Carbon, Hydrogen, and People

Vikram Rao, Vice President, Technology, Halliburton Energy Services

Editor’s note: This is the first installment of a new yearlong series designed to stimulate discussion in research and development. The Technology Tomorrow articles will be published every other month and vary in emphasis, covering topics as broad as R&D industry trends and as focused as improving reservoir recovery factors. This series is one of several actions being taken by the SPE R&D Advisory Committee to encourage R&D development and discussion. The target audience is the entire readership of JPT. We hope to create a forum that sparks discourse and ideas, including those ideas that may not be in the current mainstream of thought. Comments on the articles are welcome. Please send any questions, comments, or ideas to vik.rao@halliburton.com.

Two of the most pressing problems facing the oil and gas industry are the perceived shortages of oil and natural gas and an aging workforce combined with the inability to attract talent to the industry. The first is manifest in the price of oil worldwide, and that of gas in the consuming countries. Both of these are at unprecedented highs and, more importantly, are widely forecast to stay high for a number of years. Unlike the oil price shocks of the 1970s, this one is demand driven, and this time the world’s workhorse producing fields are in the decline phase.

So, do we face a medium- to long-term prospect of shortages of oil, gas, and people? This article advances the belief—probably not. Energy molecules are plentiful; they are just in the wrong form or in the “wrong” place. Similarly, qualified personnel are available and not averse to working in the energy industry, they are just in places we do not source from enough. Much support can be offered for the first contention; the one regarding people relies on solid numbers and a dose of conjecture.

Unlocking the Potential

All energy-producing compounds comprise carbon (C) and hydrogen (H) in some proportion. Coal is at one end of the C/H spectrum, with the carbon-to-hydrogen ratio in excess of 8. At the other end is natural gas. Curiously, these two polar opposites are the principal sources of energy for electricity generation. The molecules in the middle are used for transportation and, for that purpose, need to be delivered in the form of light and middle distillates, gasoline, and diesel. Two unconventional sources of oil found in abundance are shale oil (more than a trillion bbl) and ultraheavy oil (also well over a trillion bbl). The former is in the form of kerogen, requiring thermal modification to yield useful oil, and the latter is a material that does not flow readily and, consequently, is difficult to produce and transport. It has C/H ratios in the vicinity of 8 and thus is many hydrogen atoms short of the needed light and middle distillates.

The deposits of ultraheavy oil are near the largest consuming country, the U.S. We simply need the technology to unlock this potential at a reasonable cost to the consumer and to the environment. The latter point relates to the fact that 20% or more of the ultraheavy oil is a carbonaceous residue requiring dispensation. In congressional testimony last year, Shell reported on a large ongoing effort to convert kerogen into useful distillates in situ. While the details are understandably sketchy, this promises the sheer elegance of a “refinery” in the ground. There is also a lot of work under way, mostly in Canada and the U.S., on how to economically recover ultraheavy oil.

But all of these efforts still amount to only a small body of work. Furthermore, most of the likely solutions will require coordinated decisions between sectors of companies that rarely collaborate: the upstream, midstream, and downstream. In fact, in my view, the principal reason for the slow pace of development in this area has been the hurdles presented by the midstream (the difficulty of transportation) and the downstream (the difficulty, cost, and unpredictability of feed, impeding the conversion of refineries to process heavy crude).

The Potential for Gas

Gas destined for power and chemical plants is dominantly in the form of methane, and a large majority of these accumulations are far from the importing nations. Transporting gas in liquefied form—mostly as liquefied natural gas and some compressed natural gas (CNG)—to the users largely solves this problem. More recently, there is a trend to transport liquids derived from Fischer-Tropsch synthesis, the technology known as gas to liquids. The science is 80 years old, and the scale alone requires reservoirs in excess of 7 Tcf to be economical. Stranded gas in small accumulations, especially in deep water, could use a technology boost. But, arguably, the largest potential reserves in currently intractable form are gas hydrates. These are Buckyball-shaped cages of ice with trapped methane in concentration approximately 160 times that of free gas.

