Beyond The Gas Pump Energy From Oil

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Beyond The Gas PumpEnergy From Oil Gas

• Ron Hinn
• Society of Petroleum Engineers
• NEED Educators Workshop July 17, 2007
• Alexandria, Virginia

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Energy A Front Center Topic

• Washington Post Monday July 16
• Editorial Column
• Biofuels Debate
• Advertisements
• Fuel Efficiency
• Solar Power
• Comics
• Environmental Awareness
• Hilton Hotel
• Bed Linens Commitment To Energy Conservation

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Just Over The HorizonForecasting Oil Gas
Supply

• WSJ 7-10-07, The industrialized worlds energy
  watchdog added to rising concerns in some
  quarters that oil and natural gas production
  wont keep up with the worlds growing thirst for
  energy in coming years, highlighting worries over
  supplies and prices. (Referencing the recently
  published International Energy Agency Oil Market
  Report )
• WSJ 7-16-07, World oil and gas supplies from
  conventional sources are unlikely to keep up with
  rising global demand over the next 25 years
  (Referencing the National Petroleum Council Draft
  Report, commissioned by the U.S. government)

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A Significant Challenge

• In the draft report, oil-industry leaders
  acknowledge the world will need to develop all
  the supplemental sources of energy it can --
  ranging from biofuels to nuclear power to oil
  extracted by unconventional means from the oil
  sands of Canada -- to meet soaring demand. The
  surge in demand is expected to arise from rapid
  economic growth in such fast-developing countries
  as China and India, as well as mounting
  consumption in the U.S., the world's biggest
  energy market.
• Comments from the National Petroleum Councils
  Draft Report, Facing Hard Truths about Energy,
  Bhushan Bahree, The Wall Street Journal 7-17-07

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Our Energy FutureSignificant Issues of
Interest/Importance

• Enhancing The Worlds Standard of Living
• Alternative Fuels / Sources Economics
• Environmental Impact Issues
• Consumption - Improving Energy Efficiency
• Fueling The Worlds Economic Growth
• Supply Challenge Fueling Economic Growth
• Geo-politics

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Meeting The Challenge

• There are two American oil industries. One
  exists only in the minds of its critics, many of
  whom are politicians. When prices and profits
  rise, as happens in a cyclical business, the
  critics demand new antitrust and other
  legislation. When prices and profits inevitably
  fall? Silence. The other American oil industry
  exists in the real world. It's intensely
  competitive, innovative and subject to more
  scrutiny and tougher antitrust enforcement than
  any other segment of the economy. And it's adept
  at meeting the diverse and dynamic needs of
  American consumers.
• Tim Muris, Former FTC Chief,
• WSJ Oil Industry Reality Check, 7-17-07

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Commodities Price Value

• Commodity Savy?? NYMEX Closing Prices 7/16/07
• West Texas Intermediate Crude (/bbl)
• Natural Gas (/Mcf)
• Volumes
• 1 Barrel 42 gallons 672 cups
• 1 Mcf 1000 Std. Cubic Feet _at_ Standard Temp
  (60F), Pressure (1atm)
• Just for fun!
• Grande Latte _at_ 3.50 (est. 2 cups)
• 1 Barrel Latte 672/2 3.50 1176
• 1 Barrel of WTI 74.15, 1 cup of WTI 0.11
• Energy contained in 1 cup of crude oil?
• Assume avg. Car Mileage 25 mpg... Equivalent of
  1.6 miles/cup

Oil 74.15/bbl Gas 6.38/mcf
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Chemical Composition of Hydrocarbons

• Crude Oil
• 84-87
• 11-14
• 0.06-2
• 0.1-2
• 0.1-2

• Natural Gas
• 65 80
• 1-25
• 0-0.2
• 1-15
• 0

Carbon Hydrogen Sulfur Nitrogen Oxygen
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Petroleum Products
A Barrel of Crude Oil Provides
Gasoline - 19.5 gallons
One Barrel 42 gallons
Fuel Oil - 9.2 gallons
Jet Fuel - 4.1 gallons
Asphalt - 2.3 gallons
Kerosene - 0.2 gallons
Lubricants - 0.5 gallons
Petrochemicals, other products - 6.2 gallons
American Petroleum Institute, 1999
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Petroleum Products
Raw Natural Gas Components - Example
Source Midstream Primer Oil Gas Investor,
July 2007
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Petrochemical Products
More Than 3,000 Products

• Detergents - Cosmetics
• Fertilizers - Weed Killers
• Medicine - Antiseptics - Anesthetics
• Plastics - Synthetic Fibers
• Synthetic Rubber
• Rust Preventatives
• Liquid Petroleum Gas

American Petroleum Institute, 1999
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Historical Oil Prices 2006
Real Oil Prices
SourceBP
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Why High Oil Prices?

• Driven by
• OPEC behaviour post 1999
• Strong demand growth 2004
• Low spare capacity
• Geopolitics
• Energy as a financial commodity

World Oil Consumption Growth
Mb/d
SourceBP
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OPEC Production
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(No Transcript)
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Supply Demand

• Airline tickets
• Stocks
• Real Estate
• I-Phone
• In a free market commodity prices are driven by
  the balance between supply and demand For
  hydrocarbon fuels (oil and gas) the price
  equation is becoming evermore dominated by
  supply related challenges.

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Oil Gas Supply

• Origin - Theory
• Worldwide
• Where did my last gallon of gas come from?
• OPEC
• The politics of oil
• Control by NOCs
• Geopolitics
• US
• Exploration
• Refinery Capacity
• Weather

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World Energy Consumption
BP Statistical Review of World Energy June 2006
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Oil Consumption
BP Statistical Review of World Energy June 2007
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Major oil trade movements
BP Statistical Review of World Energy June 2007
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Proved oil reserves at end 2006
BP Statistical Review of World Energy June 2007
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Remaining Oil??
BP Statistical Review of World Energy June 2007
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Proved Natural Gas Reserves
BP Statistical Review of World Energy June 2007
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Proved Coal Reserves 2006
BP Statistical Review of World Energy June 2007
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Demand ChallengeOne Example - Fuel Economy

• Overall fuel economy for cars and light trucks
  peaked at 22.1 mpg in 1987. Fell to 20.8 mpg in
  2004. Avg. weight of vehicles has increased from
  3200 lbs. to 4066 lbs.
• Federal tax on gasoline 18.4 cents/gallon
• State tax varies (New York 60.8 to Alaska 26.4)
• About 70 of new vehicles purchased in US have 6
  cylinders
• 89 of vehicles in Europe have 4 cylinders or
  less (average fuel economy is 35 mpg)

Wall Street Journal Fuel Economy Back in The
Saddle
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A Sampling of Whats Cool About Oil Gas

• Technology (eg. Deepwater Jack)
• Co2 Flooding Increasing Recoverable Oil
• Meeting the worlds needs
• Supplies
• Efficiency
• Environment
• Career Opportunities

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Houston Chronicle
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Historical Energy Use by Type of Fuel ()
SPE 77506 World Energy Beyond 2050, Arlie Skov