that the country also subsidizes the price, this is becoming an increasingly expensive consideration for the government. India is followed by Argentina, which is post peak and declined to 0.76 mbd most recently. Egypt is similarly declining, now to 660 kbd, but as one of the early nations to change under the most recent protests, and with the situation still somewhat fluid, it is difficult to predict how much the country will have both for itself, and for external customers, a year from now.

Oman will likely weather the current storms, and is also increasing oil production, to the point that it is moving up to pass India, with an Omani production of 863 kbd, some of which is tied to NGL production.

In the final four that produce more than 500 kbd Malaysia is barely maintaining production at 700 kbd, while Australia has fallen from 588 kbd to 540 kbd. Both are now being passed in production by Colombia, one of the “hotter” places for development at the moment, with production rising to possibly 920 kbd this year. Ecuador, which closes out the top 30, has recently increased production from 485 to 504 kbd.

That completes the top 30, and accounts for some 76.7 mbd of production. Those same countries back in 2009 were reported by the EIA as producing some 79.23 mbd of oil. Remember that world demand is anticipated to increase by somewhere between 1.4 and 1.6 mbd this year, and that of this list of 30 only 13 increased production, and the rest declined and the concern for the future becomes thus more clearly defined. (The difference between the two totals is partially explained by the loss in Libyan oil - we will see within the month how well OPEC covers that).

But it is not the overall production from the world that can be estimated that accurately, but by looking at individual countries and, in some cases, individual oilfields that we can get some better sense of what is to come. So the next step will be looking at these nations in more detail, in the weeks ahead.

OGPSS - Lower second tier oil producers - Norway, Brazil, Iraq and Algeria

This current series of posts is aimed at an overview of the top oil producing nations, seeking to establish how the ranking of the countries is changing from the original table that EIA put out in 2008, After looking at the conditions governing the top six, this was followed last week when I looked at the condition of the following three (Mexico, UAE and Kuwait) in a little detail, but, having spent four posts on Veneuela in the recent past forebore going back there again.

Source EIA

It is worth recapping, however, that the initial order has changed, and that, currently Russia is at the head of the League, slightly ahead of Saudi Arabia., and both producing somewhere around 10.2 mbd. I’ll go more into that detail as the posts focus in on the individual countries later. The United States production, if one includes ethanol, is around 8.2 mbd, and this is in third place,. China has moved into fourth place, slightly ahead of Iran which is followed by Canada. At present these six appear to be the only countries producing over 3 mbd.

In the next tier down I have already mentioned the United Arab Emirates, which have moved into 7th place, with a production of around 2.81 mbd, how ahead of Mexico, albeit perhaps barely (based on the addition of NGLs etc). As with the UAE Kuwait has been limiting production in line with OPEC requests, but while only producting at around 2.35 mbd at the moment, is looking to increase this to up to 3.5 mdb by 2015, which would move it into the top tier. Venezuela, although it too has some grandiose plans, based on the potential increases in production from their tar sands, is currently producing at down around 2.26 mbd. As I have mentioned Venezuela does have plans to raise production to 4 mbd by 2015. However recent commitments to China of up to 1 mbd and problems that Venezuela continues to have in meeting current obligations leaves a large question mark on those predictions.

And so we come to the lower half of the second tier.

In order to create the current ranking we have to first work out what the current levels of production are, and the future potential. So let’s start with Norway, since that country did rank 11th in 2008. Statoil has noted that their equity liquids production fell to 1.945 mbdoe in the fourth quarter of 2010. Statoil anticipate that there will be little change in production this year, but that there may be a slight rise thereafter. Statoil is not, however, Norway, being responsible for about 80% of the countries production (with properties abroad as well) but I mention it as indicative of the trends. One hopeful sign of which been the agreement with Russia that defines who owns what in the Barents Sea. However when we look at the long-term Norwegian trend is is recognizably downwards, with the Norwegian Petroleum Directorate predicting a 1.7 mbd average production in 2011. The Directorate is predicting that oil production will fall to 1.54 mbd by 2015. This does not consider other liquids and if these are included, while the overall total still lies below 2 mbd, it is currently a lot closer to that, though that is not expected to last.

Norwegian oil production in 2011 (Norwegian Petroleum Directorate)

In January this total, was made up of 1.836 mbd of crude oil, 256 kbd of NGLs and 69 kbd of condensate. Most of Norwegian production is exported, and the percentage can be seen from the EIA Country Analysis. The relatively flat domestic production is (as we have discussed with the Export Land Model) not typical.

Declining production, and thus exports of petroleum from Norway (EIA )

Natural gas production, on the other hand, is continuing to rise, though it depends on finding and developing new fields, and 95% of this is exported.


Norway produced 3.65 Tcf in 2009, with the majority of production coming from the Troll, Oman Lange and Asgard fields.

