This is an abbreviated version of a post at my personal blog . There you will find more detailed text, additional figures and references. In 1956, M. King Hubbert predicted that crude oil production in the U.S. (ex-Alaska) would peak in rate around 1970, to be followed by a long, irreversible decline. Hubbert nailed the timing of the peak, and in doing so, cemented his status as a technological visionary among neo-Malthusians and opponents of the “fossil fuels”. But Hubbert’s paper also contained a similar forecast for gas. In 1956 , Hubbert’s estimate of the amount of natural gas that would ultimately be consumed in the U.S. was 850 trillion cubic feet (TCF) . In the 1978 update, Hubbert increased his estimate to 1,103 TCF , but considered that value to be on the high side. Lower 48 Gas Production, 1900-2010 By the end of 2010, we had produced and marketed 1,131 TCF from the Lower 48, more gas than Hubbert thought would ever be possible. We find ourselves in the midst of a natural gas boom, with gas production now exceeding the peaks of 1973: rates are over three times higher than the 7 TCF per year Hubbert foresaw for 2010. The Lower 48 resource base is some 3,100 TCF, three to four times Hubbert’s earlier estimates. Peak Oilers rarely mention Peak Gas. Hubbert expected his method to work for all resources; why did it fail with respect to gas? The answers to that question shed light on the shortcomings of Peak Oil Theory, and reveal the reasons why it should not be used as a policy-making tool. Shortcoming #1: Hubbert’s technique depends entirely upon the estimate of the ultimate resource base . Any extrapolation of historical trends contains only the information embedded in the history. There is no way to anticipate “game-changing” developments outside the confines of the history upon which it is based. A forecast of a limited future thus becomes a self-fulfilling prophecy if it is used to set policy. Shortcoming #2: “Hubbert’s Peak” is the ultimate ceteris paribus analysis. Problem is, all other things are never equal, particularly in the realm of economics. Hubbert’s equations worked well in his experience, so well that he accepted them as immutable laws. Hubbert showed little concern for how changing policies or economics might affect his resource estimates (see Shortcoming #1 ). Shortcoming #3: We are all limited by our imaginations. Hubbert could not imagine economic production of hydrocarbons from water depths over 600 feet; we now have production in nearly 10,000 feet of water. Shale rocks were never considered to have economic potential. Moore’s Law has enabled accomplishments in drilling and exploration beyond Hubbert’s wildest dreams. Product Price Until the mid-1970s, natural gas was dirt cheap, so cheap that drillers rarely targeted it intentionally. Most of the gas that was found and produced was incidental to oil operations, which explains why Hubbert deemed the gas resource to be a ratio of his crude oil estimate. The following graph shows the history of natural gas prices (which was historically priced per mcf, or 1,000 standard cubic feet). The average wellhead price (i.e., the price received by the producer in the field) from 1925 until 1970 was less than 10¢ per mcf (about 66¢ in 2005 dollars). The energy content of one barrel of oil is roughly the same as 6 mcf of gas, so that the cost of buying one barrel’s worth of energy in natural gas form was only 60¢ (or less than $4.00 in 2005 dollars). Nominal and Real U.S. Wellhead Gas Prices, 1925-2010 Public Policy Since 1938, the Natural Gas Act had enforced low gas prices and near monopoly status for the big interstate gas pipelines. It was not unusual for a producer to be locked into a long term gas sales contract at 3¢ per mcf, with no recourse and no alternatives. In an effort to build domestic gas supplies, President Carter signed the Natural Gas Policy Act (NGPA) in 1978. It maintained existing price controls while granting preference to newly-found supplies. Its recognition of a dozen or more “vintages” of gas led to a price structure that became increasingly byzantine over time. President Reagan began phasing out price controls on oil and gas in 1983. Tax reform ended limited partnerships’ tax shelters for drilling dry holes. The industry floundered as prices tanked and investors vanished. From 1981 until 1985, the count of active drilling rigs declined from 4,500 to under 700. Under severe economic pressure, the energy industry consolidated and contracted, then set about figuring out how to regain profitability. Technology Coincidentally, by about 1985, the impact of desktop computing began to be felt in the industry. Directly or indirectly, the PC era would contribute to a number of important technical advances in exploration and well operations, including 3-D seismic, horizontal drilling and logging-while-drilling. Using these and other new technologies, operators began finding ways to produce natural gas from rocks that had been never before been considered to be commercial sources of hydrocarbons. Explorers drilled fewer dry holes, and more efficiently developed smaller accumulations than in