Oil Facts

The Origins

As it becomes covered with further sediment over the course of millions of years, this layer is exposed to high pressures and temperatures. By the end of the process, it might seem as if the biomass has been “sunk” into the base ground; this is a popular error, instead, the biogenetic sedimentary layers have been covered over by ever more sizeable strata over a long period of time. Under such conditions, the long-chain, water-insoluble hydrocarbons contained in the biomass (the so-called kerogens) are split into short-chain, gas-like, liquid hydrocarbon chains, a process that is also known in the industry as “cracking”. The finely distributed kerogens are disintegrated by pressure and temperature, but not oxidized, and are able to find their way into the pores of minerals; this process is known as migration. The hydrocarbons collect in so-called “reservoir rocks” as petroleum and natural gas. 

If the petroleum encounters impervious mineral strata that prevent its further journey towards the earth’s surface or to the side (an oil trap) it collects there to create an oil deposit. In addition to petroleum, the mineral pores also contain deposited water and natural gas. Various attempts have been made to explain the origins of petroleum. Current scientific opinion suggests that it was created from hydrocarbon-rich deposits in shallow epicontinental seas. According to the biogenic or biotic theory of petroleum origin, petroleum was created from dead sea organisms such as algae that were deposited at the bottom of the sea over the course of several hundred thousand or even millions of years. If low-oxygen conditions are present near the seabed in the oceanic areas affected, enormous sedimentary layers with a high proportion of biogenic material will form over the course of time. The absence of oxygen in this deposition scenario prevents the complete decomposition of the biomass and a rotting sludge is formed.

A so-called gas cap is often created above oil deposits under very similar conditions to petroleum. Drill core sample from a petroleum-bearing layer of sandstone. A range of geological factors must be present to ensure the conversion of kerogens into petroleum and natural gas; the pressures and temperatures that occur during catagenesis play an important role here. Current scientific opinion suggests that a sub-surface depth of about 4000m should not be exceeded for bedrock and reservoir rocks to ensure that the hydrocarbon chains contained in the petroleum remain stable; these regions are also known as petroleum windows. Only natural gas deposits are likely at greater depths. Optimal conditions for the formation of petroleum as far as pressure, temperature and suitable oil trap structures are concerned are generally located on passive continental shelves, in rift zones and in the vicinity of subterranean salt domes. Over the course of further diagenesis, the kerogens may become bituminous, i.e. viscous and immobile. Because of the high costs involved, such deposits are of no interest for recovery in the first instance, but higher oil prices may make the processing of heavy oil fractions worthwhile. Sedimentary rocks containing high proportions of biogenic hydrocarbons are known as petroleum source rocks. An example of hydrocarbon-rich sedimentary rock that is well-known in Germany is Black Jura oil shale, which is often found on the surface in South Germany and is also an important petroleum source rock in the North Sea area. Sandy, petroleum-rich sediments that are found near the surface are known as oil sands.

Optimal conditions for the formation of petroleum as far as pressure, temperature and suitable oil trap structures are concerned are generally located on passive continental shelves, in rift zones and in the vicinity of subterranean salt domes. Over the course of further diagenesis, the kerogens may become bituminous, i.e. viscous and immobile. Because of the high costs involved, such deposits are of no interest for recovery in the first instance, but higher oil prices may make the processing of heavy oil fractions worthwhile. Sedimentary rocks containing high proportions of biogenic hydrocarbons are known as petroleum source rocks. An example of hydrocarbon-rich sedimentary rock that is well-known in Germany is Black Jura oil shale, which is often found on the surface in South Germany and is also an important petroleum source rock in the North Sea area. Sandy, petroleum-rich sediments that are found near the surface are known as oil sands.

Prospecting

"Targeted searches for petroleum and natural gas deposits are known as prospecting."

In the early period of petroleum production, people relied on features on the earth’s surface that might suggest the deposits of petroleum. Shallow deposits continually leak small amounts of petroleum and an example of this is the now exhausted St Quirin’s well near Bad Wiessee, on the lake at Tegernsee, which had been known since the 15th century; the petroleum that it exuded for centuries was primarily used as a medicine. Searches for deep oil deposits used to be carried out through a comprehensive analysis of the geological characteristics of an area of land. 

Test drillings were subsequently undertaken at selected locations, of which about 10 – 15% were successful. Sophisticated investigative methods were developed over time to make an increasingly detailed evaluation of the ground layers possible. The most common procedure is reflection seismology; here, vibrations are transmitted from the earth’s surface and the signals reflected by the varying ground strata are received with geophones and recorded.

Strata profiles can be calculated from the transmission times and characteristics of the reflected signals. The Vibroseis technique is used in about 2/3 of cases in Europe; here, groups of usually three to five special vehicles (which transmit a defined frequency to the ground by means of a kind of vibrating plate) are driven along a measured distance. Geophones are deployed in groups along the route to receive the reflected signals. Systematically covering an area with interlinking measuring routes makes it possible to calculate a three-dimensional model of the ground strata.

