by Robert Bryce
In January 2011, during his State of the Union speech, President Barack Obama called oil “yesterday’s energy.”5 That sound bite may appeal to the noisy members of the Green Left who are advocating for more mandates and subsidies for solar and wind energy, but here’s the reality: oil has been “yesterday’s energy” for more than a century. And yet, it persists. It persists because of continuing innovation that allows drillers like Artie White to produce more oil and gas and do so Faster Cheaper.
If oil didn’t exist, we would have to invent it. No other substance comes close to oil when it comes to energy density, ease of handling, and flexibility. Those properties explain why oil provides more energy to the global economy than any other fuel.6 (Oil provides about 33 percent, coal provides 30 percent, natural gas provides 24 percent, and hydro, 7 percent. The balance comes from nuclear and renewables.) It also explains why more than 90 percent of all transportation continues to be fueled by petroleum products.
Oil—and natural gas—are going to continue dominating the global energy market for decades to come because companies like Helmerich & Payne, Devon Energy, and dozens of others have a simple choice: innovate or die. Innovate they have. The convergence of several technologies ranging from better drill bits and seismic techniques to robotic rigs and nanotechnology are allowing the oil and gas sector to produce ever-increasing quantities of energy at lower cost. Furthermore, those technical advances are being deployed by an industry that is spending enormous sums every year to find, refine, and transport the fuel that the world’s consumers demand.
Advocates of solar, wind, and other renewable technologies like to point to the rapid growth that has occurred in the solar- and wind-energy sectors over the past few years. In 2011, Bloomberg New Energy Finance estimated that global investment in “clean energy” totaled $302 billion, a record. (In 2012, investment fell slightly to $268.7 billion.)7 That’s a lot of money. But in 2012, global spending on oil and gas drilling totaled more than $1.2 trillion.8 About a quarter of that amount, roughly $300 billion per year, is being spent drilling wells in the United States. Thus, every year, America alone is spending as much just drilling oil and gas wells as the entire rest of the world is spending on “clean energy.” And drillers are getting more efficient all the time, as shown, once again, by the numbers.
More wells have been drilled in the United States than anywhere else. No other country even comes close. Between 1949 and 2010, more than 2.6 million oil and gas wells were drilled in the United States, and that number has been increasing by about 41,000 new wells per year. And yet, thanks to ongoing innovation in the oil field, between 1949 and 2011, the percentage of dry wells, or “dusters” dropped from 34 percent to 11 percent.9
Perhaps the most important recent innovation in the Oil Patch has occurred in the design of drilling rigs. Drill rigs are relatively simple devices. They can range in size from small truck-mounted units that drill water wells to massive 100,000-ton drill ships that can prospect for oil and gas in 10,000 feet of water.11 But the principles are basically the same: they must be stable, precise, and capable of producing the torque needed to punch a hole in the earth. The latest, most important innovation in drill rigs is the AC top-drive. That’s the design that Artie White and his colleagues were using to drill the Tom Horn 7–13–9 10H. The key improvement came by moving the rig’s main drive mechanism from the floor of the rig onto the mast. The result is a major step forward in the speed and control of the drilling process.
Number of US Oil and Gas Wells Drilled and Percentage of Dusters 1949–2010
Source: Energy Information Administration (EIA).10
The AC top-drive consolidates the rig’s drive and hoist mechanism into one unit. That allows the automation of several mundane processes that used to require human intervention. Although many of the operations on the rig still must be handled by roughnecks, a bank of computers monitor key data points such as rotational speed on the bit, drilling rate, and flow rates. The computers feed that data into a drilling control system that keeps the optimum amount of weight on the drill bit and keeps it spinning at optimal speed.
January 26, 2013: A pair of roughnecks on the floor of an AC top-drive rig in Canadian County, Oklahoma. The lower part of the 800-horsepower drive mechanism can be seen above their heads. The rig is powered by three diesel engines that produce a total of 4,428 horsepower. Those engines produce the electricity needed to run nearly everything on the rig: the motors, lights, computers, hoist, and drive mechanisms. Source: Photo by author.