The next country down the 2008 list was Brazil, and here there is a change in order since Brazil is now rising past 2.12 mbd of crude production in December, moving ahead of Norway. Offshore production in the Tupi field, which may hold 6.5 billion barrels of oil, will be followed by that from the Jupiter field, possibly of similar size. The fields fall deep offshore in the Santos and Campos Basins, which will deserve a couple of posts on their own, down the road.

Location of the Santos and Campos Basins off Brazil

Development has now started.

The Tupi field is being developed as a pilot project in two phases. In the first phase tests will be conducted to gather information about the future production systems. This phase is expected to end in 2012.

The second phase is expected to start from 2012 and will include two parts. In the first part (2012-17) ten production units will be installed at the field with 20 producing wells and injectors expected to be drilled during this time.

In the second part of phase two (after 2017), new technologies such as dry completion units will be employed to recover oil and natural gas from the field.

Brazil plans to double crude production from the current 2 mbd to 4 mbd by 2020, reaching 3 mbd by around 2014. However overall liquids production is already at 2.7 mbd and the EIA anticipates that this will rise over 3 mbd by next year. With the cumulative liquid totals Brazil has also passed Venezuelan production and may soon be competing with Kuwait as they both move into the top tier.

Brazil also produces ethanol, mainly from sugar cane, with production at around 450 kbd However, with a growing economy, the country does not, as yet, have much of its production available for export. (The BP figures are a little more pessimistic than those of the EIA).

Brazilian oil information (Energy Export Databrowser)

Brazil continues to find oil onshore, most recently in the Amazon Basin and this bodes well for the targets that it now envisages.

Brazil gets most of its electric power from hydro-electric power plants, but is able to use the natural gas that is recovered during oil production to meet about half of the national need for gas, the rest being imported.

The next country on the original list was Iraq. And this poses a problem of prediction since we have to decide who to believe in the tales of competing numbers that have been used, among other places by BP in predicting the sources of future oil supply. The problems in this case are as much geo-political and locally ethnic and religious as they have to do with the capabilities of producing oil. At the moment Iraq has finally got back up to a production level of 2.6 mbd not that this will necessarily help Western imports that much:

The rising output will boost Iraq’s oil exports by 5 percent to 2 million barrels a day next month, Falah al-Amri, head of the country’s State Oil Marketing Organization, said today in an interview in Baghdad. The nation sells about 60 percent of supplies to India, China and other Asian countries where demand is increasing, he said

In January, OPEC reports, Iraq produced a total of 2.7 mbd, which was 300 kbd up on production in the last quarter of 2010. To put this in context in February 2003, just before the conflict began, Iraq was producing 2.8 mbd. At the moment production is centered on the North and South Ramalla fields and that of Kirkuk in the North. The problems of Iraq are not so much, in the short term those of most of the rest of the world, i.e. in finding more oil. In the immediate short term the information on fields that have been known for some time (and in some cases were previously producing) already exists. What is needed is some way of ensuring that the infrastructure is repaired and, if necessary, new pipelines laid. Those plans are now advancing although it is now going to be more difficult to foresee their short-term success, given the developing turmoil in the region. The EIA has posted a table showing the potential from the different regions.

Estimate of oil availability in Iraq

Consumption in Iraq has been fairly stable until about 2007 where it started to climb, and, given a little more stability in the country, it is reasonable to expect that it will surge as it has in much of the Middle East. On the other hand it is a little difficult for me to see production rising to the 12 mbd figures that are now discussed as being possible for Iraq by 2017.

Until recently Iraq was flaring more than 60% of the natural gas that it was producing (perhaps as much as 1 bcf/day) One option that is open is to pipeline some of the gas up to Turkey and then feed it into the Nabucco pipeline. There is a hope that this can lead to exports of up to 2.5 bcf/day but new legal hurdles are continuing to delay progress. Apart from resurrecting the pipelines there is also the possibility of installing an LNG train or two.

And when one is considering the growing instability of the region, the next country down the list is Algeria, and that has now started to be mentioned among the countries feeling the fallout from the initial protests in Tunisia. The Algerian Foreign Minister is denying the risk of a “domino” effect. Possibly this could be because, as it is reported the income from oil and gas sales can, in this case help.

Unrest in Algeria could have implications on the world economy since it is a major oil and gas exporter, but analysts say an Egypt-style revolt is unlikely because the government can use its energy wealth to placate most grievances.

There are, however, other opinions.

Algeria is a member of OPEC, which reports the January 2011 production of oil at 1.28 mbd, which has been relatively stable for some time. The EIA consider that the crude is some of the finest in the world . Production is supplemented by condensate (450 kbd in 2008) and NGL (357 kbd) for a total liquid fuels production of over 2 mbd. It is the largest oil-liquids producer in the African continent.

