World Is Awash With Oil

Discussion in 'Commodity Futures' started by K.C., Sep 4, 2005.

  1. K.C.


    Petroleum geology
    Raining hydrocarbons in the Gulf

    Below the Gulf of Mexico, hydrocarbons flow upward through an intricate network of conduits and reservoirs. They start in thin layers of source rock and, from there, buoyantly rise to the surface. On their way up, the hydrocarbons collect in little rivulets, and create temporary pockets like rain filling a pond. Eventually most escape to the ocean. And, this is all happening now, not millions and millions of years ago, says Larry Cathles, a chemical geologist at Cornell University.

    "We're dealing with this giant flow-through system where the hydrocarbons are generating now, moving through the overlying strata now, building the reservoirs now and spilling out into the ocean now," Cathles says.

    He's bringing this new view of an active hydrocarbon cycle to industry, hoping it will lead to larger oil and gas discoveries. By matching the chemical signatures of the oil and gas with geologic models for the structures below the seafloor, petroleum geologists could tap into reserves larger than the North Sea, says Cathles, who presented his findings at the meeting of the American Chemical Society in New Orleans on March 27.

    This canvas image of the study area shows the top of salt surface (salt domes are spikes) in the Gas Research Institute study area and four areas of detailed study (stratigraphic layers). The oil fields seen here are Tiger Shoals, South Marsh Island 9 (SMI 9), the South Eugene Island Block 330 area (SEI 330), and Green Canyon 184 area (Jolliet reservoirs). In this area, 125 kilometers by 200 kilometers, Larry Cathles of Cornell University and his team estimate hydrocarbon reserves larger than those of the North Sea. Image by Larry Cathles.

    Cathles and his team estimate that in a study area of about 9,600 square miles off the coast of Louisiana, source rocks a dozen kilometers down have generated as much as 184 billion tons of oil and gas — about 1,000 billion barrels of oil and gas equivalent. "That's 30 percent more than we humans have consumed over the entire petroleum era," Cathles says. "And that's just this one little postage stamp area; if this is going on worldwide, then there's a lot of hydrocarbons venting out."

    According to a 2000 assessment from the Minerals Management Service (MMS), the mean undiscovered, conventionally recoverable resources in the Gulf of Mexico offshore continental shelf are 71 billion barrels of oil equivalent. But, says Richie Baud of MMS, not all those resources are economically recoverable and they cannot be directly compared to Cathles' numbers, because "our assessment only includes those hydrocarbon resources that are conventionally recoverable whereas their study includes unconventionally recoverable resources." Future MMS assessments, Baud says, may include unconventionally recoverable resources, such as gas hydrates.

    Of that huge resource of naturally generated hydrocarbons, Cathles says, more than 70 percent have made their way upward through the vast network of streams and ponds, venting into the ocean, at a rate of about 0.1 ton per year. The escaped hydrocarbons then become food for bacteria, helping to fuel the oceanic food web. Another 10 percent of the Gulf's total hydrocarbons are hidden in the subsurface, representing about 60 billion barrels of oil and 374 trillion cubic feet of gas that could be extracted. The remaining hydrocarbons, about 20 percent, stay trapped in the source strata.

    Driving the venting process is the replacement of deep, carbonate-sourced Jurassic hydrocarbons by shale-sourced, Eocene hydrocarbons. Determining the ratio between the younger and older hydrocarbons, based on their chemical signatures, is key to understanding the migration paths of the oil and gas and the potential volume waiting to be tapped. "If the Eocene source matures and its chemical signature is going to be seen near the surface, it's got to displace all that earlier generated hydrocarbon — that's the secret of getting a handle on this number," Cathles says.

    Another important key to understanding hydrocarbon migration is "gas washing," Cathles adds. A relatively new process his research team discovered in the Gulf work, gas washing refers to the regular interaction of oil with large amounts of natural gas. In the northern area of Cathles' study area, he estimates that gas carries off 90 percent of the oil.

    Ed Colling, senior staff geologist at ChevronTexaco, says that identifying the depth at which gas washing occurs could be extremely useful in locating deeper oil reserves. "If you make a discovery, by back tracking the chemistry and seeing where the gas washing occurred, you have the opportunity to find deeper oil," he says.

    Using such information in combination with the active hydrocarbon flow model Cathles' team produced and already existing 3-D seismic analyses could substantially improve accuracy in drilling for oil and gas, Colling says. ChevronTexaco, which funds Cathles' work through the Global Basins Research Network, has been working to integrate the technologies. (Additional funding comes from the Gas Research Institute.)

    "All the players are looking for bigger reserves than what's on shore," Colling says. And deep water changes the business plan. With each well a multibillion dollar investment, the discovery must amount to at least several hundred million barrels of oil and gas for the drilling to be economic. Chemical signatures and detailed basin models are just more tools to help them decide where to drill, he says.

    "A big part of the future of exploration is being able to effectively use chemical information," Cathles says. Working in an area with more oil by at least a factor of two than the North Sea, he says he hopes that his models will help companies better allocate their resources. But equally important, Cathles says, is that his work is shifting the way people think about natural hydrocarbon vent systems — from the past to the present.

    Lisa M. Pinsker
  2. K.C.


    In 2000 I worked in the Gulf of Mexico for two different OSV companies
    that provided support services to the "oil patch". The two companies did
    very different work for the oil companies so I got to get an eye full.

