Easy Oil.

[Scorpio]

Monday, October 04, 2010

by Phil Flynn of PFGBEST

The Energy Report for Monday, October 4, 2010

Easy Oil.

Who has the second largest amount of proven conventional oil reserves or easy to get to oil? Well if you asked me yesterday the answer officially was Iran but today that all may change.

Iraq has announced that they will increase the amount of their proven oil reserves from mere 115 million barrels of oil to a whopping 143.1 billion barrels of oil putting them in second place in the world of cheap, easy to get to oil. Dow Jones reports that the figure, the first update since 2001, would mean Iraq has the world's second largest reserves according to statistics on the OPEC website. Iraq would take second place from Iran, which has 137.01 billion barrels of proven reserves, but would still be far behind Saudi Arabia, which has 264.59 billion barrels of proven oil reserves, according to OPEC figures.

These aren't random figures, rather they were the results of deep surveys carried out by the ministry's oil reservoir company and international companies which signed contracts with Iraq," al-Shahristani said. "Most of these figures were the result of surveys conducted by these international companies, especially at oil fields such as West Qurna and Zubair."

Dow Jones say that Iraq has signed 12 deals with international oil companies to ramp up output capacity to about 12 million barrels a day from around 2.4 million barrels a day now. BP PLC (BP), Exxon Mobil Corp. (XOM), Royal Dutch Shell PLC (RDSA), Lukoil Holdings (LKOH.RS), Eni SpA (E), Total SA (TOT), Japan Petroleum Exploration Co. Ltd. (1662.TO) and China National Petroleum Corp., or CNPC, have signed on to develop Iraq's vast oil fields. Shahristani said the largest Iraqi oil field was West Qurna. With total proven oil reserves of 43 billion barrels, it could be the world's second largest.

West Qurna is divided in two--Phase 1 and Phase 2. Exxon Mobil led a consortium and won a deal to develop Phase 1, while Lukoil led a consortium to develop Phase 2. Rumaila, which is being developed by BP and CNPC, is the second-largest Iraqi oil field, with total proven reserves of 17 billion barrels, the minister said. Majnoon, which Shell won the right to develop, comes third with proven reserves of 11 billion barrels of oil. These three are in southern Basra governorate.

The untapped East Baghdad oil field, near the capital, has proven reserves of 8 billion barrels, while Kirkuk oil field in the north has 8.9 billion barrels, the minister said. Shahristani said 71% of Iraq's total oil reserves are located in the southern Iraqi governorates, particularly in Basra. Some 20% of the reserves are in northern governorate particularly in Kirkuk, while the remaining 9% are located in central Iraq.

The minister said the new reserve figure doesn't include the semi-autonomous region of Kurdistan in northern Iraq. The region's authorities have estimated reserves in their Kurdistan region to be around 40 billion barrels. The ministry will update Iraqi oil reserves on yearly bases from now on, the minister said, adding he expects the reserves to increase.

This is an amazing development. It has been said that one of the reasons that Saddam Hussein invaded Kuwait was because it had coveted its oil, If he only would have taken the time to look around. Oh well, another setback for peak oil theorists. Oil’s assault on higher prices last week was just what the Federal Reserve wanted. The $80 a barrel plus oil prices is just what the doctor ordered to get your mind off deflation.

The market will try to get a sense of what they feel will be the scope of the quantitative easing by looking at the economic data. Oil will continue to follow and not lead. Make sure you are watching the Fox Business Network! Call me at 800-935-6487 or email me at pflynn@pfgbest.com to open your account.

http://insidefutures.com/article/177967/Easy%20Oil.html

[TnAndy]

Oh well, another setback for peak oil theorists.


Nah...not really.

1. Hard to believe everything you hear from OPEC.

2. Only delays, doesn't dispute the truth of peak oil. Whether or not it happens in my lifetime, or some future generation, the fact remains the glass will be less than half full at SOME point.

[hipster_dufus]

It’s the same sort of thing we saw last year with article after article talking about reserves revisions on the upside, including fantastic new discoveries. Let’s get depletion out of peoples minds! :D

Take any mature basin in the world and the story is always the same. The biggest conventional pools are discovered first, followed by an increase in production, then a peak followed by decline. Usually you get a plateau which is a function of the application of enhanced oil recovery methods (water flooding, solvent flooding, CO2 flooding..etc) and to some extent economic variables. Discovered pools get smaller and smaller, old wells are re-entered to complete mediocre by-passed zones. Production/well spacing gets tighter and tighter. Plot a cumulative production curve of a mature basin and you get a rise, an inflection at peak, then the curve roles over and flattens out indefinitely. At some point the global production curve will look much the same; oil fueled economic growth is a function of production and we'll hit the ceiling sooner rather than later.

[gnome]

2. Only delays, doesn't dispute the truth of peak oil. Whether or not it happens in my lifetime, or some future generation, the fact remains the glass will be less than half full at SOME point.

Exactly. Or even further, reports like this actually CONFIRM peak oil, by showing us that most of the EASY OIL is already gone, with the exception of pockets here or there that have remained undeveloped for political reasons. Meanwhile, for every deep-sea find, there is an aging giant such as Ghawar, Cantarell, North Sea, Houston oil patch, in terminal decline. It's all about when, not if.

