Reporting gross oil production to hide the collapse of net oil production

[lektrode]

Re: Reporting gross oil production to hide the collapse of net oil production

precisely.
on all the above.

[Shakespear]

Re: Reporting gross oil production to hide the collapse of net oil production

After years of debating EROEI with peak oil doomers, I've given up.

I hope EJ is thinking of a "subgroup" of peak oil researchers as the rest are rather rational. I suspect many of those debating peak oil have no clue what goes on in the E&P side of the Oil Industry and think they can debate the topic.

While EROEI is a nonsense concept,

Oooh, now that is a concept. The metric is valid and as any metric has its limits.

https://pangea.stanford.edu/research...o/publications
https://pangea.stanford.edu/research...em-transitions

http://www.mdpi.com/1996-1073/4/8/1211

Abstract: The efficiencies of energy extraction and conversion systems are typically expressed using energy return ratios (ERRs) such as the net energy ratio (NER) or energy return on investment (EROI). A lack of a general mathematical framework prevents inter-comparison of NER/EROI estimates between authors: methods used are not standardized, nor is there a framework for succinctly reporting results in a consistent fashion. In this paper we derive normalized mathematical forms of four ERRs for energy extraction and conversion pathways. A bottom-up (process model) formulation is developed for an n-stage energy harvesting and conversion pathway with various system boundaries. Formations with the broadest system boundaries use insights from life cycle analysis to suggest a hybrid process model/economic input output based framework. These models include indirect energy consumption due to external energy inputs and embodied energy in materials. Illustrative example results are given for simple energy extraction and conversion pathways. Lastly, we discuss the limitations of this approach and the intersection of this methodology with “top-down” economic approaches.

Over the last decade, Charles and David Koch have emerged into public view as billionaire philanthropists pushing a libertarian brand of political activism that presses a large footprint on energy and climate issues. They have created and supported non-profit organizations, think tanks and political groups that work to undermine climate science, environmental regulation and clean energy. They are also top donors to politicians, most of them Republicans, who support the oil industry and deny any human role in global warming.
What is less well documented are the many Koch businesses that benefit from the brothers' efforts to push the center of American political discourse rightward, closer to their own convictions. At the top of the list are the Koch family's long and deep investments in Canada's heavy oil industry, which have been central to the company's initial growth and subsequent diversification since 1959.

http://www.reuters.com/article/2012/...45980520120510

Few more bit of info

Tar sands are a mixture of roughly 90 percent sand, clay and water, plus 10 percent bitumen, a thick hydrocarbon liquid. After extracting that 10 percent of bitumen from the tar sand mixture, the bitumen can be purified and refined into synthetic crude oil.

Bitumen is one of the world's most expensive and heaviest hydrocarbons. And it is very energy intensive. In fact, bitumen production requires so much natural gas for processing and enrichment that it now accounts for one-fifth of Canada's natural gas demand.

That's the problem Professor Aleklett was referring to above.

Since bitumen is a highly viscous “heavy” oil that doesn’t flow as easily as lighter crude, it requires more processing to facilitate its flow through oil pipelines.

In fact, bitumen is so heavy and viscous that it will not flow unless it is heated or diluted with lighter hydrocarbons, such as natural gas. Typically, tar sands are produced using natural gas to heat the steam that drives the oil out of the sands. And it takes a lot of gas to do this.

Finally, bitumen has to be upgraded so that it can be refined. This can be done by adding methane or hydrogen — from even more natural gas — to the bitumen to create lighter oil.

Even if electricity is used to extract the tar sands and natural gas, this ultimately comes from a coal-fired power plant. It doesn't change the equation; you're still exchanging one form of energy for another.

http://independentreport.blogspot.co...nt-energy.html

[shiny!]

Re: Reporting gross oil production to hide the collapse of net oil production

Switchgrass for biofuel looks promising but I seldom hear about it. It can grow in the areas where the shale oil fields are, so making switchgrass biofuel refineries close to the shale oil fields would make sense, would it not? Make a fuel that could be used to extract the shale oil, close to where the shale oil is. Then use corn for food instead of fuel.

