U.S. Energy Demand,Offshore Oil Production and

BP’s Macondo Well Spill

Tad Patzek, Petroleum & Geosystems Engineering, UT AustinDepartment of Physics, Wheeler Lecture Hall, September 1, 2010, 4:00 p.m.

Technology. . .. . . Challenges and reveals the Earth:

“Such challenging happens in that the energyconcealed in nature is unlocked, what is unlocked istransformed, what is transformed is stored up, whatis stored up is in turn distributed, and what isdistributed is switched about ever anew. ”

“Everywhere everything is ordered to stand by, to beimmediately on hand, indeed to stand there just sothat it may be on call for a further ordering.”

Technology is a “standing-reserve” of energy forhumans to order nature and, in turn, be enframed bytheir technology.

Martin Heidegger, The Question Concerning Technology, 1954

– p.1/40

In Plain English. . .What Heidegger meant is:

We are an impatient species that regards astanding-reserve of energy as a must

Since we cannot control technology, technologycannot be our tool to control nature

We are a part of technology

We tend to think of technology as an instrument thatis outside of us. Instead, we are a part of a biggersystem that comprises us and technology

PE departments form well-rounded petroleumengineers, and deliver science and technology toO&G Industry, while trying to educate all ontechnology’s impacts on the Earth and society(?)

– p.2/40

Talk Outline. . .

Fuels that run the U.S.

Complexity, models, risks

Gulf of Mexico’s oil and gas production

Conclusions

– p.3/40

Summary of Conclusions. . .

The global rate of production of oil is peaking now,coal will peak in 2-5 years, and natural gas in 20-30years

There is PLENTY of fossil fuels (“resources”) left allover the Earth

The resource size (current balance of a bankingaccount) is mistakenly equated with the speed ofdrawing it down (ATM withdrawals)

Few understand the ever more stringent dailywithdrawal limits imposed by nature on our ATMcards (oil & gas wells and coal mines)

Until we all learn about our limitations, we willcontinue to hallucinate about energy and technology

– p.4/40

Summary of Conclusions. . .Economists, business people, and policy makersgenerally have poor understanding of banking, be itan AIG or a Prudhoe Bay

They know what the rate of withdrawals (energydemand) should be, but have little idea about thewithdrawal limits (energy supply)

Offshore fields will be producing an increasingportion of global oil supply

Energy flow-based solutions (wind turbines,photovoltaics, and biofuels) will require most radicalchanges of our lifestyles

Thermodynamically, industrial-scale biofuels are notsustainable, and will quickly degrade and destroy theEarth’s most vital ecosystems

– p.5/40

U.S. Energy IndependenceFossil fuels run 85 percent of U.S.economy directly, and the remainderhas a variable but non-negligiblefossil fuel content

Electricity is produced almost entirelyfrom domestic energy sources

Natural gas is the swing fuel forelectricity generation

Natural gas could aid in theelectrification of railroads

Natural gas could supplementpetroleum as an automotive fuel

– p.6/40

Units in My Presentation. . .The fundamental unit of energy is 1 exa Joule (EJ)

1EJ = 1,000,000,000,000,000,000 Jis the amount of metabolized energy in food

sufficient to sustain the entire U.S. population forone year @100 J/s-person = 100 W/person

continuously

Currently the U.S. uses 105 EJ/year; one hundredand five times more than we need to live

If we were to metabolize this amount of energy, wewould be 15 m long sperm whales, each weighing 40tonnes.

1 EJ/year = 32 GW heat continuously ≈ 1 TscfNG/year = 1/2 million BOPD

– p.7/40

Homo Colossus Americanus. . .

