Posted by Big Gav in hubbert, peak oil
Mason Inman emailed me recently to inform me that he has had a book published on M King Hubbert called The Oracle Of Oil.
Apparently the inspiration for the book was my long ago article at The Oil Drum. I haven't had a chance to read it yet but there is a review up at Nature Energy.
Posted by Big Gav in carbon trading, hubbert, technocracy
I normally only ever come across the Canada Free Press (I'm not sure what is "free" about a Canadian publication that worships America, but whatever) when people are spouting conspiracy theories about global warming and the apparently baleful influence of Canadian Maurice Strong. Today however I came across an article on Hubbert and the Technocrats and how their ideas about an energy based currency may be slowly coming to fruition via carbon credits - Carbon Currency: A New Beginning for Technocracy ?.
Critics who think that the U.S. dollar will be replaced by some new global currency are perhaps thinking too small.
On the world horizon looms a new global currency that could replace all paper currencies and the economic system upon which they are based.
The new currency, simply called Carbon Currency, is designed to support a revolutionary new economic system based on energy (production, and consumption), instead of price. Our current price-based economic system and its related currencies that have supported capitalism, socialism, fascism and communism, is being herded to the slaughterhouse in order to make way for a new carbon-based world.
It is plainly evident that the world is laboring under a dying system of price-based economics as evidenced by the rapid decline of paper currencies. The era of fiat (irredeemable paper currency) was introduced in 1971 when President Richard Nixon decoupled the U.S. dollar from gold. Because the dollar-turned-fiat was the world’s primary reserve asset, all other currencies eventually followed suit, leaving us today with a global sea of paper that is increasingly undesired, unstable, unusable.
The deathly economic state of today’s world is a direct reflection of the sum of its sick and dying currencies, but this could soon change.
Forces are already at work to position a new Carbon Currency as the ultimate solution to global calls for poverty reduction, population control, environmental control, global warming, energy allocation and blanket distribution of economic wealth.
Unfortunately for individual people living in this new system, it will also require authoritarian and centralized control over all aspects of life, from cradle to grave.
What is Carbon Currency and how does it work? In a nutshell, Carbon Currency will be based on the regular allocation of available energy to the people of the world. If not used within a period of time, the Currency will expire (like monthly minutes on your cell phone plan) so that the same people can receive a new allocation based on new energy production quotas for the next period.
Because the energy supply chain is already dominated by the global elite, setting energy production quotas will limit the amount of Carbon Currency in circulation at any one time. It will also naturally limit manufacturing, food production and people movement.
Local currencies could remain in play for a time, but they would eventually wither and be fully replaced by the Carbon Currency, much the same way that the Euro displaced individual European currencies over a period of time.
Sounds very modern in concept, doesn’t it? In fact, these ideas date back to the 1930’s when hundreds of thousands of U.S. citizens were embracing a new political ideology called Technocracy and the promise it held for a better life. Even now-classic literature was heavily influenced by Technocracy: George Orwell’s 1984, H.G. Well’s The Shape of Things to Come and Huxley’s “scientific dictatorship” in Brave New World.
This paper investigates the rebirth of Technocracy and its potential to recast the New World Order into something truly “new” and also totally unexpected by the vast majority of modern critics.
Background
Philosophically, Technocracy found it roots in the scientific autocracy of Henri de Saint-Simon (1760-1825) and in the positivism of Auguste Comte (1798- 1857), the father of the social sciences. Positivism elevated science and the scientific method above metaphysical revelation. Technocrats embraced positivism because they believed that social progress was possible only through science and technology. [Schunk, Learning Theories: An Educational Perspective, 5th, 315]
The social movement of Technocracy, with its energy-based accounting system, can be traced back to the 1930’s when an obscure group of engineers and scientists offered it as a solution to the Great Depression.
imageThe principal scientist behind Technocracy was M. King Hubbert, a young geoscientist who would later (in 1948-1956) invent the now-famous Peak Oil Theory, also known as the Hubbert Peak Theory. Hubbert stated that the discovery of new energy reserves and their production would be outstripped by usage, thereby eventually causing economic and social havoc. Many modern followers of Peak Oil Theory believe that the 2007-2009 global recession was exacerbated in part by record oil prices that reflected validity of the theory. ...
Conclusion
If M. King Hubbert and other early architects of Technocracy were alive today, they would be very pleased to see the seeds of their ideas on energy allocation grow to bear fruit on such a large scale. In 1933, the technology didn’t exist to implement a system of Energy Certificates. However, with today’s ever-advancing computer technology, the entire world could easily be managed on a single computer.