Algeria, which operates the oil and gas through the company Sonatrach exports most of its natural gas, through pipelines to Europe and through LNG terminals, with a new one that is to be completed in 2012. Total exports are around 2 TCF making it the fourth largest exporter. (CIA 2011 World Factbook). Gazprom has recently become involved in field development. It also provides a useful fuel for the processing of fertilizer in Morocco, as Jeff Vail noted, back in 2008. As one of the world’s largest exporters of natural gas, Algeria supplies Southern Europe.

The part of the Algerian gas in the gas balances in some European countries is significant. 86% for Portugal, 61% for Spain, 49% for Italy, 26% for Belgium, 25% for France and 21% for Turkey. Today about 97% of Algerian gas exports supply the European market next to Russia, and Norway, one of the main suppliers of the Europe. Algeria accounts for 29 percent of European Union gas imports and 15% of gas consumption

Algerian natural gas delivery network

The Algerian reserves are found in the Sahara

• 67% of oil and gas reserves contained in the Oued Mya and HassiMessaoud areas, where the two giant fields Of Hassi Rmel (Gas) and Hassi Messaoud (Oil) are located. 

• The Illizi basin comes third with 14% of initial reserves;

Then come the basins of Rhourd Nouss (9%), Ahnet Timimoun (4%), and the Berkine basin.

Algeria is hoping to increase exports by 50% by 2015, using a new pipeline into Spain to help develop the European market.

But the current turmoil may make some of these plans moot.

Carbon Sequestration sites and their success

There are a number of questions on the ease with which carbon dioxide can be sequestered underground, and I alluded to some of them in yesterday’s post. That led me to a quick review of the status of the concept, and I thought I would pass on information from some of the papers that I looked at. Some of the different options that can be used for carbon dioxide injection underground are illustrated by a review of the Polish program.

Different options for carbon dioxide disposal underground.

Of these the use for enhancing oil recovery has, perhaps the longest history. Some sense of the work can, perhaps, be seen by looking at CO2 injection at the Cranfield site in Mississippi.


The site is in an oilfield that was discovered in 1943, and abandoned in 1966. Since that time, under the influence of a strong aquifer drive, it has returned to its original reservoir pressure. There is a layer of residual oil, under a gas cap..

Section through the Cranfield site

The site is actually a dome, folding in both directions, so that the residual oil forms a ring. It is a part of the Tuscaloosa Formation, which MIT has calculated should be able to retain some 10,000 million metric tons of CO2. Adjacent continuations in East Texas and the Gulf would add an additional 187,000 million tons of capacity. Validation of the performance of the test site would thus go a long way to answering some of the critics of the technology. Because of the limited volume of oil available, the project is also looking into injecting CO2 into the brine interval during the third phase of the program.

At Cranfield the CO2 has been injected continuously, starting in July 2008, at a rate of 500,000 tons per year. so that, as Professor Economides discussed, the injection pressure remains high. At present the analysis of the samples shows little change in the water chemistry as a result of the injection. Last November it became the fifth site in the world to store more than a million tons of CO2. Monitoring of the pressures as the third stage has begun, does show a pressure increase, although this may be injection rate sensitive.


Monitored pressures for Cranfield 3 (U of Texas)

A second site is being prepared in Alabama at the Citronelle oil field, near Mobile. Both carbon dioxide and water will be injected at that site, with the intent that the CO2 will allow an additional 15 to 20% increase in overall production from the field, before the site is left to sequester the CO2.

In the United States, CO2 injection has already helped recover nearly 1.5 billion barrels of oil from mature oil fields, yet the technology has not been deployed widely. It is estimated that nearly 400 billion barrels of oil still remain trapped in the ground. Funded through the D.O.E.'s Office of Fossil Energy, the primary goal of the Citronelle Plan is to demonstrate that remaining oil can be economically produced using CO2-EOR technology in untested areas of the United States, thereby reducing dependency on oil imports, providing domestic jobs, and preventing the release of CO2 into the atmosphere. . . . . . . When the 5-month injection is completed, incremental oil recovery is anticipated to be 60 percent greater than that of conventional secondary oil recovery by water flood. A recent study by Advanced Resources International of Arlington, Va., estimates that approximately 64 million additional barrels of oil could be recovered from the Citronelle Field by using this tertiary recovery method.

In the last Oil and Gas Journal survey (April 2008) they found 100 miscible ongoing CO2 projects and 5 immiscible ones, with enhanced oil production, at the beginning of 2008, running at 250,000 bd.
Costs for CO2 EOR have been given as $20.86 boe, divided out as follows:
* $3.68/boe for CO2.
* $5.72/boe for power and fuel.
* $3.34/boe for labor and overhead.
* $2.00/boe for equipment rental.
* $1.36/boe for chemicals.
* $3.05/boe for workovers.
* $1.71/boe for miscellaneous.

