Laugh Until It Sinks In

Occidental Petroleum is running a very clever and funny ad supporting and informing about what petroleum is used for as well as natural gas, gasoline and diesel.

As you’ve seen in the video lots of things will disappear.  They even missed important stuff like the concrete foundation of the house, the asphalt roadway and the elastic holding up the boxer shorts.  It could have been funnier if you tolerate crudeness with a smile.

But seriously, life as its known in the developed world would stop.  No gas for the car, no diesel to bring food into the city, no jet fuel for travel and mail, no natural gas or heating oil for warm homes and California will be dark.  300 million people won’t be supportable.

275 million will be left out of the food chain.  Do you think they won’t be looking for answers?  Would a gulf oil drilling moratorium get food close enough for meal?  The idiocy at high levels of government is astonishing.  Foolishness knows no limit in today’s media saturated silly society.

That said, oil coming up way short would have tens of millions looking for how the political elites blew the modern world apart.  It might be a very good idea to be, well armed, really.  Folks are going to be hungry and angry. At desperate – lives will be lost. Those with – will be attacked by those without.

It might be very self interested (self preserving) to be “pro oil”.   For many reasons beyond just jobs, profits, taxes and cheap energy, petroleum is crucial.  Start taking it away such that it become too dear the danger would be intense for everyone.

Reading, watching or listening to news or pundits that don’t concern themselves with adequate affordable supplies for everyone is setting up ignorance pointing to risk.

For this writer adequate petroleum supplies is crucial – it will take decades for the alternatives to supplant and replace fossil oil and gas.  Moreover, the economy has to be robust enough for the consumers and producers to buy conservation, efficiency and alternative work devices.  This is going to take a long time.

Screwing it up along the way is senseless and essentially a betrayal.

Thanks to Occidental.  The lighthearted ad just touches, but leaves no scars, suggesting a warning.  A real petroleum shortage will leave scars – from the bloody wounds, too.

Author: New Energy and Fuel

Fracturing the Bakken Triples Oil Reserves

With the BP gulf floor oil leak making the news – all bad even if they get it stopped, some good news is worthwhile.  Especially when the Obama tribe has frozen the major U.S. controlled North American resources of oil development for political appeasement to ‘do something.”  Meanwhile the Bakken formation in the north of the U.S. and southern Canada is growing production and growing in importance.  Crescent Point Energy of Canada has tested their Bakken wells with fracturing and water floods tripling the recovery making the estimate move up to recovering 30% of the oil in place.

It’s worthy news.  This writer hasn’t addressed the BP gulf floor leak – you’ve noticed, and maybe won’t at all.  It’s simply a media frenzy and political positioning structure while the people and environment take the hit.  Blaming and leveling responsibility takes precedence over imparting resources, something the big oil industry has to do alone while coping with the public relations cost of stupid media and useless political power.  Enough for now – but that’s an idea of why the post hasn’t been written.

Scott Saxberg, chief executive of Crescent Point Energy Corp. told the company’s annual general meeting the application of water flooding, along with infill drilling, could allow the company to more than double reserves within five years.

Water Flooding Oil Reservior – A Simple Example. Click image for the largest view.

In an interview, Saxberg said two years of tests at an initial pilot project in the Bakken – and more recent results from a second test – show that injecting water into formations being tapped by nearby horizontal wells with multiple fracture stimulations can help boost recovery from about 10 per cent to 30 per cent of oil in place.

For Crescent that would mean, “These mainly untapped resource pools provide Crescent Point with over 5,000 drilling locations and the potential to add over 500 million barrels of reserves, which could potentially double our current net asset value,” Saxberg said.

Saxberg explains, “We’ve seen very strong results. What it’s done in the pilot over the past two years is give us flat production. Without it, it’s 10 per cent, and with infill drilling you might get to 20 per cent. And then with water flood it’s 30 per cent. That’s huge.”

It’s because normally, after an initial “flush” of production in the first year, Bakken oil output drops off by about 70 per cent.

But Analyst Kyle Preston of Canaccord Adams cautioned that Crescent Point’s water flood strategy is promising, but not necessarily proven in all areas of the Bakken saying, “This water flood technology is not really new. What’s new here is applying the water flood to a tight rock reservoir which, to my understanding, hasn’t been done very successfully in the past.”  Preston points out PetroBakken, the second-largest player in the Bakken, doesn’t believe in water flooding.