1 Statistical American = 1 Sperm Whale

EUGENE ODUM, Ecological Vignettes, 1998

– p.8/40

Electricity generation: 39 EJp/y

1998 2000 2002 2004 2006 20080

50

100

150

200

250

300

350D

ays

on E

lect

ricity

/yea

r

Coal

Natural Gas & Other

Nuclear

Hydroelectric

Rest

176

79

72

23

That’s 37% of primary energy use in U.S. Source: DOE EIA, accessed 03/28/2010– p.9/40

Electricity generation – Rest

1998 2000 2002 2004 2006 20080

2

4

6

8

10

12

14

16

18

20

22D

ays

on E

lect

ricity

/yea

r

Petroleum

Wood & Other Biomass

Wind

Geothermal

4

5

5

1

Solar thermal and PV = 1 hour of U.S. electricity. Source: DOE EIA, accessed 03/28/2010– p.10/40

Transportation Fuels: 33 EJp/y

1950 1960 1970 1980 1990 20000

50

100

150

200

250

300

350D

ays

on F

uel/y

ear

Motor Gasoline

Distillate Oil

Aviation Fuels

Residual Oil

Ethanol

202

99

38

188

That’s 31% of primary energy use in U.S. Source: DOE EIA, accessed 03/28/2010 – p.11/40

U.S. Energy IndependenceNatural gas, increasingly from tightsands and gas shales, is the onlylarge-scale, clean, domestic fossilfuel in the U.S. portfolio

Natural gas can easily generate anadditional 1–2 EJ/yr of electricity (4–9Tcf/y NG) and displace 2–4 EJ/year(1–2 million BOPD) in motor gasolineand diesel fuel

Key to natural gas success are stablegas price over 5-10 year contracts,and environmental soundness of fieldoperations

– p.12/40

Natural Gas = Cleaner Air. . .

0 20 40 60 80 100

Natural gas

Liquid petroleum gas

Refinery gas

Gasoline

Kerosene

Crude oil

Diesel

Fuel oil

Hard coal

Lignite

Peat

Wood

Kg CO2 per GJ in fuel

MeanMedian

Source: Volker Quaschning, Regenerative Energiesysteme,(Renewable Energy Systems), Carl Hanser Verlag, München, 2009 – p.13/40

. . . and also Cleaner Soil & Water

TVA coal ash spill 12/23/2008

After mercury capture, utility boilerson natural gas emit 0.44 t Hg/y, vs.coal at 48 t Hg/y (5.3 t Hg/y in TXalone)

Commercial boilers emit mercury at9.3 t Hg/y

Combusting coal generatesapproximately 290 Mt ash/y andpollutes surface and groundwaterover watershed areas across U.S.

Dumping coal ash occurs at 574large sites across U.S.

Scrubbing coal flu gas movespollution from air to surface water

Mining coal destroys earth surface– p.14/40

Tropical Biofuel Madness

Borneo: NASA-Johnson Space Center

Tropical forest burning for oil palmand soybean plantations releasesamounts of CO2 comparable to theentire fossil fuel emissions on theEarth

When peat underlying the forest isalso set on fire, emissions double ortriple

Wood burning for electricitygeneration is utterly unsustainable(the Polaniec electrical power stationin Poland is a good example)

Local use of stranded natural gas caneliminate some of the forest burning

– p.15/40

CO2 From SE Asia Forest Fires

1990 1992 1994 1996 1998 2000 20021.5

2

2.5

3

3.5

4

4.5

5

CO

2 em

issi

ons,

gig

aton

nes/

yr

Source: D. SCHMIL AND D. BAKER, The Wildfire Factor, Nature, 420 29, 2002

– p.16/40

Gas Shales Are Everywhere

Source: US DOE EIA– p.17/40

Unconventional Resources, 2008 . . .

0 1 2 3 4 5 6

Shale Gas

Tight Gas

Coalbed Methane

Technically Recoverable Reserves, Prudhoe Bay Eq.

P95P5−P95

Source: Navigant Consulting, Inc., 2008– p.18/40

Most Important Points for UT AustinTexas produces 18% of U.S. oil, 24% of U.S. grossnatural gas

Texas EOR produces 12% of U.S. EOR oil

Texas produces 4 times more energy as natural gasand liquids (NG&L) than as oil

Texas produces 21 times more energy as NG&L thanas EOR oil

Texas drills about 30% of linear feet drilled in the U.S.