If you’ve ever drilled a hole in Sheetrock or a piece of wood, you know that applying proper pressure is key. Press too hard, and the drill freezes or gets stuck. Not enough pressure or insufficient speed, and the drill bit makes no progress. The same factors are at play on a drill rig that’s boring a four-mile-long well. By moving the rig’s prime mover from the floor to the mast, the AC top-drive allows digital controllers to continually weigh the entire drill string. By monitoring the weight, the system continually adjusts the amount of pressure being applied to the bit, as well as the rotational speed. Those adjustments assure the maximum rate of penetration. Add in the rig’s ability to use longer sections of drill pipe and its modular design—which allows it to be transported more quickly than older rig designs—and it’s easy to see how companies are able to drill more wells Faster Cheaper.
In addition to better drill rigs, we’ve seen innovation in drill bits, seismic tools, telemetry systems, proppants, pumps, and numerous other technologies that are needed to produce hydrocarbons. All of those innovations have resulted in big improvements in speed. Back in 2007, Devon Energy needed about fifty-seven days to drill an average well in the Cana Woodford Shale. By 2012, the company was able to drill a well like the Tom Horn 7–13–9 10H—a well with a vertical depth of 12,814 feet and a lateral extension of nearly 5,000 feet—in just thirty days.12
Other drillers are showing similar speed improvements. Southwestern Energy is a Houston-based company that has pioneered the development of the Fayetteville Shale in Arkansas. Between 2007 and 2012, the cost of an average well that Southwestern drills in the Fayetteville Shale has stayed fairly constant, at about $3 million per well. But over that same time frame, Southwestern reduced the number of days needed to drill a well from seventeen days to just seven days. Better yet, the initial production rate on the wells being drilled has more than tripled.13
The result of all that innovation can be seen in the production data. In 2012, US oil production rose by 790,000 barrels per day, the biggest annual increase since US oil production began in 1859.14 Domestic natural gas production is also at record levels. The United States has been the epicenter of oil and gas exploration and production for more than a century. And yet, thanks to ongoing innovation, production keeps rising.
On January 26, 2013, a drill bit made by Halliburton sits in the foreground of the well known as the Tom Horn 7–13–9 10H. Polycrystalline diamond compact bits like this one are often used in place of traditional roller-cone drill bits when drilling in shale formations. Renting a PDC often costs about $20,000. Drilling the Tom Horn 7–13–9 10H required the use of about ten bits like this one. Source: Photo by author.
The extension of the hydrocarbon era is happening thanks to the industry’s innovation onshore and offshore. One of the biggest offshore discoveries in recent years was the Johan Sverdrup field in the North Sea. The Sverdrup field alone contains up to 3.3 billion barrels of recoverable hydrocarbons, making it the largest discovery in the North Sea since 1980.15 In early 2013, a pair of offshore discoveries in the Lower Tertiary Trend in the US Gulf of Mexico confirmed the presence of billions of additional barrels of oil and natural gas resources.16 Few countries provide a better demonstration of offshore oil innovation than Brazil. In 1990, Brazil, the largest country in South America, was producing 650,000 barrels of oil per day. In 2011, production had increased to nearly 2.2 million barrels per day. Nearly all of that increased production came from offshore wells.18
Offs
hore Oil and Gas Discoveries, 1995–2012
The innovations that are happening in onshore drilling are being mirrored by continuing discoveries offshore. Advances in materials science, robots, submarines, and other technologies are allowing companies to access offshore oil and gas reservoirs that were once thought inaccessible. As this graphic shows, between 2002 and 2012, more than 100 billion barrels of new oil resources were discovered in offshore locations around the world. In 2012 alone, global offshore oil discoveries totaled some 25 billion barrels. Source: Deutsche Bank and Wood MacKenzie.17
In 1929, the economic historian Abbott Payson Usher wrote: “The limitations of resources are relative to the position of our knowledge and of our technique.” He continued, explaining that the perceived limits of available resources “recede as we advance, at rates that are proportionate to the advance in our knowledge.”19 The history of the oil and gas sector is one of advancing knowledge and increased resource availability. And that has resulted in Cheaper energy.
We’re Running Out of Oil . . .
In 1914, a US government agency, the Bureau of Mines, predicted that world oil supplies would be depleted within ten years.