earlier days. Real Wellhead Price and Lower 48 Gas Production, 1925-2010 Conclusion Hubbert may have been correct about the ultimate volume of gas that would have been produced under pre-1970 prices and marketing structures. That price was unrealistically low compared to the energy content of gas. Today’s gas prices are about six times the pre-1970 average (2005 dollars), but gas is still a relative bargain. (Six thousand cubic feet of gas costs about $24, but can do as much work as one $100 barrel of oil.) So, if all this is true, why does Hubbert’s curve seem to work so well for crude oil? One key fact distinguishes natural gas and oil. Oil can be readily imported from anywhere in the world. Gas is primarily a North American commodity. Imports (other than Canadian pipeline imports) can impact the market only when domestic prices are high – and even then we have to compete with Japan and other regular customer on the world market. At the current low price of gas (relative to oil), the United States may become a gas exporter . The transportability of oil caused the oil-oriented major integrated companies to focus their exploration efforts overseas when drilling and production costs rose in the U.S. Finding large deposits of oil overseas was easier, cheaper and more efficient than it was in the States. The U.S. natural gas market became the domain of domestic independents. Policy decisions have taken much of the domestic oil resource base off the table, namely in the Alaskan North Slope, much of the Mountain West and the 85% of the Outer Continental Shelf which is closed to exploration. We cannot know how big this potential resource base is until we drill it. Many would prefer not to know, whether for political or environmental reasons, so we can expect the fight to continue. Cross-posted at stevemaley.com . Follow @VladimirRS !function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src=”//platform.twitter.com/widgets.js”;fjs.parentNode.insertBefore(js,fjs);}}(document,”script”,”twitter-wjs”);
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What’s Wrong with Peak Oil Theory? Consider ‘Peak Gas’.
I’m very pleased to announce that I’ll be hosting
Heather Peters (no relation to this writer) is hopping mad at Honda. She says her ’06 hybrid Civic’s actual mileage more than just varied : About 30 MPG vs. the EPA (and Honda) advertised 50 MPG. So she’s going after Honda in court — small claims court — for $10,000. Which is the maximum payday she can get there. Honda is concerned because if Peters wins, other hybrid owners may use the same tactic — and $10,000 times all the potentially unhappy Civic hybrid owners out there, of which there are hundreds of thousands, could add up to a lot more than $10,000 in no time at all. Peters, a lawyer, estimates it could potentially add up to as much as $2 billion . “I would not be surprised if she won,” Richard Cupp Jr., a product liability law professor at Pepperdine University, told the Associated Press . “The judge will have a lot of discretion and the evidentiary standards are relaxed in small claims court.” So, Honda should be worried. In fact, so should every car company that’s ever sold a hybrid vehicle — because few, if any of them, deliver the promised fuel economy. Often, they deliver much less. But it’s not really the cars’ fault. Because they are capable of delivering the advertised mileage. Theoretically. The problem is that you have to drive them in a way that, for most people, is not only unrealistic but downright impossible. To get a steady 40 MPG (let alone 50 MPG) out of any hybrid — and I have driven all of them, extensively — you must keep your speed under 50 MPH and treat the accelerator as if it were a Fabergé egg. This is enervating if you have any consideration for your fellow drivers — whose progress you will be constantly impeding — as well as downright dangerous for you . Merge lanes become suicide lanes; semis loom large in the rearview; you can feel the Hate all around you. So, you give it some pedal — and poof! — there goes your 50 MPG. There are also hills . Hybrids work best on a perfectly horizontal plane. Once rolling, it takes not much power to keep on rolling — and many hybrids can actually shut down the gas engine side of their hybrid powertrain entirely as you coast along. But alas, the world is not — usually — flat. Where I live, for instance, there are 6-8 percent grades. These grades pummel the MPG potential of hybrids as they struggle uphill, burning gas abundantly and also at the same time rapidly depleting the electricity stored in their battery packs, which in a hybrid is used to provide a supplemental boost when needed as well as to allow the car to operate on electricity alone. And once the batteries are depleted, the car can no longer shut down its gas engine even when the road is flat once more — because there’s insufficient reserve power to run the electric motor. You can almost see the tongue of exhaustion hanging out the car’s grille. I had a “state of the art” Chevy Volt recently and this is exactly what happened. Going up and down the mountain rapidly sucked the life out of the battery