Peak Energy: Myth or Reality?

By James G. Speight and M.R. Islam

Does the Earth contain enough oil to provide energy for the human race indefinitely? If not, how long will the oil last? What about renewable energy technologies like wind and solar? Will they be able to supply an indefinite supply of energy for the human race? If not, how long will it last? And what role does overpopulation play in our world's energy supply? Even with multiple forms of energy available, how long will it last as long as more and more humans, and therefore more industries and energy consumption, are added? Taking a long-held theory called "Peak Oil Theory" the authors of this groundbreaking new text examine the theory of "Peak Energy" to examine all of these questions.

Crude oil and natural gas are the major sources of fuel used to supply energy for various needs. Users of crude oil and natural gas must take into account that these energy sources are, without doubt, non-renewable depleting resources, and the cost of extraction depends not only on the current rate of production but also on the amount of cumulative production. In fact, many pundits believe projections that the world is rapidly apprpaching a precipice, after which crude oil and natural gas will no longer be in ready supply.

This phenomenon has given rise to the peak oil theory – peak oil is the point in time when the maximum rate of petroleum recovery from the reservoir is reached, after which the rate of petroleum production enters terminal decline. From this concept has emerged the wider concept of the peak energy theory which, as it is related to the availability of all fossil fuels, is also subject to decline with fossil fuel use.

This text, written by two of the world's most well-known, respected, and prolific writers in the energy industry, is a fascinating study of our world's energy needs and the future of the multi-source energy supply on this planet. Whether oil and gas, wind, solar, geothermal, or even nuclear, all sources of energy have their limits, and we, as scientists, engineers, and consumers of energy need to be knowledgeable on these topics. This book is a must-have for any engineer, student, scientist, or even layperson interested in energy and the idea of energy sustainability on planet Earth.

• Language: English
• Publisher: Wiley
• Release date: May 6, 2016
• ISBN: 9781119301400

James G. Speight

Dr. Speight is currently editor of the journal Petroleum Science and Technology (formerly Fuel Science and Technology International) and editor of the journal Energy Sources. He is recognized as a world leader in the areas of fuels characterization and development. Dr. Speight is also Adjunct Professor of Chemical and Fuels Engineering at the University of Utah. James Speight is also a Consultant, Author and Lecturer on energy and environmental issues. He has a B.Sc. degree in Chemistry and a Ph.D. in Organic Chemistry, both from University of Manchester. James has worked for various corporations and research facilities including Exxon, Alberta Research Council and the University of Manchester. With more than 45 years of experience, he has authored more than 400 publications--including over 50 books--reports and presentations, taught more than 70 courses, and is the Editor on many journals including the Founding Editor of Petroleum Science and Technology.

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Chapter 1

History and Terminology of Energy Sources

1.1 Introduction

Fossil fuels occur in many parts of the world but until the commencement of the Industrial Revolution in Western Europe in the late 18th century these vast resources lay mostly hidden and untapped below the surface of the Earth and wood was the energy source of choice (Henry, 1873; Abraham, 1945; Forbes, 1958a, 1958b; James and Thorpe, 1994; Speight, 2014). It was not until the late 17th and 18th centuries that coal became the fossil fuel of choice and provided energy for industry as well as, with the advent of gas lighting, energy for domestic use (Speight, 2013a, 2013b). In addition, oil from seepages and natural gas leaking to the atmosphere from geologic fissures had been known for centuries in many other countries but found little use. During the 19th century, the demand for coal, petroleum (also known as crude oil), and natural gas was limited but, as the 19th century matured, as the surging demand for kerosene, lubricants, and gaseous fuels, coupled with better exploration, recovery, and refining techniques, changed the outlook for the known fossil fuels, what might well be known as the Age of Fossil Fuels dawned, due to the emergence of these fuels and derivatives thereof as major sources of energy (Speight, 2013a, 2013b, 2014).

The modern petroleum industry began in the latter years of the 1850s with the discovery, in 1857, and subsequent commercialization of petroleum in Pennsylvania in 1859. The modern refining era can be said to have commenced in 1862 with the first appearance of a commercial unit for the distillation of petroleum (Yergin, 1991; Speight and Ozum, 2002; Hsu and Robinson, 2006; Mokhatab et al., 2006; Gary et al., 2007; Yergin, 2011; Speight, 2008; Seifried and Witzel, 2010; Speight, 2014). In the time since the latter half of the 19th century, petroleum has become the major source of fuel used in the modern world with coal and natural gas following close behind. However, because crude oil is liquid and is usually accompanied by natural gas (1) oil is easier to recover by drilling and pumping, rather than by mining as, for example, coal, (2) oil is easier to transport in pipeline and sea-going tankers, and (3) oil is much easier to refine and convert to useful saleable products than coal (Speight, 2013a, 2104).