In 1939, the US Department of the Interior looked at the world’s oil reserves and predicted that global oil supplies would be fully depleted in thirteen years.20
In 1946, the US State Department predicted that America would be facing an oil shortage in 20 years and that it would have no choice but to rely on increased oil imports from the Middle East.21
In 1951, the Interior Department said that global oil resources would be depleted within thirteen years.22
In 1972, the Club of Rome published The Limits to Growth, which predicted that the world would be out of oil by 1992 and out of natural gas by 1993.23
In 1974, population scientist Paul Ehrlich and his wife, Anne, predicted that “within the next quarter of a century mankind will be looking elsewhere than in oil wells for its main source of energy.”24
Reality check: in 1980, the world had about 683 billion barrels of proved reserves. Between 1980 and 2011, residents of the planet consumed about 800 billion barrels of oil. Yet in 2011, global proved oil reserves stood at 1.6 trillion barrels, an increase of 130 percent over the level recorded in 1980.25
We’re Also Running Out of Natural Gas . . .
In 1922, the US Coal Commission, an entity created by President Warren Harding, warned that “the output of [natural] gas has begun to wane.”26
In 1956, M. King Hubbert, a Shell geophysicist who became famous for his forecast known as Hubbert’s Peak, predicted that gas production in the United States would peak at about 38 billion cubic feet per day in 1970.27
In 1977, John O’Leary, the administrator of the Federal Energy Administration, told Congress that “it must be assumed that domestic natural gas supplies will continue to decline” and that the United States should “convert to other fuels just as rapidly as we can.”28
In 2003, Matthew Simmons, a Houston-based investment banker for the energy industry who was among the leaders of the peak oil crowd, predicted that natural gas supplies were about to fall off a “cliff.”29
In 2005, Lee Raymond, the famously combative former CEO of ExxonMobil, declared that “gas production has peaked in North America.”30
Reality check: in 2012, US natural gas production averaged 69 billion cubic feet per day, a record, and a 33 percent increase over the levels achieved in 2005, when Raymond claimed North American production had peaked.31
18
THE TYRANNY OF DENSITY
Among the Mount Everest of inanities ever uttered on the subject of energy, the blue-ribbon winner must be this one: “the tyranny of oil.”
Both Barack Obama and Robert F. Kennedy Jr. have used the line. Obama claimed it for his own in 2007 during a speech in which he declared his run for the White House. While standing on the steps of the Old State Capitol in Springfield, Illinois, Obama said, “Let’s be the generation that finally frees America from the tyranny of oil.”1
In March 2013, during a speech at Sandhills Community College in North Carolina, Kennedy, a high-profile opponent of the Keystone XL pipeline (he was arrested at the White House during an anti-Keystone protest), said, “we need to free ourselves from the tyranny of oil.”2
That Obama and Kennedy, both of whom went to Harvard, claim that a super-high-energy density substance that can be deployed for innumerable purposes, from pumping well water in Kenya to emergency generation of electricity in Lower Manhattan, is somehow bad or even yet, tyrannical, is nonsense on stilts. Rather than talk about the tyranny of oil, the two Harvard grads might as well complain about the tyranny of physics—or better yet, the tyranny of density.
Few substances this side of uranium come close to touching oil when it comes to the essential measure of energy density: the amount of energy (measured in joules or BTUs) that can be contained in a given volume or mass. In addition to petroleum’s high energy density, it is stable at standard temperature and pressure, relatively cheap, easily transported, and can be used for everything from making shoelaces to fueling jumbo jets.
