Rystad Energy Cost Curve for Various Crude Oils Globally (1/12/2015)

From an Essay by S. Tom Bond, Lewis County, March 11, 2020

Energy is a key to production, transportation, comfort and many other things in our world. War is a profligate use of energy. Until the use of steam power and electricity, technology changed slowly. The citizens of ancient Babylon or Assyria could adapt easily to the technology of Great Brittan of George III or the Germany of Wilhelm II, at the time James Watt developed the first widely used steam engine.

Today, cheap energy is the most sought commodity on earth. It is the key to both industrial and military power. For the present, oil is the preferred source of energy, and who has petroleum reserves, and the lowest cost of getting it to market, is the winner. Looking for a comparison of the cost leads to Rystad Energy data presented in graphical form below:

NOTE: Pumping costs by nation are in green and the total costs including capital and transportation in grey:

Petroleum Production Costs ($/bbl) by Country Vary Widely

Theoretically, oil prices should be a function of supply and demand. However, geopolitics and environment are also important concerns. The combined OPEC countries produce more oil than the United States but the U. S. is the top-producing nation, as well as the top consuming nation.

The United States imported 9.10 million barrels a day in 2019, while exporting 8.57 mb/d giving net imports of 0.55 mb/d in 2019. The two principal nations importing U. S. oil are Mexico and Canada. They also export to the U. S. so in net we send 0.54 mb/d to Mexico and receive 3.41mb/d from Canada.

As of late 2019, only four nations produced fracked oil and gas, the United States, Canada, China and Argentina. Many nations have frackable reserves, but the abundant reserves of easy to get oil and the high environmental costs outweigh it for many. The money cost of fracking is substantially more, even when the law allows externalization of environmental and health costs. Externalized costs are a most contentious subject in America today, and in other nations. In places fracking has been banned because of this, and we won’t get into that further here.

As for the greater cost of fracking to drillers, that is hard to track down. Sites are larger. Rigs are larger. More pipe is needed because wells are deeper. More cement is needed, more water, a larger impoundment, plus larger, more powerful equipment is needed. Special, imported, sand is used to keep the cracks open so the product oil and gas will flow. Several times as much water is produced than product, andmust be disposed of. Endless lines of trucks are needed to supply materials and carry away wastes, and vast amounts of diesel fuel.

There is a fracking cost given in the Rystad Energy graphic above, but it may be unrealistic, “politically correct.” More reliable is the following:

Shale oil costs more than conventional oil to extract, ranging from a cost-per-barrel of production from as low as $40 to over $90 a barrel.

A final point we want to consider is geopolitics. The four nations with lowest cost production are, first, Saudi Arabia, which can kill a famous journalist living in the U. S., visiting Istanbul, and carry away his remains in a brief case (Khashoggi). He was considered less valuable than the $110 million arms sales to the Saudi’s. Then Iran, Iraq and Russia. No need to say anything to this audience about the United States geopolitical stance toward them.

Indonesia trades mostly with the Oriental countries. The U. S. is pretty openly fomenting an overthrow of the government of Venezuela which has the world’s largest known reserves of oil. Nigeria is a mess, essentially the oil companies there do as they please. Brazil is essentially a dictatorship on good terms with United States.

Control of oil and gas is one of the reasons for the United States big military, larger than the next ten nation’s militaries combined. Unsurprisingly, this huge U. S. military is also the world’s largest single user of oil. The United States was the first nation to drill for oil, and for generations exported its resources. The “easy stuff” is gone here. Now the US must resort to other methods to retain its power.

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See also: Oil Price News: Saudi Arabia Aramco to Pump Record Crude in April – Bloomberg, March 10, 2020

Saudi Arabia escalated its oil price war with Russia on Tuesday, as its state-owned company pledged to supply a record 12.3 million barrels a day next month, a massive increase to flood the market.

The supply hike — more than 25% higher than last month’s production — puts Aramco above its maximum sustainable capacity, indicating that the kingdom is even tapping its strategic inventories to dump as much crude, on the market as quickly as possible.

Moscow responded within minutes, with Energy Minister Alexander Novak saying Russia had the ability to boost production by 500,000 barrels a day. That would put the country’s output potentially at 11.8 million barrels a day — also a record.

The Nord Stream pipeline(s) run 760 miles under the Baltic Sea

From an Article by Tsvetana Paraskova, OilPrice.com, November 25, 2019

Russia’s gas giant Gazprom is rushing to hire an engineering contractor to have an underwater natural gas pipeline, which has broken off the seabed in the Arctic, fixed, Russian news agency Interfax reports.

This is the second time a pipeline on the route that crosses the Baydaratskaya Bay has come to the surface in the past two years. As Interfax notes, last year another pipeline had broken off the seabed.

It was not clear if the resurfacing of the pipelines has created major safety hazards or affected gas supply from the fields in the Yamal Peninsula, according to The Barents Observer.

A unit of Gazprom has announced a competitive tender for engineering surveys for the Bovanenkovo – Ukhta 2 line, which transports natural gas from the Bovanenkovskoye field on the Yamal Peninsula via the Baydaratskaya Bay in the Kara Sea to mainland Russia and onto Europe.

