An oil industry leader's perspective on abundance, etc.

I talked this afternoon with ChevronTexaco's corporate Vice President of Technology and Environmental Affairs, Donald L. Paul, on the subject of energy and its future. (Paul was a former colleague at Chevron.) The conversation as reconstructed below presents views of an influential industry leader that contrast with most of the views that have appeared from time to time on this forum-including my own.

Disclaimer: The following conversation does not precisely reproduce the conversation we had and may not accurately represent Paul's views-but it was written soon after and is as faithful to the ideas, concepts and facts as I was able to make it.

DW- What's the future of petroleum?

DLP- Looks great. China has now become..

DW- I don't mean marketing. I know there's plenty of demand. What about exploration and production?

DLP- There's plenty of molecules. That's not an issue.

DW- A few years ago Chevron management decided to buy huge reserves around the world and soft-pedal its own exploration for new fields.

DLP- You've got to both buy and explore. But there's no way we're going to replace all the oil we produce by finding new reserves. The only really good prospects left lie in deep water or in the arctic.

DW- So the world is running out?

DLP- No, there's plenty of molecules. But the easy reserves are running out.

DW- Does that mean we can expect prices to start rising fairly near-term?

DLP- Not necessarily. The deciding factor is how efficient we can make the conversion from molecules in the ground to molecules in the barrel. All oil fields leave a large fraction of their hydrocarbons behind. The tar sands [of Alberta, Canada] have a trillion barrels in place, and the extraction cost has halved over the past two[?] decades. Improved technology could greatly expand the amount of producible reserves without increasing ultimate product cost to consumers.

Furthermore, the decline curve for gas is not nearly as far along as for oil, and we'll be going more and more to gas. One problem with gas is the associated CO2. The giant Gorgon field in Australia has 20% CO2, and the Australian government has stipulated that we must produce the field without releasing CO2. That's a problem. I don't know whether we can reinject it all.

DLP- ChevronTexaco has now become the only major company in the US with a serious effort to make hydrogen available [from methane] as a fuel. We bought this capability from Texaco. The US government and the military are already significant customers.

DW- Environmentalists and some politicians claim that making hydrogen from methane only worsens "CO2 pollution," so we should be getting it by electrolysis from seawater instead.

DLP- Well, as you know, that's definitely a losing proposition that uses more energy than it makes available. Now, Iceland has practically infinite reserves of geothermal energy, so it makes sense for them to get hydrogen from water. But not for the rest of us.

DW- How about producing hydrogen in Iceland for the rest of the world?

DLP- A big problem with hydrogen is that it's not cost-effective to transport it. To liquefy or even compress it requires a significant fraction of the energy it contains. Ultimately we'll probably go to some solid form.

DW- You don't mean freezing it?!

DLP- No! I mean chemically bonding it with solids, such as adsorption on carbon [?]. [I didn't understand what he said on this. But I added, "Something like gas hydrates?" And he replied, "Yes."]

DLP- ChevronTexaco also has the largest industrial [?] solar energy array. It covers a full six acres near the Kern River oil field [in California], and it's used to power oil-field equipment so that we can market the methane that would otherwise be used for this purpose. We'll probably do even larger arrays in the future. In Holland we're employing windmills for similar purposes.

Don

 
Received on Sat Dec 6 03:44:17 2003