Crude: The Story of Oil
Thank you all for coming.
My book is called 'Crude' as Dave mentioned, it tells a story of oil from its birth hundreds of millions of years ago through to its maturation into deep underground, as well as the modern tale of crudes abrupt exhumation, the battle to control its riches and its effect on the environment out of which it came.
Oil is a precious natural resource. The product of the decayed remains of billions of sea creatures that grabbed sunlight out of the air and turned it into living tissue. Our planet has born somewhere around 2 trillion barrels of oil, that is 84 trillion gallons of oil in an elaborate sequence of events, taking place over millions of years, enlisting the carcasses of billions of creatures, the rising and falling of ancient seas and the shifting of tons of rock.
Oil molecules are hydrocarbons which simply means that they are made up of hydrogen and carbon. Hydrocarbons have a very useful quality, that is they repel water. Living creatures such as single-celled plankton floating on the seas encase the walls of their cells with hydrocarbon molecules. This is the one thing that separates their watery insides from their watery environment, it's that line between adamant and inadamant. When the corpses of these creatures pile-up on the sea floor and slowly get buried the water gets squeezed-out and what remains is mostly the hydrocarbons from cell-walls and this is the stuff that can turn into oil.
Two-thirds of the worlds oil comes from the buried marine creatures of a single ancient sea called the Tepes, it was a warm shallow sea that washed just above the equator about 180 millions years ago. For more than 100 million years abandon shells, plankton and other organic sediments rained gently onto the Tepes seabed, the layers of organic sediment sank as more and more stuff built up on top of them, the weight compressed them into rock. As the rocky layers descended deeper into the Earths crust they were gently heated and the organic material imbued in the rock matured into a greasy liquid, that essence of ancient life, oil.
The oil stuck in those rocky layers is impossible to mine however over millions of years the earths crusts shifts, the oil starts to migrate underground, sometimes as far as hundreds of miles. It twists and turns to the tiny tunnels in the rocks that smother it. If it makes it to the surface it will evaporate. If it descends further underground it will crack under the pressure and heat into hydrocarbon gas, that is natural gas. If however the migrating oils encounter a certain kind of rock, one with plenty of interconnected pores to hold the oil that rock will suck it up like a sponge. That oil soaked rock is called a reservoir rock, if a dense layer of rock moves over this reservoir rock the oil will stay put, it will be trapped and those oil traps are what petroleum geologists and oil companies spend their time hunting for.
Around 15 million years ago the sea-floor under the Tepes was consumed into the Earth and the sediments were scraped-up onto the surface. The continents of Arabia and Asia that once lined the Tepes shores collided and so now the Tepes oil was trapped and most of it was in what would become to be known as the Middle East.
Newly evolved humans walked out of the ancestral Africa using the land-bridge formed by the crash between Arabia and Asia and settled in the fertile valley between the Tigris and Euphrates rivers. It wasn't long before we found the remains of that ancient sea as its oils were slowly oozing to the surface. People gathered the strange liquid dividing the future from the shapes it would make when thrown into water. They gummed it onto their boats and houses to create watertight seals. The Mesopotamia's dug up over 50 thousand kilos of petroleum-sludge and the Persians filled pots with crude mixed with sulphur which they set-a-fire and hurled at their enemies. The plumes of natural gas that escaped out of the crust along with the pools of oil would spontaneously ignite inspiring the fire worshiping religion of Zoroastrianism which was the official religion of Persia for over 4 hundred years.
Oil extraction in the commercial sense began in earnest in 1859, when a former railroad conductor drilled a hole on a farm in Pennsylvania near where oil had been spotted seeping out of the ground. At 59 feet the hole started incredibly to fill with dark fluid. By 1862 entrepreneurial oil-driller's were bringing up 3 million barrels of Pennsylvanian oil every year and within 30 years the better part of the states oil was gone.