[EO 11110]

iraq has been the key to the oil production suppression scheme. despite having huge reserves they have been prohibited from representative production....prohibited by nyc's opec cabal.

saddam wanted to ramp up and buck nyc.

nyc decided he had to go because of this. result = iraq invasion and thousands (millions?) dead

for proof: study iraq's reserves versus their production quota (mandated by nyc's opec)

the suppression scheme is now assured. dont look for production to ramp up.....just like the last decade

[killer2021]

I personally don't buy peak oil theory. Regardless of fields being depleted just look at the world oil production. Has risen for quite some time now:

http://upload.wikimedia.org/wikipedia/commons/a/a1/World_Oil_Production_1960_to_2005.png

Current production: 86.8 mb/d (august 2010)

When I see the production starting to decline then we can start talking about peak oil. Until then, it only looks like oil production will continue upward. Now cheap oil, thats another thing. Oil market is heavily manipulated by OPEC. They cut supply to drive up prices in the short term. Then increase production a couple months later. Thats more of a problem of a monopoly controlling prices rather than peak oil production.

Plus petroleum can be produced synthetically (in a laboratory). Matter of time before we find ways to tap primary energy at larger and larger quantities. Energy is NOT limited, it is unlimited. Remember, law of thermodynamics: energy is never created nor destroyed, merely transformed from one state to another. Petroleum = stored chemical energy. You can take primary energy + hydrogen + carbon and produce petroleum. We will find cost effective way to produce synthetic fuels before we hit peak oil.

[gnome]

looks like a plateau to me

http://www.theoildrum.com/files/PU200803_Fig1c.png

[hipster_dufus]

I personally don't buy peak oil theory. Regardless of fields being depleted just look at the world oil production.

World annual production = the sum of production from all the basins in the world; many of which are mature basins.

Most proponents of peak oil are talking about conventional oil (not oil sands, not EOR, not resource plays like the Bakken, not oil shale etc.). They're talking about the stuff with a decent EROEI.


When I see the production starting to decline then we can start talking about peak oil. Until then, it only looks like oil production will continue upward. Now cheap oil, thats another thing. Oil market is heavily manipulated by OPEC. They cut supply to drive up prices in the short term. Then increase production a couple months later. Thats more of a problem of a monopoly controlling prices rather than peak oil production.

There’s a growing trend in the cannibalization of export capacity among OPEC producers; that’s what happens when utilities companies are subsidized at 7 cents/gallon and pump prices are at 25 cents/gallon. When demand really gets going in China, India, and other developing countries OPEC will have serious capacity issues; trust me, it'll only get worse.


Plus petroleum can be produced synthetically (in a laboratory). Matter of time before we find ways to tap primary energy at larger and larger quantities. Energy is NOT limited, it is unlimited. Remember, law of thermodynamics: energy is never created nor destroyed, merely transformed from one state to another. Petroleum = stored chemical energy. You can take primary energy + hydrogen + carbon and produce petroleum. We will find cost effective way to produce synthetic fuels before we hit peak oil.

With respect to peak oil, when we start talking about The First Law of Thermodynamics we need to consider the consequences of The Second Law of Thermodynamics; the degradation of energy/order, Entropy. It's all about diminishing rates of return. Trying to fight entropy is a losing proposition.


Example 1: The roller coaster
The car of a roller coaster has the greatest potential energy when it is sitting on the crest of the highest point. Now it starts rolling down into a valley and makes it up to the second crest which is a little lower than the first crest. At this point the car has potential energy plus some kinetic energy. Here's the kicker; the sum of the kinetic energy plus the potential energy at the top of the second crest is not equal to the potential energy it had sitting at rest on top of the first crest. Where did the extra energy go? It was lost to the surroundings as thermal energy (electromagnetic radiation, IR on the electromagnetic spectrum, photons ---> thermal entropic dispersion).

Creating useable chemical energy via endothermic reactions is analogous to the useable energy we have on the second crest of our roller coaster; less useable energy than we had before. However, it would make economic sense to do this if the resulting chemical energy is more valuable than the input energy. In the old days it was common to flare off natural gas because it wasn't worth anything.

Wood ---> 6,000 Btu/pound
Coal ---> 8,000-14,000 Btu/pound
Oil ---> 20,000Btu/pound (the product of millions of years of sunshine in conjunction with the geothermal driven endothermic reactions that occur during thermal maturation)


Example 2: The Resource Pyramid [Oil and Gas]
Conventional oil & gas sits at the apex; highest quality, greatest EROEI but limited in quantity. Non Conventional oil & gas sits lower down; lower quality, less EROEI but greater in quantity.

Non-conventional oil & gas includes plays like the Bakken play, oil sands, oil shales, tight gas, shale gas, CBM etc; they're known as Resource Plays and they sit further down on the resource pyramid. Entropy increases (and EROEI decreases) as you go down the resource pyramid. You can see this in the exploration/exploitation cycle of a mature basin. You just need to look at the targets companies are going after and how they're exploiting them; they're less and less concentrated.


