Comin' in on a wing and a prayer
Comin' in on a wing and a prayer
Though there's one motor gone
We can still carry on
Comin' in on a wing and a prayer
— World War II song by Harold Adamson and Jimmie McHugh (1943)
There is never a dull moment for those studying the peak oil question. The National Petroleum Council (NPC) released its long-awaited report Facing the Hard Truths About Energy on Wednesday, July 18th. A prepublication draft of the report contained references to a graph (2nd figure, below left) which was subsequently excised from the full report now available to public. The NPC report talks about peak oil, and the missing graph is part of that discussion.
The NPC's view of peak oil is best summed up in this passage from the Executive Summary (p. 19):
Concerns about the reliability of production forecasts and estimates of recoverable oil resources raise questions about future oil supply and deliverability. These concerns are strongly expressed in “peak oil” forecasts in which (1) oil production does not grow significantly beyond current levels and (2) an inevitable decline in oil production is increasingly near at hand. Views about oil supply tend to diverge after 2015, with peak oil forecasts providing the lower bound. These forecasts generally consider oil supply independently of demand and point to supply shortfalls. Such views contrast with forecasts and economic models that expect market forces to provide incentives for developing global hydrocarbon and other resources to meet energy needs through at least 2030.
The "Hard Truths" report makes the point throughout that prices will stimulate supply to save us from medium-term shortfalls. This economist's view of scarcity is embraced by the EIA, whose longer term forecasts out to 2030 are liberally cited in the supply section (Chapter 2) of the document. The EIA's Simple Model of a Complex World (this column, June, 13th, 2007) provides a detailed look at how the energy department forecasts future liquids supply. Their market clearing model shows non-OPEC supply growing primarily as a function of the oil price and anticipated demand, while holding OPEC production at a fixed level in three separate scenarios.
The NPC's excised graph was meant to illustrate how market forces might increase the oil supply to meet growing demand. Adam Smith's invisible hand will supply new oil by means of continuing development of existing conventional oil reserves, new discoveries, unconventional substitutes and enhanced oil recovery (EOR). Examining how EOR might affect the peak of world oil production serves as a warning to analysts like Daniel Yergin, who played a prominent role in putting the NPC report together, and whose unbounded faith in the supply & demand balance prompts him to dismiss peak oil out of hand.
EOR, which is also called tertiary recovery, is used after primary and secondary recovery methods in an oil field have been exhausted. Primary recovery takes advantage of natural reservoir pressure to lift the oil out of the ground. What nature provides is augmented at some point by secondary recovery methods, which involve injection of water or associated natural gas to maintain reservoir pressure. Secondary recovery techniques are now used more and more in combination with infill and horizontal drilling. These methods have resulted in an average recovery of about 33 to 35% of the original oil-in-place for all fields worldwide. EOR is used, where applicable, to raise recovery factors by some percentage in the tail-end of the production curve (graph left, click to enlarge). EOR methods include:
The NPC's absent graph (left, click to open) shows a substantial, growing contribution from enhanced oil recovery starting in the year 2000, and continuing until 2030. In so far as the NPC has backed away from this sample forecast, there is no need to directly evaluate its contents. However, it is safe to say that the National Oil Companies (NOCs) have offered enhanced oil recovery as an important remedy for future oil supply ills.
EOR technology is not some new, miracle cure for recovering additional oil in mature reservoirs, as reporter Jad Mouwad reported in his New York Times article Oil Innovations Pump New Life Into Old Wells. (See a previous column, Deconstucting the New York Times, for an analysis.) The NPC report predominantly represents the outlook of the NOCs, and these views are well represented by the Times. It is educational to quote the article at some length —
The oil industry is well known for seeking out new sources of fossil fuel in far-flung places, from the icy plains of Siberia to the deep waters off West Africa. But now the quest for new discoveries is taking place alongside a much less exotic search that is crucial to the world’s energy supplies. Oil companies are returning to old or mature fields partly because there are few virgin places left to explore, and, of those, few are open to investors...
At Bakersfield [Kern River], for example, Chevron is using steam-flooding technology and computerized three-dimensional models to boost the output of the field’s heavy oil reserves. Even after a century of production, engineers say there is plenty of oil left to be pumped from Kern River.
“We’re still finding new opportunities here,” said Steve Garrett, a geophysicist with Chevron. “It’s not over until you abandon the last well, and even then it’s not over.”
Typically, oil companies can only produce one barrel for every three they find. Two usually are left behind, either because they are too hard to pump out or because it would be too expensive to do so. Going after these neglected resources, energy experts say, represents a tremendous opportunity...
“Ironically, most of the oil we will discover is from oil we’ve already found,” said Lawrence Goldstein, an energy analyst at the Energy Policy Research Foundation, an industry-funded group. “What has been missing is the technology and the threshold price that will lead to a revolution in lifting that oil" ...
Oil companies have been perfecting so-called secondary and tertiary recovery methods — injecting all sorts of exotic gases and liquids into oil fields, including water and soap, natural gas, carbon dioxide and even hydrogen sulfide, a foul-smelling and poisonous gas....
“Yes, there are finite resources in the ground, but you never get to that point,” Jeff Hatlen, an engineer with Chevron, said on a recent tour of the field.
In 1978, when he started his career here, operators believed the field would be abandoned within 15 years. “That’s why peak oil is a moving target,” Mr. Hatlen said. “Oil is always a function of price and technology.”