Is there a "gotcha" to this idea?

http://www.scientificamerican.com/ar...anol-than-corn

Grass Makes Better Ethanol than Corn Does

Midwestern farms prove switchgrass could be the right crop for producing ethanol to replace gasoline

By David Biello


switchgrass GRASS GAS: Turning fields of switchgrass like this one in northeastern Nebraska into ethanol produces 540 percent more energy than the amount consumed growing the native perennial. Image: COURTESY OF USDA-ARS

Farmers in Nebraska and the Dakotas brought the U.S. closer to becoming a biofuel economy, planting huge tracts of land for the first time with switchgrass—a native North American perennial grass (Panicum virgatum) that often grows on the borders of cropland naturally—and proving that it can deliver more than five times more energy than it takes to grow it.

Working with the U.S. Department of Agriculture (USDA), the farmers tracked the seed used to establish the plant, fertilizer used to boost its growth, fuel used to farm it, overall rainfall and the amount of grass ultimately harvested for five years on fields ranging from seven to 23 acres in size (three to nine hectares).

Once established, the fields yielded from 5.2 to 11.1 metric tons of grass bales per hectare, depending on rainfall, says USDA plant scientist Ken Vogel. "It fluctuates with the timing of the precipitation,'' he says. "Switchgrass needs most of its moisture in spring and midsummer. If you get fall rains, it's not going to do that year's crops much good."

But yields from a grass that only needs to be planted once would deliver an average of 13.1 megajoules of energy as ethanol for every megajoule of petroleum consumed—in the form of nitrogen fertilizers or diesel for tractors—growing them. "It's a prediction because right now there are no biorefineries built that handle cellulosic material" like that which switchgrass provides, Vogel notes. "We're pretty confident the ethanol yield is pretty close." This means that switchgrass ethanol delivers 540 percent of the energy used to produce it, compared with just roughly 25 percent more energy returned by corn-based ethanol according to the most optimistic studies.

The U.S. Department of Energy (DOE) is partially funding the construction of six such cellulosic biorefineries, estimated to cost a total of $1.2 billion. The first to be built will be the Range Fuels Biorefinery in Soperton, Ga., which will process wood waste from the timber industry into biofuels and chemicals. The DOE is providing an initial $50 million to start construction.

"Cost competitive, energy responsible cellulosic ethanol made from switchgrass or from forestry waste like sawdust and wood chips requires a more complex refining process but it's worth the investment," Energy Secretary Samuel Bodman said at the Range Fuels facility groundbreaking in November. "Cellulosic ethanol contains more net energy and emits significantly fewer greenhouse gases than ethanol made from corn."

In fact, Vogel and his team report this week in Proceedings of the National Academy of Sciences USA that switchgrass will store enough carbon in its relatively permanent root system to offset 94 percent of the greenhouse gases emitted both to cultivate it and from the derived ethanol burned by vehicles. Of course, this estimate also relies on using the leftover parts of the grass itself as fuel for the biorefinery. "The lignin in the plant cell walls can be burned," Vogel says.

The use of native prairie grasses is meant to avoid some of the other risks associated with biofuels such as reduced diversity of local animal life and displacing food crops with fuel crops. "This is an energy crop that can be grown on marginal land," Vogel argues, such as the more than 35 million acres (14.2 million hectares) of marginal land that farmers are currently paid not to plant under the terms of USDA's Conservation Reserve Program.

But even a native prairie grass needs a helping hand from scientists and farmers to deliver the yields necessary to help ethanol become a viable alternative to petroleum-derived gasoline, Vogel argues. "To really maximize their yield potential, you need to provide nitrogen fertilization," he says, as well as improved breeding techniques and genetic strains. "Low input systems are just not going to be able to get the energy per acre needed to provide feed, fuel and fiber."

[radon]

Re: Reporting gross oil production to hide the collapse of net oil production

Consider a process where water is heated up until it forms steam, which is used to drive a turbine which generates electricity. The electric energy generated by the turbine is smaller than the energy required to heat up the water to power the turbine.

The EROEI in less than 1. As a result, are all turbines useless?

The turbine takes a less useful form of energy, heat, and produces something more useful such as electricity. You could hardly call it useless and it really has nothing to do with EROEI as it relates to oil fields where the choice is ether to trade electricity for liquid hydrocarbons or use what is extracted parasitically in the process thus reducing yield.

In the case of ethanol if the input requires more hydrocarbons are produced and requires large government subsidies on top of it to make the process economical then I would say it is worse than useless.