This article intended to show that
* Carbon Currency is not a new idea, but has deep roots in Technocracy
* Carbon Currency has grown from a continental proposal to a global proposal
* It has been consistently discussed over a long period of time
* The participants include many prominent global leaders, banks and think-tanks
* The context of these discussions have been very consistent
* Today’s goals for implementing Carbon Currency are virtually identical to Technocracy’s original Energy Certificates goals.
Of course, a currency is merely a means to an end. Whoever controls the currency also controls the economy and the political structure that goes with it. Inquiry into what such a system might look like will be a future topic.
Technocracy and energy-based accounting are not idle or theoretical issues. If the global elite intends for Carbon Currency to supplant national currencies, then the world economic and political systems will also be fundamentally changed forever.
What Technocracy could not achieve during the Great Depression appears to have finally found traction in the Great Recession.
Posted by Big Gav in hubbert, technocracy
In the wake of the recent interview with Jay Hanson posted at The Oil Drum, there was some discussion of Hubbert's role in the Technocracy movement.
I hadn't been aware that Hubbert was a Technocrat (or that the technocrats were an organised grouping, for that matter), so in this post I'll explore the Technocracy movement and Hubbert's role in it.
The knowledge essential to competent intellectual leadership in this situation is preeminently geological - a knowledge of the earth's mineral and energy resources. The importance of any science, socially, is its effect on what people think and what they do. It is time earth scientists again become a major force in how people think rather than how they live. - M King Hubbert
The world's present industrial civilization is handicapped by the coexistence of two universal, overlapping, and incompatible intellectual systems: the accumulated knowledge of the last four centuries of the properties and interrelationships of matter and energy; and the associated monetary culture which has evolved from folkways of prehistoric origin. Despite their inherent incompatibilities, these two systems during the last two centuries have had one fundamental characteristic in common, namely, exponential growth, which has made a reasonably stable coexistence possible. But, for various reasons, it is impossible for the matter-energy system to sustain exponential growth for more than a few tens of doublings, and this phase is by now almost over. The monetary system has no such constraints, and, according to one of its most fundamental rules, it must continue to grow by compound interest. This disparity between a monetary system which continues to grow exponentially and a physical system which is unable to do so leads to an increase with time in the ratio of money to the output of the physical system. This manifests itself as price inflation. A monetary alternative corresponding to a zero physical growth rate would be a zero interest rate. The result in either case would be large-scale financial instability. - M King Hubbert
So why does Technocracy think that its proposal can "save" us from Peak Oil? Quite simply Technocracy's plan knows how to do more with less. Technocracy's design will allow all North Americans to live with a standard of living many times greater than is the average even today. Not only this, but is does so by using far less, both in terms of resources and labour. The calculations done as part of the initial study performed by Technocracy's scientists back in 1930 showed that at that time it would be possible for every citizen to have a standard of living the equivalent of a lower-upper class income, and only have to work for 16 hours per week, with 2 and a half months vacation per year, at a job that they have both chosen and were well trained for. Also included were things such as free, high-quality education and health care, indefinite maternity rights, and retirement at age 45 with no loss of income or benefits. How they could achieve this was through an ingenious reorganization of continent-wide industry, that would unleash its potential to produce this "abundance" for all. They showed conclusively how business, politics, and money were all holding back this production, and causing ever-greater need of waste of resources. The key was automation, which allows us to produce more while requiring less resources to do it, as well as less labour to operate these machines.
Today it is obvious that automation has improved many thousands of times, with the advent of the computer and industrial robotics. There in no longer any need whatsoever for anyone to have to work at a menial labor or unskilled service-industry job because it can all be performed by machines. By harnessing automation like this, we consume far less resources, including energy, and can still increase our overall standard of living. One estimate shows how by simply reworking the continental transportation system, we could operate our entire society on as little as 5% of the energy we consume today, with no corresponding drop in standard of living! Adjustments in other areas would allow us to decrease even this number, but it should be obvious that with so little energy consumption, and the enhanced abilities of scientific research allowed by a society of abundance, we would have plenty of time to devise alternative and sustainable sources of energy that would also be non-polluting.
Our ignorance is not so vast as our failure to use what we know. We are not starting from zero, wWe have an enormous amount of existing technical knowledge. It's just a matter of putting it all together. We still have great flexibility but our maneuverability will diminish with time. - M King Hubbert
Posted by Big Gav in hubbert, peak oil
Steve Andrews from ASPO USA is channeling the ghost of M King Hubbert in an effort to divine what the peak oil prophet would have to say about the energy situation today. One highly likely option - the recommendation that we turn to solar power to meet our energy needs.