A campus-wide, $100 million+ initiative to addresshuge challenges with UNG/Oil production is underway

– p.19/40

The rare and unexpected. . .

The Lucas Gusher, January 10, 1901

Our ignorance the future should becalled anti-knowledge

Yet, we habitually form models of thefuture

Models are not necessarily bad, butthey are limited

We never know in advance whenthese models fail

The mistakes made using models canhave very severe consequences

Simple iterated/recursive models or of-ten better than complicated ones

– p.20/40

A Harbinger of Things to Come?

Sources: NASA; Physicist Richard Feynman with an O-ring in a G-clamp, National Geographic– p.21/40

Feynman, NASA, and Risk

It appears that there are enormous differences of opinionas to the probability of a failure with loss of vehicle and ofhuman life. The estimates range from roughly 1 in 100 to 1in 100,000. The higher figures come from the workingengineers, and the very low figures from management.What are the causes and consequences of this lack ofagreement? Since 1 part in 100,000 would imply that onecould put a Shuttle up each day for 300 years expecting tolose only one, we could properly ask “What is the cause ofmanagement’s fantastic faith in the machinery?”

Source: Richard Feynman, Report of the PRESIDENTIAL COMMISSION on the Space ShuttleChallenger Accident. Appendix F - Personal Observations on Reliability of Shuttle, 6/1986

– p.22/40

Feynman, NASA, and Risk

We have also found that certification criteria used in FlightReadiness Reviews often develop a gradually decreasingstrictness. The argument that the same risk was flownbefore without failure is often accepted as an argument forthe safety of accepting it again. Because of this, obviousweaknesses are accepted again and again, sometimeswithout a sufficiently serious attempt to remedy them, or todelay a flight because of their continued presence.

Source: Richard Feynman, Report of the PRESIDENTIAL COMMISSION on the Space ShuttleChallenger Accident. Appendix F - Personal Observations on Reliability of Shuttle, 6/1986

– p.23/40

The Essence of the Problem

Here is an exchange that took place in Paris in the1920s. It illustrates well a serious problem with earthsciences (and most disciplines of engineering), as theyare currently practiced:

Scott Fitzgerald: The rich are different than us.

Ernest Hemingway: Yes, they have more money.

The problem is that bigger systems are essentiallydifferent than smaller ones, but we tend to ignore thisprofound truth

– p.24/40

Complexity and emergent properties

When this clockwork is disassembled and put back together properly, its behavior is predictableThe dissected frog will not hop off the table, when her intestines are squeezed inThe living frog has emerging, autonomous properties that cannot be gleaned from her carcass

– p.25/40

Complexity and earth systems

Reductionist approach customarily applied to all systems does not work for complex systemsNew science, engineering, anthropology, sociology, political science, and psychology are neededSource: Dr. Larry Lake, PGE, UT Austin

– p.26/40

A rare event. But unexpected?

Sources: U.S. Coast Guard, July 12, 2005 photo by PA3 Robert M. Reed, displayed in Wikipedia– p.27/40

A rare event. But unexpected?

Source: U.S. Coast Guard – 100421-G-XXXXL- Deepwater Horizon fire, displayed in Wikipedia– p.28/40

Complex system and simple failure

Complex system System cost Failed part cost

Space Shuttle $1.7 – 6.7 billion $1000a?

Thunder Horse $1 (+1 billion) $100b?

Deepwater Horizon $700c million (+50 billion) $15 milliond?aFailed O-ring was a fluoroelastomer specified by Morton-ThiokolbA 6-inch length pipe (but also bad welds)c$500 million for the rig and $200 million for the well with cost overrunsdA tieback for production casing, pull BOP, 20 centralizers, cement job, CBL, casinglockdown

A complex multi-billion dollar system disintegratesbecause of one or few poorly designed parts that costalmost nothing. Bad management, judgment, andworkmanship are involved

– p.29/40

Predicting the Future. . .

