How Oil Becomes Gasoline in Your Tank: Volume One
The Birds and the Bees
and Other Living Things on Earth are Organic, meaning they contain linked carbon atoms. When the carbon atoms are combined with hydrogen, what results is a hydrocarbon. When in a tree, they help create wood. When in an animal, they help create aardvarks and zebras. When either plant or animal life dies, it typically combines with existing natural hydrocarbons to become a fuel, such as oil, natural gas, coal or peat. Most hydrocarbons are usable as fuel.
Those that are easily burned are called VOCs, Volatile Organic Compounds. These include natural gas and certain distillates of oil. They also include sugar-derived compounds such as alcohols. There are others, but we’re concerned with distillates of oil. Geologists and miners know oil occurs in large quantities in certain kinds of geographies. There is no certainty that there is oil when a parcel is put up for lease, and so unless the parcel is in the middle of a large number of other parcels already producing oil, the lease is relatively inexpensive. And, what is being leased is the right to recover minerals, such as oil. The entire leased parcel is still available to the owner except for the area needed to explore and drill for oil. And, leases have expiration terms.
Where to find oil
Places that accumulate a lot of oil and gas are current or former sea beds. Ocean life has few options other than to sink when it dies. Also, with the movement of tectonic plates, what were previously gas or oil deposits can be force-fed into shale (and some other formations) under tremendous pressure. This has been going on continuously since earth gained a relatively-oxygen-rich atmosphere between 2.7 and 3.5 billion years ago.
Since most of the world is covered by water, it makes sense that much of the oil and gas is beneath the ocean. Rather than have countries or corporations fight for the right to resources in or under the sea, in 1994 a UN-sponsored convention created the Law of the Sea Treaty. This reinforced the earlier UN- sponsored convention in 1982 that established Exclusive Economic Zones. This differs from territorial waters, on which full sovereignty of the coastal nation is conferred, Instead, it confers a sovereign right to resources out to 200 nautical miles (about 370 km). The remainder of the world’s oceans are international waters.
There are enormous reservoirs of oil in Canada, the US, Mexico and Venezuela. Brazil has a good deal of oil, but it is offshore. Much of North Africa sits atop oil, as does the area from Algeria to Kurdistan. Russia has enormous deposits of oil. There are likely deep-water deposits off the coast of Asia. But not all oil is equally available.
Recoverable Reserves
The first consideration is the likely future sales price of oil. You can estimate the cost of extracting the oil, usually to within 10% plus or minus. If the oil is selling “at the wellhead” for more than that, it’s economically feasible to drill. If the cost of extraction exceeds the wellhead selling price, it is not economically feasible. The term “recoverable reserves” balances technology and finance. Does the technology exist, and what is the cost of extraction? Oil that can be extracted at a cost lower than wellhead selling price is deemed recoverable. Any other oil in that same deposit represents an unrecoverable reserve. You can see that recoverable reserves can actually increase with no new drilling, or decrease despite many new wells.
Having an approved lease does not give one the right to drill. That is a separate process, getting a drilling permit. So, when Jen Psaki says that oil companies should drill on the leases already granted, she is being disingenuous. The lease must be explored, an expensive process, to see if there is any oil or gas there, and how deeply it might be buried under/within what type of rock. Then there is the problem of the environmental impact statement. Recoverable gas and oil were discovered in upper New York State near the St Lawrence riverway. A proposal was put forward to use fracking. After the first two environmental impact statements returned a “minimal impact” finding, the third one finally satisfied the political agenda by recommending against the project.
Wells
It costs at least a few hundred thousand dollars to drill an exploratory well. If the first few show no value, it’s difficult to justify further work, because a full-fledged oil well costs about $26M on land and on the ocean floor it can exceed $1 billion.
The oil must be transported to a refinery. From Asia to the Americas it goes by seagoing tanker. From Africa to anywhere it goes via tanker. That requires getting the oil from the well-head to the loading dock, using pipelines, trucks or trains. The safest of these is a pipeline. Which makes Biden’s decision to close the XL pipeline difficult to understand. The oil is still coming, it’s just coming via truck and rail – both more likely to spill than a pipeline.
The Biden administration, in addition to making it difficult-to-impossible to get a drilling permit for a lease, has refused to approve any refinery upgrades. We have not built a new refinery in the U.S. in 27 years. Adding capacity to refineries had been a way to produce more gasoline and other fuels; now, that is forbidden. Blaming retail gas stations for the high price of gas is, well, bat-shit crazy.
Refinery
At a refinery the oil is pumped into a fractionating tower, where heat causes the most volatile distillates to rise to the top, and the least volatile to sink to the bottom. One thus can skim off high-power fuel from the top layer, and from the bottom liquid layer one gets bunker fuel, which is used to power most ships. In between you get diesel, kerosene, etc.
More to follow.
Thanks for the tutorial. At the moment easy oil is mostly gone. But there are an infinite number of deposits yet to be found and geology creates new ones. We are discovering that previously abandoned wells can be reopened using later technologies. The peak oil stuff remains nonsense.
Just think all that coal awaiting a return as oil, only a few thousand years from now or technology advancement.
I understood some of the opposition to the XL Pipeline was the route transversing an important source of drinking water for the Lakota reservation and that alternate routes were resisted by more politically powerful communities. Is that a correct interpretation?