Twenty years ago this month, I interviewed Marion King Hubbert at his home in Chevy Chase, Maryland. Hubbert was a brilliant and opinionated man. If he were alive, he would no doubt be fascinated by the quadrupling in oil prices and the increasingly vigorous discussion of peak oil. In this column, I’ll take my best shot at summarizing what Hubbert might have to say today about recent developments in the oil industry. His remarks from that old interview are in italics.
1. Hold the USGS’ feet to the fire:
There is no doubt in my mind that the USGS’s optimistic world petroleum resources report of 2000 would top Hubbert’s agenda today. His frustration would be born from his experience during the 1960s and 1970s, when the USGS issued a number of over-optimistic forecasts. While Hubbert would need a crash course in the new computing tools and resource assessment terminology, once he were up to speed, I suspect he’d blister the USGS’ year 2000 report. Quotes from the 1988 interview:
The U.S. Geological Survey—Vincent McKelvey in particular—always came out with an ultimate of around 600 billion barrels for the Lower 48, for crude oil. Since the USGS is highly respected, these misguided figures were taken seriously in Congress. Industry wasn’t quite so taken in, but the government was.
In the early 1960s, I predicted that the US would peak shortly, within less than 10 years, and the Geological Survey was predicting that it would occur in closer to 40 years. So, okay, I said “well, let’s wait and see what happens.” As it turned out, the USGS misled the government for 15 years [through 1977].
2. Critiquing unreasonably optimistic forecasters:
How would Hubbert feel about the U.S. Energy Information Administration’s forecast of a global peak between 2036 to 2043? I suspect he would be railing at EIA in public.
In their forecast, after peak production, EIA projects a cliff-like decline rate (10%/yr). Based on his statement below, Hubbert would favor a more gentle decline, similar to that drawn by the EIA in 2000, showing a peak in 2016 with much slower net annual decline rate (about 2%/year). “After the hump, production can’t drop sharply; it’s got to go down gradually because that’s how you find oil. You don’t find it all at once and you don’t produce it all at once. It peters out gradually.” The key point here: since the decline rate wouldn’t fall that fast, Hubbert would insist that the peak would have to come decades sooner than currently forecast.
How about optimists, like Daniel Yergin and Cambridge Energy Research Associates? Consider Hubbert’s thought here: “After my study was published, there were two camps of thought. The first reaction was ‘that guy must be crazy.’ It violated their intuitive judgment. But when some of the skeptics went back and took a look at my ultimate, they found it fell within their range of their estimates, making the conclusion of a near peak in US production not just likely but inevitable. But others found my conclusion so abhorrent that they couldn’t accept it.” He would likely put CERA in the latter camp.
3. The Solar and Efficiency Pathway:
One of Hubbert’s famous presentations, delivered 52 years ago to an audience of his peers, was called “Nuclear Energy and the Fossil Fuels.” At the time, he anticipated that nuclear energy would step in to substitute for future declining petroleum production. Later, he saw too many problems with nuclear and started promoting solar energy instead.
‘Were we a rational society, a virtue of which we have rarely been accused, we would do so and so…’ Hubbert suggested. He believed we should husband our dwindling supplies of oil and gas—supplemented by imports as long as they are available—and institute a program comparable to that in the nuclear industry of the 1940s, 50s and 60s, for the conversion to solar energy. He understood that time was a precious and fleeting resource: We still have great flexibility but our maneuverability will diminish with time.”
The biggest source of energy on this earth, now or ever, is solar. I used to think it was so diffuse as to be impractical. But I’ve changed my mind. It’s not impractical…This technology exists right now. So if we just convert the technology and research and facilities of the oil and gas industries, the chemical industry and the electrical power industry—we could do it tomorrow. All we’ve got to do is throw our weight into it.
4. Challenge Shell to come clean:
Hubbert enjoyed speaking truth to power. Back before his famous 1956 presentation, Shell officials were twisting Hubbert’s arm to change his message right up to the last minute. Then afterwards, “This thing hit the New York Times and some officers at Shell nearly went through the roof. They just about had cat-fits. Things were pretty intense for a few weeks around Shell. But by the time they had time to study the paper, they found they couldn’t [refute it].”
Eventually Shell got over it. Hubbert continued to lecture at Shell’s month-long, executive training school at the Arden House for up-and-coming staffers. “I have a letter I received during the 1980s, written by a Shell vice president who wanted some information for a talk he had to give. He had been in one of these Arden House groups and he said he thought I was the most pessimistic geologist he ever heard….and now he commented about how right I was.”
Now comes 2008, and Royal/Dutch Shell’s CEO Jeroen van der Veer writes to his staff that the output of conventional oil is close to peaking, that world demand for oil and gas will outstrip supply within seven years. But in this country, Shell’s CEO John Hofmeister fired a salvo last week aimed at discrediting the concept of peak oil. Hubbert would favor the Euro-Shell’s view of our unfolding future and take Hofmeister to task.
