The Oil Drum

For those waiting the tech talk on cracking, it has been delayed a week, since I was working on trying to index the first six months of our efforts.

It seems relevant to be talking a little about refineries since the latest ASPO-USA newsletter has a piece by Tom Standing about the dangers of including all produced hydrocarbon liquids into the total of oil products available.  As he points out the CERA study, that we have discussed earlier includes Natural Gas Liquids (NGL) and Condensate in their report that production of "petroleum liquids" will increase in volume by 16 mbd between 2004 and 2010.  Forgoing the reality of that increase for a moment, Tom points out that there are some problems with including the Condensate and NGL in the supply, particularly as it relates to transportation needs.

Gasoline, diesel, and aviation fuels consist of hydrocarbon molecules with roughly 8 to 16 carbon atoms. This size range keeps fuels within the specification for vapor pressure, but light enough to be readily ignited.
Condensate is a much lighter and more volatile liquid. It frequently is a co-product in natural gas fields, but also appears in some oil fields. Its molecules may be as large as 12 carbon atoms or as small as 4 (butane). The heavier end of condensate (higher boiling temperatures) can be blended into transportation fuels. But the light, volatile end must be used sparingly to keep within the specification for vapor pressure.
Natural gas liquids consist mostly of propane and butane (3 and 4 carbon atoms) with some ethane (C2H6). NGL is too volatile for blending into transportation fuels.

Given the relatively large amount of NGL that is anticipated to be available over the next four years this is a fairly critical distinction, that has not previously been obvious. However the article points out that most of the NGL goes into chemical feedstock, and thus including it in the crude oil numbers (which of most critically oriented towards transportation use where NGL doesn't work) is akin to "comparing apples with rhubarb."

** -- Or, Everything You Wanted Know about LNG but Were Afraid to Ask

Liquified natural gas (aka LNG) involves cooling the gas to minus 160 degrees (Celsius). That shrinks it to about 1/600th of its original volume, allowing significant quantities of this LNG to be loaded aboard tankers for shipment overseas. When the gas reaches its destination at an LNG terminal, the gas is reheated (regasification) and shipped through pipelines to end users.

[ED: Dave's really put together an amazing post here...much to read under the fold.]

Kjell Aleklett has an excellent article in World Watch, which I read at the Energy Bulletin giving a broad view of the developing problem.  He begins with the changes that he saw in Sweden in the small village where he was born.  Oil was not used in the village when he was born, and its impact has been dramatic on Swedish life.

His comment reminded me of the village in South-West Scotland where my grandfather was the village blacksmith.  The impact of oil is such that this attractive  little community has changed from a farming village to a place where the houses are largely owned as vacation homes, and the locals are no longer able to afford to live there.  The local economy also suffered through mad cow and foot and mouth diseases, and thus the small, self-sufficient community of my youth (with the baker at the bottom of the street) has gone, and the skill levels largely with it. When I was a kid we harvested peat to heat the house, now they use gas.

Today's energy headlines are focusing on the announcement, by Jeffrey Rubin that conventional crude peaked in 2004, leaving the increased demand to be met by Deepwater and NGL increases, as the ASPO Ireland predictive curve suggests on page 2 of the current newsletter.  Currently China is anticipating 8.5 - 9% growth with major investments in energy and transport. US demand is anticipated to increase this year, and by some magic apparently US Gulf production is going to return to at least pre-Hurricane levels despite the loss of rigs and platforms that it will never be economic (according to those that know and have commented here) to re-establish. There is still 400,000 bd of oil and 1.8 bcf of gas that has not been restored.

(You should also note that ASPO USA is starting a weekly publication to overview issues as an e-mail, and the address to send for a copy should be posted on their website today.)

There's been some discussion lately about reserve additions due to new discoveries and the trends there. This topic came up in some comments on Stuart's Predicting US Production with Gaussians--for example here). WebHubbleTelescope over at Mobjectivist has done a couple posts lately on this topic. In Monte Carlo Discoveries, he comes to a rather important conclusion.

The main thing to note relates to the essential noise characteristic in the system [discovery curves]. The fluctuation excursions fairly well match that of the real data (see the first diagram at the top of this post), with the occasional Ghawar super-giant showing up in the simulations, at about the rate expected for a log-normal distribution. But the truly significant observation relates to the disappearance of the noise on the downslope, in particular look at the noise after about 1980.

Remember what I said initially about noise telling us something? The fact that the noise starts to disappear should make us worry. That noise-free downslope tells us that we have pretty effectively mined the giants and super-giants out there and that oil exploration has resorted to back-up strategies and a second pass over already explored territory or to more difficult regions that have a tighter distribution of field sizes.

I'll leave the heavy duty mathematics & modelling to Stuart, WHT, Khebab and others to argue over. This includes the mysterious assumption first used by M. King Hubbert that

The discovery curve mirrors approximately the production curve with a lag that varies from country to country. The US-48, for example, had a lag of 41 years whilst the UK North Sea production, with its urgency and technological basis had a lag of 25 years. The World's lag is estimated to be 36 years.

noted at (among other places) Wolf At The Door. Here instead I will check in with the real world data over the last twenty years and particularly since 1994 using a favorite source, presentations from IHS Energy, to see what's been happening lately on the tail end of the discoveries curve. I feel it's always a good idea to remain a part of the reality-based community, so let's look at some data and look closely at what the recent trends are. Do they confirm the modelling?