Recovery

In general, the recovery of conventional petroleum is carried out in the following stages. In the first phase, oil is raised to the surface through the natural pressure of trapped natural gas (eruptive recovery) or by “pumping“ (primary oil recovery). In the second phase (secondary oil recovery), water or gas is injected into the reservoir (miscible flooding or gas injection) and any additional oil is flushed out of the deposit. In a third phase (tertiary oil recovery), more complex substances such as steam, polymers, chemicals, CO2 or microbes are injected to increase the utlization rate still further.
Depending on the deposit, 10-30% of the oil present may be recovered in the first phase and a further 10–30% in the second, generally resulting in a total of 20–60% of the available oil. Given the escalating prices and dynamics of the global market, tertiary recovery can be expected to increase rapidly, even in the case of “old” deposits. Extracting oil from deposits that are located under bodies of water (“off-shore recovery”) causes particular problems; accessing the deposit requires drilling platforms (oil rigs) to be placed either on the seabed or to float above it so that oil wells can be drilled and their contents then extracted (production platforms). Directional drilling is of particular advantage here, as a larger area can be tapped from just one drilling rig. If an oil deposit is near the surface, oil can be recovered with open-cast mining, such as at the Athabasca oil sands in Alberta. Petroleum is recovered from deeper deposits using probes that can be inserted into the deposit via shafts. After the drilling work has been completed a dedicated production platform can be erected, such as Thistle Alpha.
Over the last few decades, oil production and its accompanying apparatus have caused considerable economic, social and ecological problems in a number of developing countries. Pipelines are broached or whole tankers hijacked by armed bands, as has happened in Nigeria for example, in order to sell the goods acquired (approx. 2.25 million barrels per day) to unscrupulous dealers for weapons, as many of the armed bands in the Niger Delta often feel they have been betrayed by the state and robbed and exploited by the large mineral oil companies in particular. This can sometimes result in a response of blind violence from the state, in which entire villages may be razed to the ground. Shell suggested there could be 1,000 victims of violence annually, while amnesty international put the figure at some 500 victims in a single week.

Global reserves and supplies

Confirmed global reserves for the year 2008 were calculated (depending on source) as 1329 billion barrels (182 billion tons according to ExxonMobil’s Oeldorado 2009) or 1258 billion barrels (172.3 billion tons according to BP Statistical Review 2009). The total reserves that have been located and can be economically recovered with the technology available today have – despite the amounts recovered annually – increased slightly over the last few years. While reserves in the Near East, East Asia and South America have decreased due to the exhaustion of oilfields and insufficient prospecting work, Africa and Europe have recorded slight increases.

Given the current state of technology, prospected land and consumption, petroleum reserves are enough to cover global consumption for another 50 years. The term “petroleum constant” describes a circumstance whereby such predictions of the static scope of petroleum may be regularly updated in the same way as with other commodities. In 2003, the largest petroleum reserves were located in Saudi Arabia (262.7 billion barrels), Iran (130.7 billion barrels) and Iraq (115.0 billion barrels), followed by the United Arab Emirates, Kuwait and Venezuela. However, critics of these reserves estimates point out that most of the reserves in countries that are not members of the OECD are not subject to independent monitoring (see footnotes to BP statistical review) and in many cases (such as in Saudi Arabia), all details of recovery data relating to individual fields and reserves are state secrets; for this reason, such critics consider these figures to be incorrect. A number of OPEC oil-producing countries are also suspected of being too optimistic in their estimates as their production quotas are dependent on the reserve volumes they record.

The predictions from a number of experts that the future price of oil will ineluctably rise as a result of reaching “peak oil” and maximum global production limits in the first decades of the 21st century are yet to be categorically confirmed. The price of oil did indeed reach a nominal and real record high in 2008 (at 147 US dollars per barrel) and remained at a comparably high level during the ensuing global economic crisis, but we are yet to establish conclusively that this price rise was due to reaching peak petroleum production. A definitive determination of “peak oil” is only possible in retrospect, with several years’ hindsight. The current problem is in any case not a drop in production but rather a failure to satisfy rising demand. Price is thus the only remaining corrective, as market conditions showed in 2008 with a peak price of almost 150 US$. The considerable expansion of supply as a result of marked price increases that had always been apparent in the past was, for the first time in history, not recorded in 2008, despite the exorbitant rise in prices.

The countries in the European Union are obliged to maintain 90 days’ reserves for times of crisis. A large part of the German reserves and a small portion of foreign holdings are located in the underground cavern facillities in the Zechstein salt layer near Wilhelmshaven, which is also where most petroleum is imported into Germany. The Erdöl-Lagergesellschaft petroleum storage company takes care of this task in Austria.