5. No soft treatment of presidential candidates:
On the 1988 presidential candidates, he energetically opined: “They’re ignorant, they don’t know anything about [energy]. The entire crop, with the exception of [Governor Bruce] Babbitt, is a bunch of ignorant asses. They haven’t any idea of the state the country’s in, with respect to energy resources.” Just imagine what Hubbert would say about the recent pandering of presidential candidates to Iowa’s ethanol lobby; it wouldn’t be pretty.
6. Growth as a cultural problem:
“We’re dealing with a cultural problem. We’ve had nothing but exponential growth for 200 years. During that period we’ve had nothing but exponential growth, and so we’ve developed an exponential growth culture. Politicians are always trying to maintain our growth. If we could maintain it, it would destroy us.”
Posted by Big Gav in colorado, hubbert, oil, queensland, shale, shale oil, shell
The Australian Financial Review today has a report on a plan by the Ziff brothers to revive Queensland's defunct shale oil industry (subscription required) - "a mining project worth as much as $14 billion near the Great Barrier Reef Marine Park". The report predicts the development would bring 16,000 new residents to the Whitsundays region and is already facing opposition from local groups like "Save Our Foreshore" concerned about damage to the environment and the tourism industry.
Bloomberg has a much smaller version of the story - "Ziff Seeks to Develop Australian Oil-Shale Project, Review Says".
Queensland Energy Resources Ltd., a closely held company backed by Ziff Brothers Investments, is seeking to develop an Australian oil-shale project valued at A$14 billion ($12 billion), the Australian Financial Review reported.
Consultants from New-York based Ziff recently met the Queensland government to discuss development of the project, which would require the relocation of a nearby airport, the paper said, citing government documents. The project, located in Queensland state near the Great Barrier Reef Marine Park, may contain as much as 9.7 billion barrels of oil resources, the Review said, citing a document lodged with the state's government.
Queensland Energy is scheduled to complete an initial study into possible development of the project within six months, the Review said, citing Simon Eldridge, the company's director of corporate affairs. The company acquired the project from Southern Pacific Minerals NL in 2004, the report said.
The Stuart Project, operated by Southern Pacific Petroleum (SPP), is an experimental attempt to produce oil from shale rock. The plant has significant environmental problems, such as releasing highly toxic dioxins and making local people sick with noxious fumes.
Greenhouse pollution from the production of shale oil is nearly four times higher than from normal oil and SPP refuses to publicly release any evidence to prove its claim that it can reduce shale oil's greenhouse pollution to 5 per cent below normal oil. Even if SPP could reduce shale oil's greenhouse pollution to the level it claims, if SPP developed all of its shale oil deposits in Australia, as it wants to do, it would at least double Australia's greenhouse emissions.
Blue Ensign Technologies Ltd., the company that said it's found a way to extract oil from Australia's outback, filed an amended prospectus today to disclose the checkered past of the inventor of the process.
John Rendall, developer of the technology Blue Ensign plans to use to produce oil from shale, misled investors in Solv-Ex Corp. from 1995 to 1997 with claims that he had devised a method to exploit Alberta's oilsands, Double Bay, Australia- based Blue Ensign said in today's filing with the Australian Securities & Investment Commission.
Rendall, 73, and Herbert Campbell, his general counsel at Solv-Ex, were sued by the U.S. Securities and Exchange Commission in 1998 for lying to shareholders about their efforts to extract oil from tar-soaked sand in Alberta.
Shell has withdrawn an application for a mining permit on one of its three oil-shale research and demonstration leases for economic reasons. Shell has been working on its In-Situ Conversion Process (ICP) for oil shale for more than two decades—ever since the collapse of the first run at oil shale in the 1980s.
Under the in-situ process, Shell drills holes into the resource, inserts electric resistance heaters, and heats the subsurface to around 343º C (650º F) over a 3- to 4-year period. During this time, very dense oil and gas is expelled from the kerogen and undergoes a series of changes, including the shearing of lighter components from the dense carbon compounds, the concentration of available hydrogen into these lighter compounds, and the changing of phase of those lighter more hydrogen rich compounds from liquid to gas.
To keep groundwater away from the process (which would affect the heating), and to keep byproducts of the process away from the groundwater flow, Shell proposes to freeze the groundwater to create a subsurface ice barrier. (The creation of subsurface ice barriers to prevent water flow is a mining technique).
Shell spokeswoman Jill Davis said the withdrawal of a permit on one of its three oil-shale research and demonstration leases was done for economic reasons: Costs for building an underground wall of frozen water to contain melted shale have “significantly escalated.” ...