    The first thing that I'd like to expose is the fact that nearly all of
    the new wells in the gulf are immediately capped off and forgotten
    about. I saw well after well brought in only to see them capped off and
    left. Oil or natural gas it didn't matter. I asked a couple of petroleum
    engineers what exactly was going on and I was told by both (they worked
    for different companies) that there was no intention of bringing that
    oil to market until the "price was right".

    That wasn't the only bogus thing that was happening. Seismic technology
    had developed to the point that they could not only tell the companies
    where the oil was but how much oil was there. All they had to do was go
    out and stick a straw in and suck it out. They didn't. Once again, the
    oil prices weren't right. When they are ready and want it they know
    right where to go get it.

    Another lie I'd like to lay to rest is the one about all of the
    "terrible damage" done to the oil platforms and rigs in the gulf during
    hurricanes. This is how they justify the price spikes that occur because
    of lost production. If anyone cared to see this for themselves they
    could travel the entire Gulf of Mexico in search of destroyed oil rigs
    and they won't find any- not one. There is a damed good reason that this
    is so and that reason is that they are built so well that a hurricane
    can't touch them.

    Think about it . If you're going to build something in an area where you
    are guaranteed to see 150-180 mph winds, storm swells up to 60-80 feet
    and it will happen year after year, how would you build them? Out of
    chicken wire and duct tape? Hell no and they don't. The platforms are
    designed to offer almost no wind resistance and the majority of
    platforms are at least 120 feet above the water level. They are built so
    well that several of them have suffered direct hits by watercraft of all
    sizes with little harm. They were damaged but they were far from destroyed.

    The reason that I know how well they are constructed is because for
    awhile I worked with a company that salvaged derelict oil rigs. When the
    wells ran dry and the oil companies didn't need them any more the
    company that I worked for would buy them, take them apart, haul them
    back to land, refurbish and then resell them. It is an incredible
    process to take these things apart because they are constructed so well.
    I've worked on the boats that hauled explosives to the job sites to
    speed the disassembly process.

    Another lie regards the "burp" in the supply line. Oil companies are as
    stingy as any on earth and one of the ways that they cut costs is to
    eliminate the number of people that they need on a rig to keep it
    running. Most active wells are totally automated and require almost no
    human intervention. The oil companies have guys that travel from rig to
    rig via helicopter to check on things periodically but most never see a
    human on them unless something goes wrong or some maintenance is needed.
    During a hurricane about the only rigs that need to be evacuated are the
    drill rigs that have workers on them. The active wells and pumping
    stations are controlled by remote control from the shore and if it
    weren't for the evacuation of land based personnel from areas where
    there is danger from the hurricanes these things could continue to pump
    right through the worst hurricane.

    So, regarding a burp in the supply chain there shouldn't be one and that
    is because most of the oil from the Gulf of Mexico goes to the refinerys
    at Port Arthur or other points in Texas and the tankers from the middle
    east go to Galveston to offload.

    When oil moves across the Atlantic during hurricane season the tanker
    traffic may have to kill some time to let a storm get ahead of them but
    once it does they haul ass right behind it. Anyone who has seen how fast
    an oil tanker can move in open water will tell you that they don't
    dawdle around. Most of them can move around 30-40 knots and for a ship
    that size that baby is moving on. The only reason they would have to
    kill any more time would be if a hurricane suddenly changed course and
    was headed for Galveston. So far this year that hasn't happened. So why
    the "break" in supply?

    Everything that we hear about oil from the oil companies is a big fat
    lie. Have we hit "peak oil" as a good many insist that we have? I'll
    make a wager with anyone who would care to take the bet. I bet that when
    oil hits $100 a barrel (I have a hunch that's the target price) there
    will be no shortage. Any takers?

    Denny Meredith
    Louisville, Ky.
  3. now oil is going to go up again.
  4. when oil hits a hundred there will be no shortage?

    what a loaded remark. a) there is no shortage of oil now. b) that's like saying, 'i bet when the sky clouds up it's going to rain.' of course higher prices bring on more capacity -- that's how it works. c) having said that, my hunch is that, unless something changes structurally, the market must test 90 simply because it's ingrained in the psychology that that is what oil is "worth" -- if indeed it really is trading at record levels, which, while nominally true, is a debatable and ulikely assertion. if there really was a shortage, we'd have seen 90 well before this hurricane.

    i'm inclined to humbly opine that everyone and his mother is selling everything he can get his hands on right now.
  5. Babak


    I've read that oil companies are still inputing $30ish/barrel into their project calculations. And as a result not taking on projects that would deliver positive FV.
  6. Brandonf

    Brandonf Sponsor

    A big part of the problem is that we are still consuming a lot of oil. Even with higher prices oil use was up 4% this summer vs last. Now, I was out yesterday and there was hardly a car on the road so this weekend might have an effect..but up till this point higher prices have not.

  7. KC

    I know a man who worked for an oil company who told me the same thing about capping wells.
  8. The discussion is a little bit below par for market people. Why should oil be cheap if many of the people that consume it get paid outrageous sums for doing nothing or almost nothing.
    If you own something of value, you wouldn't like to give it away either. What we are witnessing is a catastrophic economic imbalance. In the long run, it will wreck any civilization that is powerless to cope with it. (The scenario is running for a long time already.) The Louisiana/Mississippi natural disaster simply accentuates it a bit, it's not the cause.
  9. guys, get out and get some FRESH AIR. maybe take a little trip to the library (it's free) and check out a book called, "The Doomsday Myth: Ten Thousand Years of Economic Crises." And don't forget your Ritalin.

  10. izeickl


    Thanks for pointing that book out...

    Very interesting...will deff buy it.
    #10     Sep 4, 2005