# Presentation: 098137

## Presented at the annual
EIA Energy Outlook and Modeling Conference
March 27, 2006
Washington, D.C.

by
Dale Simbeck
SFA Pacific, Inc.
   444 Castro Street, Suite 720		    	     phone: 	   1-650-969-8876  
      Mountain View, California 94041			        fax:	                      1-650-969-1317
      web home page: www.sfapacific.com  	                        e-mail:         info@sfapacific.com

**EIA Energy Outlook and Modeling Conference**
**March 27, 2006**
**Washington, D.C.**
**by**
**Dale Simbeck**
**SFA Pacific, Inc.**
**   ****444 Castro Street, Suite 720****	****	****    ****	****     phone: ****	****   1-650-969-8876  **
**      ****Mountain View, California 94041****	****	****	****        fax:****	****                      1-650-969-1317**
**      ****web home page: www.sfapacific.com  ****	****                        e-mail:         info@sfapacific.com**

**EMERGING UNCONVENTIONAL **
**LIQUID PETROLEUM OPTIONS**

## Presentation Overview

**Background**
**SFA Pacific**
**When will the oil age peak**
**Impacts of higher oil prices**
**What happens if we really move into a carbon constrained world**
**Unconventional oil supply options **
**CO****2**** enhanced oil recovery (EOR)**
**Oil sands & ultra heavy oil **
**Oil shale**
**Oil substitution - clean alternative liquid fuels via syngas-to-liquids (STL) from natural gas, coal & biomass plus ethanol & biodiesel**
**Outlook and Summary**

## SFA Pacific Background

**Founded in 1980 **
**Performs technical, economic & market assessments for the major international energy & engineering companies**
**Over 40% of our work is consistently outside the United States **
**Principal work involves heavy oil upgrading, syngas (H****2**** & CO), electric power generation & emissions control**
**Niche is objective outside opinion & comparative analysis before companies make major decisions or investments**
**Unique perspective with no vested interest in engineering, resources, technologies, R&D or project development**

## Famous Hubbert Curve Peak Oil Analysis

**In 1956 M. King Hubbert, a Shell Oil geologist, predicted USA domestic oil production would peak in the early 1970s**
**In spite of much ridicule from his peers, he was correct for the USA**
**This famous paper was focused on promoting nuclear energy and  **_**also predicted**_** that USA NG would peak in 1973 & **_**world**_** oil would peak in 2000 at 33 million bbl/d, **_**both quite wrong**_** **
**Hubbert curve analysis continues today by mostly oil peak “doomsayers” who are usually predicting the oil peak is only few (2-5) years away for the last 26 years (since the 1980 oil price price run-up)**
**Hubbert peak curve analysis is based on a bell curve analysis with the key input being a **_**fixed recoverable resource**_
**Fixing the recoverable resource is questionable due to our poor ability to predict future technology improvements & impact of oil prices**

## Shell’s Famous 1996 World Energy Supply/Demand Projection Shows the long-term importance of increasing efficiency & new renewables 

**Source:  Paper by C.A. Herkstroter (managing director of Royal Dutch Shell), “A Continuing  Contribution--Oil and Gas in the 21st Century”, presented at Nymphenburg Talk, Munich, June 19, 1996**

**Projected oil & NG peak in about 2030**

## Big Range In Current Oil Peak Projections The realization of this inevitable oil peak might keep oil prices high 

## SFA Pacific’s Worst (Latest) Case Projection of the Fossil Age Peak

**Note:**
**CO****2**** emissions as carbon **_**not**_** units of energy**
**Also the IPCC IS92a beyond 2050 Gt/y carbon projection is **_**highly questionable**_

- Source: SFA Pacific, Inc.