As a result, the popularity of petroleum as a fuel source surged, reaching highs that are still evident from the use of petroleum for production of fuel products, other products and petrochemicals (Table 1.1, Table 1.2) (Speight and Ozum, 2002; Hsu and Robinson, 2006; Mokhatab et al., 2006; Gary et al., 2007; Speight, 2008, 2014) in popularity and use. Although petroleum became the so-called leading fossil fuel in terms of energy production and chemicals production, the volatility of crude oil prices in the last five decades has strengthened calls for renewed initiatives on energy security in relation to reductions in energy imports (Wihbey, 2009; Crane et al., 2010; Speight, 2011b; Hamilton, 2013; Luciani, 2013). While there has been a convergence of factors contributing to the volatility of crude oil prices, forces such as (1) supply and demand fundamentals, (2) the role of price speculation, (3) bottlenecks in the downstream sectors, and above all (4) the geo-politics of petroleum have emerged as the main areas of blame/fault/concern in terms of energy importing (Yergin, 1991; Bower, 2009; Wihbey, 2009; Speight, 2011a, 2011b, Yergin, 2011; Speight, 2014).

Table 1.1 Examples of products from petroleum.

Table 1.2 Petrochemical products from petroleum and natural gas.

Considering fossil fuels as a group rather than as individual components, the availability (i.e., the remaining reserves) and the economics (i.e., cost of recovering those reserves) of fossil fuels must take into account that they are, not surprisingly, like any natural commodity subject to depleting availability and are, in fact, without any surprise, depleting non-renewable resources – unless the consumers can wait for a prolonged period (millions of years in geologic terms) for the addition of more reserves. This phenomenon has given rise to the peak oil theory – peak oil is the point in time when the maximum rate of petroleum recovery from the reservoir is reached, after which the rate of petroleum production enters terminal decline. From this concept has emerged the wider concept of the peak energy theory which, as it related to the availability of all fossil fuels, is also subject to decline with fossil fuel use.

At this time it is worthy of note that the term peak oil is often used synonymously and interchangeably with the term peak energy – crude oil being the most abundant form of energy – and the terms are used interchangeably throughout this book.

In terms of cost, fossil fuels are treated similarly to any other commodity with high price volatility in times of shortage and oversupply (Wihbey, 2009; Crane et al., 2010; Speight, 2011a, 2011b). For example, the price cycle of an individual fossil fuel or fossil fuels collectively may extend over several years responding to changes in demand as well as supply. Many energy-oriented pundits offer theories related to the projections of depletion of, say, crude oil that are based on (1) science but in some cases (2) emotion, which lacks any scientific foundation. At the same time, factual data may indicate that existing fossil fuel resources are plentiful and (as an example) many petroleum reservoirs have more than half of the original oil in place. These are resources that are known to exist as well as the largely untapped resources of other fossil fuels – the locations are known and the properties of the resource and the amount and properties of produced liquid products are known (Table 1.3). Another aspect of fossil fuel economics is the cost of producing saleable products (Yergin, 1991; Bower, 2009; Crane et al., 2010; Speight, 2011b; Yergin, 2011). For example, refining high-sulfur crude oil (to produce low-sulfur products) and producing as well as refining liquids from coal and from oil shale also requires greater expenditures for energy – the energy required accounts for approximately (at least) half of the costs of refining.

Table 1.3 Examples of the varying properties of petroleum.

Refinery location is yet another variable in any petroleum-based energy scenario – the closer a refinery is to the resource and the demand for the refined liquids, the lower the transportation costs and the lower the overall cost of the product. On the other hand, high transportation costs add an additional factor to the cost of the product but the ultimate variable in any economic scenario is the base price of the fossil fuel. Fossil fuel quality and the ability of the fossil fuel to produce needed products are the other key variables – high-sulfur fossil fuels can cost up to one-third more than a similar low-sulfur fossil fuel to produce saleable products.

While there is a growing need to address these issues, there exist barriers and constraints to the experienced person and the neophyte alike as well as to the economist. Often the terminology employed by the fossil fuel industries is so confusing that the ensuing issues that are involved in resource and product pricing are a mystery and at best are speculative outside of company board rooms and remain largely unknown. In addition, many economists are unable to explain the economics of fossil fuel (and product) pricing without recourse to higher mathematics. The result is the development of complex equations that are often difficult to understand and, for the technical person in the industry, appear to bear little relationship to what s/he understands in terms of fossil fuel properties and conversion to saleable products. Moreover, these cost scenarios do not include the potential for the stability of supply and costs implanted by the governments of fossil fuel-producing (particularly petroleum-producing) countries.