[radon]

Re: Reporting gross oil production to hide the collapse of net oil production

Is there a "gotcha" to this idea?

Not enough sun in north america, especially at high latitudes. Besides, if they really want cellulose they should grow hemp.

[shiny!]

Re: Reporting gross oil production to hide the collapse of net oil production

Not enough sun in north america, especially at high latitudes. Besides, if they really want cellulose they should grow hemp.

The midwest is pretty hot and sunny in the summer. The test farms for the switchgrass are in NE Nebraska and the Dakotas, and it's outperforming corn by a wide margin.

I got no problem with hemp.

[radon]

Re: Reporting gross oil production to hide the collapse of net oil production

The midwest is pretty hot and sunny in the summer. The test farms for the switchgrass are in NE Nebraska and the Dakotas, and it's outperforming corn by a wide margin.

I got no problem with hemp.

Summer is the key word. It wont grow at all in the winter, and it can only capture the solar energy that reaches the ground and isn't diverted into maintaining its substantial root system. While it may produce fuel the quantity is likely to be insufficient.

[Bundi]

Re: Reporting gross oil production to hide the collapse of net oil production

Calculation has been done and Hal (North America) and others have decided to expand where cost to produce is cheapest.

At some point, will production costs (much like labor arbitrage in other industries) may be trumped by transportation costs?

Frontline (large oil tanker company - NYSE listed) 2011 20-F
Fuel, or bunker, prices may adversely affect our profits

For vessels on voyage charters, fuel oil, or bunkers, is a significant, if not the largest, expense. Changes in the price of fuel may adversely affect our profitability to the extent we have vessels on voyage charters. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by OPEC and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. Further, fuel may become much more expensive in the future, which may reduce the profitability and competitiveness of our business versus other forms of transportation, such as truck or rail.
The above is boilerplate and just one of many risks listed year after year but looking forward it may be a more pronounced risk to profits.

Other disclosure...

The bunker (vessel fuel oil) market followed movements in the oil market closely in 2011. The average bunker price in Fujairah and Philadelphia was $649 per metric ton and $657 per metric ton in 2011, respectively, which represented an increase of $183 per metric ton and $178 per metric ton, respectively, from 2010.

From Frontline 2008 20-F

Bunkers followed the movements in the oil market closely in 2008. The lowest bunker price in Fujairah was quoted at the end of December at $206.50 per metric ton while the highest bunker price in Fujairah was quoted at $756.5 per metric ton in mid-July. The average bunker price in 2008 was approximately $508 per metric ton.

From ONG (oil tanker company - NYSE listed) 2011 20-F

THE 2011 TANKER MARKET (Source: Fearnleys)

Based on data for 2011, it was the worst year for the freight market for all types and sizes of tankers in almost a decade. In 2002, freight rates were periodically lower than in 2011, but the downturn lasted for a shorter period of time, and, more importantly, bunker costs were approximately 75% lower in 2002 compared to 2011. As a result of bunker prices, earnings on a time charter equivalent basis for the largest vessels have been negative for a large part of the year...

The ability of oil tanker companies to take on ever higher bunker fuel costs that are simoultaneously negatively impacting global trade volume may be limited. I don't mean right now, although the industry tone does currently seem dire (a look at FRO, OSG, NAT, and TNK long term charts is not favorable), but post peak. Perhaps the industry consolidates and brings pricing power to charter rates but this price will be measured against other sources (domestic, regional via pipe/rail) that, at lower demand points, may provide sufficient volume at lower total cost (transport + E&P cost).

I don't doubt that some fields in the US are cheaper production than Alberta. I do wonder though if the demand for oil in the future is lower while cost is higher. In that setting transportation costs matter and pipe or rail may be more efficient than ship. Kind of hard to pipe or rail oil from MENA to US. Either that or maybe the shipping companies go with helium blimps for lift and float through air to reduce drag.

[bpwoods]

Re: Reporting gross oil production to hide the collapse of net oil production

"What am I missing here? Energy returned on energy invested might be an important philosophical problem, but real people are concerned with economic problems not philosophic ones."

