Pre-vacation thoughts

Well posting is going to be very light for HO over the next couple of weeks, as I slip away for a few days on the beach, but just one or two short notes before I go. Firstly, since this has popped up in comments twice, let me note that when I mentioned last year that I was getting my trips to fun places (such as Alaska) in while I still could, it was not meant to imply that I only had one trip or year in mind. There are a number of places to go, but if we had not started . . . . . .(and some, as this year, are not PO related).

Speaking of beaches, or rather sand, attention is turning back to the Middle East again, I see. While rig counts continue to go up, and I leave most of that to Stuart, it is worth a note to follow up on Leanan's catching of the Wall Street Journal story on SA moves to "unlock" their heavy oil reserves. Some of this is, I suspect, related to Manifa, since this is the field that they count as being part of their deliverable reserve, even though it is not yet refinable. At present Aramco are building a refinery to deal with the oil themselves, with production slated to begin in 2009. Though I see that they are also looking at the same sort of steam stimulation that is being used in Alberta.

The change in mix from sweet to a greater percentage of sour is potentially part of the reason that Saudi production has dropped, since selling some of the sour to China has not been the success that was hoped. Since the Chinese have found problems with refining the crude, they have cut back orders.
China will extend a 50,000 barrel per day (bpd) cut in Saudi crude oil imports into July and August after some refiners struggled to cope with new higher-sulphur supplies, industry officials said.
China contracted to buy 500,000 bpd of Saudi crude in 2006, but cut that back by 10 percent in the second quarter after refiners ill-equipped to handle the kingdom's mainly heavy-sour oil were forced to slow production after running the grades, the officials said.
There is another change in that a new exploratory well is being drilled in the Empty Quarter. After being extensively surveyed Shell, Total and Aramco are jointly drilling the well.
SRAK began exploring the contract areas in January 2004. The Company has completed the largest high-resolution airborne gravity survey in the world and continues to conduct extensive seismic acquisition. A second drilling rig is planned to be mobilized to the area in 2007, the statement said.
The well, Isharat-1, in southwestern Saudi Arabia is considered a rank wildcat because of the very significant distances from any previous exploration wells drilled within the kingdom, and its testing of new hydrocarbon plays. The well is anticipated to take up to four months to drill.
The time that it will take is interesting, since it is one more data point to plug into the production estimates for Saudi operations.

The fact that Aramco are bringing in partners is perhaps also indicative of the fact that, as the world is moving to the production of more and more expensive-to-extract oil, investment costs are going to be an increasing factor. Given the likely cost increases for production of the tar sands , the increased costs for deep water production, and this not to mention the costs for new production in Russia, I can't help but think that there is only so much investment capital to go around in this business. It may (grin) prove practical to get oil from shale, but, as with other things it is going to be expensive. And one wonders at the inertia of the financial side of things, if, for example, we know that there is a possible source out there, can all the capital be assembled to move all the needed projects forward.

This has been a theme of a number of folk who have surveyed the business, from the point of view that - "given the investment of $x trillion - we can find all the oil we will ever need." While I was never much enamored of that statement, seeing it as not much more than a fall-back excuse - it does begin to concern me that the curve may tip faster because investment capital for E & P has rather gone to buying other firms, as Gazprom has diligently demonstrated over this past year. Although I do note that they are now putting some money into exploring in Gujarat. But even they, apparently, are seeing the impact of higher costs. Although, as they continue to build their monopoly, their customers may soon find the bite to bring their profits back.

(Gazprom export head) Medvedev said the company would have no problems meeting demand in the future.
"Our reserve base is sufficient to meet not only the demand of Europe, but also our new markets: China, Korea, and the United States," Dow Jones Newswires quoted him as saying.
Medvedev also rejected allowing independent Russian gas producers to export gas from Russia.
It will be interesting to see if the G8 meeting has any effect
With energy security topping the agenda at next week's Group of Eight summit in St. Petersburg, the United States will pressure Russia and other countries to espouse open market policies in an effort to stabilize the increasingly volatile global energy environment, a top Energy Department official said yesterday.

Assistant Secretary for Policy and International Affairs Karen Harbert stressed that the United States and other G8 countries are wary of Russia's push to increase state control of its energy sector as well as the recent decline in oil production.

