SC 213 SLATE: OUR ENERGY FUTURE

Week Two: Fossil Fuels

John Bush

October 14, 2005

SOME QUESTIONS

• Does humanity face an energy crisis?

NO!• Then what is the nature of the “crisis”?

1)The availability of energy in a form that is consistent with sustaining the current American lifestyle (which has become the desired lifestyle of the World) appears to be rapidly diminishing.

2) The continuance and spread of the American lifestyle arguably will make the Earth a very

uncertain and unpleasant place to live.

WHAT DO I MEAN BY “THE AMERICAN LIFESTYLE”?

• Dispersed location of housing, work & services • Primacy of individualized personal transport• Relatively low cost, flexible distribution of goods

and services• Productive agriculture achieved with high energy

input and low labor.• Adequate, reliable access to low cost utilities:

water, fuel, communication, electricity

THE OIL & GAS SHOCK

We Americans will have to deal with a crisis brought on by the decreasing availability to us of particular forms of fossil fuels.

At first we may respond to the shock as we did to the 1973 “Oil Shock”

THE 1973 OIL SHOCK: CONSEQUENCES & RESPONSES

• Inflation: rapid rise in costs of heating/cooling, transportation, food, materials, services…..

• Panic buying in response to wild swings in availability/cost of oil and gas

• Emphasis on behavior resulting in efficient use of oil and gas: reduction of energy input per unit of GDP

• Enormous build-up of energy r&d and demonstration programs

• Altering of behavior to decrease consumption of goods and services, especially those with high dependence on oil and gas… leading to stagflation or economic depression?

THE OIL & GAS SHOCK: NEAR TERM POLICY OBJECTIVES?

• Secure access to proven oil & gas reserves• Secure delivery systems for crude oil & gas• Enhance domestic infrastructure for processing oil & gas• Stimulate the development of domestic oil & gas• Implement the means to cushion economic dislocations

resulting from swings in the availability/cost of oil & gas• Stimulate the development and implementation of

technologies that result in efficient use of oil & gas• Encourage the use of coal-generated electricity in

applications now dependent on oil & gas, subject to a carbon dioxide constraint

• Encourage rd&e to create acceptable alternatives to oil & gas

Energy Research

• For comparison, the European Union is completing a $1 billion program on renewable energy to end in 2006, and expects double that afterwards to 2010.

• In 2005, the US will spend $1 billion, but mostly at national labs (DOE National Renewable Energy Laboratory in Colorado), but university funding is “bleak”.

• Stanford has a Global Climate and Energy Project (GCEP) of $225 million over ten years from industry.

Fossil Fuel Future Summary

• Oil, Natural Gas, Shale Oil, and Coal produce CO2.

– Carbon sequestration requires an extra 30% of power and needs research. FutureGen $1 billion research plant.

• Oil is needed for transportation fuel– Too expensive for electricity generation – Total world reserve of oil is a large question, uses politically

motivated estimates of individual countries and industry secrets– Reserves: About 50 years with growth in use– 2/3 is in the Middle East

• Coal may last 100 years with growth in usage, but only 70 years if partly converted to replace oil

• Current rate of use of fossil fuels will increase worldwide

THE OIL & GAS SHOCK: NEAR TERM POLICY OBJECTIVES?

• Secure access to proven oil & gas reserves• Secure delivery systems for crude oil & gas• Enhance domestic infrastructure for processing oil & gas• Stimulate the development of domestic oil & gas• Implement the means to cushion economic dislocations

resulting from swings in the availability/cost of oil & gas• Stimulate the development and implementation of

technologies that result in efficient use of oil & gas• Encourage the use of coal-generated electricity in

applications now dependent on oil & gas, subject to a carbon dioxide constraint

• Encourage rd&e to create acceptable alternatives to oil & gas

DIALOG

• If these objectives are met what will it mean for the oil & gas crisis?

America will have a bridge into a post- oil & gas era (POGE).

• How long do we have?• What will provide the energy needed to maintain

the American lifestyle in the POGE?That is what our Slate will try to answer.

DIALOG (CONTINUED)

• If these objectives are met what will it mean for the global climate?

The rate of carbon dioxide addition will be decreased but the World will be irrevocably committed to some consequences of global

warming.The severity of the consequences will depend on what happens elsewhere in the World.

• What if we conclude that in the time frame of the POGE bridge adequate replacements for oil & gas cannot be established?

Then the American lifestyle cannot be maintained and we will have to think the unthinkable.

FOSSIL FUELS

• Petroleum• Terrestrial Natural Gas• Coal• Bitumen (“Tar Sands”)• Kerogen (“Oil Shale”)• Seabed Methane (Methane Hydrate)

WHY OIL & GAS?

• Huge, industrial scale quantities occur• Accessible with proven technology• Reasonable cost• Reliable supply• Relatively clean burning• Relatively lower carbon dioxide production• We have built a huge infrastructure that is

dependent on oil and gas

WHY NOT OIL & GAS?