Example 3: The Resource Pyramid [Gold mining]
The Red Lake Gold Mine, an Archean gold deposit, is one of the world's highest grade and lowest cost gold producing operations. The grade averages about 60 grams/tonne. High-Grade-Low-Tonnage ---> less entropy
Porphyry gold deposits, on the other hand, are Low-Grade-High-Tonnage ---> more entropy. When oil prices get high enough, Low-Grade-High-Tonnage deposits will become sub-economic (a good reason to hoard bullion, haha).


In conclusion, back to the roller coaster example; we could discover that the roller coaster is situated on top of Mt. Everest. The trick is to find a way to tap that hyper-concentrated potential energy so that we can start the car rolling down the mountain.

The answer could lie in particle physics and string-theory. But will we run out of time? The odds are stacked against our species..

[__hoot__]

CaCO3 + H2O + Scavanger Mineral + heat&pressure = HC hydrocarbons + oxidized scavanger rocks.............dah, are the russians the only ones that know this? They did it in the lab back in 56 or 57 produceing oil and rust from limestone water and iron. Reason why they lead the world in oil production today; and have a professional geologist as a leader.



Remember, you have to step around all the Rockerfeller funded "road apples" in this life

[killer2021]

CaCO3 + H2O + Scavanger Mineral + heat&pressure = HC hydrocarbons + oxidized scavanger rocks.............dah, are the russians the only ones that know this? They did it in the lab back in 56 or 57 produceing oil and rust from limestone water and iron. Reason why they lead the world in oil production today; and have a professional geologist as a leader.



Remember, you have to step around all the Rockerfeller funded "road apples" in this life


I talked about this in the post regarding the origin of petroleum. The reaction you are referring to is called the serpentization reaction.


Serpentinization is a geological low-temperature metamorphic process involving heat and water in which low-silica mafic and ultramafic rocks are oxidized (anaerobic oxidation of Fe2+ by the protons of water leading to the formation of H2) and hydrolyzed with water into serpentinite. Peridotite, including dunite, at and near the seafloor and in mountain belts is converted to serpentine, brucite, magnetite, and other minerals — some rare, such as awaruite (Ni3Fe), and even native iron. In the process large amounts of water are absorbed into the rock increasing the volume and destroying the structure.
The density changes from 3.3 to 2.7 g/cm3 with a concurrent volume increase of about 40%. The reaction is exothermic and large amounts of heat energy are produced in the process.
Rock temperatures can be raised by about 260 oC, providing an energy source for formation of non-volcanic hydrothermal vents. The magnetite-forming chemical reactions produce hydrogen gas under anaerobic conditions prevailing deep in the mantle, far from the Earth atmosphere. Carbonates and sulfates are subsequently reduced by hydrogen and form methane and hydrogen sulfide. The hydrogen, methane, and hydrogen sulfide provide energy sources for deep sea chemotroph microorganisms.

My guess is that you can inject water into these formations to induce the serpentinization reaction. The increase in volume breaks the rocks around it which causes the hydrogen to move toward the surface where it reacts with carbonate materials and turns into methane + heavier hydrocarbons. Many people think that all petroleum comes from biotic sources but I have more than enough evidence to prove that hydrocarbons can be produced abiotically. For those who still believe in biotic formation of oil then here is a good question for you: How are hydrocarbons produced on other planets when no biotic life has been found there? (ie. mars and the moon have trace amounts of methane in the atmosphere).

[hipster_dufus]

Nobody denies that these reactions occur in nature …
You guys are referring to two different reactions though..

killer2020: Serpentinization involves redox reactions that involve a transfer of electrons between species having different valence states – e.g., involving minerals and solutions containing transition metals like Fe, Mn, and Cr. Metasomatic reactions change the bulk-chemistry of the rock (alteration). Serpentinization is a low temperature exothermic hydrothermal process.

__hoot__: I think you’re referring to a reaction that occurs at completely different P-T conditions. These reactions involve calcite, water and iron oxide to produce methane under much higher P-T conditions than serpentinization. Yes, there is merit in the Russian/Ukrainian view. They’ve been able to verify this in diamond anvil high pressure/temperature experiments.

Anyways, great discussion but we should move this stuff (above) into the Origin of Petroleum Thread (http://goldismoney2.com/showthread.php?8991-Official-Thread-ORIGIN-OF-PETROLEUM); cuz we’re getting way OT here :biggrin:.


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Reason why they lead the world in oil production today; and have a professional geologist as a leader.

There's been plenty of investment, optimization, mega-projects but production growth is slowing significantly; maybe to plateau soon, if it hasn't already. Also, it seems they're getting pretty assertive and desperate in trying to claim a slice of the Arctic pie. Why is that?


Remember, you have to step around all the Rockerfeller funded "road apples" in this life

What Rockerfeller "road apples" do you refer to?

[killer2021]

Anyways, great discussion but we should move this stuff (above) into the Origin of Petroleum Thread; cuz we’re getting way OT here

haha, agree. Please post in that thread as I would enjoy your insights. I always enjoy conversing with an insightful mind :)