The Bureau of Land Management recently received ten applications (by eight companies) for a pilot program to develop Colorado's shale reserves. The program allows the companies access to public lands for the purpose of testing shale-extraction technologies. You see below an interesting mix of large, publicly traded oil giants and small, privately held innovators.
* Natural Soda, Inc. of Rifle, Colorado.
* EGL Resources Inc. of Midland, Texas.
* Salt Lake City-based Kennecott Exploration Company.
* Independent Energy Partners of Denver, Colorado
* Denver-based Phoenix Wyoming, Inc.
* Chevron Shale Oil Company.
* Exxon Mobil Corporation.
* Shell Frontier Oil and Gas Inc
There is dispute within the industry over how long, if ever, demonstration extraction technologies can become commercially viable. I've spoken with some of the smaller companies that have applied for leases from the BLM. Some of them will have to raise money to conduct the project. And some of them have been less than forthcoming about how exactly their extraction technology is different or better than previous methods.
How will it all unfold? Well, for starters, it could all utterly fail. To me, Shell's in-situ process looks the most promising. It also makes the most sense economically. There may be a better, less energy-intensive way to heat up the ground than what Shell has come up with. But Shell, Chevron, and Exxon Mobil clearly have the resources to scoop up any private or small firm that makes a breakthrough.
Haold Vinegar is the energy industry's leading expert on the complex petroscience of transforming solid oil shale into synthetic crude - a liquid fuel that can be refined into diesel and gasoline. The breakthroughs this 58-year-old physicist has achieved could turn out to be the biggest game changer the American oil industry has seen since crude was discovered near Alaska's Prudhoe Bay in 1968.
If that sounds like hyperbole, then consider this: Several hundred feet below where Vinegar is strolling lies the Green River Formation, arguably the largest unconventional oil reserve on the planet. ("Unconventional oil" encompasses oil shale, Canadian tar sands, and the extra-heavy oils of Venezuela - essentially, anything that is not just pumped to the surface.)
Spanning some 17,000 square miles across parts of Colorado, Utah and Wyoming, this underground lakebed holds at least 800 billion barrels of recoverable oil. That's triple the reserves of Saudi Arabia.
The reason you probably haven't heard about the Green River Formation is that most of the methods tried for turning oil shale into oil have been deeply flawed - economically, environmentally or usually both. Because there have been so many false starts, oil shale tends to get lumped with cold fusion, zero-point energy, and other "miracle" fuels perpetually just over the horizon.
"A lot of other companies have bent their spears trying to do what we're now doing," Vinegar says of his 28-year quest to turn oil shale into a commercial energy source. "We're talking about the Holy Grail."
Unlike the Grail, though, Shell is convinced that oil shale is no myth and that after years of secret research, it is close to achieving this oil-based alchemy. Shell is not alone in this assessment. "Harold has broken the code," says oil shale expert Anton Dammer, director of the U.S. Department of Energy's Office of Naval Petroleum and Oil Shale Reserves.
Vinegar has developed a cutting-edge technology that, according to Shell, will produce large quantities of high-quality oil without ravaging the local environment - and be profitable with prices around $30 a barrel. Now that oil is approaching $90, the odds on Shell's speculative bet are beginning to look awfully good.
Shell declines to get too specific about how much oil it thinks it can pump at peak production levels, but one DOE study contends that the region can sustain two million barrels a day by 2020 and three million by 2040. Other government estimates have posited an upper range of five million. At that level, Western oil shale would rival the largest oilfields in the world.
Of course, considering the U.S. uses almost 21 million barrels a day and imports about ten million (and rising), even the most optimistic projections do not get the country to the nirvana of "energy independence." What oil shale could do, though, is reduce the risk premium built into oil prices because energy traders could rest easy knowing that the flow of oil from Colorado or Utah won't ever be cut off by Venezuelan dictators, Nigerian gunmen or strife in the Middle East. In a broader sense, U.S. energy security lies in diversity of supply, so enhancing domestic sources is appealing.
Oil shale has one other big appeal: It's not vulnerable to the steep depletion rates that have afflicted other big oilfields. Alaskan oil production is now 775,000 barrels a day, down from its peak of two million in 1988. In contrast, there's enough oil shale to maintain high production levels for hundreds of years. "Companies just aren't discovering new Prudhoe Bays anymore," says Bear Stearns oil analyst Nicole Decker, who thinks Shell has hit on a breakthrough technology. "This could be very significant - certainly bigger, to our knowledge, than any new discoveries that might be available globally." ...