## Hubbert Curve Oil Peak Doomsayers Commonly Ignore Several Basic Issues:

**How consistently **_**wrong**_** everyone’s past projections have been, being too negative or conservative on future oil supplies**
**Typical remaining oil in place (ROIP) is still 60-70% of the original oil in place (OOIP) when defined as unrecoverable**
**Long-term it is likely reasonable to expect doubling of total production to ROIP down to only 30-35% of OOIP**
**Increasing oil recovery via improving technologies & higher oil prices **
_**Unconventional oil**_** options, the focus of this presentation**
**The **_**inevitable**_** oil peak will be **_**when**_** oil supplies vs. demand makes oil prices high enough that **_**other options become more economical**_** - we are only running out of **_**cheap**_** oil**

## High Oil Prices Generates More Conservation Plus Increased Oil Supplies & Oil Substitution

**Oil conservation**** driven by higher fuel prices (oil price & taxes)**
**Large potential in just replacing current 15 mpg SUVs with 30 mpg clean diesels & hybrid SUVs**
**Large potential by also reducing vehicle weight - smaller & lighter SUVs & autos, **_**regardless**_** of power source - 15 mpg SUV vs. 60 mpg compact**
**Increased oil supplies**** from **_**unconventional oil**_** such as: CO****2**** EOR, heavy oil, oil sands & shale oil - driven by high oil prices**
**Oil substitution**** via **_**syngas-to-liquids**_** (STL) from remote natural gas (GTL) & coal (CTL) - become economical at high oil prices**
**However, 5-10 years lag time due to the long life of energy use equipment & high capital cost of energy investments**

## What If We “Really” Moved Into a “Carbon Constrained World”

**Conservation & energy efficiency**** significantly increase as energy prices rise to reflect increasing realization that oil & NG **_**could**_** peak in 10-40 yr.**
**Natural gas**** demand/prices go up while coal & oil residue demand/prices go down as CO****2**** avoidance & emission cost gains “**_**real”**_** market values**
**Nuclear**** will eventually make a big comeback, however, not for 20-30 years, until life-extensions & upgrades + eventual decommissioning of current fleet + we honestly assess why nuclear power failed the 1****st**** time**
**Renewables**** become increasingly important but have limitations **
**Intermittent solar PV & wind turbines cannot replace baseload coal power**
**Beyond waste biomass, bioenergy requires cheap land & ultra-cheap labor **
**CO****2**** capture & storage (CCS) ****of fossil fuels becomes strategic for technical, economic, energy resource & overall reduction perspectives**
**Once big coal CCS units can co-process biomass for “double reductions”**

## Over 25 Years of Experience - Currently 35 Million t/y CO2 Storage (with 30% from Anthropogenic CO2 Sources) producing 250,000 bbl/d of Enhanced Oil Recovery (EOR)

## CO2 EOR CCS Using Anthropogenic CO2

**Texas****	****   Gas Processing****	****                  1.6****	****     Sharon, Ridge, etc. ****	****    ExxonMobil**
**	****	****	****	****	****	**
**Colorado****	****   Gas Processing****	****                  1.3****	****	****Rangely****	****ChevronTexaco**
**Oklahoma        Fertilizer****	****                              0.7  ****	****Purdy, Sho-Ven-Tum   ****	****Anadarko/                        ****	****	****	****	****	****Chaparell**
**	****	****	****	**
**Wyoming****	****     ****Gas Processing****	****                  3.6****	****  Lost Soldier, Salt Creek****	****  ExxonMobil**
**	****	****	****	**
**Alberta****	****    Ethylene Plant****	****                    0.5****	****	****Joffre Viking****	****        Numac Energy**
**Saskatchewan****	****  Coal Gasification****	****               ****2.0****	****	****Weyburn****	****  EnCana **
**& North Dakota **
- 		                                 ------
**	****                     ****North American Total       9.7 million tons per year CO**2
**This is almost** **30% of the total North American EOR of about 35 million t/y**
**For comparison North Sea Sleipner Aquifer ****CO****2** **injects **_**only**_** 1.0 million t/y**