One of the Centers most active in the monitoring of CO2 plumes as they migrate from the wells out into the formation is at the University of Texas-Austin. Sue Hovorka, for example, monitored a CO2 plume migration after it was injected as part of a test in the Frio Blue sand, although in that test the injection was of the gas.

Several times a day during injection, trucks hauling 20-ton tanks of cold liquified CO2 arrive at the test site, where it is transferred to two 70-ton storage tanks. The CO2, which comes from a natural reservoir near a Mississippi salt dome, is transported most of the way by train.

During injection, the liquid CO2 is pumped through a heat exchanger, which warms it up to 21 degrees C (70 degrees F), converting it to a gas. Then it is pumped through the injection well head and a mile down the well. The CO2 enters the porous sandstone and brine through perforations in the well casing and spreads out in a plume.

She also described, briefly how the process was supposed to work.

Before the first tests, the scientists had predicted that an effect called residual saturation, caused by capillary forces, would cause the brine-filled pores in the stone to trap and hold about 20 percent CO2. The other 80 percent moves on to the next set of pores, and as it moves, it’s continuously diminished. In other words, the plume smears out. Hovorka said the effect is intuitive.

“It’s the same reason you can’t get grease off the stove,” she said. “You can’t wash it loose with water, you have to use soap.”

The 2004 test confirmed this prediction and now initial results from the 2006 test seem to reconfirm it. “It means we got the physics right,” said Hovorka. It also means she and her colleagues can predict the CO2-trapping ability of other sites before injection begins, a powerful and necessary tool for carbon sequestration to become a common practice.

Polish trials have looked at displacing natural gas with CO2 in a program that has been going on for over 12 years Part of the process at the Borzecin site was to inject the gas into the underlying aquifer beneath the natural gas pocket. The CO2 dissolves into the water and so the migration to the gas pocket occurs only very slowly, the gas is at 1,500 psi (just above the critical pressure) when it enters the reservoir). The gas displaces natural gas that had previously been dissolved in the aquifer, yielding about 60% of the injected volume of CO2, as natural gas from the production wells.

One event that this test showed, which perhaps Professor Economides had not considered is that the dissolved CO2 appears to have interacted with the water, over time, to form a carbonic acid, that ate into the carbonate rock, and increased the permeability of the formation, lowering the pressure required for injection, rather than, as he had anticipated, having it rise. The site has now accepted more than 1.4 million scm.

CO2 has also been tested as a means of displacing methane from unmined coal seams. The initial project was completed in 2005

During the project 203 tonnes of CO2 were supplied to the site and stored in tankers. The CO2 is taken from the tankers where it is already stored under pressure and then injected at the injection well (MS-3 well). The injection well was a new well drilled down to a depth of 1120m for the purpose of this pilot project. The target seams were thin coal layers that were bounded (above and below) by highly impermeable shales. The pre-existing coal bed methane (CBM) production well (MS-4) is 150m from the injection well. A tank by the production well stores the saline water which is a by-product. This is emptied and disposed of on a weekly basis. The produced gas (naturally - 97% methane, 2% CO2) is flared. Since December 2004 there has been a gradual rise in CO2 content of the produced gas, the latest figure is 8% which may represent breakthrough of injected CO2 at the production well.

Modeling of the process is not yet fully functional, and in contrast to the more conventional reservoirs for oil and natural gas, the large fracture patterns in coal, known as cleat, play a greater part in the performance of the coal beds and must be included in the analysis.

Nevertheless the tests of the different methods for storage, and use of CO2 injected into the ground have been successful. The most widely recognized, however, is that carried out by Statoil, with Sleipnir the most documented. By 2004 Sleipnir had been injecting CO2, which is produced at an unacceptable 9% in the natural gas extracted at the site, at a level of a million tons a year, since 1996. Because of the length of time that the injection had occurred it has been possible to map the migration of the CO2 over that time. The initial injection is at a depth of 1,000 m below sea level.


Pattern of CO2 injected flows from the injection well at Sleipnir after 3 years

If I read the plots correctly the injection point is aligned with the deepest point in the picture and the flow path is about 2 miles long on its greatest extent.

The site continues to be monitored, as injection continues, with migration being downward under the containment of the cap rock.

Seismic surveys of CO2 migration at Sleipnir

It is expected that the CO2 will slowly dissolve into the brine (over hundreds of years). The scale of the above is exaggerated vertically since the height of the plume is around 600 ft.

The success of the program has led to the Snohvit Project which again takes the CO2 from a natural gas supply (in this case at 5% CO2) and stores it underground.

The success of these projects, and the changes in conditions from the simple models initially assumed to the more complex considerations that have had to be undertaken as the storage has continued to accept high levels of CO2 in some cases, and only high injection rates in others, nevertheless combine to suggest that Professor Economides models may be overly conservative.