and so I was running exclusively on the gas engine — which never did better than 35 MPG. This is about 5 MPG worse than several non-hybrid 2012 cars, including the Mazda3 SkyActive and Ford Fiesta — cars that, it should be noted, cost about half what a new Volt costs. GM better lawyer up, too. Even when you get back to flat land, because the battery was depleted dealing with hills (or helping to provide adequate acceleration) the hybrid just becomes a heavier-than-usual (because of the added weight of the battery pack and electric motor) car burning gas just like any other car. And usually, more gas than an otherwise equivalent non-hybrid car — for two reasons: 1. In a hybrid, the gas engine is usually smaller and less powerful than the engine in an otherwise equivalent non-hybrid. For instance, in Peters’ 2006 Civic hybrid, the gas engine is just 1.3 liters and makes only 110 hp. In the non-hybrid Civic, the engine is 1.8 liters and makes 140 hp. Result? The hybrid’s smaller/weaker engine has to work harder to deliver comparable forward thrust — which means it burns more fuel. 2. In a hybrid, the gas engine has two jobs — powering the drive wheels and powering up the battery pack. There is no free lunch in physics. If the battery is strained and drained repeatedly, it puts additional load on the engine — just like any other accessory. Which — wait for it, now — results in more fuel being burned . Honda’s sin — the sin of all car companies hawking hybrids — was (and still is) not making all this clear to its customers. Hybrids can indeed return 40 or even 50-plus MPGs. The problem is finding a place where you can drive them in such a way as to make that real-world feasible rather than pie-in-the-sky advertising copy.
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A Honda Civic Lesson
Another day, another distorted and fear-mongering attack from the Old Grey Lady on America’s natural gas industry. Headline: Add Quakes to Rumblings Over Gas Rush (originally published under the headline “Some Blame Hydraulic Fracturing For Earthquake Epidemic”; link may require subscription/signup) Nine quakes in eight months in a seismically inactive area is unusual. But Ohio seismologists found another surprise when they plotted the quakes’ epicenters: most coincided with the location of a 9,000-foot well in an industrial lot along the Mahoning River, just down the hill from Mr. Moritz’s neighborhood and two miles from downtown Youngstown. At the well, a local company has been disposing of brine and other liquids from natural gas wells across the border in Pennsylvania — millions of gallons of waste from the process called hydraulic fracturing that is used to unlock the gas from shale rock. Here, the Times conflates two dissimilar processes in an attempt to create fear and worry about natural gas. Follow below the jump, and allow me to explain. As excited as the Times may be to have the words “fracking” and “earthquakes” in the same headline, there is not a single shred of a scintilla of an iota of evidence that the well-completion process known as hydraulic fracturing has ever caused an earth-shifting seismic event. But the Times would like you to associate the two. Wikipedia image. The Youngstown, OH well featured in the linked article is a deep injection well . There are thousands of deep injection wells in the U.S. They are used for the disposal of all kinds of hazardous and non-hazardous liquid waste, from all kinds of industries. Construction of deep injection wells is normally regulated by a state agency. Here in Louisiana, Underground Injection Control is a totally separate agency from the oil and gas regulatory body. All they do is regulate underground injection, and there are elaborate well construction standards designed to prevent shallow water resources. An injection well is typically vertical, as shown in the accompanying diagram. The fluids are injected into permeable rock layers that are separated from drinking water sources by impermeable beds and thousands of feet. The expected life of an injection well is many years. During that period of time, millions of barrels may be injected. The intention is for the injected fluid to stay put forever, out of sight and out of mind. As the Times article notes, a deep injection well at the Rocky Mountain Arsenal in Colorado was suspected of causing seismic activity — after injection of 165 million gallons (nearly 4 million barrels) of wastewater. Injection in several wells in Arkansas has been suspended until a connection to earthquakes can be investigated, but as yet there is no proven link. I’m willing to concede that a deep injection well might be capable of causing an earthquake. That might happen if there were a fault in the vicinity of the injection zone. The introduction of millions of barrels of fluid into an existing fault might – might – provide sufficient lubricity to make movement along that fault more likely. It would not make for a stronger earthquake than would be possible without the injection. But here’s the key point: it does not matter whether the injected fluid is industrial waste, fracking fluid or mother’s milk. The