With some 200 Shell (Charts) oil shale patents already filed and approvals needed from Colorado and the U.S. Department of the Interior to proceed with commercial production, Shell knows it has to make the public case for developing the country's oil shale potential.
So after months of negotiations, Shell and Vinegar agreed to give FORTUNE an exclusive look at a new technology - inelegantly dubbed the In Situ Conversion Process, or ICP - that could vindicate Shell's 28-year, $200 million (at least) bet on oil shale research.
In a nutshell, ICP works like this: Shell drills 1,800-foot wells and into them inserts heating rods that raise the temperature of the oil shale to 650 degrees Fahrenheit. To keep the oil from escaping into the ground water, the heater wells are ringed by freeze walls created by coolant piped deep into the ground; this freezes the rock and water on the perimeter of the drill site. Eventually the heat begins to transform the kerogen (the fossil fuel embedded in the shale) into oil and natural gas. After the natural gas is separated, the oil is piped to a refinery to be converted into gasoline and other products. ...
Attempts to commercialize oil shale began in the early 20th century and accelerated during the 1970s Middle East oil crisis, when the Carter administration began pouring big money into synthetic fuels. Problem was, the prevailing production process - known as surface retorting - was dirty and inefficient. Federal subsidies masked the problems, encouraging companies to build businesses they never would have created on shareholders' dimes. When oil prices collapsed, so did the economic rationale for shale oil. The day Exxon left town in 1982, turning some communities into ghost towns, is still remembered in northwestern Colorado as "Black Sunday."
The basic problem with surface retorting was that shale had to be mined, transported, crushed and then cooked at 1,000 degrees Fahrenheit. Not only were there toxic waste byproducts, but the oil thus produced had to be purified and infused with hydrogen before it could be refined into gasoline and other products. Vinegar may be a physicist by training, but he thinks like an MBA, and to him such a labor- and energy-intensive process reeked of bad economics.
Wouldn't it be better, he thought, if Shell could extract a liquid that could be pumped and pipelined instead of a solid that had to be mined and trucked? Upon visiting a Shell surface-retorting site for the first time in 1979, he came to a quick, life-changing conclusion: "Wow, we're going to have to do this in situ." ...
"Shell continued doing research, even in the 1980s when most everyone else quit," says Glenn Vawter admiringly. Vawter, a veteran of Exxon's failed oil shale operation, is now an executive with an oil shale startup, EGL Resources. In 1998 - when the price for West Texas crude crashed to less than $15 a barrel - Shell spent $799 million on R&D; by comparison, the larger Exxon Mobil spent $549 million.
In 2006, Shell spent $855 million on R&D to Exxon's $733 million. Both Vinegar and Shell Vice President for Unconventional Production John Barry confirm that oil shale is now the biggest piece of the company's R&D budget, though neither will specify exactly how much has been spent. One source briefed by Shell officials puts the total oil shale R&D investment at north of $200 million.
Shell has long been known for its science. It invented the first semi-submersible offshore drilling rig and pioneered the use of steam flooding to maximize oil well production; it's also the industry leader in natural-gas-to-liquids (GTL) technology. Much of its research originates at its Bellaire Research Center in Houston, where Vinegar has spent most of his career.
The lab's most famous alumnus is the late M. King Hubbert, of Hubbert's Peak fame. Hubbert was the first geologist to understand the mechanics of oilfield depletion and the first to make a reasonably accurate assessment of recoverable oil reserves - initially for the U.S. and later for the world. The founding father of peak-oil theory, Hubbert predicted that U.S. production of conventional oil would peak around 1970 (he was right) and that global oil production would taper off after 2000 (he was wrong, though by how much is the topic of heated debate).
Neither Vinegar nor Barry wants to get drawn into a discussion of peak-oil theory. They simply state that the rapid growth in worldwide oil demand necessitates the development of unconventional oils. (Shell has also invested in biofuels and solar power.)
That said, it's no coincidence the oil company Hubbert once called home is the one now making the biggest bet on unconventional oil - not only oil shale but GTL and Canadian tar sands too. Jim Spehar, a former Colorado community-relations consultant for Shell, remembers company scientists and executives talking at length about peak oil - and about oil shale as a potential "bridge" between conventional oil and renewable energy - when he worked for Shell in the late 1990s.
"They definitely believed that the conventional stuff being pumped out of the ground was a declining resource," Spehar says.
Vinegar and the Shell team of chemists, engineers and physicists eventually figured out why the oil they collected early in that 1981 field test was so light and clean and the later samples so dark and dirty. They found that a slower, lower-temperature process - 650 degrees Fahrenheit, versus the 1,000 degrees required in the retorting process - allows more of the hydrogen molecules that are liberated from the kerogen during heating to react with carbon compounds and form a better oil.