Pick Points from Poland

Well, I’m back in Poland after a quick trip to Stavanger, where the price of things was notably different. I suppose that comes with some of the rig crews coming to town to spend some of their income. This is just going to be an assembly of small thoughts, given that the day job requires a fair amount of preparation each evening for the meetings the following day – plus some of the discussions are, naturally, not something I can write about.

One of the first things that our Norwegian host said as we walked over for the first lunch was to point out the irony that Norway, the great oil and gas producer, only makes one car – and it is the electric Buddy . The price seems to be in the $30,000 range – though it is hard to assess what it might be elsewhere given (as noted above) the high prices in Norway, and that I got charged 20% commission on changing my money at the Spar Bank in the airport (confusing my estimate of the real rate of exchange). You should be able to go 50 to 75 miles between charges, at speeds of up to 50 mph.

Both in Norway and Poland I was impressed with the amount of granite that is now being used in the city centers for roads and pedestrian walkways (in Poland in places this just means removing the overlying asphalt). It should be a local industry given the local rock in both countries – yet the crates waiting to be unloaded in Stavanger had Chinese routing labels. Both countries also encourage bicycles with wide cycle paths as part of the walk way – but informative signs for illiterate (in the local language) tourists might have helped those of us who initially walked in the wrong part of the street.

I am currently in Wroclaw and it is after dinner, so I am a little too lazy to check the number, but our host at dinner mentioned that the town will see an influx of 140,000 students next week as the new term begins. They will bring with them, or soon buy, some 30,000 vehicles. Apart from other, social benefits, there are simple financial reasons to do so. Living out of the heart of down town can reduce living costs by about two-thirds, and so the expense of the car can be written off in just a few months, faster if you provide chauffeur service to a couple of like-minded friends, who can also share the accommodation.

Now this doesn’t disparage the local public trams, electrically powered, that are still very popular, and have both old and new versions running very regularly – but in the rush hour these are packed. (We actually walked the 25-minute route that my colleague followed every day he was an undergraduate from the dorm to the campus – it is now a strange mixture of contrasts with many of the old buildings restored and repainted, or replaced with modern construction. Only the odd building remains as it was during Soviet times – still dirty and dilapidated. (I need to dig out my slides from back then, when I first came here).

The papers and talk shows remain focused on the tragedy in the coal mine that happened last week with some commentators talking about changing to purchase of cheaper Chinese coal, rather than using the more expensive (since it is deeper) Polish coal. Our discussion at dinner went through that topic in about two sentences, since the Chinese need most of their own, and Poland has to (for a variety of reasons) have some reliable domestic energy resource, and they have concluded that coal is (for the next generation) pretty much it.

A minor note of amusement, since it getting rather late here, the stories that I hear from locals about what the new Japanese Prime Minister actually said about climate change and the new Japanese Government response don’t seem to equate to the reports in the western press, but the conversations are very second hand this falls more under the heading of general gossip.

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An Oil Museum, some old and new Gas Fields

View of Stavanger from the Oil Museum

It has been a beautiful day in Stavanger and so naturally I wandered over to the Oil Museum on the quayside to see what it had to show.

The Oil Museum, Stavanger

Going in past the world’s largest drill bit ( 90 cm (35 inch) diameter) the first exhibit showed how the earth changed as the algae first created the oil and gas beds, and where (with a loud bang) the meteorite strike in the Gulf wiped out the dinosaurs even as coal was being laid out. I might mischievously mention that the Secretary of Energy might want to watch this to correct his ignorance of geology but will save that until I can scan in some of the pictures from the guide. (One of my beefs from the visit was that there were no DVDs or good literature at the Museum that you could take away, but this is ameliorated by the amount of material available at the web site, if you drill down into some of the pages).

I was particularly interested in some of the drilling platform models, since I plan to use the pictures I took, when I write about this on one Sunday in the future. Since some of the platforms were built before the days of 3-D modeling in engineering the models were accurate enough to ensure that there would be no geometrical problems as the real platforms were build (right across the harbor).

There were three significant exhibitions that were particularly interesting – the first being the Frigg natural gas field.

Frigg gas field location (Total)

The field was brought into production in September 1977 and ceased operations on 26th October, 2004. (Though they have recently found a new small field nearby). At its peak between 1978 and 1987 it produced 16.5 billion cubic m of natural gas a year that supplied a third of the UK demand, producing in total 192 billion cu m of gas. Peak daily flow reached 80 million cubic meters/day (2.8 bcf/day).

The exhibition also described life on the rig. Interestingly, as time went on, the working arrangements changed.

The length of an offshore tour compared with time spent on land varied during Frigg's history, but the trend has been towards increasing leisure. When the field began production in 1977-78, most people worked eight days on Frigg and then had eight days off ashore. That changed to two weeks at work and two weeks free, and then two weeks on, three weeks off. Towards the end of the production period, time on land had risen to four weeks with 14 days offshore.

