Investing in precious metals 101

Shale Gas and Salty Oil

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  • Mon, Jan 24, 2011 - 09:26pm

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    Pops

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    Shale Gas and Salty Oil

Shale Gas and Pre-Salt Oil are two very important stories I didn’t see discussion of in a quick search here.

First:

Shale gas is natural gas in “tight formations” that requires directional drilling and fracturing of the rock formation (Fracking) to allow extraction. So far it’s expensive, wells have a short productive life and there are questions about environmental damage… But… there is a whole lot of shale.

Pre-salt oil (like Mocando and Tupi) is crude found under layers of salt – this is important because drillers have always stopped drilling when they hit salt, it was thought to have been deposited before the deposition of the oil producing organisms so salt without oil signaled a dry hole. Turns out, geologic action caused sediments is certain areas to actually turn upside down while keeping the oil trapped in place, so drill through that salt layer and voila or eureka or whatever a gusher  – that’s the way I understand it anyway.

Now…

“Peak oil” says maximum flow comes when half of the extractable resource is used. If we are at peak or thereabouts, then the remaining half will be by definition harder and slower coming. If this is true, then it’s no surprise these supplies are super deep and technologically hard – read “expensive” to extract.

BTW, it shouldn’t be a surprise either that we are discovering more “oil”. We better hope we are finding more because if we don’t, there is only a 40 years reserve to consumption ratio at current levels and that ain’t much.

So…

PO “True Believers” usually say: “it’s a drop in the bucket”, “only a few day–months consumption”, “I’ll believe it when I see it.”

PO “True Deniers” usually say: “see, we’re saved” and “Fill’er Up!”

 

What is your opinion about these two developments?

Have they changed your outlook?

  • Mon, Jan 24, 2011 - 09:49pm

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    Re: Shale Gas and Salty Oil

Pops –

PO “True Understanders” usually say, “What is the Energy Return On Energy Investment?”  and “How many barrels of shale or pre-salt oil can be extracted per barrel of oil energy expensed to extract?” and “What happens when the previous ratio approaches 1:1?”

  • Mon, Jan 24, 2011 - 09:58pm

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    Re: Shale Gas and Salty Oil

So, you think this stuff will never come to market?

  • Mon, Jan 24, 2011 - 10:16pm

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    Re: Shale Gas and Salty Oil

If we were to add up all the oil still available, and subtract what we, the human species have extracted thus far, we would be stunned to learn how much is still left. Way more than what we have extracted for sure. The problem is, the extracting process is slowing because of the difficulty and energy cost required in getting it and refining it. Then yes, if we also add in the environmental cost, much would be way more expensive than it is worth.

The other equation to measure is how much energy it takes to extract the oil. As the energy costs increases, the less net energy is available for work.

 

As far as gas shale, I hate it with a fierce passion. We are flirting with disaster, from poisoning underground water, to cracking the glue that holds together the earth.

http://www.earthworksaction.org/fracturingearthquakes.cfm

  • Mon, Jan 24, 2011 - 10:27pm

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    Re: Shale Gas and Salty Oil

[quote=Pops]

So, you think this stuff will never come to market?

[/quote]

Sure it will – because most people only look at the cost side of the equation.  There will always be oil and at some $googledysnotfreakin’highnumber / bbl it will always be profitable to extract oil from a cost perspective. 

Proponents of these new techniques will tell you that the energy piece is ‘costed’ in to the price of a bbl, but when it “cost’s” 1.2 bbls worth of oil energy to extract a bbl of oil, why do it? 

  • Mon, Jan 24, 2011 - 10:31pm

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    Re: Shale Gas and Salty Oil

So sevenm, you too think these two sources won’t have an impact on the market?

Energy return is a good ruler as far as it goes but I’ll be honest, I’d rather have a gallon of gas for my chainsaw than a buck saw and a sack of corn with twice as much “energy”…

 

114,000 btu/gal unleaded, 7500 btu/lb 0% corn

  • Mon, Jan 24, 2011 - 10:46pm

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    Re: Shale Gas and Salty Oil

[quote=Pops]

So sevenm, you too think these two sources won’t have an impact on the market?

Energy return is a good ruler as far as it goes but I’ll be honest, I’d rather have a gallon of gas for my chainsaw than a buck saw and a sack of corn with twice as much “energy”…

 

114,000 btu/gal unleaded, 7500 btu/lb 0% corn

[/quote]

Not in my opinion. Oil from shale can not possibly replace the production of the declining super-giant fields – it has to be cooked out. Natgas shale can, but only because gas flows from shale.

Your chainsaw can only operate on the net energy! Remember that!

  • Mon, Jan 24, 2011 - 11:22pm

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    Re: Shale Gas and Salty Oil

Actually, I was talking about shale gas and pre-salt oil.

I’m not arguing either will postpone peak forever, I’m not arguing they will postpone it at all for that matter, I’m just trying to get a feeling for how I might need to update my overall assessment in light of new facts.

[quote=sevenmmm]Your chainsaw can only operate on the net energy! Remember that!

[/quote]

No, that is incorrect. 

My chainsaw can only operate on gasoline. Whereas a pumpjack and most other equipment can run on electricity which can be made any number of ways.

I would trade many times the equivalent amount of crappy lignite coal or field corn or meadow wafers for a gallon of extremely versatile and energy dense gasoline. 

Better remember that. :^)

 

  • Tue, Jan 25, 2011 - 02:10am

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    Re: Shale Gas and Salty Oil

[quote=Pops]

Actually, I was talking about shale gas and pre-salt oil.

I’m not arguing either will postpone peak forever, I’m not arguing they will postpone it at all for that matter, I’m just trying to get a feeling for how I might need to update my overall assessment in light of new facts.

[quote=sevenmmm]Your chainsaw can only operate on the net energy! Remember that!

[/quote]

No, that is incorrect. 

My chainsaw can only operate on gasoline. Whereas a pumpjack and most other equipment can run on electricity which can be made any number of ways.

I would trade many times the equivalent amount of crappy lignite coal or field corn or meadow wafers for a gallon of extremely versatile and energy dense gasoline. 

Better remember that. :^)

 

[/quote]

Nononono. The only way you will get gasoline – for that chainsaw – below net, is if  crappy lignite coal is used as a fuel source for those pump jacks and refineries. And I think that is dreaming kinda’ ideating. As far as corn is concerned, as soon as oil is below net, there will be a lot less corn and you will be on one end of a two man saw. 

 

Yeah ok, I didn’t address salty oil. It is a topic I haven’t studied. Maybe you have some links to explore?

  • Tue, Jan 25, 2011 - 12:13pm

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    Re: Shale Gas and Salty Oil

Pops, not sure what your main point is, but reading between the lines, you seem to be saying that there’s plenty of oil left, albeit more difficult or expensive to extract.

The main points we make around here about oil are these:

  • It’s the flow rates that matter.  Can we pump more out of the ground next year than this year, or not?
  • And it’s the EROEI that matters.  Can an exponentially driven, debt-based economy function well, or at all, on declining EROEIs?  We simply don’t know because humanity, as a species, has never encountered this situation before but the early returns are not promising.

The only things I care about in this pre-salt, tight shale formation, horizontal slant drilling bottle brush high-pressure fracking story are whether or not all of our combined efforts in these exotic plays can  not only offset the declines in the existing conventional plays, but also increase the total amount of energy available every year going forwards.

So far, the data says “no” but we are always open to new data around here.  If you’ve got it, bring it.  So far there’s not really enough in your posts to really react to, except with opinions.  

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