• Economists argue that there will always be plenty of oil and gas if we are willing to pay for it

• Geologists argue that there is a finite global resource of the “good” kind of oil & gas that has made the American lifestyle possible

• At issue: when will the production peaks of the “good” kind of oil and the “good” kind of natural gas be reached?

ARE WE RUNNING OUT OF OIL?

Historically observations about oil supplies have not been very reliable

• 1855: “Hurry before this wonderful product is depleted”• 1874: “The US has enough petroleum to keep its

kerosene lamps burning for only four years”• 1979: “The US will exhaust its own petroleum reserves in

about 10 years”• 2005:“World oil discoveries peaked in the 1960s. You

can’t pump what you haven’t found. Where will that additional oil production come from and at what price?”

World Oil Growth and Decline - Pessimistic 2 Trillion Barrels Total Recoverable

Optimistic 3Trillion Barrels Total Recoverable: US Geological Survey

Peaking of World Oil ProductionHirsch Report: Feb. 2005

THE CRITICAL QUESTIONS

• How long does America have until the “good” fossil fuel becomes too scarce and costly to support the “American Lifestyle”?

• How much carbon dioxide from the combustion of fossil fuel can the Earth accommodate until the consequences for the “American Lifestyle” become intolerable?

SOME POSSIBLE VIEWPOINTS• Oil

– At or past the peak of world production– Good for another 30 -50 years– There will always be plenty

• Gas– Non-domestic sources are too risky– Good for another 50-75 years but the peak will come sooner– There will always be plenty

• Global Warming– It is too late to stop it—things will only get worse with more fossil fuel

combustion– Restricting future carbon dioxide emissions can keep the Earth

livable– Global warming is a myth or it is in fact beneficial

SOME POSSIBLE ELEMENTS OF POLICY I

Extend the availability of oil and gas as long as possible

• Locate more deposits of oil and gas• Apply improved management practice and technology

for oil and gas recovery, transport and processing• Convert coal, bitumen, kerogen, and biomass to oil and

gas equivalents• Develop and apply carbon dioxide sequestration• Emphasize efficiency in conversion and use, especially

in transportation, over and above the cost-induced efficiency improvements

SOME POSSIBLE ELEMENTS OF POLICY II

Substitute electricity for fossil fuels wherever that is feasible*

• From natural gas• From coal• From nuclear fission• From nuclear fusion• From renewables: wind, hydro, solar, geothermal, tidal,

biomass…• Apply especially to transportation

* “Feasible” combines the ideas of technical feasibility with economic, political, and environmental acceptability

SOME POSSIBLE ELEMENTS OF POLICY III

Substitute hydrogen for fossil fuel use wherever feasible*

• From natural gas• From coal• From nuclear fission• From nuclear fusion• From renewables• Apply especially to transportation

TWO “EXTREME” VIEWPOINTS

• “Super-optimist”

-Always will be enough oil and gas

-Global warming is no problem

• “Super-pessimist”– Past the peak for oil and importing gas is too

risky– It is already too late; things will only get worse

POLICY RESPONSES

• Super-optimist– Locate more oil and gas– Manage these resources well– Economics will take care of the rest

• Super-pessimist– Develop and apply carbon sequestration– Emphasize super-economic efficiency– Shift to electricity derived from coal, nuclear fission,

and renewables, and apply to transportation

“MOST REASONABLE VIEWPOINT”

• Oil: we are at or past the peak of world production.

• Gas : We are good for another 50-75 years, but the peak will come sooner

• Global Warming: Restricting carbon dioxide emissions can keep the earth livable.

POLICY RESPONSES

• Locate more deposits of oil and gas• Apply improved managements practices for oil and gas

recovery, transport and processing• Convert coal, bitumen, and kerogen to oil and or gas• Develop and apply carbon dioxide sequestration• Emphasize super-economic efficiency• Substitute electricity for fossil fuels wherever it is feasible

using coal, nuclear fission, and renewables• Substitute electricity for fossil fuels in transportation

FOSSIL FUELS

Petroleum

Terrestrial Natural Gas

Coal

Bitumen (“Tar Sands”)

Kerogen (“Oil Shale”)????????Seabed Methane ?????????????????????

TOPICAL ORGANIZATION

• Locating oil and gas• Management and technology for recovery of oil

and gas (including methane hydrates)• Coal for electricity generation• Carbon dioxide sequestration• Conversion of natural gas to liquid fuel• Conversion of coal to liquid and gaseous fuel• Conversion of bitumen to liquid fuel• Conversion of kerogen to liquid fuel

LOCATING OIL AND GAS

• How much is there left to find?– World Oil: USGS 3000 bbl– US Oil: USGS 32 bbl– US Gas: 55 TCF below 15,000 ft, 460 TCF in tight formations

• Where is it likely to be?– Middle/Far East; Arctic Ocean; Deep Cont. Shelves– Arctic Wildlife Preserve; California/Florida Coasts; National Forests