Enhanced oil recovery has been used in the United States for three decades. CO2 injection gains momentum (Oil & Gas Journal, April 17, 2006) indicates that oil production in America from EOR was 605 thousand b/d in 1986. A Niche for Enhanced Oil Recovery in the 1990s, published by Schlumberger, provides an excellent overview of EOR technology in 1992. Little has changed since then. The early 90's report concludes:
EOR technology does not seem to be on the threshold of any dramatic technological breakthroughs. Instead progress will probably come through gradual evolution, stimulated by growing motivation to recover more oil from known fields. The major contribution to EOR is likely to be from the constantly improving art of reservoir characterization for predicting EOR response and from horizontal drilling.
No dramatic breakthroughs have taken place, but there's no lack of motivation now.
It is instructive to look at the history of EOR production in the United States. The EOR graph (left, click to enlarge) indicates that production appears to have peaked in 1998 at 759.6 thousand b/d, as thermal recovery declines more than offset gains from miscible carbon dixoide injection. (Data is from the Oil & Gas Journal article cited above, see here to get the breakdown.) Production now stands at 649.3 thousand b/d. In 1998, EOR made up 12.1% of total U.S. production; it was 12.6 % in 2006.
The NPC's Executive Summary makes two recommendations regarding EOR (see below), saying that such technology could potentially yield "an additional 90 to 200 billion barrels of recoverable oil in the United States alone, which could help slow the current decline in production." The technology section (Chapter 3) has this to say about EOR production in the United States (p. 22) —
The NPC studied EOR in 1976 and 1984, and raised great expectations for domestic EOR activity (projecting 3 million and 2 million barrels per day, respectively). These expectations have not been met. Peak domestic EOR production occurred in 1992 at 761,000 barrels per day. Current activity is 680,000 barrels per day. In the interim, many technologies have been tried, but most failed. Two successes are CO2-miscible floods and steam (cyclic, steam-assisted gravity drainage [SAGD], and steam flood).
The NPC's estimates for using EOR to recover additional oil in mature reservoirs derive from the views of Vello A. Kruuska of Advanced Resources International. His research, which centers around recovery of stranded light oil by use of CO2 EOR methods, has been reviewed by the author in Stranded Oil Recovery and American Energy Independence (The Oil Drum, October, 13, 2006). Kruuska's May, 2007, testimony before the House Subcommittee on Energy and Mineral Resources outlines an aggressive scenario which assumes additional government-funded research into "next generation CO2 EOR technology" and field demonstrations of Carbon Capture and Storage (CCS) to assure affordable supplies of carbon dioxide. If these steps are taken — a Big If — Kruuska is optimistic that it might be possible to produce as much as 800 thousand b/d of stranded light oil by 2015 (graph left, click to enlarge). If expanded tax credits and CO2 sequestration incentives are thrown into the mix, production might reach 1 million b/d by that date. The size of the stranded conventional oil resource sounds impressive, but oil flows much beyond what we've seen to date are still up in the air.
It is in this context that the NPC's recommendations for expanding EOR production make sense (Executive Summary, p. 21). The government must 1) support regulatory streamlining and research and development programs for marginal wells, and 2) expedite permitting of EOR projects, pipelines, and associated infrastructure. Recommendation #1 makes it clear that developing advanced EOR technology to recover stranded oil is still mostly a research project. For example, Chevron, so confidently quoted by the New York Times, is betting on research in using surfactants and polymers. The array of technologies listed by the NPC in the Technology chapter (p. 23) are supposed to be ready in either 2015 or 2020. CO2 EOR recovery requires infrastructure to capture and transport the gas, which would seem to be part of the basis for recommendation #2.
Bringing expensive enhanced oil recovery on-stream is also a function of oil reservoir characteristics, not just available technology and the oil price. Uncertainty abounds in current EOR production projects. Chevron is using sour gas (H2S) injection at Tengiz in Kazakhstan to help increase production there to somewhere between 430,000 and 500,000 b/d by late 2006, up from the current 298,000 b/d. The achieved incremental production flows will "depend on the [subsurface reservoir] effects of sour-gas injection" (Oil & Gas Journal, op. cit.). EOR technology is not universally applicable in any case. From Progress in IOR technology, economics deemed critical to staving off world's oil production peak (Oil & Gas Journal, August 4, 2003) —
Olivier Appert, chairman and CEO of the Institut Français du Petròle, contends that IOR [Improved Oil Recovery, which overlaps with EOR in this context] technologies "should be adapted on a case-by-case basis, depending on the characteristics of the field and the fluids"...
"Simultaneous water and gas injection is developing rapidly. For heavy oils and nonconventional oils, thermal technologies such as SAG-D (steam assisted gravity drainage), or vapor extraction, where hydrocarbons are replacing steam," are seeing growing use. "There is also a renewed interest for polymer flooding in the case of smart wells and completions."
There is no single technological magic bullet that will "stave off" peak oil, as the NPC admits throughout its report.
It is reasonable to ask at this juncture why the the NPC is still fiddling while Rome burns, still talking about "accumulating risks" to the oil supply. The IEA has finally made their position on the future oil supply clear — it is in trouble by 2012. By its own admission, the NPC's previous estimates for EOR production didn't pan out. Thus, the missing graph made an unsupportable conjecture, which is probably the reason it was withdrawn. EOR technology will not provide much help in any time frame that would be relevant to the IEA's demand projections. Conveniently for the NPC, they guarantee that oil production will meet growing demand out to 2015, when we are assured that the technology cavalry will arrive. Are you willing to take the chance that the NPC is right? Is a wing and a prayer all we need?