Oil’s tyranny of density can be demonstrated by looking at the aviation sector and by doing a tiny bit of math. To make it easy, let’s use metric units and focus on weight, as that factor is critical in aerospace. The gravimetric energy density of jet fuel is high: about 43 megajoules (million joules) per kilogram. (Low-enriched uranium, by the way, is 3.9 terajoules—trillion joules—per kilogram.)3
Keep those numbers in mind as we look at the best-selling jet airliner in aviation history: the Boeing 737.4 A fully fueled 737–700 holds about 26,000 liters of jet fuel, weighing about 20,500 kilograms. That amount of fuel contains about 880 gigajoules (billion joules) of energy. The maximum take-off weight for the 737–700 is about 78,000 kilograms; therefore, jet fuel may account for as much as 26 percent of the plane’s weight as it leaves the runway.5
Obama and Kennedy are big fans of electric cars.6 Lithium-ion batteries have higher energy density than most other batteries, holding about 150 watt-hours—540,000 joules—of energy per kilogram.7 Recall that jet fuel contains about 43 megajoules per kilogram, or nearly 80 times as much energy. Therefore, if Boeing were trying to replace jet fuel with batteries in the 737–700, it would need about 1.6 million kilograms of lithium-ion batteries. That means that the 737–700 would require a battery pack that weighs about 21 times as much as the airplane itself.
Prefer to use a “green” fuel like firewood? With an energy density of about 16 megajoules per kilogram, that same 737–700 would require about 55,000 kilograms of wood. With that much kindling onboard, rest assured there won’t be room in the overhead bin for your carry-on bag.
Even at 35,000 feet, the truth is obvious: the only tyranny at work in our energy and power systems is that of simple math and elementary-school physics. Obama and Kennedy may not like oil, and their allies on the Left may hate Shell/BP/Marathon/Exxon/Saudi Aramco/Chevron/Keystone XL, but here’s the reality: oil is a miracle substance. Without it, modern society simply would not be possible.
Rather than condemning the fuel that makes modern life possible, our political leaders should be figuring out how we can make oil more available to more people at lower cost.
Denser Energy Is Green Energy: Comparing Uranium with Various Other Sources
We use oil because of its high-energy density and other characteristics. But gasoline—and even hydrogen—are no match for uranium, which when enriched to 3.5 percent, has 3.9 terajoules per kilogram. For comparison, firewood has about 16 megajoules per kilogram. Thus, to match the energy of one kilo of enriched uranium, you’d need about 244,000 kilos of firewood. Source: World Nuclear Association.8
SMALLER FASTER INC.
CLEAN ENERGY SYSTEMS
Official Name Clean Energy Systems, Inc.
Web site http://www.cleanenergysystems.com
Ownership Private
Headquarters Rancho Cordova, Californi
a (US)
Amount of Capital Raised $100 million
Latest Annual Revenue N/A
Clean Energy Systems is bringing rocket technology to the electricity business. In doing so, it is achieving power densities that approach those seen in nuclear reactors.
Clean Energy Systems is proving its Smaller Denser technology amid the dusty almond groves that lie on the outskirts of Bakersfield, California. On the site of a former biomass-to-energy plant, the company is testing a gleaming prototype called the 12-inch Gas Generator, which is, in effect, a modified rocket engine that has been laid horizontally. The machine is a marvel of precision engineering, curved pipes, stout bolts, and burly flanges. On a hot day in mid-2013, the company’s plant manager, Heath Evenson, explained the process. Natural gas and pure oxygen are ignited under high pressure at the top of the engine. Just downstream of where the ignition occurs, a series of injection nozzles spray water into the combustion chamber. The exhaust gas—a mixture of nearly pure carbon dioxide and high-pressure steam—then flows into a generation unit that produces electricity. By adjusting the flow of fuel, oxygen, and water, Clean Energy Systems can change the outlet pressure as well as the temperature of the steam being produced. That flexibility means that the company’s generation units could be employed for a variety of uses, including electricity generation, refining, and enhanced oil recovery.
June 27, 2013: Heath Evenson, the plant manager at Clean Energy Systems’ plant in Bakersfield, California, shows visitors the company’s newest design: a machine that uses rocket technology to produce high-pressure, high-temperature steam that, in turn, can be used to generate electricity. Source: Photo by author.
What’s intriguing about the design is its compactness. The essential components are small enough to fit inside a single 40-by-8-foot shipping container. Under optimum conditions, the machine can generate about 70 megawatts of electricity. When accounting for all of the equipment needed by the system, including the air separators needed to produce oxygen, Clean Energy Systems’ generator has an areal power density of about 117,000 watts per square meter.9 That’s an astoundingly high number, particularly when you consider that wind energy has a power density of 1 watt per square meter, and even the best solar systems are in the low double digits.