Ever since the first oil embargo of 1972, the petroleum-consuming and petroleum-importing nations have been gripped with the fear of energy crisis (Bower, 2009; Crane et al., 2010; Speight, 2011b). In 1978, US President Jimmy Carter told the world in a televised speech that the world was in fact running out of oil at a rapid pace – a popular peak oil theory of the time – and that the United States in particular had to wean itself off the petroleum commodity. Since the day of that speech, worldwide oil output has actually increased by more than 30 percent, and known available reserves are higher than they were at that time. This hysteria related to the world is running out of petroleum has survived the era of Reaganomics, President Clinton’s cold war dividend, and the post-9/11 era of President George W. Bush of fearing everything but petroleum and, currently at the time of writing (August 2015), even many supporters of the petroleum industry have been convinced that there is an energy crisis looming and it is only a matter of time (weeks, months, years – decades may be a more realistic timeframe) before consumers will be forced to switch to a non-petroleum energy source. It is in such a scenario that the peak oil theory raises its worrisome head, whether or not there is any logical scientific perspective.

The peak oil theory (Chapter 7) is a theory that promotes the concept that global oil reserves are limited (through continued depletion) and at some point (many pundits would say next week) will start to run out, leading to an exponential increase in the price of crude oil. This theory presents two possible scenarios: (1) a worldwide depression will follow the peak in oil production as high prices drag down the whole world’s economy, and (2) alternate energy sources have to be introduced as soon as possible – if not immediately (i.e., next week) – in order to prevent the predicted energy crisis (Bower, 2009; Crane et al., 2010; Speight, 2011b). Embedded in the theory is the notion that the need for energy on a per capita basis is increasing globally and will continue to increase because of (1) an increase in the population of the world, and (2) modernization in formerly undeveloped countries – China and India are often cited as the examples of such countries – that incites more members of the increasing population to join the urban energy-intensive lifestyle. Because it is also assumed (rightfully so) that oil reserves are finite, it follows that at some point oil production will peak, after which the amount of oil that is being produced in a specific unit of time will decline with disastrous consequences for humanity.

Moreover, it is also believed by many observers that once the decline in crude oil production has commenced, it will become a terminal decline and crude oil production will never again reach the levels attained during peak oil production. Furthermore, when this happens (i.e., when peak oil production has passed) there will be serious consequences to the world economy and, since the demand for oil is unlikely to decline, this inevitably means that the price will increase (supply and demand economic theory), at which time the concept of the peak oil crisis will have arrived and will be a proven and irreversible fact.

As a corollary to the peak oil crisis, it has been proposed that the crisis can be remedied by (1) adoption of austerity measures relating to crude oil consumption to decrease dependence on energy by decreasing per capita energy consumption, and (2) adoption of alternative energy sources to replace the quickly depleting (or even depleted) fossil fuel resources. None of these measures seem appealing because any austerity measure that is introduced at any level of government can induce an imbalance in the economic system that has been, and remains, dependent on the spending habits of the population, and any alternative energy source may prove to be more expensive than fossil fuel. These concerns create panic in the minds of the energy-consuming populace and it is felt (often deduced without any logical thought) there is the need to rush to alternate sources of energy (such as biofuels, nuclear energy, solar energy, and wind energy) not soon but immediately, if not earlier! In addition, the recent hysteria based on the premise that fossil fuel consumption is the sole reason behind global climate change (Chapter 8) adds to the panic, and the circle of misinformation is complete.

In fact, the global climate change proponents very rarely (if at all) state that the Earth is in an interglacial period when temperatures are expected to (and do, in fact) increase but they are only too ready and willing to assign any global temperature increase to anthropogenic reasons, i.e., the use of fossil fuels by human populations. No doubt, anthropogenic fossil fuel use does play a role in the temperature increase but the extent of the increase is not, and cannot be, accurately determined, and furthermore, the contributory factors cannot be accurately determined. Indeed, serious questions about the origin of the data supporting climate change have arisen but the idea persists that the Earth is doomed just as the cracked egg in the frying pan (skillet) or the egg being hard-boiled are changed irreversibly (Pittock, 2009; Bell, 2011; Speight and Foote, 2011).