Hydrocarbons are incredibly volatile, the bond between the carbon and the hydrogen atoms that make up the molecule are very strong so when they're ripped apart when they're set alight they release an explosive amount of energy. Indeed the amount of energy stored in a single gallon of oil is equal to the amount in 5 kilos of the best coal or more than 10 kilos of wood or more than 50 human slaves toiling the entire day away. In fact the best oil is so energy rich that it can provide 100 times more energy than its extraction requires. The crude oil when it comes out of the ground is a messy mix of different kinds of hydrocarbon molecules all of which burn at different temperatures. By distilling the stuff certain fractions can be reliability produced and their explosive energy can be reliability harnessed. But in the late 19th century only one fraction of crude was considered useful and that was kerosene used for lighting. The entrepreneur John D. Rockefeller built his fortune on the market for kerosene but then in 1879 Thomas Edison invented the incandescent light bulb and in a stroke demand for kerosene and thus oil as well collapsed and yet Rockefeller's Standard Oil Company had already moved on to the oil fields of Ohio and Indiana by then. The company was swimming in oil, a new market had to be found and fast.
However cars are hardly popular when they first arrived on the scene less than a decade later. Here's what the New York Times had to say in 1899, quote, there's something uncanny about these new fangled vehicles, they're unutterly ugly and never one of them has been provided with a good or even an endurable name. The French were usually orthodox in their entomology have evolved automobile which being half Greek and half Latin is so near indecent that we print it with hesitation, unquote. But not only were cars ugly and indecent they were inefficient compared to the trains and bicycles used in that day. Even todays cars require 3 times more energy than trains and 30 times more energy than bicycles to transport people a given distance. And where would they be used when they first came on the market, roads for the cars to be driven on where they existed at all were mostly rutted and impassable. However unlike coal powered trains and people powered bicycles the car needed oil and only oil to run. Within a decade of the invention of the internal combustion engine gasoline sales had surpassed kerosene sales. Over the following decades oil and car companies would buy-out and dismantle the popular electric-trolley system forcing consumers to opt for diesel burning busses or cars instead. They successfully lobbied the government to build a massive network of smooth roads and highways for gasoline burning automobiles to ramble on. By 1955 American's owned 50 million cars, 20 years later they owned twice that number. Investors abandoned bicycle-paths they had planned to construct such as one linking Pasadena to Los Angles, half built. The vast amounts of oil needed to run the nations cars and trucks created a gigantic river of crude byproducts which industry scientists fashioned into to petro-chemicals and fertilizers that would find their way into every nook and cranny of society. Our closets full of petro-polyester clothes, our medicine cabinets stocked with petro-plastic bottles of petro-chemical derived drugs, our refrigerators full of petro-fertilized foods brought to us on diesel burning trucks and now we were hooked for good consuming crude about 100 thousand times faster than it could possibly accumulate again.
During most of the first century of oil consumption though, western oil companies extracted the crude cheaply from its most abundant reservoirs in the Middle East, Russia and Mexico. By 1960 with the formation of OPEC though oil companies would soon be exiled from all of these countries shorn of access to more than half of the worlds oil and the vast majority of it that lies in the easy to find and cheap to produce areas. However by then western leaders understood oil as essential to the economy and to their own military prowess. If in World War I the Allies had quote, floated to victory upon a waive of oil, unquote, as one statesman had famously put it. By the 1990's oil would become so crucial to military might the US forces were mostly made of oil, today no less than 70% of the entire weight of all the soldiers, vehicles and weapons of the US Army is pure fuel. And so having been shut of oils most prolific reservoirs in the Middle East, western oil companies many of which were the progeny of Rockefeller's Standard Oil Company, stepped up their hunt for oil in its more hidden corners under the protective wing of US and British officials. They looked for instance in Alaska where the ground was permanently frozen down to 2 thousand feet and in the North Sea a sea so turbulent that one of its storms had vanquished an entire invading armada back in 1588. When some 20 odd billions barrels of oil were discovered in these regions the technology to pry the crude out barely existed but with higher oil prices public panic on dependence on foreign oil and aggressive government subsidies in the wake of the 1970's oil shocks. A whole new generation of technology was successfully forged in order to extract North Sea and Alaskan oil.