The production history of the field was shown, and the facilities are now decommissioned as the field production has been completed.

The main website also gives access to a web site on the Ekofisk production facilities.

The latest video showed a visit to the new gas facilities as Ormen Lange just before the field was developed and connections made to bring this gas to the UK, where it comes ashore at Easington.

Ormen Lange location (Rigzone)

The video shown, The Traveller, has won Hollywood Awards, and a shortened version of it seems to be available, though not at the web sites listed. I found the short version on UTOG - (because of Ian Wright’s accent the film has sub-titles). The film shows some of the problems, first in drilling through the templates to establish the field, then the need to add anti-freeze to stop methane hydrates forming in the line in the cold of the bottom of the North Sea (up to 3,600 ft deep) as the gas travels to land, and then the problems of making a path for the pipeline over rough and dangerous seabed sections.

Ormen Lange (Long Serpent) is operated by Shell and is Europe’s third largest gas field, stretching some 25 miles long, by about 5.6 miles wide. The reservoir is some 9,000 ft below the surface, and the gas is found in a sandstone deposit that is 165 ft thick. (The original was a Viking Longship).

Computer model of the field (Shell)

The field will produce 20 billion cu m/year the equivalent of Norway’s total energy demand but will supply only 20% of the gas needed by the UK. (Note that the associated revenues from fossil fuel production pay for 31% of the Norwegian government budget). There are estimated to be 315 bcm in place so that the field will last in total some 40 years, though there will be declining production and the gas will need to be compressed before being put into the pipeline after the first 10 years. Full production (2.4 bcf/day) is expected before the end of this year, after four new wells are completed. Production statistics can be found at the Norwegian Petroleum Directorate.

The exhibition also addresses some of the problems with diving around the platforms and although there is a video of one of the diving operations (done with avatars and a very good animation) the display notes that much of the work is now carried out remotely without the need for individuals to work in these conditions.

There was also a section showing the precautions that need to be followed if you are going to visit a rig (and which Robert Rapier has described in personal detail).

In short it was worth the visit (we stayed and had a good lunch) and you’ll likely see more of the photographs that I took in later posts. For example there was recently a question as to how the Kelly was rotated, well they had a plastic cover over the drive section so that you could see the gearing and chain drive from the motor on the full-sized model of the rig floor. They had to do away with some of the other features to show it however.

Kelly drive mechanism (Oil Museum)

They also showed what the bits look like when they are brought back out of the hole.

Worn bit (and bit teeth)

Well that was about it for the day - we had a good lunch, as I mentioned, and then this evening it was time to sit down and prepare for the real reason for our trip.

P38. Pick Points

Half-a-dozen or so stories of interest:

Until recently if you had tried to talk to me about solar cars, I would have only been able to think of the cars in the American Solar Challenge, a biennial race that takes cars built by university students in races that last started in Dallas and finished in Calgary. Our office has a small glass memento for helping Principia College, who finished second last year (well OK, our car finished 7th). But these are all flat, single person vehicles that can reach (and exceed) the speed limit, but are fragile enough to require protective chase cars. Thomas Friedman describes driving around New Delhi this weekend in an electric car, with solar panels on the roof and 3 other folk in the car. The car is a plug-in electric with a 90 mile range which had just finished a 3,500-km road tour though when you see the size of the car, rather them than me. (The car sells for Rupees 399,343. ($8,196). That does not include the modifications needed for the road trip). The Tesla electric car that is to be made in the United States is waiting for a $450 million federal loan to get started. It is expected to come from the $25 billion loan program for retooling U.S. factories and they hope to get the money in the next “four to five months.” The current plan is for cars to be on the market by 2011 – for a mere $109,000. They have a thousand customers on their waiting list. (If that’s a tad much you might want to chat with John Hendrickson, who made one out of a rusty VW, it does 50 miles per charge and uses gel batteries).

India continues to move ahead with its planned expansion of nuclear power , with two new plants as part of a 2.000 MW expansion being announced as part of a move towards 20,000 MW targeted for 2020, as a way of supplying a country that is currently short about 16% of demand at peak hours. By 2030 the target will rise to 60,000 MW. Uranium will largely come from Russia , though U.S. firms are anxious to become involved, and French firms hope to be able to do some reprocessing since some of the uranium will come from there. Apparently Pakistan was getting some help from Japan as well as China with their nuclear program. Russia is also helping Turkey with its plan for four new nuclear reactors. China is also switching its power emphasis more towards nuclear .