This was a crucial discovery, because one of the hallmarks of a light oil - the most valuable kind because it costs less to refine - is its elevated hydrogen content.
Best of all, Shell was able to replicate the lab results in several field tests; the most recent one, in 2005, yielded 1,700 barrels of light oil. In that test, carefully engineered heating rods were inserted several hundred feet into the ground in order to gradually raise the temperature of the oil shale to 650 degrees Fahrenheit. Now Shell had a proven technology that it believed could produce a barrel of oil for $30. ...
Because there's no mining and because most of the action occurs underground, ICP is more environmentally benign than surface retorting or even tar sands production in Canada. But one big challenge is preventing the oil from leaching into ground water. Vinegar's solution was to create an impenetrable "freeze wall" of frozen rock and ice around the perimeter of the heating and production wells.
On a football-field-sized parcel of its own land, Shell is spending an estimated $30 million on a test that involves drilling 150 well bores and filling them with coolant in order to freeze surrounding rock and water to a temperature of minus-60 degrees Fahrenheit. "I do realize," says Vinegar, "that the whole idea of heating an area [to 650 degrees Fahrenheit] and simultaneously freezing around the circumference to keep the water out sounds almost like science fiction." Regardless, the freeze wall passed a smaller-scale test in 2004, and Vinegar says everything is proceeding as expected with the latest one.
All this cooling and heating, of course, consumes energy. Can it possibly be worth it? Yes, says Vinegar, who estimates ICP's ratio of energy produced to energy consumed will range from 3-to-1 to 7-to-1, depending upon the scale of the project. Moreover, the power needed to perform the heating and cooling will be generated entirely from natural gas produced onsite by the ICP process. Shell plans on building its own large power plant and is exploring ways to sequester any CO2 produced. ...
Shell insists that it has no beef with Governor Ritter's desire to proceed slowly. Even so, it's not leaving anything to chance. Shell has a public relations team devoted to oil shale and, in a shrewd move, the company has hired former U.S. Secretary of the Interior Gale Norton as an in-house lawyer. The stakes are huge. Assuming only $20 in profit for each barrel produced (at today's inflated oil prices, it would be more like $50), 300,000 barrels per day would add $2.2 billion to Shell's annual pretax profits. And three million barrels a day would be worth $22 billion.
It could be decades before Shell hits the really big numbers, if it happens at all. The logistics are daunting. It has taken the tar sands industry of Canada almost 30 years to reach its current production of about a million barrels a day (although it could be double that by 2010). ...
While it waits for its latest freeze wall to freeze and for the BLM to grind its way toward some sort of commercial leasing program, Shell is exploring other applications for ICP. It is negotiating with Jordan to test it on that country's oil shale reserves and investigating whether ICP can produce oil from Canadian tar sands - in which Shell also has major investments - more efficiently than current methods.
Battling viewpoints on oil shale were presented on Friday at a water seminar sponsored by the Colorado River District. The theme of the conference was "Water: Fueling the Future?" and much of that question pertains to how much water it might take to extract oil from the vast oil shale deposits in Western Colorado, eastern Utah and southeastern Wyoming. "Half of the world's oil shale is within 100 miles of this room," Randy Udall of the Community Office for Resource Efficiency told the audience at the Two Rivers Convention Center in Grand Junction.
And he thinks the oil shale should stay in the ground. "We have one energy boom in our region and that's plenty," he said. He said that oil shale has low energy content and it is not worth the environmental degradation, water use, and intense electricity use that would go along with intense oil shale production.
Udall believes that pursuing energy efficiency measures makes far more sense than developing elaborate and technically complex schemes to heat the oil shale in the ground as part of the process of turning it into fuel. "I do think there are better ways to address our energy needs than oil shale," he said. "The way we are using petroleum right now in the United States today is a tragedy and it's kind of a bad joke and we will not use it this stupidly and this wastefully in the future. So oil shale will have to compete with all kinds of ways to save this precious fluid we call oil or 'black magic.'"
But Tony Dammer, the director of the Office of Naval Petroleum and Oil Shale Reserves with U.S. Department of Energy, said the federal government is bullish on oil shale development and that the potential exists for 2 trillion barrels of oil to be extracted from the oil shale in the Green River Basin region.