During the 1980's the oil flowed profusely and American oil consumption proceeded unhindered the price of oil fell below the price of bottled water but it wasn't long before the flow of oil from these two new oil patches had also peaked near the end of the 1980's. Leaving behind a 10 billion dollar tab needed to rehabilitate the North slope of Alaska and 300 hundred million gallons of toxic sludge at the bottom of the North Sea along with dozens of rickety aging rigs. Oil companies were forced once again to renew their hunt for more oil but finding oil is like picking up a piece of shattered glass. First you pickup the biggest pieces and then you get on your hands and knees to sweep up the shards. In terms of global oil supply the industry's hunt for oil is for increasingly diminishing returns. The stream of oil from industries discoveries after 1970 comprise less than 1/3 of the oil powering humans and their machines today, most of it from oil fields that will peak and deplete rapidly and in some cases oil companies have even ended-up burning even more fuel digging and pumping from deep buried oil fields than those sought after wells themselves can provide in return. And yet this inherently unsustainable activity makes financial sense for oil companies, after all an oil company can wow its investor's with a find of 5 hundred million barrels of oil or less. Although such a quantity of oil is sufficient to slake todays thirst of oil for about a week at best at a market price of even 20 dollars a barrel, such a find is a 10 billion dollar asset. And so the western oil industry exploits the most expensive and cutting edge technologies it can find in order to find new oil in its hidden corners. Armed with new technologies such as three dimensional seismic surveys in which supercomputers are used to map echos into 3 dimensional models of the underworld. Oil explorers were able to pinpoint 76 new oil and gas fields of over 5 hundred million barrels each during the course of the 1990's. But getting the oil out of these smaller more hidden oil fields is another giant technological challenge. More than half of the oil finds of the 1990's lie not under the familiar arid plains nor even under Arctic tundra but deep under the sea floors shifting sediments. Under the deep waters of the Gulf of Guinea off the coast of West Africa and the Gulf of Mexico among other regions. But oil companies are well practiced at using more resources to get less however in some of the most extreme environments in the world. In the 1990's for instance oil exploitation had commenced off the Grand Banks, a series of banks that rise off the continental shelf about 180 miles off the coast of New Finland in Canada. In 1979 after drilling 50 dry holes Mobil had struck oil off the banks in a field they dubbed Hibernia. This oil was under serious guard, over 2 thousand icebergs drift around Hibernia every year and the underwater current can slam those icebergs into a rig even if the wind in blowing in the opposite direction. This is where the Titanic had been sank after all not long back in 1912. In 1982 Mobil's 15 thousand ton colossal of a rig had sank in a storm over Hibernia but undeterred the company spent 7 billion dollars building a new one requiring the labor of over 5 thousand workers toiling on 3 continents for over 6 years. A mini metropolis of drilling derricks, lifeboat stations, holly decks and living quarters were built atop a giant base of 4 hundred thousand tons of concrete and 69 thousand tons of steel. The resulting mammoth weighting more than 5 aircraft carriers was submerged onto the floor of the icy banks using more than 400 thousand tons of iron-ore to do it. And today supply ships ring the rig shooting water-cannons at the looming icebergs and all of this for less than point 1% of the quantity of oil secreted under the Middle East where oil executives say producing oil is as difficult as sticking a straw in the ground.