fluid used in fracking is 99% water. You would have to run a lab analysis to determine the trace chemicals in the other 1%. Any seismic effect, if true, would happen because of the introduction of a large quantity of fluid – of any type – into an existing fault. Horizontal oil and gas wells are a whole ‘nother kettle of fish from deep injection wells. Horizontal wells drilled for production into a shale zone are stimulated by fracturing to help the impermeable rock give up the gas or oil inside. A frac job on a new well is a limited process lasting a day or a few days at most. The volumes pumped into the well are not intended to stay downhole as in injection wells, but are intended to flow back out. Like deep injection wells, horizontal production wells are separated from drinking water supplies by thousands of feet of rock. Wells are designed with protection of shallow water sources a key consideration. {Quick analogy: If fracking a well is like a getting a shot with hypodermic needle, an injection well is like a continuous IV. They differ in volume, in pressure, and duration. They’re simply not the same thing.} There is not a shred of evidence that fracking a production well has ever caused a damaging seismic event. Coincidence does not establish causation, and major earthquakes have happened in areas where seismic activity is rare. The strongest earthquake ever in North America was the New Madrid (MO) quake (200th anniversary this week!); there was nary a Halliburton truck in sight. Our nation is enjoying an unprecedented boom in natural gas production. If asked to design the ideal fuel for our times, one would be hard-pressed to improve on clean-burning, abundant, American natural gas. The Times ‘ irrational, anti-science vendetta against gas is particularly confounding in light of the economic opportunity gas development represents for upstate New York. Cross-posted at my blog . Follow @VladimirRS !function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src=”//platform.twitter.com/widgets.js”;fjs.parentNode.insertBefore(js,fjs);}}(document,”script”,”twitter-wjs”);
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The New York Times and Its Anti-Fracking Cargo Cult
M. King Hubbert is the father of Peak Oil theory. In a 1956, he paper correctly called the timing of the peak in U.S. crude oil production in the early 1970s. Neo-Malthusians and Progressives make sure you know about Hubbert’s pessimistic outlook for conventional crude oil. They made Hubbert a household name, the only oil technologist whose name they use without adding “sellout” or “whore”. But here’s what they never tell you about what Hubbert’s wrote… 1. The name of the paper is “Nuclear Energy and the Fossil Fuels” (.pdf link) …Fig. 30 … covers the time span from 5,000 years ago — the dawn of recorded history — to 5,000 years in the future. On such a time scale the discovery, exploitation and exhaustion of the fossil fuels will be seen to be an ephemeral event in the span of recorded history. There is promise, however, provided mankind can solve its international problems and not destroy itself with nuclear weapons, and provided the world population (which is now expanding at such a rate as to double in less than a century) can somehow be brought under control, that we may at last have found an energy supply adequate for our needs for at least the next few centuries of the “foreseeable future.” Hubbert arrived at this conclusion after cataloging the uranium potential in the United States. Much of that potential exists in widespread shale deposits in various parts of the nation. Hubbert’s vision of the future may have become reality in France. He must have been disappointed to see what a bunch of hysterical twits the American environmentalist movement can be when they derailed American nuclear development after Three Mile Island/ The China Syndrome . 2. Hubbert saw considerable potential in the oil shales. The oil obtainable from oil shales in the United States has been taken to be 1,000 billion barrels. [Hubbert's high-end crude oil projection for the Lower 48 was 200 billion barrels. - Ed.] This is based upon a revised figure recently released by the United States Geological Survey of 900 billion barrels of oil for the shales of Colorado. A.C. Rubel has recently made a review from published literature of all the bituminous shales of the United States which are potential sources of oil, and has arrived at an estimate of a possible 2.5 trillion barrels of oil obtainable from shale. (Oil shales are massive kerogen-rich formations which are found in the Mountain West, primarily western Colorado. Kerogen is a waxy, immature oil precursor, not to be confused with conventional oil in the Bakken shale of North Dakota and elsewhere.) Ironically, Hubbert foresaw the potential energy locked up in the shales in the form kerogen and fissionable materials, but did not appreciate the potential of shale as a source of natural gas. Shales currently supply 40+% of our gas. More on that topic in a future blog. Cross-posted at stevemaley.com . Follow @VladimirRS
Link:
What Peak Oilers Won’t Tell You About Peak Oil