**State/**
_**Province**_

**Plant**
_**Type**_

**CO****2**

_**Million t/yr**_

**EOR**
_**Fields**_

_**Operator**_

## Large CO2 EOR Opportunity While Also Reducing CO2

**Currently 0.25 million bbl/d EOR while storing 35 million t/y CO****2**** with total USA domestic oil production at **_**only 5 million bbl/d**_** and total USA proven reserves of **_**only 21.9 billion bbl**_
**Feb. 2006 DOE Report by ARI estimate of USA EOR potential:**
**582 billion barrels OOIP & 389 billion barrels ROIP (67% of original IP)**
** **_**47 billion barrels**_** (*****economic potential, current technology*****)**
** ****89  billion barrels (*****technical potential, current technology*****)**
**129 billion barrels (*****technical potential, advanced technology*****)**
**Exploitable U.S. CO****2****-EOR potential up to **_**3 million bbl/d by 2020**_** **
**CO****2**** requirements - about 0.5 billion t/yr CO****2**** or  9% of U.S. total**
**EOR is currently limited by CO****2**** supplies - must develop cost effective man-made CO****2**** supplies as this is a big “win-win”**

## Large CO2 EOR Potential Gaining Support

**North Sea:**** ****BP announced NG to H****2**** for power with CO****2**** capture for EOR           ****	****          Statoil & Shell - NG to power & MeOH with CO****2**** capture for EOR**
**California****: ****BP announced refinery coke gasification for H****2**** to power with CO****2**** for local EOR**
**East Texas****: ****Strong Texas State government supporting refinery coke or coal gasification to refineries H****2**** & power with CO****2**** capture for EOR**
**Western Canada****: ****Considering CO****2**** pipeline for Fort McMurray oil sands upgrading sources of CO****2**** for EOR amenable oil fields near Edmonton**** **
**Alaska North Slope:**** ****Considering CO****2**** from clean-up of NG for the planned North Slope NG pipeline with CO****2**** capture for EOR**** **
**Expanding existing CO****2**** EOR systems + additional potential in other North American oil fields (including Midwest & Mexico) **

## Oil Sands and Ultra-Heavy Oil 

**Alberta, Canada - Heavy oil and mostly “oil sands”**
_**Recoverable**_** resource estimated at >180 billion bbl - big increase due to the development of Steam Assisted Gravity Drainage - SAGD**
**Oil sands production already 1 million bbl/d & conservatively estimated to grow to 3 million bbl/d by 2020 - $70 billion being invested**
**Total resource about 1,600 billion bbl**
**Venezuela - mostly Orinoco “extra heavy crude”**
_**Recoverable**_** ****resource estimated at 272 billion bbl**
**Current production total approaching 3.5 million bbl/d with 0.5 million bbl/d from Orinoco **_**but**_** political instability hurting growth**
**Total resource about 1,900 billion bbl**
**Other steam stimulated heavy oil EORs in USA & Mexico**

## Steam Assisted Gravity Drainage

**Steam Assisted Gravity Drainage**

- Source: Suncor

## Oil Shale

**Perhaps the most technically & economically challenging unconventional oil resource **
**Due to the low energy (oil) content per ton of oil shale “rock”**
**However, massive resource (over 1,500 billion bbl in just the USA) thus the size of the recoverable “reward” warrants high risk R&D efforts**
**Innovative R&D efforts underway by several major energy companies**
**Will likely require innovative new in-situ process to:**
**Reduce massive solids handling, thermal processing & water use **
**Avoid massive CO****2**** emissions of carbonate rock calcinatiion**
**Oil shale is an important domestic oil resource, **_**however**_** impacts likely minor for the **_**next 25 years**_** **
**Nevertheless, expect some innovative demonstrations in the future**

## Oil Substitution at High Oil Prices via Syngas (H2 & CO)-to-liquids (STL)

**Growing F-T diesel + some methanol, ethanol, mixed alcohol, dimethyleither & even H****2**** (for FCV) as transportation fuels**
**Syngas-to-liquids via remote natural gas GTL: already 50,000 b/d with >1 million b/d F-T & MeOH under development in Qatar, Nigeria & Iran **
**Higher capital & lower efficiency than LNG but GTL gives better net-back value & market flexibility to the remote NG resource owner**
**Syngas-to-liquids via coal CTL: already 150,000 b/d F-T operating in South Africa with >400,00 b/d being proposed in Australia, China & U.S.**
**Very high capital & low efficiency requires cheap coal & high oil prices**
**Coal gasification for syngas-to-liquids or H****2**** has nice co-benefits**
**Can easily co-feed what ever waste fuels are available, like waste biomass**
**Large pure CO****2**** vent - thus cost effective large source of CO****2**** for EOR**