The oil industry latest finds in West Africa's Gulf of Guinea and the Gulf of Mexico are not only smaller then these earlier discoveries are but extremely remote, well away from the usual complex of underwater pipelines, refineries and oil terminals needed to extract, transport and process oil. In some cases the oil is so deeply buried that the pipes bringing it to the surface can clog-up with icy hydrates and nor is it feasible to spend years and billions of dollars building rigs to extract oil from such oil fields, the water is too deep and the pools of oil too small. And so with help from geologists and engineers at universities such as Texas A&M and The University of Texas the industry has developed a new way to extract oil, tailored for the exploitation of small remote and deep water oil fields, it's called the FPSO which stands for floating production storage and offloading system. Not a very creative name. FPO's are basically refurbished oil tankers, they're equipped to get the oil out, process it, store it and pack it off onto tankers all from a single vessel floating on the top of the surface. Instead of building giant concrete and steel islands, installing them over oil fields hooking them up to a maze of pipelines, a single ship can be simply floated into place, suck out the oil and then move on to the next field. This is oil extraction by stealth and it is rapid as well. Generally the oil industry takes about 10 years from when they pinpoint new oil to when they start drilling it out, with FPSO's they can cut that time lag by a factor of 6 but FPSO's also pose new environment threats. They rely exclusively on oil tankers and other ships to carry their oil rather than underwater pipelines. Although pipelines are much safer and less likely to spill oil and this is part of the reason why US regulator's banned FPSO's from the Gulf of Mexico until 2002. Potentially more significant than the quantifiable risk of oil spills though are the unknown risks posed by FPSO's drilling in deep waters. According to government regulators the deep ocean is quote, so poorly understood that little more than conjecture about the possible impacts are possible.
Oil in the earths crust is not unlike blood in our own bodies. If a body is pierced by a thousand holes the blood will gush out to begin with then when about half of the volume has been spent the flow will slow to a lazy dribble and that point when about half of the worlds oil supply has been spent now approaches us. According to industry analysts the flow of oil and gas from the earths crust will decline at a rate of about 3 to 5% a year.
Meanwhile our global desire for crude will only increase marching ever upwards at a rate of about 2% a year. While oil executives and government officials often paint this ever increasing demand as the inenviable result of human progress and development. It is also the result of years of hard work on the part of the oil and auto industries advertising the joys of the petro-life in order to maintain strong demand for their products. In 1990 for instance the American automobile market was technically saturated, the average American household owned 1 car for each of its licensed drivers. Gone of course was the family pleasure drives of the 1950's, by 2001 American adults spent more time in their cars then with their own children. Although all the extra driving isn't necessarily getting us any farther, between 1995 and 2001 American's spent more time in their cars but traveled the same number of miles. The faster the liberation of cars spreads the more often we find ourselves trapped by congestion. Car and truck accidents and fumes derived respiratory illnesses kill more than 70 thousand American's a year but enough is not enough. In the 1980's automaker's started marketing larger cars such a light trucks and SUV's that use more oil instead and American's continued to buy more vehicles with a new car rolling into driveways every 3 seconds, a rate almost 3 times faster than the rate at which new babies appeared. Nevertheless true growth market will have to be found elsewhere. Compared to the average American who uses about 3 gallons of oil per day the average Chinese person consumes point one-five gallons a day. Insuring that developing countries such as China and India consume increasing quantities of oil is quote, crucial to the long term growth of oil markets, unquote as the Department of Energy has acknowledged.
International financial institutions have lent a helping hand doling out over 50 billion dollars to developing countries to embark on fossil fuel projects between 1992 and 2002. In 2001 the World Trade Organization accepted China's membership but only on the condition that they agree to slash their tariffs on car imports from over 80% to 25% or less by 2006. By the year 2000 automaker's were spending almost 10 billion dollars advertising their cars outside the United States with billions invested in China alone. Quote, the worlds leading automaker's and part suppliers have reached a consensus a recent trade journal noted, that China is the most important place to be, unquote. Cars sales in China are now leaping forward by over 60% a year and by 2020 developing countries led by China and India are expected to consume almost 90% as much oil as industrialized ones.