ERoRI is a theromdynamic issue. Liquid hydrocarbon fuels are priced in two ways: 1: Number of 'barrels' needed to extract, refine, transport and deliver 100 barrels to customers. This number has increased as the crude extraction processes become technically and geologically more difficult. Think of Fixed v Variable cost. You just consume greater and greater amounts of liquid fuel the more difficult your extraction process is. We have consumed all the 'easy' crude! [Try constructing, erecting, maintaining and replacing an off-shore wind turbine using electricty as your sole energy source.] 2: Prospecting [and leases] and drilling for crude is priced in dollars. So it is easier to price the product in dollars also.

You can print any amount of dollars. Getting sufficient liquid fuel is another matter entirely.

[globaleconomicollaps]

Re: Reporting gross oil production to hide the collapse of net oil production

"What am I missing here? Energy returned on energy invested might be an important philosophical problem, but real people are concerned with economic problems not philosophic ones."

ERoRI is a thermodynamic issue. Liquid hydrocarbon fuels are priced in two ways: 1: Number of 'barrels' needed to extract, refine, transport and deliver 100 barrels to customers. This number has increased as the crude extraction processes become technically and geologically more difficult. Think of Fixed v Variable cost. You just consume greater and greater amounts of liquid fuel the more difficult your extraction process is. We have consumed all the 'easy' crude! [Try constructing, erecting, maintaining and replacing an off-shore wind turbine using electricity as your sole energy source.] 2: Prospecting [and leases] and drilling for crude is priced in dollars. So it is easier to price the product in dollars also.

You can print any amount of dollars. Getting sufficient liquid fuel is another matter entirely.

Yes EROEI is indeed a thermodynamic issue. We can think of it in much the same way as we think about the heat death of the universe. A largely theoretical issue of no immediate urgency.

Let's try another thought experiment I use a giant magnifying glass to boil water that I then use to extract crude oil from rock. My energy balance is insane. I am using 10 times the energy that I extract. How can I hope to make a profit here? Simple. My crude oil use is zero. I am spending exactly zero to boil water. It is the economics that mater here, not the energy balance. There is a good reason you put barrels in quotes up above. It is because they are not barrels of crude oil.

[metalman]

Re: Reporting gross oil production to hide the collapse of net oil production

Yes EROEI is indeed a thermodynamic issue. We can think of it in much the same way as we think about the heat death of the universe. A largely theoretical issue of no immediate urgency.

Let's try another thought experiment I use a giant magnifying glass to boil water that I then use to extract crude oil from rock. My energy balance is insane. I am using 10 times the energy that I extract. How can I hope to make a profit here? Simple. My crude oil use is zero. I am spending exactly zero to boil water. It is the economics that matter here, not the energy balance. There is a good reason you put barrels in quotes up above. It is because they are not barrels of crude oil.

[gnk]

Re: Reporting gross oil production to hide the collapse of net oil production

I respectfully disagree with the EROEI is nonsense view.

I understand your point of view, but I also can understand the biophysical economics (BE) point of view. It's a different type of thinking. BE is adapted from looking how nature works. Money to us is a mere abstraction, often manipulated, to serve many purposes: to allocate resources, to build economies, to retain political or geopolitical power, to "keep score"/quantify progress, etc...

But in the end, the human species on planet earth can also be seen as a superorganism. An example of this is a bee hive. (I recently started beekeeping, so bear with me.) A bee hive is made up of individual organisms, bees, but it also acts as a superorganism in a collective sense. I say in a collective sense, to describe the fact that individual bees can not survive in nature. They need to live in a society with rules and each member has a specific role to play. This superorganism's future, growth, and existence relies on calories obtained from nectar and pollen. These are collected by forager bees that often need to fly several miles a day.

If these forager bees have to fly further away from the hive to gather nectar and pollen, the energy they expend to gather that very pollen and nectar takes away from the energy they ultimately can bring to the hive for immediate use or storage for later use. That energy is then allocated by the hive to all its residents: to drones, nurse bees, guard bees, foragers, cleaning bees, scout bees, and others as well as the queen - which often lays her own weight in eggs every day.

I have seen hives during a nectar dearth - it's not a good thing. They'll try to consume anything that exists - they will go in trash bins, they likely eat their own brood, they will eject the drones, they will starve the queen so she doesn't lay more eggs... Their population plummets.

Bees somehow accomplish this without a monetary system. They are programmed - it's done on instinct. Yet the EROEI theory is very real to the hive.

