lifeitself | In the summer of 1858, Edwin Drake punched 33 ft of cast iron pipe into the earth to prevent near surface water from collapsing the hole. He then lowered drilling equipment into the cased hole and used a steam engine to drill a successful, 69 ft deep well. On August 27th, shallow oil flowed almost to the surface and was recovered with a sump pump. Edwin Drake made absolutely no money on developing modern drilling technology and died a poor man.
Let us go back to Colonel Drake and his technology. Do you see the fundamental difference between producing 20,000 barrels per day of shallow oil from 5 simple wells that may cost 0.04 million dollars each, versus 20,000 barrels of ultradeep oil and gas from one well that will cost 200-300 million dollars?
In the first case, the initial and ongoing expenditures of energy were nothing compared with the heating value of the oil. In the second case, in addition to the well hardware, we need to throw in two hundred miles of a seafloor steel pipeline or a bunch of tankers, seafloor facilities, ships, and other energy-intensive means of assuring production from our well for a few years.
Net energy gain from the ultradeep wells can be much, much less than producing the old East Texas oilfields. Net energy gain from the various oil and gas shale projects can be less yet. And this is the main energy problem the twenty first century Earthlings face. Most are ignorant, others are in denial. The current state of affairs is not a prescription for a meaningful social discourse on what to do next, when the current global economy is strangled by the lack of cheap reliable crude oil. For those in chronic denial, please note that I said "when," not "if."
P.S. What I just showed you is translated into the official business language as follows:
Do not feel guilty if you can't understand this quote, but it surely is scary when you superimpose it on top of the actual declines of production by most major oil companies.
Let us go back to Colonel Drake and his technology. Do you see the fundamental difference between producing 20,000 barrels per day of shallow oil from 5 simple wells that may cost 0.04 million dollars each, versus 20,000 barrels of ultradeep oil and gas from one well that will cost 200-300 million dollars?
In the first case, the initial and ongoing expenditures of energy were nothing compared with the heating value of the oil. In the second case, in addition to the well hardware, we need to throw in two hundred miles of a seafloor steel pipeline or a bunch of tankers, seafloor facilities, ships, and other energy-intensive means of assuring production from our well for a few years.
Net energy gain from the ultradeep wells can be much, much less than producing the old East Texas oilfields. Net energy gain from the various oil and gas shale projects can be less yet. And this is the main energy problem the twenty first century Earthlings face. Most are ignorant, others are in denial. The current state of affairs is not a prescription for a meaningful social discourse on what to do next, when the current global economy is strangled by the lack of cheap reliable crude oil. For those in chronic denial, please note that I said "when," not "if."
P.S. What I just showed you is translated into the official business language as follows:
Our analysis of the 50 largest publicly traded oil and gas companies (ex-FSU) shows that cost inflation continues to increase sharply within the global upstream oil and gas industry. In 2011, production costs increased by 26% while the unit cost of production increased by 21%, which was higher than longer term trends. In 2011, the marginal cost of production the same companies increased 10.8% to US$92.26/bbl."Era of Cheap Oil Over As Secular Growth in Upstream Cost Inflation Underpins Triple Digit Oil Prices," Bernstein Research, May 2, 2012.
Do not feel guilty if you can't understand this quote, but it surely is scary when you superimpose it on top of the actual declines of production by most major oil companies.