Here’s a look at how Canada treats new resource development.   Trent Stangl, Crescent Point’s vice-president of investor relations, explained the company’s strategy is to let a central well produce for about a year to take advantage of Saskatchewan’s royalty holiday on new horizontal wells before converting it into an injector well. Then forcing water into the well builds pressure underground to push more oil out of surrounding wells, a technique commonly used in conventional oil fields.

Saxberg adds, the company is also experimenting with cemented liners on the horizontal part of the wells instead of steel pipe, allowing adjustments in the number of fractures as the well ages. He added the company is pleased to hear about the Alberta government’s new royalty incentive plans, including lower royalties for deep wells and horizontal wells, but he has no immediate plans to spend money in Alberta.

We’ll see how long that lasts in Alberta.  One nation’s dumb move can be another’s windfall.  As the U.S. administration plays media politics and undermines the national economy the neighbors, bless ‘em, can make good use of the capital.  And why not?  Our Canadian neighbors can use the capital, jobs and economic growth as well or better than anyone else.

The only concern then is, can the Canadian effort stay profitable at lower oil prices?  With the Athabasca oil sands under political assault the Alberta and Saskatchewan provinces need a fall back.  The irresponsible and capricious political neighbor brings risks, as the U.S. economic recovery isn’t driving lots of oil consumption.

Crescent Point plans four more pilot projects throughout the Bakken field over the next year.  With U.S. offshore drilling at a standstill, the capital going inert, worker layoffs imminent, and a sure increase impact on the world price of oil, the BP leak looks to grow far beyond a single company’s disaster and ecological calamity.

Irresponsible and capricious political conduct might be media savy – but the impact will be long and costly for consumers the world over.  But hey, only about 75% of American’s are catching on – throwing in with BP to get the oil escaping contained, stopped and the ecology and economy protected, sustained and supported could have been the job.  But leftism doesn’t even think to cooperate with business. Leftism needs commercial disasters to participate in the economy.  Commercial disaster gone far enough is an ‘opportunity’ to bail something out and take over making the capital, jobs and eventually, the management their own.

The Bakken oil field and the Canadian firms leading the technology are refreshing in the current U.S. situation.  Thanks neighbors, we wish you well.  Thanks to the Calgary Herald for kicking up the story. Americans need a little good oil news about now.

Here is the original post: New Energy and Fuel

Global Oil: Economic Recovery should Drive Demand and Price

Despite the global economic recession, preliminary data suggest oil demand remains rather resilient. According to the latest reported information from the Energy Information Administration (EIA), Global Petroleum Consumption is down one percent y/y in 2008 while China and India show increases of 4% and 5%, respectively. However, current data through September 2009, show oil demand fell quite precipitously in the US. Through September 2009, oil consumption is down over two million barrels per day form the 2007 annual average (an 11% decline). Most of the change in oil consumption is cyclical and with an economic recovery expected, oil demand should rebound and perhaps drive prices higher.

Figure 1 US Average Annual Oil Consumption US Oil Demand

Historically, the US has seen this type of demand erosion before. From 1979 to 1983, oil demand in the US declined 28% with annualized rate of a 10% decline per year. Over this same period, oil prices actual rose despite the fall in demand. Oil prices by barrel (42 US gallons) rose from $3.60 in 1972 to $25.10 in 1979. Oil prices are up significantly in 2009. In January 2009, oil was traded at $33.07 a barrel and in January 2010, oil is trading at 2010 Oil prices $78.00 per barrel.

On a global basis, oil demand has only contracted by one percent in 2008, the latest data from the IEA. Despite the fall out in US oil demand, global markets driven from demand from China and India, has kept the global demand for oil relatively stable.

Figure 2 Global Oil Demand Oil

The growing demand for oil from China and India increased their respective share of the global oil markets from 3% and 1%, respectively in 1980 to over 9% and 3% in 2008. At the same time, the US share of global oil consumption has declined from 27% in 1980 to under 23% in 2008. See Figure 3 China and India Oil Demand.

Figure 3 China and India Oil Demand Global Oil Demand

The bottom line is that as financial growth emerges across the globe, oil demand should increase commensurately and with oil process already at elevated levels, further prices increases are expected. – demand for oil will increase and so will oil prices.