Unlike bees, mankind is not programmed to work in a society from the minute a human is born. There is heavy learning, there is conflict, there are systems of governance that constantly change, etc... But nonetheless, mankind is a superorganism that exploded in population, not only because of mankind's thinking powers, as mankind has had essentially the same brain for thousands of years. But mankind exploded in "civilization" and population with the same exponential growth in efficiency gained by fossil fuels. Mankind's EROEI fundamentally changed with the advent of the fossil fuel age - the monetary system preceded fossil fuels. Thus it wasn't money that changed, but the energy man used.

Thus the BE school of economics looks at the extreme macro view: what happens when EROEI drops as fossil fuels, in mankind's thought process/language: gets "more expensive?"

By the way, when several bee hives are kept together in the same beeyard, and energy is scarce, that is, the local environment lacks the pollen and nectar needed just for sustainability, let alone growth, the strong hives will rob from the weak hives. I have seen this. It's all out war. A weak hive can be depleted of all its food stores in hours. Dead bees littering the entrance and botttom board of the weak hive. Formerly full combs of honey, mere empty shells...

BE is an extreme macro view. We are fossil fuel man - that is our era, and the change in EROEI that came with it. What comes next? Do we slowly revert or do we enter a new energy based world - like in "Star Trek" or something like that. It's one or the other - regardless of what we do with that abstraction we call "money."

To me, money is merely an appendage of man's governance system that began when man lived in growing communities based on agriculture - the nomadic hunter existence ended.. Money was devised as a means to maintain order and to glue together the collective society - to allocate resources and to assign specific jobs as societal complexity increased.

We may not be programmed like bees are from day one, but we are not immune to EROEI either.

[Shakespear]

Re: Reporting gross oil production to hide the collapse of net oil production

To me, money is merely an appendage of man's governance system that began when man lived in growing communities based on agriculture - the nomadic hunter existence ended.. Money was devised as a means to maintain order and to glue together the collective society - to allocate resources and to assign specific jobs as societal complexity increased.

We may not be programmed like bees are from day one, but we are not immune to EROEI either.

Well said.

What has happened over time is that man thinks he has escaped the ecosystem called Earth and its Laws. Mankind (Western civilization) is operating under the assumption that it set the rules until that is Sandy visits.

That energy is then allocated by the hive to all its residents: to drones, nurse bees, guard bees, foragers, cleaning bees, scout bees, and others as well as the queen - which often lays her own weight in eggs every day.

Mankind's version of this model needs adjustment with addition of thieves, robbers and psychopaths. I would venture to say that the North American Indians were closer to the Bee Model than the developing Western Civilization.

[globaleconomicollaps]

Re: Reporting gross oil production to hide the collapse of net oil production

obnoxious clapping guy

Don't you have a job to go to?

[don]

Re: Reporting gross oil production to hide the collapse of net oil production

After years of debating EROEI with peak oil doomers, I've given up. I'm not sure what their agenda is but it isn't to develop an understanding of the political and economic impact of diminishing availability of cheaply produceable oil.

It makes sense at least theoretically to convert the energy in an abundant fixed energy source such as uranium into a transportation fuel like diesel by using nuclear power to heat water to produce steam to convert shale rock into crude oil (pyrolysis) that can be refined into diesel. However, mining shale rock and then converting it into liquids costs more than pumping crude from reservoirs. In fact any alternative to oil that's mined out of reservoirs of oil buried in the ground is necessarily more expensive to produce due to all of the extra capital and energy consuming steps involved. By the same token, oil mined from reservoirs at the bottom of the ocean also are more expensive to mine than shallow land-based reservoirs, and as the latter are rapidly depleting and the former are all that's left, the world's remaining oil endowment will be increasingly expensive to produce. This, as I've told the Peak Oil doomers since 2006, is why I coined the phrase Peak Cheap Oil. There will always be oil but starting in 1998 markets started to price in the reality that oil will be increasingly more expensive to produce -- forever -- albeit with periods of price declines when demand falls due to recession, some of which recessions will be triggered by oil price shocks.

While EROEI is a nonsense concept, profit is not. If E&P costs for a particular shale field including the cost of building and operating a nuclear power plant are higher than potential revenues then it will not be produced that way. I haven't done the math but I suspect that the economics of nukes-to-oil energy won't work until oil prices are two or three times current levels.

Not surprisingly well put. Another factor to toss into the hopper is public subsidies, especially in the nuke field, which mitigates higher energy costs to the industry.