Bovanenkovskoye is currently the largest natural gas producing field on the Yamal Peninsula, according to Gazprom. The construction of the Bovanenkovo – Ukhta 2 gas pipeline began in 2012 and the pipeline was brought on line in 2017.

Now with a second line resurfacing, Gazprom has launched a tender for repair works on 9.2 kilometers (5.7 miles) of the pipeline in the bay, Interfax reports, citing tender documents from the Gazprom unit.

Gazprom expects the work to help it have the pipeline placed in a trench of up to 5 meters (16.4 feet) below the seabed. The engineering surveys are planned to take place in 2020 and 2021, according to Interfax.

Gazprom is dominating gas supplies to many European markets, and now it also vies to meet rising Chinese natural gas demand. Russia wants a share of the huge Chinese market and the Russian gas giant looks to supply pipeline gas to China — and this will begin in weeks.

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Russian natural gas pipelines in West Siberia and the Yamal Peninsula

See also: Pipeline problems for indigenous peoples on Russia’s Yamal Peninsula · Global Voices, February 20, 2020

The Yamal Peninsula contains some of the biggest known reserves of natural gas on the planet. This remote peninsula in the Russian Arctic extends for 700 kilometres into the Kara Sea, and now several pipelines, offshore gas fields, and liquefied natural gas (LNG) terminals have made it their home. Those tens of millions of cubic metres of natural gas have attracted Russia’s state-owned gas companies and several international investors; in 2008, Gazprom announced its Yamal Project, to unlock the region’s hydrocarbons on a vast scale. Yamal is also home to 15,000 people, 10,000 of whom are Nenets reindeer herders.

"induced seismicity" under study

Commentary by S. Tom Bond, Jane Lew, Lewis County, WV

1. The top ten well-pads in Pennsylvania [in 2013] have produced 820 million dollars worth of natural gas, with estimated total royalty payouts of over 100 million dollars. These values are based on a total production of 245 million Mcf, at-the-wellhead pricing of $3.35/Mcf (the most recent pricing published by the US Energy Information Administration), and estimated 1/8th royalty payments (no allowances for production deductions). The residential pricing value of the produced gas is 2-1/3 billion dollars.

www.MarcellusGas.org 30 May 2014

With a few wells like this, no wonder the urban gambling investors are ready to despoil the countryside! Perhaps they think all Marcellus wells are as good.

2. The Bazhenov in Russia may be the largest shale play on earth. 80 times bigger than the Bakken. Despite the threat of sanctions hanging over Russia because of the standoff with Ukraine, Russian oil and gas opportunities like the Bazhenov appear to be too lucrative for Western companies to pass up, as follows:

http://www.forbes.com/sites/christopherhelman/2012/06/04/bakken-bazhenov-shale-oil/

ExxonMobil and Statoil have joint ventures with Rosneft, the Russian company. Not a drop of national loyalty to the U. S. to be seen here. Both the U. S and Norway (to a much lesser extent) are at loggerheads with Russia over Ukraine, while the oil companies are kissing Russia up, trying to get the oil.

3. Between 1967 through 2000, there were an average of 21 earthquakes yearly above magnitude 3.0. That rate shot up to an average of 300 earthquakes yearly after 2010. Because of the recent jump in earthquakes, and their significant size, the USGS plans to estimate the national shaking risk from “induced seismicity” for the first time, as follows:

http://news.yahoo.com/fracking-linked-earthquakes-may-strike-far-wells-133057848.ht

Ever see the old physics demonstration where the instructor fills a one gallon jug with water, inserts a cork so no air is between the cork and the water, then hits the cork lightly? The jug breaks easily. The identical force applied by one square inch of cork applies to each and every square inch of the interior of the jug.

Imagine the force that develops down the well when the equivalent volume of many tankers of water are forced down it day after day!

4. In 2013, the average total water volume for a fracturing event at a Pennsylvania unconventional well site was 5,365,363 gallons – the equivalent of 670 full tanker trucks. This is a 25% increase when compared to the average volume of water used per event in 2012 (4,259,693 gals). Our review of fracturing events shows the highest water usage recorded was nearly 19 million gallons. On February 15, 2012, the DCNR 595 6H well in Bloss township Tioga county, operated by Seneca Resources Corp, used 18,754,176 gallons of water for a fracturing event – enough to fill over 2,340 tanker trucks.

www.MarcellusGas.org 5/2/14

This “670 full tanker trucks average” is 96 truckloads of water a day for 7 days or one every 15 minutes, day and night for a full week. Noise, dust, diesel odors, lights at night, harrowing traffic conditions, school bus risk; and if rural, road destroyed, flag men, livestock and crops affected. If only Aubrey McClendon and Rex Tillman could live in such luxury, they would understand “externalized cost.”

5. Aubrey Miller found 52,000 unconventional (shale) gas wells in the U. S., yet when he searched the literature for research, he found little. “How do we have no data on an enterprise of this magnitude?”

http://www.philly.com/philly/news/science/20140302_GreenSpace__The_uncertain_state_of_gas_drilling_and_health.html#YRFxEB1kyymCLpea.99

The short answer: Because the industry doesn’t want any data let out.

Tomorrow, let’s focus on West Virginia specifically.

>>> Tom Bond is a retired professor of chemistry and resident farmer in central West Virginia <<<