Thus, by way of clarification, and setting aside the issue of global climate change until later in the book, it is appropriate to commence this book with an explanation of the terminology of fossil fuels and crude oil as well as the properties of crude oil (and crude oil products) which are essential for understanding an essential part of availability for the future, pricing, and politics (Yergin, 1991; Bower, 2009; Yergin, 2011; Speight, 2014). Accordingly this chapter deals with the history and terminology of fossil fuels – particularly the fossil fuels that are available for energy production – and the means by which they are described. Once this is understood, it will become obvious that the premises on which peak oil theory is based are suspect and often based on erroneous assumptions followed by errors in calculations of fossil fuel reserves, as well as by theories based on emotion.

Briefly, in petroleum science and engineering, the term reservoir fluids refers to the mixture of gases (such as hydrocarbon and non-hydrocarbon gases), liquids (such as crude oil), and any semisolid to solid material (such as heavy oil) contained within the reservoir which technically are located within the reservoir rock. Reservoir fluids also include aqueous solutions with dissolved salts (also known as brine).

Reservoir rock is not the typical solid rock and must possess fluid-holding capacity (porosity) by virtue of the uneven contact between the mineral grains and the ensuing space (porosity) within the rock. In addition, the reservoir rock must also possess fluid-transmitting capacity (permeability). A variety of different types of openings in rocks are responsible for these properties in reservoir rocks, the most common of which are the pores between the grains of which the rocks are made or the cavities inside fossils, openings formed by solution or fractures, and joints that have been created in various ways. The relative proportion of the different kinds of openings varies with the rock type, but pores usually account for the bulk of the storage space. The effective porosity for oil storage results from continuously connected openings which provide the property of permeability (the capacity of the rock to allow fluids to pass through) and although a rock must be porous to be permeable, there is no simple quantitative relationship between the two.

In reservoir rock, porosity is generally in the range of 5 to 30 percent while permeability is typically on the order of 0.005 Darcy and several Darcys (Speight, 2015a). It should be noted that pores may be, at best, only a millimeter or so in width, whereas fossil fuel and solution cavities may sometimes be 30 to 50 times wider. Many joints and fractures are probably only a millimeter across, although they may extend for considerable distances.

The specific gravity of petroleum generally between specific gravity (at 60 °F, 15.6 °C) that varies from about 0.75 to 1.00 (57 to 10° API), with the specific gravity of most crude oils falling in the range 0.80 to 0.95 (45 to 17° API), is considerably lower than those of saline pore waters (specific gravity: 1.0 to 1.2). Hence the segregation of the fluids in the reservoir (Figure 2.2). However, the line of demarcation between the various layers is not clean and, within the reservoir there can be displacements and miscible and/or immiscible flow, with one, two, or sometimes three mobile phases (oil, gas and water) (Grattoni and Dawe, 2003). Furthermore, heterogeneity in the form of layers, lenses, cross-beds and quadrants can have a significant effect on fluid displacement patterns. Thus, within the range of reservoir conditions, the fluids can undergo severe transformations and exist as a single phase (gas, liquid, or solid) or co-exist in several forms (liquid plus gas, solid plus liquid, vapor plus solid or even in liquid-plus-liquid combinations). For example, the distribution of the fluids in the reservoir rock is dependent on the density of each fluid as well as on the properties of the rock. If the pores are of uniform size and evenly distributed, there is: (1) an upper zone where the pores are filled mainly by gas (the gas cap), (2) a middle zone in which the pores are occupied principally by oil with gas in solution, and (3) a lower zone with its pores filled by water.

A certain amount of water (approximately 10 to 30 percent) occurs along with the oil in the middle zone. There is a transition zone from the pores occupied entirely by water to pores occupied mainly by crude oil and the thickness of this zone depends on the densities and interfacial tension of the crude oil and water as well as on the size of the pores. Similarly, there is some water in the pores in the upper gas zone that has at its base a transition zone from pores occupied largely by gas to pores filled mainly by crude oil.

The water (interstitial water) found in the crude oil zone and in the gas zone usually occurs (1) as collars around grain contacts, (2) as a filling of pores with unusually small throats connecting with adjacent pores, or, to a much smaller extent, (3) as wetting films on the surface of the mineral grains when the reservoir rock is preferentially wet by water.