Original post: Green Econometrics

Oil Refining and Consumers Get a Little Help

The U.S. oil refinery business is up against the wall for profiting, coping with oil prices and the economic atmosphere.  Regulatory issues raised by every government from local to federal have imposed requirements, compliance, and regulations across the full imaginable board – each with increased costs and inefficiencies.  It’s a miracle there’s any gasoline or diesel to buy at all.

They’re closing down; several northeast refineries are closed or have announced closing.  Some are large ones, too.  As they close the pipelines from the Gulf of Mexico coast try to make up the supplies, but factually the pipeline capacity is maxed out.  Policy is just about to have serious economic impacts in the Northeast, but the press isn’t likely to do any journalism to identify the basic problems.  Getting any policy change would take years, so such an effort could be just fruitless or too late.  In most meaningful ways, it’s too late now.

Rakesh Agrawal, the Winthrop E. Stone Distinguished Professor of Chemical Engineering at Purdue who is working with doctoral student Vishesh Shah and funded by the U.S. Department of Energy’s Industrial Technology Program have published research that appeared online this month in the AIChE Journal, the official peer-reviewed journal of the American Institute of Chemical Engineers, and will be included in a future issue of the print journal.

The research is showing refineries could trim millions of dollars in energy costs annually by using a new method the pair developed to rearrange the distillation sequence needed to separate crude petroleum into products.

Agrawal says, “This is important because improving efficiency by 10 percent at a refinery processing 250,000 barrels per day would save in excess of $12 million a year if oil were priced at $70 a barrel. And that’s just a single refinery. For the U.S. petroleum industry as a whole, this is a huge potential savings.”  It would be 4 to 5 times that impact worldwide.

Refineries spend from 50 percent to 70 percent of their energy in distillation separations, which are required to separate a crude oil into various products. Four distillation columns are needed to separate raw crude into five separate components – naphtha, kerosene, diesel fuel, gas oil and heavy residue. Crude petroleum is fed into the system, heated and vaporized. Vapor rises up the first column, and the product is collected in a condenser at the top. The process is repeated in additional columns, with the number of columns depending on how many components are to be separated.  It’s from these components gasoline and diesel are made.

“Improving efficiency by only a few percentage points translates into major savings. For every 100 barrels of oil distilled, nearly two barrels go into supplying energy for distillation. That’s a lot of oil,” says Agrawal.

The research is showing the distillation can be more energy efficient depending on the order in which the columns are operated.  Agrawal says, “There are many ways to arrange the columns.  Once we know all of the possible ways they can be arranged, then we can tell you which ones have the potential to be the most energy efficient.”

As a matter of fact, petroleum refineries have been using the same sequence for about 75 years, and it is currently the most energy efficient of the sequences known to the industry. That knowledge sets a basis for the research as the Purdue researchers confirmed using their new method.

For discovering a new method Shah built a computer algorithm that identifies all of the possible sequences and then determines which require the least heat and energy. The Purdue researchers used their new technique to determine there are nearly 6,000 possible sequences for the four columns used in petroleum distillation.

The pair identified 70 new sequences that have potential to consume less energy than the sequence now used by industry. Those 70 sequences range from being 6 percent to 48 percent more energy efficient than the method currently in use. That does speak well of the current industry engineering.

Agrawal says, “However, just because a particular sequence would be more energy efficient doesn’t mean it would be practical for industry to implement. There are a lot of challenges. Some are easy to build and just involve trivial retrofitting, and some are more difficult. So we’ll need to work with companies and refinery experts to determine which sequences could be built.”

While this might seem trivial, crude refining is a business of huge capital investment and profit margins that are usually very thin with brief periods of high profits and losses.  Over a daily U.S. consumption of 19 million barrels of crude, 2% still works out to more than 380 thousand barrels a day worth something nearing $28.5 million a day or over $10.4 billion annually.  Cutting that by up to 48% is worthwhile.  Plus the saved heat energy would back on the market. It would be like discovering a large oil reservoir that would not decline.

If the worldwide industry can engineer in just half of the potential savings it could mean almost 400 thousand barrels a day world wide – about ten mature offshore oil platforms of production and another half percent of margin between supply and demand.  It’s one more way to buy time for alternatives in fuels and other efficiencies.

Original post: New Energy and Fuel