"This is a time for responsible actors to try and act in responsible ways to calm a fairly unstable and volatile market," Harbert said.

Somehow, as with the similar conversations that were held this time last year with Saudi Arabia, I suspect that these statements are likely to prove equally fruitless.
And yes, once again, the Pittsburgh Post-Gazette comes through.

It's the WSJ story by Bhushan Bahree.  For free.  :-)

Hey, Leanan, are you in Pittsburgh? If you are, send me an email, OK? I'm living in Friendship just this side of Shadyside.
No, I'm not in Pittsburgh (though I visited a friend there in May).  I'm just a news junkie.  I noticed a long time ago, via Google, that articles that were behind the paywall at the Wall St. Journal site are often available for free at the Pittsburgh Post-Gazette Web site.

Another tip: you can get a free 14-day trial of the NY Times TimesSelect service.  Download up to 100 TimesSelect articles for free, then cancel before the two weeks are up so you don't get charged.  (I'm a cheap news junkie.  ;-)

Also, a lot of articles that are subscriber-only if you go in a newspaper's front door are free if you go in via Google News.  Google must have some kind of deal worked out.

Steam injection can recover 80+ percent of a field's oil, per the WSJ article. The obvious questions are:

  1. What extraction rates are achievable (as a function of amounts of steam injected, in this case)?

  2. What is the quality of the oil recovered? and relatedly,

  3. What is the EROEI of the process?

Peak oil, in general, is mostly about these questions.

I believe Chevron has its own NG pipelines dedicated to bringing NG from the northern Rockies area for their Bakersfield operations.  In a sense, at Bakersfield, Chevron runs a GTL (or GT Heavy Liquids) operation.

Nice summary of the some of latest news in our current predicament. Too bad none of us can be a fly on the wall at the G8. Still, we must find a way to act "in responsible ways" to remain calm.

With both you and Stuart on vacation, I'll try to keep the content fresh.

best, Dave

"stabilize the increasingly volatile global energy environment"

This is newspeak for we want overproduction to lower prices.  Transparency has nothing to do with the price of oil.  The only way it could have is if reserve numbers are being kept secret and understated.  If anything the reserves of OPEC are overstated and the market has been assuming essentially limitless supply.  Now that the price is increasing to reflect the production reality it is being branded as "volatility" by self-serving government hacks.  This is a new defintion for the word since volatility would be prices going up and down, not just up around $20 a year.

volatility is a favorite wall street means "i'm on the losing side of this bet"...bullish , on the other hand means "i'm making money".
Minnesota is a state of 30,000 beaches.

Plus, I can teach you to sail in one weekend (weather permitting). Would be delighted to do so.

This offer (plus free drinks at Don's American cafe plus my wonderful cooking) is open to all posters and commenters on TOD.


That is quite an incentive to start posting more here to qualify for that offer. Being an alumnus of the U of M (law school), I'm always looking for an excuse to visit Minnesota. I wanted to stay in Minnesota after I graduated, but I could not find a job to cover my expenses after student loans. I wound up coming back to Chicago and my former occupation - union cabinetmaker/carpenter.
Eight hour drive from your place to mine. If you are serious, I'll gladly send you a map.

I can teach even lawyers to sail!

(Indeed, I have taught over 1,000 people to sail since 1963 and have failed only once--with a person who stopped taking her meds after leaving a locked ward in a mental institution. You can't win them all:)

So basically you're saying she was a law student during summer break?



If you must know, she was a judge.
It's a very generous offer! thanks!
Lake Harriet is a 15 minute taxi ride from Minneapolis/St. Paul airport. I donated a boat (SCUM DANCER) to SCUM (sailing club at the University of Minnesota), and although I've changed my affiliation to BBRA (Black Bear Racing Association on nearby White Bear Lake, where I grew up), I'm always welcome there.

Seriously, for powerdown let us:

  1. Bike
  2. Walk way more
  3. Play tennis for hours each cool morning
  4. Sail, sail, sail

It was back around 1963 that I became very worried about peak oil and figured all this out.
One of my best friends from school had an apartment right off Lake Calhoun. Did a lot of fishing off the dock there and a lot of partying in the Uptown area. I really liked William's Peanut bar and the Uptown bar and grill.
May I suggest:

5. Soar, soar, soar


I live about three miles from Benson's airport, one of the best-known glider ports within the five-state area. They also have vintage and some experimental aircraft there.