Universally accepted definitions have not been developed for the many terms used by geologists, engineers, accountants and others to denote various components of crude oil resources because most of these terms describe estimated and therefore not absolute certain, rather than measured, quantities of the available resources. Particularly common is a general lack of understanding of the substantial difference between the terms reserves and resources (Speight, 2014) as indicated by the frequent misuse of either term instead of the other. The amount of oil in a subsurface reservoir is the oil in place (OIP, or original oil in place, OOIP) and only a fraction of this oil can be recovered from a reservoir, and this fraction is called the recovery factor. The portion that can be recovered is considered to be the reserve while the portion of the oil that is non-recoverable should not be included unless or until methods are implemented to produce it. However, this scenario changes with the developments in hydraulic fracturing that are assisting in the recovery of the hard-to-produce crude oil (Speight, 2016). The downside to hydraulic fracturing, which has been in practice since the 1940s, is the associated environmental effects and the mitigation of these effects that have not been explained at all well to the general public or to the government permitting agencies by the natural gas and petroleum industries. The need for a multi-disciplinary approach is rarely acknowledged by the drilling operatives and therein lies part of the problem.

Finally, there is the need for two definitions that are made in the context of this book and without bias. Thus, (1) a resource is the total amount of a naturally occurring material that occurs within the domain of the Earth, whereas (2) a reserve is the amount of the resource that is available for extraction and use. In many cases, the reserve is also the amount of the resources that can be extracted economically from the reservoir of deposit using currently available technology (Speight, 2009, 2014). Finally, resource depletion is due to consumption of a resource at a rate faster than the rate at which the resource can be replenished. Resources are commonly divided between renewable resources (i.e., biofuels, solar energy, and wind energy) and non-renewable resources (i.e., fossil fuels) and use of either of these types of resource at a rate that is beyond the rate of replacement is considered to be resource depletion.

1.2 Fossil Fuel Resources

Fossil fuel energy sources are formed by natural processes such as anaerobic decomposition of dead and buried organisms (Speight, 2008, 2011c, 2013c, 2014). The age of the organisms and their resulting fossil fuels is typically millions of years, and may even exceed 650 million years. Fossil fuels contain high percentages of carbon and range from volatile materials with high hydrogen/carbon ratios (such as natural gas and light oils) to materials with lower hydrogen/carbon ratios (such as heavy oil and tar sand bitumen) to oil shale kerogen and low-carbon solids such as the various ranks of coal (Lee, 1990; Scouten, 1990; Speight, 2012, 2013, 2014). However, fossil fuels, which are non-renewable resources and require millions of years to form, are being depleted at a much faster rate than new reserves are being produced. For the purposes of this book, the fossil fuels of interest are (1) petroleum, (2) natural gas, (3) heavy oil, (4) tar sand bitumen, (5) coal, (6) oil shale, and (7) methane hydrates.

1.2.1 Petroleum

Petroleum is a naturally occurring mixture of diverse hydrocarbons whose physical and chemical qualities reflect the different origins and, especially, different degrees of natural processing of these hydrocarbons (Speight, 2008, 2014). In fact, the term petroleum covers a wide assortment of materials consisting of mixtures of hydrocarbons and other compounds containing variable amounts of sulfur, nitrogen, and oxygen, which may vary widely in volatility, specific gravity, and viscosity. Metal-containing constituents, notably those compounds that contain vanadium and nickel, usually occur in the more viscous crude oils in amounts up to several thousand parts per million and can have serious consequences during processing of these feedstocks (Speight and Ozum, 2002; Hsu and Robinson, 2006; Mokhatab et al., 2006; Gary et al., 2007; Speight, 2008, 2014). When petroleum occurs in a reservoir that allows the crude material to be recovered by pumping operations as a free-flowing dark to light colored liquid, it is often referred to as conventional petroleum.

The majority of crude oil reserves identified to date are located in a relatively small number of very large fields, known as giants (Robelius, 2007). A giant oil field contains at least 500 million barrels of recoverable oil and contributes a substantial amount of crude oil to the market. A large number of the largest giant fields are found in the countries surrounding the Persian Gulf. In fact, approximately 300 of the largest oil fields contain almost 75 volume percent of the available crude oil (and approximately 65 percent of the global ultimate recoverable reserve (URR) (Robelius, 2007). Although most of the oil-producing nations produce at least minor amounts of oil, the primary concentrations are in the Persian Gulf, North and West Africa, the North Sea, and the Gulf of Mexico. In addition, of the 90 oil-producing nations, five Middle Eastern countries contain almost 70 percent of the current, known oil reserves.

