<Wishful thinking The Oil Drum Sustainable Energy Forum 2006, Washington DC, 7-9 May 06>

107 comments on Open Thread

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davebygolly on May 1, 2006 - 6:54pm Permalink | Subthread | Comments top
This goes back a few threads. I was ranting about monopolies and monopoly profits, and used ExxonMobil as an example. At least two people pointed out that EM has but 3pct of the world's total oil production. So I wrote this, waiting for a live thread:

Exxon posted profits of $36.13 billion for last year (2005). According to a dipchip, ExxonMobil produced 2.5 mbpd in 9/05. Total production is/was around 85 mbdp, so that's 3pct of total. Just say the avg price was $55/bbl.

This would mean that EM profits were a little over 2pct the of the TOTAL value of production in 2005 OR 66 pct of its own 3 pct share! Well, clearly EM derives its profits from gas and chemicals as well as oil -- so not all of this profit is attributable to oil.

On the other hand, the profits do not include the hefty compensation of the top level execs, plus the generous compensation of even the midlevel management. So the $33.16 is understated from one point of view (mine).

And EM is only one of the majors, although a biggie and probably the most profitable. It seems to me that either EM's profits are staggering for a 3 pct share of the market OR the 3pct share is misleading, i.e. they are somehow involved in profitting from a much larger share than just the 3 pct that is ascribed to them.

I still maintain, that while peak oil is here or near, we cannot exculpate the oil companies. They are a big part of the problem, though perhaps not in quite the way the public imagines. There is no good solution to the problem that is going to make the oil companies happy.

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Robert Rapier on May 1, 2006 - 7:59pm Permalink | Subthread | Parent | Comments top
On the other hand, the profits do not include the hefty compensation of the top level execs, plus the generous compensation of even the midlevel management. So the $33.16 is understated from one point of view (mine).

For any particular year, you will find that those hefty bonuses (which I do not condone, by the way) amount to far less than 1% of the annual profits.

I still maintain, that while peak oil is here or near, we cannot exculpate the oil companies. They are a big part of the problem, though perhaps not in quite the way the public imagines. There is no good solution to the problem that is going to make the oil companies happy.

Oil companies are doing what they are supposed to do: Find and refine oil, and make money selling it. This is what they do year in and year out, and is what they can be counted on to do in the future. I don't believe that Big Oil will make a serious move into biofuels until the time is right. And 'the time is right' when they think they can make money at it. That's not to say that they won't miscalculate and get into the game too late, but Big Oil is currently moving into projects past conventional oil (tar sands, GTL, NGL, etc.).

RR

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Nate Hagens on May 1, 2006 - 8:21pm Permalink | Subthread | Parent | Comments top
Robert - To what extent is Big Oil aware of net energy, in the widest boundary sense?
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Robert Rapier on May 1, 2006 - 8:30pm Permalink | Subthread | Parent | Comments top
For the most part, it is economics, and not energy that is the primary concern. But if your EROI is poor, your economics will normally be poor. Energy reduction is certainly an ongoing effort, and I imagine everyone has energy models telling them where the energy is being used, but they wouldn't hesitate to run a project with an EROI of less than 1 if it was economic. By that, I mean something like GTL or CTL.

RR

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Nate Hagens on May 1, 2006 - 8:55pm Permalink | Subthread | Parent | Comments top
Are you confident that CTL ( I assume you mean Fischer-Tropsh) is low EROI? If so, how can it be profitable? Because coal is still underpriced on  BTU basis?

Industrial Energy Prices ACEEE

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Robert Rapier on May 1, 2006 - 9:09pm Permalink | Subthread | Parent | Comments top
Yeah, GTL and CTL are both dependent upon cheap supplies of gas or coal. As long at the price is low enough and the price of crude is high enough, the projects can be done economically even if the EROI is less than 1.

RR

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Robert Rapier on May 1, 2006 - 9:14pm Permalink | Subthread | Parent | Comments top
Now that I think about it, as long as you consider the entire process, from getting the coal out of the ground, the EROI may in fact be >1. I don't know what the EROI is for a typical coal mining operation. I was specifically thinking of the POX and FT steps, both of which have EROIs less than 1.

RR

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Nate Hagens on May 1, 2006 - 9:19pm Permalink | Subthread | Parent | Comments top
But if coal itself had an EROI of 20-1 (ranges vary widely), then POX and FT steps would just multiply through. (like oil at 10:1 and refining at 10:1 make gasoline at 5:1)

I think CTL is significantly decent gross EROI but net EROI (after accounting for environmental impacts) is very low, and perhaps below unity.  We need more studies on these things before they scale, in any case.

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Robert Rapier on May 1, 2006 - 9:26pm Permalink | Subthread | Parent | Comments top
Yeah, it hit me that this is what you were saying, and you are correct. The EROI from the process itself is probably decent from beginning to end, since that first step is probably pretty good.

RR

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peakearl on May 1, 2006 - 11:20pm Permalink | Subthread | Parent | Comments top
The simplest common example is batteries. No EROI there, but great utility/versatility that makes it worthwhile and profitable. If liquid fuel for transportation is valuable enough, the EROI is not the main concern, although I certainly realize the long-term implications.
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BioDiesel on May 1, 2006 - 10:14pm Permalink | Subthread | Parent | Comments top
Big oil follows Government subsidies just like any other business.  

The hidden "economic" factor.

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peakhasarrived on May 2, 2006 - 3:38am Permalink | Subthread | Parent | Comments top
As these profits go out of control I wouldnt be surprised by more such stories.

http://news.bbc.co.uk/2/hi/americas/4963348.stm

And I wouldnt put any country out of the reckoning to do it.

Rao

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107 comments on Open Thread

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