## National Academies Recent 2003 Hydrogen Economy Report - Major Finding

**Could have a major impact in the next 50 years - conducting RD&D to determine whether a hydrogen economy might be realized is important**
**H****2**** must be economic, safe & appealing, & offer energy security & environmental advantages - four fundamental RD&D challenges**
**Economic, durable, safe & environmentally acceptable FC & H****2**** storage**
**Infrastructure to provide H****2**** for FCV**
**Sharply reduce costs of H****2**** production from renewables**
**If policies for CO****2**** reduction develop, capture & storage of CO****2**** from coal gasification H****2**** production may become an important technology**
**Transition period is likely to be lengthy **
**H****2**** FCV can reduce imported energy via use of domestic coal, nuclear & renewables - **_**however**_** impacts likely minor for the **_**next 25 years**_** **

## Oil Substitution at High Oil Prices via Renewable Energy Alternative

**Ethanol & biodiesel - discussed by others at this conference**
**Key issues: size of required subsidies, unsustainable use of aquifer water & low liquid fuel yield per year per acre (or hectare) of land use**
**Most of subsidies paid to the big distillers with few benefit to farmers**
**Waste biomass for substitute liquid fuels is likely better **
**Could be cellulosic ethanol, aggressively promoted in North America**
**Europe appears to favor waste biomass to **_**syngas-to-liquids**_** due to **_**twice**_** the liquid fuel yield year per unit of land use vs. ethanol**
**However more likely co-processing any waste biomass in large coal based syngas-to-liquids units is more cost effective, even with CCS**
**Essential economy-of-scale for gasification to make the syngas & avoids massive seasonal biomass storage or low annual load factors**

## Outlook

**Potential for worldwide unconventional oil by 2025 in millions of bbl/d crude oil equivalents **_**if**_** oil prices stay above $45/bbl**
_**Options**_**	****	****	****     **_**MM bbl//d COE**_**	****    **_**Key location**_
**CO****2**** EOR****	****	****	****	****        3-6            ****	****	****USA**
**Oil sands****	****	****	****	****        4-5            ****	****	****Canada**
**Ultra heavy oils****	****	****        ****	****        4-5            ****	****	****Venezuela**
**Syngas-to-liquids from remote NG        2-3           ****	****	****Middle East**
**Syngas-to-liquids from coal/biomass    1-2           ****	****	****China & USA**
**Ethanol without subsidies ****	****          <0.5          ****	****Brazil**
**Ethanol & biodiesel via big subsidies     <0.5           ****	****USA **
**Oil shale****	****	****	****           only demos       ****	****	****USA**
**	****	****	****	****    ****Total****	****     15-22  million bbl/d**

## Summary

**We are only running out of **_**cheap**_** oil**
**Nevertheless, the Hubbert curve “doomsayers” will likely keep public attention on the peak in the oil age, which helps keep oil prices high**
**High oil prices generates more conservation plus increased oil supplies (like unconventional oil) & oil substitution (like STL)**
**However, 5-10 years lag time due to equipment life & big investments**
**Large potential for unconventional oil in **_**just**_** North American**
**Impressive Canadian oil sands growth shows what **_**can**_** be done  **
**CO****2**** EOR is the biggest “win-win” for the USA - **_**limited**_** by CO****2**** supplies**
**Potentially 3-5 million bbl/d EOR production while storing 0.5-1.0 billion t/yr CO****2**** **_**if**_** we can develop cost effective big man-made CO****2**** supplies**
**Syngas-to-liquids via coal + waste fuel gasification is an effective USA source of clean alternative liquid fuels **_**plus big**_** CO****2 ****supplies for EOR**