For many years, petroleum and heavy oil were very generally defined in terms of physical properties. For example, heavy oils were considered to be those crude oils that had gravity somewhat less than 20° API with the heavy oils falling into the API gravity range 10 to 20°. For example, Cold Lake heavy crude oil has an API gravity equal to 12° and tar sand bitumen usually has an API gravity in the range 5–10° (Athabasca bitumen = 5–8° API). Residua would vary depending upon the temperature at which distillation was terminated but usually vacuum residua fall into the approximate range 2 to 10° API (Speight and Ozum, 2002; Hsu and Robinson, 2006; Gary et al., 2007; Speight, 2008, 2014). However, classification of crude oil by the use of a single physical property is subject to the errors inherent in the analytical method (by which the property is determined) and must be used with caution.

By way of further introduction to the focus of attention in this book, petroleum has a checkered history that requires some elaboration.

The modern era of oil production and the ensuing age of petro-politics began on August 27, 1859, when Edwin L. Drake drilled the first successful oil well 69 feet deep near Titusville in northwestern Pennsylvania. Just five years earlier, the invention of the kerosene lamp had created intense demand for oil. By drilling an oil well, Drake had hoped to meet the growing demand for oil for lighting and industrial lubrication and his success inspired hundreds of small companies to explore for oil. In 1860, world oil production reached 500,000 barrels; by the 1870s production had increased phenomenally to 20 million barrels annually. In 1879, the first oil well was drilled in California; and in 1887 an oil well was drilled, in Texas. But as production boomed, prices fell and oil industry profits declined. However, in 1882, John D. Rockefeller had devised a solution to the problem of competition in the oil fields: the Standard Oil Trust. This brought together many of the leading refiners in the United States; by controlling crude oil refining, the Trust was able to control the price of oil.

Up until the commencement of World War I in 1914, the United States produced between 60 and 70 percent of the worldwide oil supply. By 1920, oil production had reached 450 million barrels – prompting fear that the United States was about to deplete the available reserves and, hence, run out of oil. In fact, government officials predicted that oil reserves in the United States would last only 10 more years. As fears grew that the oil reserves of the United States were seriously depleted, the search for oil turned to a worldwide basis. As a result, crude oil was discovered in Mexico at the beginning of the 20th century, in Iran in 1908, in Venezuela during World War I, and in Iraq in 1927. Because of the politics of the time and the still-existing empires and/or colonies, many of the new discoveries occurred in areas dominated by Britain and the Netherlands, such as in the Dutch East Indies (now, Indonesia), Iran, and various British mandates in the Middle East. By 1919, Britain controlled 50% v/v of the proven world reserves of crude oil.

However, after World War I, a struggle for the control of world oil reserves erupted. The British, Dutch, and French governments excluded companies based in and originating in the United States from owning oil fields in territories under their sphere of control. Not surprisingly, the US Congress retaliated in 1920 by adopting the Mineral Leasing Act, which denied access to American oil reserves to any foreign country that restricted American access to its reserves. The dispute was ultimately resolved during the 1920s when American-based and American-owned oil companies were finally allowed to drill in the then British Middle East and also in the Dutch East Indies.

The fear that oil reserves in the United States were depleted to the point of near-exhaustion ended abruptly in 1924, with the discovery of extensive crude oil fields in Texas, Oklahoma, and California. These discoveries, along with production of crude oil from fields in Mexico, the Soviet Union, and Venezuela, combined to significantly lower the price of crude oil. By 1931, with crude oil selling for 10 cents a barrel (which may be compared to a value – approximately $1.54 per barrel – much less than the current variable price of $50 to $100 per barrel of oil), domestic oil producers in the United States demanded restrictions on production in order to raise prices. In fact, the major producers of crude oil – Texas and Oklahoma – passed state laws and stationed militia units at oil fields to enforce these laws and prevent drillers from exceeding production quotas but, nevertheless, despite these measures, the price of crude oil continued to fall. In a final bid to solve the problem of overproduction, the federal government – under the National Recovery Administration (NRA) – imposed production restraints, import restrictions, and price control. After the Supreme Court of the United States declared the actions of the National Recovery Administration (i.e., the federal government) to be unconstitutional, the federal government took an additional step and imposed a tariff on foreign oil. During World War II, the oil surpluses of the 1930s quickly disappeared – six billion barrels (6 × 10⁹ bbls) of the seven billion barrels (7 × 10⁹ bbls) of petroleum used by the Allies during the war came from the United States. Again, there was concern that the United States was running out of oil.