Oil companies and automaker's say that all of this extra oil consumption will bring prosperity to the Asian masses. This of course remains to be seen, what can be seen already is slum ridden mega-cities such as Calcutta, Beijing and Jakarta paving over their well-trod foot paths and bicycle allies for cars driven by the elites and the gigantic cloud of smog the so-called Asian brown cloud stretching thousands of miles over the skies of Asia blocking out as much as 10% of India's sunlight. And so today the question arises, will the industry be able to provide enough oil for all of this engineered demand? Many commentators say that we are entering a period of crisis, one that could be so drastic that it will end the American way of life as we know it. As the flow of oil peters-out while demand increases there will be increasingly bloody wars for the remaining reserves of fossil fuels. The price of energy will skyrocket, radically disrupting the lives of ordinary Americans whose way of life, driving from office to mall to home relies upon cheap gasoline and yet the oil industry and state leaders have already laid plans to minimize such disruptions albeit at ever greater costs for distant people and under-protected ecosystems. After all we've been running out of oil since the very beginning of the oil industry and have known for decades that whatever the pace of flow from the tap the tank will never be refilled at least not while homo-sapiens walk this earth.
Government officials have contrived to pry open previously inaccessible oil territories from Iraq to Libya neither which have been subjected to modern exploration methods. In addition oil companies plan to renew their search for new oil mostly in the poorer countries of the world. They're developing technology that will allow them to squeeze crude out of regions not previously considered oil country and they're attempting to switch customers from oil to its neglected stepchild natural gas. Which while also a finite resource is relatively more abundant compared to oil. Each chapter will proof burdensome to the environment and human communities in different ways.
Over the next 2 decades the US oil industry plans to spend the biggest chunk of its exploration budget searching for crude not in Alaska, Texas and Norway but in developing countries. Such operations can be reasonable expected to render small amounts of oil with large effects on local people. The business of oil extraction in countries as diverse as Angola, Congo, Ecuador, Gabon, Iran, Iraq, Kuwait, Libya, Peru, Qatar, Saudi Arabia and Trinidad, Tobago have coincided not with an increase in prosperity but with a sharp downward slide in living standards and an increasing corruption and conflict. In Iraq, Nigeria and Columbia the piles of corpses ringing big oils stomping grounds can perhaps speak for themselves.
Transforming what used to be unusable unconventional fossil fuel resources into exploitable oil will become increasingly common as well, using technology and government subsidies. The example of tar-sands in Alberta, Canada is illustrative of the process. A huge stretch of sludge called tar-sands stretches across Alberta, Canada. Back in the 1960's the technology to mine oil from tar-sands like the technology to extract oil from the Alaskan tundra didn't exist. These resources were therefore untouchable but over the years the technology has improved, the price of oil has gone up and the Canadian government has offered generous subsides. So today the price of extracting a barrel of oil from tar-sands has fallen from around 30 dollars in the 1980's to around 5 to 10 dollars today and in 2003 the Department of Energy redefined no fewer than 180 billion barrels of tar-sands as quote, conventional oil, increasing their assessment of the global supply of oil by a whopping 15%. Overnight Canada leapfrogged over Iraq to become the country with the second biggest oil reserves in the world. The trouble is mining oil from tar-sands burns up to 1/5 of Canada's natural gas and emits no less than 6 times more carbon-dioxide than producing a barrel of conventional oil, requires 6 times more fresh-water than the oil it renders and leaves behind vast lakes of waste water. The acid rain from todays tar-sands operations alone could destroy Alberta's forests and this could go on for decades. Experts say there's 2.3 trillion barrels of oil locked in tar-sands, that is more oil than in all the worlds conventional reserves. By 2030 Canadian officials expect tar-sands oil to sate no less than 15% of the US's ravenous oil appetite. New technology allowing companies to recover more oil out of reservoir rocks can also render some new stores of oil, at best only half of the oil in reservoir rock is ever extracted from the rock. Once the initial pressure is spent, driller's use secondary recovery techniques such as shooting water, carbon-dioxide, natural gas and other chemicals into the rock to force more oil out. Eventually the oil-globules within the rock enclose upon themselves and refuse to budge. As you can imagine much time and effort is spent figuring out how to extract that second half of the oil and even a minor breakthrough in this area could release mother-loads of new oil for the industry to sell.
Shifting consumers from oil to natural gas is another leading strategy underway for major oil companies. All the big oil companies are actually oil and gas companies and for many gas reserves are growing while oil reserves are falling. Shell's CEO recently announced his hope that demand for gas out-shine demand for oil by 2025 making the current era a quote, a window of opportunity, unquote, for oil companies to shift customers from one fossil fuel to the other.