The various attempts to develop the world's oil shale deposits, over a period of over 150 years, have experienced successes when the cost of shale oil production in a given region was less than the price of crude oil or its other substitutes. According to a survey conducted by the RAND Corporation, a surface retorting complex (comprising a mine, retorting plant, upgrading plant, supporting utilities, and spent shale reclamation) is unlikely to be profitable in the United States until crude oil prices range between US$70 to US$95 per barrel (in 2005 dollars). Once commercial plants are in operation and experience-based learning takes place, costs are expected to decline in 12 years to US$35–US$48 per barrel. After production of 1,000 million barrels, costs are estimated to decline further to US$30 – US$40 per barrel. Royal Dutch Shell has announced that its in-situ extraction technology in Colorado could be competitive at prices over US$30 per barrel, while other technologies at full-scale production assert profitability at oil prices even lower than US$20 per barrel. To increase the efficiency of oil shale retorting, several co-pyrolysis processes have been proposed and tested.
A critical measure of the viability of oil shale as an energy source is the ratio of the energy produced by the shale to the energy used in its mining and processing, a ratio known as "Energy Returned on Energy Invested" (EROEI). A 1984 study estimated the EROEI of the various known oil shale deposits as varying between 0.7-13.3. Royal Dutch Shell has reported an EROEI of three to four on its in-situ development, Mahogany Research Project. An additional economic consideration is the water needed in the oil shale retorting process, which may pose a problem in areas with water scarcity.
I’m not sure if I’m watching a magic trick, or an invention that will make the cigar-chomping 64-year-old next to me the richest man on the planet. Everything that goes into Frank Pringle’s recycling machine—a piece of tire, a rock, a plastic cup—turns to oil and natural gas seconds later. “I’ve been told the oil companies might try to assassinate me,” Pringle says without sarcasm.
The machine is a microwave emitter that extracts the petroleum and gas hidden inside everyday objects—or at least anything made with hydrocarbons, which, it turns out, is most of what’s around you. Every hour, the first commercial version will turn 10 tons of auto waste—tires, plastic, vinyl—into enough natural gas to produce 17 million BTUs of energy (it will use 956,000 of those BTUs to keep itself running).
Pringle created the machine about 10 years ago after he drove by a massive tire fire and thought about the energy being released. He went home and threw bits of a tire in a microwave emitter he’d been working with for another project. It turned to what looked like ash, but a few hours later, he returned and found a black puddle on the floor of the unheated workshop. Somehow, he’d struck oil.
Or rather, he had extracted it. Petroleum is composed of strings of hydrocarbon molecules. When microwaves hit the tire, they crack the molecular chains and break it into its component parts: carbon black (an ash-like raw material) and hydrocarbon gases, which can be burned or condensed into liquid fuel. Pringle figured that some gases from his microwaved tire had lingered, and the cold air in the shop had condensed them into diesel. If the process worked on tires, he thought, it should work on anything with hydrocarbons. The trick was in finding the optimum microwave frequency for each material—out of 10 million possibilities.
Pringle has spent 10 years and $1 million homing in on frequencies for hundreds of materials. In 2004 he teamed up with engineer pal Hawk Hogan to take the machine commercial.
Their first order is under construction in Rockford, Illinois. It’s a $5.1-million microwave machine the size of small bus called the Hawk, bound for an auto-recycler in Long Island, New York. More deals loom: The U.S. military may use Hawks in Iraq on waste such as water bottles and food containers. Oil companies are looking to the machines to gasify petroleum trapped in shale.
You read about "oil from shale", right? You heard about 1,000 billion barrels of oil out west? Don't get excited, it's going to stay there. Dr. Hubbert told the Senate Committee on Interior and Insular Affairs it wouldn't work, three years ago this month.
It really sounds simple. You "simply" dig up such enormous quantities of shale (1.88 million tons a day,) that it's equal to digging a Panama Canal every week. You crush it fine and heat to 1,100 degrees in a retort to boil off the oil locked in the rock. Then you get rid of the rock. Only now it's turned caustic and has increased in bulk by 20% to 33%. So you back-fill the leftovers, called tailings, into the hole you dug it out of. Since you still have a lot left over, you dump it into the empty scenic canyons of the west. To do this you need to grab off 89% of the undeveloped water of Colorado and Utah and half of Wyoming's. Oh yes, and you turn the Colorado River system into alkaline salts which means you wreck the agriculture in Colorado, Arizona and southern California. What will this get you? 1-1/2 million barrels of oil a day out of the 17 million per day that the U.S. is using!
A news item in the Milwaukee Journal of August 29, 1976,25 says that the last of the oil shale development companies, Standard Oil, Gulf, Shell and Ashland, have walked away from the projects in Colorado and Utah, asking the Department of the Interior to release them from paying any more on their leases. Standard and Gulf have already paid $126 million of the $210 million they bid, and Shell and Ashland have paid about $70 million of the $117.8 million they bid. You have to admit they tried, really tried and they spent a big buck to make it work, but it won't.
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