1970 1975 1980 1985 1990 1995 2000 2005 20100

0.1

0.2

0.3

0.4

0.5

0.6

0.7M

illio

n B

OP

D

Production histories of 65 oilfields in the North Sea. Sources: Norwegian Government

(2009), Patzek & Croft (2010) – p.30/40

. . . Emergent Behavior. . .

1960 1970 1980 1990 2000 2010 2020 2030 20400

0.5

1

1.5

2

2.5

3

3.5M

illio

n B

OP

D

A single Hubbert curve explains almost all of Norwegian production in the North Sea– p.31/40

A Future of Norwegian North Sea

1960 1970 1980 1990 2000 2010 2020 2030 20400

5

10

15

20

25

30B

illio

n B

arre

ls o

f Oil

Sources: Norwegian Government (2009), Patzek & Croft (2010)– p.32/40

2006 Reservoir Depths in the Gulf

0 50 100 15010000

9000

8000

7000

6000

5000

4000

3000

2000

1000

Wat

er d

epth

, ft

Rank = Number of fields deeper than a field

Shell’s Perdido

BP’s Thunder Horse

BP’s Macondo Mississippi Block 252

Source: MMS data, 2006Many ultra deepwater fields

– p.33/40

Emergent Behavior in the Gulf. . .

1940 1960 1980 2000 2020 20400

0.5

1

1.5M

ilion

BO

PD Shallow water

Deep water Patzek’sProjection

IndustryProjection

Sources: U.S. DOE EIA, MMS, and Patzek’s calculations– p.34/40

A Future of Deep Gulf

1940 1960 1980 2000 2020 20400

1

2

3

4

5

6

7

8

9

Historic data

Industry Projection

Patzek’sProjection

Bill

ion

Bar

rels

of O

il

Sources: U.S. DOE EIA, MMS, and Patzek’s calculations – p.35/40

Total Gulf Oil/U.S. Oil Elsewhere

1940 1950 1960 1970 1980 1990 2000 20100

5

10

15

20

25

30

35

40

45G

OM

Oil

vs. R

est o

f U.S

. Oil,

%

Sources: U.S. DOE EIA, MMS, and Patzek’s calculations

Thunder Horse

– p.36/40

2006 Oil Data for GOM

1 10 100 10001

10

100

1000

Rank = Number of fields larger than a field

Fie

ld s

ize,

Mill

ion

barr

els

of o

il

Cumulative oil producedProven oil reserves

Source: MMS data, 2006Fractals everywhere! All that is relevant was discovered?

– p.37/40

2006 Gas Data for GOM

1 10 100 1000 11

10

100

1000

Rank = Number of fields larger than a field

Fie

ld s

ize,

bill

ion

of s

cf o

f gas

Cumulative gas producedProven gas reserves

Source: MMS data, 2006Gas that is relevant was produced?

– p.38/40

Conclusions

Complexity is omnipresent in earth systems andtechnology that orders them:

There is incomplete self-similarity (self-affinity)whose exponent changes across scales

All scales are present and relevant

“Kings” or “black swans” are always possible

Our predictive ability is dismal to none for the blackswans

Epistemic humility and ability to use ignorance of thefuture to our advantage is in order

– p.39/40

Epistemic Humility

The Captive Mind by Czesław Miłosz:

An old Jew in Galicia once made an observation: “Whensomeone is honestly 55% right, that’s very good andthere’s no use wrangling. And if someone is 60% right, it’swonderful, it’s great luck, and let them thank God. Butwhat’s to be said about 75% right? Wise people say this issuspicious. Well, and what about 100% right? Whoeversays he’s 100% right is a fanatic, a thug, and the worst kindof rascal.”

– p.40/40