Even the Russians are now taking heed of energy efficiency, though at the moment it appears more of an editorial opinion than a set of programs, though the Germans have been brought in as part of a collaborative program . They also have just opened production at a new oil complex in Western Siberia at Uvat, some 1,250 east of Moscow. (You can see it on Google Earth). Collectively it will produce, in time, some 200,00 mbd roughly. Russian auto production was down 80% in January, but it should be remembered that they take their Christmas break in January, and to help with lagging demand some factories just extended the holiday. Others have been waiting for parts. But this is a y-o-y drop. Natural gas dropped 10% and coal 18%. Checking back in on the most recent numbers relative to those I quoted on the 6th: oil production on the 14th was 1,325,000 tons, (9.71 mbd) in-country refining was 658,000 tons (4.8 mbd); they produced 1,721 million cu m of natural gas, and 739,000 tons of coal. Oil is about the same, but natural gas and coal are down over the last week. Had it not been for the Yuzhno-Khilchuyu production coming on line then Lukoil production would have peaked.

In a move to corner more of the coal bed methane properties in Australia BG Group has raised its offer for Pure Energy Resources. The gas is in north-east Australia and would provide feedstock for LNG facilities that would market the product into Asia. Shell who partnered with Arrow Energy, the BG rival in the bid, is planning a new LNG facility in the region. Japan meanwhile is signing more contracts with Indonesia for future LNG supplies and is being reassured by Gazprom that it can count on it for the supplies from Sakhalin Island. At least this doesn’t go through a Ukrainian pipeline. BG may, however, have another market in mind, since they have just leased an import terminal in India which, as noted above, is greatly in need of more energy. It should be ready to import cargoes by the end of March. In the United States, a new design has been submitted to the FERC for the terminal at Weavers Cove in Massachusetts.

The value of Norwegian gas exported in January was 29.4% higher than the comparable figure last year. And last year at this time they hit a record also. The difficulties in expanding production into the Barents Sea are not seen as a barrier.

More stories can be found at The Energy Bulletin and Drumbeat at The Oil Drum.

"The Myth of the Oil Crisis" - Part 2

Well if yesterday was all misty ice, today was the snow cover that makes getting out of the drive a real challenge. So back to the book, and, today a little Welsh folk (music that is). If you remember yesterday I had got about half-way through “The Myth of the Oil Crisis,” the book by Robin Mills – which gives a petroleum economist’s view of the industry. But we had reached the point yesterday that I was bemoaning his inability to include either a realistic decline rate or depletion of reserve in his discussion of some of the major oil fields.

At the same time, while the book has significant value as a source for the different areas of the world from which we can anticipate getting the second half of the world’s conventional oil production, the factors of time and practicality in getting these reserves to the refinery are not mentioned. The $5 million it may cost to drive a slick-water fracked horizontal well to recover gas from a shale deposit is not given any consideration in the determination of what is still available out there, and that, for an economist is a bit of a lapse.

The second half of the book deals more with the unconventional sources of oil, with the nod given to the heavy oils and tar sands of the world. The book implies that these can be brought into massive production with relative ease, if only the Canadians would run a decent railroad up to Fort McMurray. Well yes they do need one, and a high speed commuter rail would solve a lot of the issues that the town has now with limited space and too many folk with lots of money. But that is not the only reason that production from that large hydrocarbon deposit hasn’t swamped the rest of the world with oil over the past five years. Getting parts for 400-ton trucks up to the site is not something that rail can always achieve, but the greater constraints involve things such as refinery capacity and adequate return on investment, as well as a very conscious effort to work on the environment. And this is a pity, because there is a case to be made for the increasing production that we will need to start seeing from these heavy oils, and from the oil shales of the world. This is not unrecognized (Total just made such an investment this month) but again progress and production is likely, at any significant level to be decades away. Listing and summing up the volumes of oil that might be produced from all these deposits is a useful catalog, but does not really give an honest perception of the volumes that will come into play in the next decade.

Production of biofuels is a whole aspect of fuel production that is likely to have some impact in the future, witness the mention of support that it is getting from the members of the new Administration, and so I cannot resist another quote from the book on this.

Much of biofuels policy revolves less around technology and more on providing sensible incentives that do not distort the market excessively or lead to negative social and environmental impacts.

One of the major factors constraining the advance of the biofuels industry is a current lack of technology that will yield an adequate return on investment, whether in terms of energy or cash. Cellulosic ethanol (as you will likely tire of hearing me explain) is a long way from being an economic or practical fuel source in volume.

Biodiesels are not advancing at the rate that they should, and while I consider algae, for example, to be a very likely future source, the reality is, as Robert Rapier has also concluded, that it remains for the moment more of a research initiative and set of projects. The biofuels industry still needs the heavy investment in development of new technology that the government and industry are making, in order to find viable answers. To project, as he does, a biofuel production rate of 4 mbd by 2020 is, as I have explained in an earlier post not realistic, given that date is only 11 years away. His planned excuse when we reach that time and the fuel isn’t there, will be that we did not make the required investment. This is the same excuse that we have been hearing from CERA for years as their forecasts fell flat, and it is disappointing to find that this book also falls into that mantra.