• What are the negatives?– Threat to wildlife– Visual/chemical pollution

• What are some technology possibilities?– Refined 3D and 4D seismic analysis– Deep drilling technology– Miniature drilling technology

RECOVERY OF OIL AND GAS

• Enhanced Oil Recovery– Primary Recovery 10%– Secondary Recovery 20-40%– Tertiary Recovery 30-60% US 700,000 bls/day

• Steam/Carbon Dioxide injection• Gas Injection• Chemical injection

• Stripper Wells– 393,000 wells produce 15% of US oil– Produce lots of contaminated brine: 300:1

• Methane Hydrates– Continental shelf/Arctic permafrost– US 2,000-200,000 TCF– Potentially 40-400 years of US consumption

GENERATION OF ELECTRICITY FROM COAL

• US has enough coal for 80-120 years• About half of US electricity comes from coal• US has a substantial infrastructure in place• Coal or Gas?

– 1999-2003 Gas fired-134,000 MW; Coal-fired 500 Mw– Currently 115 coal-fired plants under construction

• Negatives of coal to electricity– Coal generates twice as much carbon dioxide per unit of energy as

natural gas– Air pollutants– Aesthetics/water contamination– Cost/reliability of electrical transmission system– Reliability of transport of coal

US Coal Lifetime

ECONOMICS OF GENERATION• Fuel Costs—Coal is a lot cheaper than gas per

energy unit– Break-even if gas $3.50-4.00/Mbtu (2002 $)– In 2002 gas was $ 2.50/Mbtu

• Capital Costs– Gas-fired CC $550-700/kw; OC $350-550/kw– Coal-fired FB $1100 -$1300/kw; IGCC $1300-$1600/kw

• IGCC with Carbon Dioxide Capture– Eastern Coal; 629 MW– $1.2 B $1900/kw ($900/kw in 2002?)– AEP/GE/Bechtel – Goal: a standardized plant design

CARBON DIOXIDE SEQUESTRATION

• Elements of technology have already been demonstrated but not integrated: capture-transport-disposal

• Several projects underway– FutureGen $1B over 10 yrs.– Statoil in North Sea bed– BP Scotland 350 MW planned– BP Algeria

• It adds costs of energy and capital to IGCC– Capture adds 2.5 to 4 cents/kwh– Underground storage adds 1 to 5 cents/kwh

CARBON DIOXIDE SEQUESTRATION

• There seems to be storage capacity– UN IPCC capacity for 80 years worth of current

carbon dioxide emissions– Estimate 99% likelihood that will stay in place for 100

years

• Is it hazardous?• Some wilder idea

– Ocean sequestration– Stimulation of terrestrial uptake– Genetic manipulation of plant life

CONVERSION OF NATURAL GAS TO LIQUID FUEL (GTL)

• A solution to the “stranded gas” problem• An alternative to LNG shipment• Process

– Reform methane to syngas (7 projects)– Use Fischer-Tropsch to make syncrude– Refine to ultra-clean burning diesel fuel

• Projects– Tulsa Okla. DOE Demo 70 bl/day $38 M– Qatar Exxon/Chevron/Shell 750,000 bl/day $20 B– Oman /Malaysia– Possibility for Alaska?

• Estimated production costs $14 /boe

CONVERSION OF COAL TO LIQUID & GASEOUS FUEL

• Gasification is the first step• Convert to methane: DOE failed demonstration• Convert to diesel

– Convert syngas to syncrude and refine– Nazi Germany/ South Africa– Economics may favor over gtl

• Convert to methanol: Air Products and Chemicals

CONVERSION OF BITUMEN TO LIQUID FUEL

• “Tar Sands”: Canada and Venezuela• Athabasca tar sands

– 178 Bboe in place– Bitumen does not flow spontaneously– Heavy oil does not move well in pipelines

• Problems– Where does the energy come from to process the bitumen?– What happens to the landscape?

• Projects: $80 B underway• Future for nuclear energy?

– Total 500 MW HTR?– Atomic Energy of Canada?

• Industry forecasts– Cost to produce $13-18/boe (2002); $22-25 /boe (2005)– Production 1.0 Mboe/day (2004); 2.7 Mboe/day (2015)

CONVERSION OF KEROGEN TO LIQUID FUEL

• “Oil Shale”– Immature source rock– One ton of shale gives one boe– Gold mining is profitable at about $12 of gold/ton– Enormous deposits in the Green River Formation: Utah,

Wyoming, Colorado

• Process alternatives– Retorting– In-situ extraction

• Problems– What to do with the spent shale from retorting– Where to get the process water– How to make a profit

WHAT SHOULD WE EMPHASIZE?

• Locating oil and gas• Management and technology for recovery of oil

and gas (including methane hydrates)• Coal for electricity generation• Carbon dioxide sequestration• Conversion of natural gas to liquid fuel• Conversion of coal to liquid and gaseous fuel• Conversion of bitumen to liquid fuel• Conversion of kerogen to liquid fuel