That problem would be putting up with me for 4 days.
I’m in Houston at the invitation of the American Petroleum Institute (who is kindly picking up the tab) to cover the Offshore Technology Conference here. About 75,000 oil folks are converging on the place for 4 days of conferences and panels on various topics.
Today, the “Meeting The Energy Challenge” panel meets and it should be interesting. We’ll have the president of Shell Oil, a Senior Fellow of the Progressive Policy Institute, the president of the API, the presidents of the American Trucking Associations and Air Transport Association, the president of the Consumer Energy Alliance, the Executive Director of the National Council on Energy Policy and Rep. Shelia Jackson Lee (D-TX) and Sen. Lisa Murkowski (R-AK) here to talk about that – I’m looking forward to it.
And Pogue – if you read this and can respond, yes, I will be glad to buy you a beer – just let me know when (other than monday night) we can do it prior to Thursday before I fly out.
What is something you probably shouldn’t do if you want to see an industry “save or create” jobs?
U.S. oil and natural gas producing companies should not receive federal subsidies in the form of tax breaks because their businesses contribute to global warming, U.S. Treasury Secretary Timothy Geithner told Congress on Wednesday.
It was one of the sharpest attacks yet on the oil and gas industry by a top Obama administration official, reinforcing the White House stance that new U.S. energy policy will focus on promoting renewable energy sources like wind and solar power and rely less on traditional fossil fuels like oil as America tackles climate change.
Got that? They shouldn’t get tax breaks because they “contribute to global warming”. Freakin’ incredible. An ideological reason given to deny tax breaks. Here’s government again picking winners and losers.
The Obama administration’s budget would levy an excise tax on oil and natural gas produced in the Gulf of Mexico, raising $5.3 billion in revenue from 2011 to 2019.
And in a time of financial crisis, that cost will be passed on to whom?
Obama’s budget would also place a $4 per acre annual fee on energy leases in the Gulf that are designated as nonproducing. The budget proposal projects the fee would generate $1.2 billion from 2010 to 2019.
Of course, they’re talking millions of acres out there. As Sen. Cornyn points out, it won’t be the ExxonMobile’s or the Chevrons which will be hurt by this:
Senator John Cornyn of Texas criticized the tax increases, saying they would hurt independent energy companies that provide a large share of U.S. oil and gas supplies.
“My view is that higher taxes on small and independent producers here in America will make us more dependent on imported oil and gas while we transition to cleaner energy alternatives, a goal we all share,” said Cornyn. “And it will also hurt job retention and job creation in the energy sector, which provides an awful lot of jobs in this country.”
Yup – it’s all about “saving or creating” jobs – if government approves.
As most of you know I took a short trip to beautiful Bakersfield California a couple of weeks ago at the behest of the American Petroleum Institute (who paid for the trip) to tour Chevron’s Kern River Basin oil fields. Here’s a short intro video by API that will get you into the game.
Jeff Hatlin, the guy describing most of the facilities and the area, was a fabulous tour guide. And the rest of the staff there (Jim Swartz, David Boroughs, Carla Musser, Ray Thavarajah, Kevin Kimber, Kelly Lucas and Omer Saleem) took a day out of their busy schedules to acquaint 4 bloggers with a huge asset that has been producing oil for over 100 years. My thanks to all of them.
As you might imagine, the “easy oil” days of yore are long over. As Jane Van Ryan, the narrator of the video, notes, the area was first discovered because oil was literally seeping out of the ground. No more. The oil produced at Kern River is what is known in the industry as “heavy oil”. That means the viscosity is very high. For many years in the early days, its viscosity limited its use to asphalt and roofing tar.
That presents an interesting set of problems when you talk about recovery. You’re trying to pump some pretty thick stuff out of the ground and, as you can imagine, that takes a whole bunch of energy. And the oil doesn’t sit in pools, but is distributed throughout the sand layers. So it seems obvious that the way to address the problem is to find a way to lower the viscosity of the oil and cause it to flow before trying to recover it. As you might imagine, that’s not as easy as it sounds. The way Chevron has addressed those needs is through steam flooding and new drilling techniques such as horizontal drilling.
You saw Jeff Hatlin talk about how that steam is generated (and you got to see the steam generators in the video) and injected into the ground. In the 20 square miles of the Kern River Basin facility, there are approximately 770 steam injection wells helping the 8,700 production wells bring up the oil from depths of over 1,000 feet. What the steam injection wells have allowed Chevron to do is move the field from its primary production days, when only 5-10% of the oil was being recovered, to a production percentage between 50 to 80% with steam flooding. This enhanced recovery technique has helped Chevron keep the field at an 80,000 bpd production rate when, without it, it would be producing very little oil at all.
Another technique which allows more efficient recovery is the 3D modeling that you saw Dale Beeson talking about. The model in the video has 155 million cells, each 50′ x 50′ x 2′. That’s a massive amount of information stored, updated and accessible to the Chevron staff as they plan their next wells. Much of the data for this model is gathered through 660 “observation wells” drilled strategically over the vast property. Temperature and fluid saturation are monitored allowing for efficient heat management and the location of the richest oil deposits. It is through the integration of that information plus the nearly 1,000,000 data points gathered through out the field on any given day by other means, that Chevron meets its goal of reducing its production decline in the Kern River Basin to 1% a year.
A final technique introduced into the Kern River field in 2006 is horizontal drilling. The 3D modeling helps Chevron exactly pinpoint layers of oil producing sand and using advanced drilling techniques, precisely place the horizontal well in that sand layer. To give you an idea of the efficiency difference, a typical vertical well will produce about 3 bpd of oil. A horizontal well will produce about 100 bpd.
Given all of that, however, there was something else I learned that just blew my mind. While they’re producing that 80,000 bpd of oil, they’re also pumping up 555,000 bpd of water. In fact they joke about really being a water production facility which produces oil as a by-product. That’s more true than you might imagine.
But it also means they must process a half a million barrels of water a day, separate the oil from it and do something with the remaining water. This is where it gets interesting. You heard Jane mention they process and purify some of it through walnut shell filters for agricultural use. In fact, they have about 272,000 bpd in excess that they send through that process and then is sold to California for use in growing all those luscious veggies Californians are so wild about. My guess is that most of California has no idea that’s the case. That avocado you’re enjoying may have been produced with water from Chevron’s Kern River Basin field.
So what do they do with the remaining 231,000 bpd of the water they pump up? They make steam. Lots and lots of steam. And that brings us to something else of which I’m pretty sure the average Californian isn’t aware. Part of that steam powers up to 20% of the California electrical grid. It’s called ‘cogeneration’, and Chevron has actually built steam powered electrical plants on the field which are plugged into the California power grid and provide on-demand electricity. They use the waste steam generated in the steam injection process to power these plants. Clean energy and highly efficient clean production.
That’s what had me saying “wow” at the end of the trip. Two critical commodities to California – electricity and water, produced as by-product of a third critical product, oil. And all three are produced in a efficient, environmentally friendly way.
If I were Chevron, I’d be telling this story everywhere I could. It’s not quite the resource-raping, greed-is-king “Big Oil” caricature the media and many of our politicians are fond of painting, is it?