On the other hand, world oil prices were at such low levels that in 1960 Iran, Venezuela, and oil producers in the Middle Eastern countries formed an alliance (often referred to as a cartel) that became known as the Organization of Petroleum Exporting Countries (OPEC) to negotiate oil prices – for the most part, higher prices of crude oil. This price-fixing came to a head in the early 1970s when the United States, which depended on the Middle East for a third of its oil, realized that foreign (non-domestic) oil producers were in a position to control and raise oil prices. The oil embargo of 1973 and 1974, during which oil prices quadrupled, and the oil crisis of 1978 and 1979, when oil prices doubled, emphasized the vulnerability of the United States to foreign producers (Yergin, 1991; Speight, 2011b; Yergin, 2011). However, the oil crises of the 1970s had an unanticipated side-effect when higher oil prices stimulated conservation and exploration for new oil sources. As a result of increasing supplies and declining demand, oil prices fell from $35 a barrel in 1981 to $9 a barrel in 1986. The sharp slide in world oil prices was one of the factors that led Iraq to invade neighboring Kuwait in 1990 in a bid to gain control over a substantial portion (in excess of 40% v/v) of Middle Eastern oil reserves.

On the other hand, there were oil-producing countries that existed and operated outside of the OPEC cartel which were responsible for producing 60% v/v of the world’s oil, but they faced increasing production hurdles. Many of these non-OPEC producers had older, less productive wells and rising costs for new projects, and in some cases rising domestic demand, cut into the export totals, leading to increases in unconventional oil production (NPC, 2007).

Seven of the world’s 15 largest oil producers are outside of OPEC – Russia, the United States, China, Mexico, Canada, Norway, and Brazil (http://tonto.eia.doe.gov/country/index.cfm). Some major producers, such as the United States, Mexico, and Norway, have experienced a decline in production in recent years but, on the other hand, non-OPEC production, although declining, has been bolstered by the significant increases in production from Brazil, Canada, Russia, and other former Soviet states (BP, 2015) as well as hitherto unavailable oil production from tight formations and from shale formations through expansion of hydraulic fracturing projects (Speight, 2016).

1.2.2 High-Acid Crude Oils and Opportunity Crudes

Within the petroleum family are two different types of crude oils based on price: (1) opportunity crude oils and (2) high-acid crude oils. Opportunity crude oils are often dirty and need cleaning before refining by removal of undesirable constituents such as high-sulfur, high-nitrogen, and high-aromatics (such as polynuclear aromatic) components. A controlled visbreaking treatment would clean up such crude oils by removing these undesirable constituents (which, if not removed, would cause problems further down the refinery sequence) as coke or sediment. There is also the need for a refinery to be configured to accommodate opportunity crude oils and/or high-acid crude oils which, for many purposes are often included with heavy feedstocks.

High-acid crude oils are crude oil that contains considerable proportions of naphthenic acids which, as commonly used in the petroleum industry, refers collectively to all of the organic acids present in the crude oil (Shalaby, 2005: Rikka, 2007). By the original definition, a naphthenic acid is a monobasic carboxyl group attached to a saturated cycloaliphatic structure. However, it has been a convention accepted in the oil industry that all organic acids in crude oil are called naphthenic acids. Naphthenic acids in crude oils are now known to be mixtures of low to high molecular weight acids and the naphthenic acid fraction also contains other acidic species.

Naphthenic acids can be very water-soluble to oil-soluble depending on their molecular weight, process temperatures, salinity of waters, and fluid pressures. In the water phase, naphthenic acids can cause stable reverse emulsions (oil droplets in a continuous water phase). In the oil phase with residual water, these acids have the potential to react with a host of minerals, which are capable of neutralizing the acids. The main reaction product found in practice is the calcium naphthenate soap (the calcium salt of naphthenic acids). The total acid matrix is therefore complex and it is unlikely that a simple titration, such as the traditional methods for measurement of the total acid number, can give meaningful results to use in predictions of problems. An alternative way of defining the relative organic acid fraction of crude oils is therefore a real need in the oil industry, both upstream and downstream.

High-acid crude oils cause corrosion in the refinery – corrosion is predominant at temperatures in excess of 180 °C (355 °F) (Kane and Cayard, 2002; Ghoshal and Sainik, 2013) – and occurs particularly in the atmospheric distillation unit (the first point of entry of the high-acid crude oil) and also in the vacuum distillation units. In addition, overhead corrosion is caused by the mineral salts, magnesium, calcium and sodium chloride which are hydrolyzed to produce volatile hydrochloric acid, causing a highly corrosive condition in the overhead exchangers. Therefore these salts present a significant contamination in opportunity crude oils. Other contaminants in opportunity crude oils which are shown to accelerate the hydrolysis reactions are inorganic clays and organic acids.