Both John Kerry and George W. Bush favor the construction of yet another lengthly pipeline across the Alaskan wilderness this time to deliver natural gas. Endlessly mouthing the industries mantra that natural gas is a clean environmental friendly fuel. And yet methane rich natural gas is a much more dangerous net greenhouse-gas than carbon-dioxide. Already about 2.3% of the natural gas produced by the industry leaks out of the valves pipelines and other infrastructure meant to encase it and floats up into the atmosphere unburned. If that proportion makes it up to about 3% using natural gas is no better for the atmosphere than burning oil. Supplying consumers with more gas will also require dangerous wasteful practices such as natural gas liquefaction, that is burning more fuel in order to cool the gas to negative 260 degrees fahrenheit at which point it becomes liquid and thus easier to transport.
Keeping the gas pipelines full will also exact its pounds of flesh just as effectively as oil has. In 1998 the Texas gas industry for example had to drill 4 thousand new wells in order to keep natural gas production steady. The following year they had to drill 64 hundred new wells in order to do the same. All the largest remaining reserves of gas are therefore not close to home but rather are situated under conflict ridden densely populated countries such as Nigeria, Angola, Venezuela and Indonesia.
The coming crisis in oil supply will in other words be costly and destructive, the question is who's going to pay the price? Giant oil companies and SUV maker's or African villagers and the Arctic wilderness. After all the intense resource consumption of western society has always exacted a cost in human lives and ecosystems. Before Shell and other companies started pumping oil from Nigeria western traders extracted Nigerian slaves and palm-oil. Before Occidental started extracting oil from Colombia western companies had annexed great swabs of the countryside for bananas and coffee for western consumers.
In order to pursue real energy security we must do more than cut our dependence on foreign oil or use energy more efficiently by buying the fuel efficient SUV's cynically marketed by automakers. Energy efficiency while a noble goal that we must go forward with does not by itself restrained consumption as energy analysts have know for over a hundred years. As long as more efficient technology drives the price of consumption down, it stimulates more consumption not less. More fuel efficient cars for example have in the past led American's to step-up their leisure driving. More efficient refrigeration technology has led to bigger refrigerators.
Instead we must challenge the oil industry itself by cutting our consumption all together by altering the very way we live so we don't need to burn a gallon of oil everyday driving our cars nor eat food that has required another gallons of worth of fertilizers, plastic wrapping and truck transport. If we can start to do that perhaps a new era of sporadic supply interruptions and volatile prices coupled with an influx of better technology to harness solar, wind and other renewable energies would start to slowly persuade people not to opt for oil. Environmental and human rights concerns might restrain the quest for new oil and gas in some regions. Perhaps in-other-words there might be enough oil left to mine aluminum and silicon for wind mills and solar panels before the drills, shovels and clouds of carbon-dioxide poison the planet for good.
The signs I think are mixed, in Detroit hundreds of people are reclaiming the former capital of the car, coating it with acres of green food growing gardens while in Canada officials have announced their intentions to step-up tar-sands production. In Iraq and Libya Texas oil men are jostling in the cues to reenter their old stomping ground while in Houston aging oil executives are handed multi-billion dollar checks to upgrade their decrepit tankers and pipelines. In Alaska oil company trucks are sinking in the permafrost melting mud while in Washington oil executives are pressing for even more access to protected lands. In the city of London people are now penalized for driving their cars. While in Beijing bicyclist's are pressing their noses against the sparkling glass of GM's new auto show-rooms.
The simple truth is that when the oil is gone, for us it will be gone forever, we can't wait another 100 million years for more crude but whatever happens to our hydrocarbon based society under-floats the powerful black liquid will likely accumulate again and perhaps more than once before the sun burns out in 7 billion years. Whether the imperfect beings traversing the surface of the planet at that time are our descendents or not is up to us.
Transcribed by David Meldrum
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