Monday, April 28, 2008

When You Go Deep For Oil

The Oil Drum pointed me to this article at Bloomberg, which proceeds to detail what it will take to get the oil out of the ground at Brazil's Tupis field. These folks aren't kidding when they say the easy oil is mostly found. Here's a taste of what the Brazilians are up against:

Tapping what may be the biggest oil finds in the Western Hemisphere in three decades will require equipment that can withstand 18,000 pounds per square inch of pressure, enough to crush a pickup truck, pipes that can carry oil at temperatures above 500 degrees Fahrenheit (260 Celsius) and drill bits that can penetrate layers of salt more than one mile thick.

How can we be so sure?

Brazil's oil will be harder to develop than the Gulf of Mexico, where the deepest wells are now in production, Cline said. Exxon Mobil Corp. and Chevron Corp., the two biggest U.S. oil companies, saw diamond-crusted drill bits disintegrate and steel pipes crumple when they attempted to tap deposits beneath the Gulf's seafloor two years ago.

Not only are diamonds a girl's best friend, evidently they are a driller's delight. But diamonds aren't as costly as oil wells:

Petrobras hasn't said how much it spent to sink wells at Tupi and Carioca. Similar drilling by Exxon and Chevron Corp. in the Gulf of Mexico cost $180 million to $200 million for each well.

And lest you think that developing the wells and bringing on new production will lower your price at the pump:

"A big find might not be a good find if it costs so much to develop that it's not commercially viable," S&P's Vital said. "We don't have any idea at all yet of all the costs that are going to be involved. Those costs are going to set the floor for oil prices."

And how costly can it get?

Chevron, which has the deepest Gulf of Mexico exploration well, including distance below the seafloor, destroyed as many as a dozen $50,000 drill bits at each of the 14 wells in its $4.7 billion Tahiti project.

Exxon Mobil abandoned a Gulf project that would have been the deepest well after pressure and heat shut down the venture in August 2006.

By the way, the cost for the Tahiti project was $4.7 billion. That was not a typo in the snippet. The exploration well referenced is likely Jack, which they announced in September 2006. You notice that the article calls it an 'exploration' well. Chevron is not going to pursue production unless, and until, they have the technology to make it pay off.

Moral of the Story: Don't go looking for gasoline prices to plummet simply because new fields are located. Take the whole picture into account.

1 comment:

The North Coast said...

Yes, people sort of tend to think that the stuff gushes like it did at Spindletop or someplace in the good old days of EZ oil.

The Bakken Formation, for example, is so refractory to any drilling method known, that, at most, about 3.6 billion barrels may be recoverable. The hundreds of billions that may (or may not)repose between the layers of shale and dolomite are pretty theoretical at this point.

Also, people don't realize how small all the recent finds are. Most people do not realize just how little oil 15 billion barrels really is, especially if only 10% is recoverable. The 3.5 billion from Bakken would last this country about 6 months at current rates of consumption. Yes, this country guzzles 7.3 billion barrels a year, which means that even if the Bakken were everything people were hoping, and we could recover it all, we'd run through it in less than 30 years, IF our rates of consumption did not increase.

And the "current rate of consumption" is another thing. For example, we are said to have enough coal to power this country for 250 years at current rates of consumption. Now, what if the rate of consumption were to increase just 2% per year, due to increasing population, or to greater use of coal as natural gas supplies dwindle further? Same with uranium- a year-over-year increase, even of 1%, will cause the resource to deplete much more rapidly than originally projected.

These are the things our policy makers and politicos are obviously not considering, just as they seem not to be able to figure out that diverting enough of our remaining farmland to ethanol production, on anything like the scale necessary to fuel even a fraction of our auto fleet, could tip this country into real famine, a condition we have never experienced here.

It's only human to hope for rescue from our current predicament. Even I was hoping that the Bakken would prove out to have really hellacious huge reserves, after I got the newletters screaming "516 BILLION BARRELS OF SWEET CRUDE!!! THE NEXT SAUDI ARABIA!!" Don't we wish? But nothing lasts forever, least of all a resource that everybody needs for absolutely everything, and that took millions of years for the planet to manufacture.