And yet he looks at the Hirsch Report, and finds that it is too conservative, feeling that it is possible to reduce the lead time for change by at least five years, from the twenty of that report. Unfortunately while this may well work as a theoretical exercise, as I have said before, the practical realities, the steps that must be gone through before, for example, there is a large switch from gasoline powered to diesel powered cars in this country will delay the program back to the more realistic time-frame that the report suggests.

And as a mischievous point I do note that he says

Norway maintains its environmental virtue by importing electricity from its Nordic neighbors to satisfy the shortfall of hydropower rather than building “polluting” gas-fired plants, but this imported electricity is generated largely by Danish coal plants.

Thus while recognizing the demands of those seeking to arrest global warming, he also adds some reality to that discussion. He does provide an estimate of CCS costs, which, at this stage, may be a bit more of a guess than reality, since we arre still waiting for more definite regulation, but the options are outlined.

So, in the end, if you are a cornucopian then this is definitely a book you would appreciate. It provides all the information to justify that position, and discusses the energy situation from that point of view in a way that, were this the only book you read on the subject, would leave you very comfortable about the future.

Unfortunately to do so it has had to gloss over the real problems with that approach. It does not really address the factor of time as it relates to when declining field production combines to swamp the increases in production from new fields. And many of the problems that those of us who anticipate the peaking of oil production can see happening already, the politics, the delays in starting production, the lack of new employees as the older ones retire, and the disappearance of the industrial memory not to mention the myriad others that impose practical limits, have been barely recognized. Had they been otherwise, then this book could not have come to the conclusions that it has.

P23. Pick Points

Half-a-dozen, or so, stories of interest.

Time was when the word Audit would strike fear, since it was (and perhaps still is) associated with a Tax Audit. But, as part of the move to reduce the demand for fossil fuels, the lowest hanging fruit (to follow on Dr Chu’s lead) is conservation and energy efficiency, and to know how to save, one must first know where energy currently goes, particularly in a home. And thus the new emphasis on Energy Audits. It is a term that is now coming to Washington, and last week A WP reporter had one done.

At the end of lat year I wrote about the experience of hiring a professional, but it is possible to do it yourself, though Austin Energy has a web site that might be useful.

Unfortunately this will not help those indigenous villages in Alaska that are currently running out of money after having had to pay the costs of fuel. Because the early onset of winter froze the rivers before the barges could deliver fuel it now must be flown in. Prices have risen to more than $8 a gallon for fuel oil. This was known last August , and by October the Coast Guard was helping get barges in to deliver although in that particular case the problem was low tides. But the price meant that many villages did not get enough, and now they have been calling for help. While there has been a significant response, the State government is considering fuel vouchers as a solution. Alaska is also looking to use some of the stimulus package to put in roads to help with the gas pipeline from the North Slope.

Prices of gas and fuel oil have slowed purchases in Pakistan which now only has 6 days of gasoline, and nine days of fuel oil in storage, though a fresh boatload of fuel (good for five more days) is due on Tuesday. However, because the government is not paying its bill, fuel oil supplies to some power plants, refineries and distributors are being shut off. One consequence is that electricity prices will have to go up, and coal is getting another look.

Over in Bangladesh, recognizing their problems, electricity for farm irrigation is being given priority. The season runs from mid-February until April and irrigation is needed even as the supply of electricity is likely to be about 30% short of demand. Perhaps they can follow India’s lead and use more local solar power. Certainly it got a better press at the Energy Summit in Abu Dhabi, despite the worsening news on funding.

The President of Turkmenistan now feels strong enough to “go it alone”, as demand for the natural gas with which his country is endowed continues to grow. Now the Russians have been happy to buy as much as possible to ship to the West, thereby reducing the supply that will be available for the Nabucco pipeline, and have just had the Uzbek’s fall in line. Yet the shortage of energy sources for India and Pakistan mean that there is an increased urgency in getting a pipeline into Turkmenistan completed. If they can then pay for the gas it will carry. On the other hand not only Prime Minister Tymoshenko, but now President Yushchenko is also calling for the Russia:Ukraine deal to be re-negotiated. meanwhile the head of the Ukrainian gas company is in hospital, and the post mortem continues.

Hmm, maybe I should have been a geologist, with average salaries increasing over 50% last year though costs are now diminishing as demand fades, and oil company earnings also suffer, perhaps cut as much as 50%. Yet smaller companies are continuing to recruit .

Norway is joining IRENA, the international renewable energy agency – at the same time that the Norwegian coal company Store Norske made a large profit as coal moved from $80 to $160 a ton, before falling back to $75. Meanwhile a Russian company is planning on putting a wind farm on the Norwegian:Russian border.

More stories can be found at The Energy Bulletin and at Drumbeats on The Oil Drum
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