In addition to taking preventative measure for the refinery to process these feedstocks without serious deleterious effects on the equipment, refiners will need to develop programs for detailed and immediate feedstock evaluation so that they can understand the qualities of a crude oil very quickly and it can be valued appropriately and management of the crude processing can be planned meticulously.

1.2.3 Oil from Tight Formations and from Shale Formations

In addition, oil from tight sandstone and from shale formations (tight oil) is another type of crude oil (Speight, 2014, 2016). Typically, tight oil is conventional oil that occurs in low-permeability reservoirs. The oil contained in such reservoirs will not flow to the wellbore without assistance from advanced drilling (such as horizontal drilling) and fracturing (hydraulic fracturing) techniques. There has been a tendency to refer to this oil as shale oil. This terminology is incorrect insofar as it is confusing, and the use of such terminology should be discouraged as illogical since shale oil has been (for decades) the name given to the distillate produced from oil shale by thermal decomposition (Lee, 1990; Scouten; 1990; Speight, 2012, 2014, 2016).

Tight sandstone formations and shale formations are heterogeneous and vary widely over relatively short distances. Thus, even in a single horizontal drill hole, the amount recovered may vary, as may recovery within a field or even between adjacent wells. This makes evaluation of plays and decisions regarding the profitability of wells on a particular lease difficult. Production of oil from tight formations requires at least 15 to 20 percent natural gas in the reservoir pore space to drive the oil toward the borehole; tight reservoirs which contain only oil cannot be economically produced (EIA, 2013).

The challenges associated with the production of oil from shale formations are a function of their compositional complexities and the varied geological formations where they are found. These oils are light, but they are very waxy and reside in oil-wet formations. These properties create some of the main difficulties associated with oil extraction from the shale. Such problems include scale formation, salt deposition, paraffin wax deposits, destabilized asphaltene constituents, corrosion and bacteria growth. Multi-component chemical additives are added to the stimulation fluid to control these problems.

Oil from tight shale formation is characterized by low-asphaltene content, low-sulfur content and a significant molecular weight distribution of the paraffinic wax content. Paraffin carbon chains of C10 to C60 have been found, with some shale oils containing carbon chains up to C72. To control deposition and plugging in formations due to paraffins, the dispersants are commonly used. In upstream applications, these paraffin dispersants are applied as part of multifunctional additive packages where asphaltene stability and corrosion control are also addressed simultaneously.

Scale deposits of calcite, carbonates and silicates must be controlled during production or plugging problems arise. A wide range of scale additives is available. These additives can be highly effective when selected appropriately. Depending on the nature of the well and the operational conditions, a specific chemistry is recommended or blends of products are used to address scale deposition.

Another challenge encountered with oil from tight shale formations is the transportation infrastructure. Rapid distribution of shale oils to the refineries is necessary to maintain consistent plant throughput. Some pipelines are in use, and additional pipelines are being constructed to provide consistent supply. During the interim, barges and railcars are being used, along with a significant expansion in trucking to bring the various these oils to the refineries. Eagle Ford production is estimated to increase by a factor of six: from 350,000 bpd to approximately 2,000,000 bpd by 2017. Thus, a more reliable infrastructure is needed to distribute this oil to multiple locations. Similar expansion in oil production is estimated for Bakken and other identified (and perhaps as yet unidentified) tight shale formations.

1.2.4 Natural Gas

The generic term natural gas applies to gas commonly associated with petroliferous (petroleum-producing, petroleum-containing) geologic formations. Natural gas generally contains high proportions of methane (a single carbon hydrocarbon compound, CH4) – higher molecular weight paraffins (CnH2n+2) generally containing up to eight carbon atoms may also be present in small quantities (Table 1.4) (Mokhatab et al., 2006; Speight, 2007, 2014). The hydrocarbon constituents of natural gas are combustible, but non-flammable non-hydrocarbon components such as carbon dioxide, nitrogen, and helium are also present in the minority and are regarded as contaminants.

In addition to the natural gas which exists in petroleum reservoirs, there are also those reservoirs in which natural gas may be the sole occupant. The principal constituent of natural gas is methane, but other hydrocarbons, such as ethane, propane, and butane, may also be present. Carbon dioxide is also a common constituent of natural gas as well as trace amounts of rare gases, such as helium, may also occur – certain natural gas reservoirs are a source of these rare gases. Just as petroleum varies in composition, natural gas also has varied composition depending upon the reservoir from which it is produced. Furthermore, differences in natural gas composition not only occurs between