Come visit.

Power boats are Evil.
Jet-skis are evil and horribly noisey.

Save the earth.

Learn to Sail.

"Jet-skis are evil and horribly noisey"

Jet Ski is a.k.a. "Lake Lice"

From the Wall Street article
It would also be a blow to so-called peak-oil theorists who have forecast that world oil production is on the brink of peaking.

I guess our discussions are ruffling a few feathers somewhere..

Where not to vacation:  Florida.

Hurricane-related costs are detracting from the allure of the Sunshine State.

Sinkholes are also a problem:

Sinkhole incidents are on the rise.

"A lot of the things we do can cause an increase in sinkholes," says Tihansky. Changing the flow of water by paving over areas can accelerate sinkhole formation, for example. Plus, as building densities increases, sinkholes are much more likely to affect people's homes and so be reported.

I still think the Hurricanes and Sink Holes are God's punishment for fixing the 2000 election and letting all the Cuban slave owners emmigrate and vote. At least here in Texas our electorate has the excuse of stupidity, but they are just crooked.
The article discussed adding billions to SA's reserves. Funny how that reserve figure hasn't changed since the late 80s. Open up the heavy oil and it's business as usual. Early commenters on a number of posts at TOD have made it clear that the Saudis will do most anything to "save face" as the world's swing producer. After reading the WSJ article and the Dallas Times article on PEMEX, it's clear we live in most interesting times.
"Since the Chinese have found problems with refining the crude, they have cut back orders"

Aha! This must be what the Saudis were talking about when they said that customers were turning down their offers of oil.

They're not turning them down becuase there is an excess, they're turning them down because the product is crap!

I know a little about E&P, but on refining I'm stupid. What kind of "heavy metals" are in that Saudi heavy crude? Are they ending up in the air? I know the Exxon refinery in Baytown (east of downtown Houston about 30 miles) refines heavy oil and "junk oil" and also the BP/Amoco plant in good ol' Texas City. Am I breathing poison? How bout it you downstream guys?
Vanadium, according to the article.
Over at GCC is an article about a vanadium oxide based ultracapacitor. There may be a new market for this pollutant in the near future.
Hello oilmanbob.  Are you ready for a geochemistry lesson?  Light crude (has high api gravity) consists mainly of "light" hydrocarbons such as hexane (6 carbons) heptane (7 carbons) and so on and contains far less of the nasty heavy 30 to 50 carbon molecules, aromatic compunds and ashpaltenes used to make ashphalt etc.  Light crude is often clear golden colour, is easy to refine - good quality stuff can almost go straight into your tank.

Heavy crude (with low api gravity) contains little of the valuable light hydrocarbons and is stuffed full of the nasty long chain heavy molecules - 30 to 50 carbons long etc.  Heavy crude is black sticky stuff.  This stuff is great for building roads but not much good for gasoline or jet fuel.

Refineries are normally tuned to a particular type of crude and most are tuned to refining light sweet.  To refine heavy crude requires using crackers which break down the long molecules into shorter more user friendly molecules.  This needs investement and is also more energy intensive to refine.

Sour crude contains a lot of sulphur (S) which also has to be removed - leading to mountains of sulphur being produced.  In the form H2S, this sulphur can also be deadly.  Some of the Saudi heavy oil fields are rich in this deadly gas.

Finally, light sweet crude is turned into heavy crude by the action of bacteria in the sub-surface.  The end point of this process is tar sand.

Do you want to know more?

Mentioning that xTrillion dollars to be invested in energy infrastructure got me thinking. Investing in fossil fuels, especially oil, carries the risk of dry wells and political changes the makes it a lost cause. Algae is the only biomass source capable of providing the world with enough liquid fuels to continue life with some semblance to what we know. (CLWSSTWWK? Maybe there is a better accronym for that concept?) It can be grown wherever there is a little water during whatever passes for summer in your part of the world. It is an investment that would require considerable stupidity to come up dry. Solar and wind energy projects are also winners for investors. The question I have is why bother with drilling in ANWR, deep offshore, the Arabian empty quarter(there is a good reason why it's empty) when there are sure energy winners available? Are investment brokers really that narrow minded and short sighted?