Fig. 1 shows U.S. Geological Survey estimates of organic carbon worldwide. The quantity of gas in hydrate form is more than double the carbonaceous fuel from other sources. The technical challenges lie in locating economic deposits and then developing the means for releasing the gas. Geographic location may not be an issue because the mechanisms for hydrate formation lead one to expect that deposits will be close to existing infrastructure. Significant research is being sponsored by the U.S. Dept. of Energy on this topic. Much work also has been done by consortia, in which Japanese interests are prominent, but breakthroughs still seem distant.

Fig. 1—Distribution of organic carbon in Earth reservoirs (excluding dispersed carbon in rocks and sediments which equals nearly 1,000 times this total amount). Numbers in gigatons (1012 tons) of carbon.

Another intriguing source of gas is synthetic gas (CO+H2), derived from the gasification of coal. Of particular interest is the exploitation of low-grade lignite deposits, which are abundant (54% of U.S. coal reserves) but have little conventional utility because of high ash and moisture content. However, they are ideal for gasification because the moisture is a necessary ingredient in the desired reaction of C+H20–>CO+H2, and because lignites have highly volatile components. Their use for power requires little modification to natural-gas fired units, and a research institute estimates that gasified coal can deliver power at less than U.S. $0.05/kilowatt hour, with one technology projected at lower than $0.04. That would break even at a natural-gas price of U.S. $3.5/Mcf. But the viability of synthetic gas for petrochemicals still needs development. In particular, the ability to economically produce methanol and di-methyl-ether (DME), respectively effective partial substitutes for gasoline and diesel and for esters for fabrics, would advance the notion that synthetic gas is a viable substitute for imported natural gas, especially in countries with low-grade coal deposits. DME is particularly intriguing because the absence of a carbon-to-carbon bond means there is no soot on combustion, and it is said to transport as easily as CNG.

A Shortage of Engineers?

Regarding the perceived shortage of people in the industry, there is a tendency to focus just on the availability of petroleum engineers. In point of fact, the vast majority of degreed persons employed in our industry are not petroleum engineers. They do not make up even a majority of the engineers employed in the oil and gas industry, and this is decidedly so in the downstream. Even in the E&P sector, engineers are employed in job classes in which science majors with some additional training would be perfectly suitable. In areas where there are local shortages of engineers, this line of thought should be explored further. The retention rates of this group likely would be higher as well.

Engineers in general are in short supply in the U.S. and Europe, partly because of the cyclical nature of the industry. Actions have to be taken to counter this trend. However, noting my previous point that the majority of engineers needed are of the generic mechanical, electrical, civil, chemical, and the like, we need to take stock of the countries where these are being minted at a significantly faster rate than in the U.S. There is also no reason to believe, and this is largely modestly informed conjecture on my part, that there is any antipathy to the energy industry in places such as, for example, China, Russia, and India. China and India are each producing engineers at annual rates many times that of the U.S. In the case of India, for instance, language is not a problem because all the curricula would have been in English. Hence my original contention: there is no shortage of engineers, they are simply in places we do not source from enough.

Vikram Rao is Vice President, Technology, for Halliburton’s Energy Services Group. In addition to stewardship of the group’s technology efforts, he is also responsible for the set up and management of intellectual asset management. Rao previously held executive management positions in research and development, product launch, reservoir studies, and sales and marketing. He joined the company in 1974 as a senior research engineer. Rao serves as a Director on the Boards of Fiberspar Inc. and Prime Photonics Inc. He also serves on the Advisory Boards of KaDa Research Inc., PointCross Inc., the U. of Houston School of Engineering, the U. of Texas at Austin Petroleum Engineering Dept., and Zebra Imaging Inc. He is the author of more than 20 publications and has been awarded more than 15 patents. Rao earned a BS degree in engineering from the Indian Inst. of Technology in Madras, India, and MS and PhD degrees in engineering from Stanford U.