Given daily consumption of 87 million barrels, reserves of 1255 billion barrels would predict a cutoff period of about 40 years, and for 854 billion barrels about 27 years. When evaluating this figure, it should however be remembered that a global petroleum shortage will not arise until this (static or dynamic) period is completely up; unlike a tank, our petroleum reserves are not able to dispense daily volumes (production rates) of oil at will. Instead, there is a maximum possible production rate which is often reached when the well is about half exhausted, after which the recovery rate drops away (for physical reasons). Many experts are also expecting similar behavior in global oil production: after reaching a global production maximum (“peak oil“, see above), the global recovery rate will drop away. 

While there will be, from a purely mathematical point of view, enough oil to cover current daily consumption – even if this were to rise in comparison with today’s figure – it will not be possible to get the oil of out the deposits fast enough and thus to make it available to industry. The finite nature of petroleum resources will become apparent long before the last drop of oil is exhausted. The ultimate volume of oil calculated here is thus of only minimal economic importance; what is more interesting is the timing of global peak oil and the extent of the ensuing drop in production.

Global Productions

According to Abdullah Jum’ah (CEO of Aramco), approximately 1.1 billion barrels of oil had been recovered in the history of mankind up to the beginning of 2008. Most of the reserves were discovered in the 1960s. Since the beginning of the 1980s, annual production (2005) has been 30.4 billion barrels (with 87 million barrels consumed per day in 2008) – an amount beyond the capacity of the newly discovered reserves, with the result that existing reserves have been decreasing since this time. For this reason, some experts calculate the global production limit will bve reached some time between 2010 and 2020. Kenneth Deffeyes, Colin J. Campbell and Jean Laherrere fear peak oil may already have been reached before 2010. One result of this production maximum would be an ensuing drop in production, such that the demand forecast to run parallel with economic growth would no longer be met. 

Increasingly critical analyses depicting the threat of shortage scenarios in the short term have been provided by the British government, the U.S. Department of Energy and the central analysis service of U.S. Joint Forces Command, the United State’s defense force. The British government clearly seems to be reacting to the fact that Britain’s oil wealth has been dropping by approximately 8% per annum since 1999; as a result, the UK went from being an oil exporter to an importer in 2006.  Abdullah S. Jum’ah rejects such fears; he estimates that less than 10% of existing liquid oil deposits (including non-conventional reserves) has been recovered and at current consumption rates, there is enough petroleum to last for at least another 100 years. 

While private Western oil companies controlled just about 50% of global oil production in the 1970s, this figure had shrunk to less than 15% by 2008. Experts do not consider an oil shortage to be a foregone conclusion, there is instead a crisis of access to advanced technology (by the multinationals) and, inversely, in the lack of investment security in state-controlled oil production areas. In 2009, the main producers of petroleum were Russia (9,932,000 barrels/day), Saudi Arabia (9,764,000), USA (9,056,000), Iran (4,172,000) and China (3,991,000) (see also the “Production” table). Oil production in Germany originally provided for up to 80% of national consumption and was of great historical importance, but is now relatively minor.

Consumption in Germany

3.3 million tons of crude oil were produced in Germany in 2007. The proportion of petroleum recovered from German wells is about 3% of consumption and the most productive source here is the Mittelplate oilfield. Over the same period, the Federal Republic imported 106.81 million tons of crude oil but (re)exported only 0.6 million tons. A total of 109.4 million tons of crude oil was thus consumed in Germany in 2007 and, with the exception of a small portion of 5% which was used up immediately by industry, this all went on to be processed in a total of 15 oil refineries, which in turn are supplied by ten oil pipelines. In addition to this steady intake of crude oil, a further 29.1 million tons of finished petroleum products were also imported in 2007, via Rotterdam in particular. Of the finished petroleum products manufactured in 2007: 3.8% was immediately consumed by industry as an energy source, 53.7% was consumed by the overall transport sector, including road traffic (private vehicles, passenger and freight transport), air traffic (aviation fuel) and domestic shipping, 12% was used for heating energy for end users and 4.9% provided heat for commercial companies and public institutions. Agriculture and forestry accounted for 1.7%, and, finally, 23.9% was used as an ingredient for the chemical treatment of such products as fertilizers, herbicides, lubricants, plastics (e.g. injection-moulded products, rubber items, foams and textile fibers), paints, lacquers, cosmetics, food additives, medicines and the like. Consumption of finished petroleum products has been decreasing annually by about 1.5% since the 1990s, partly due to advances in energy efficiency (cf. energy-saving legislation in Germany) and partly due to a switch to natural gas or alternative energy sources such as biodiesel, solar power, wood pellets, biogas and geothermal energy.

However, preliminary results show that importation of petroleum and natural gas to Germany rose in value by more than a quarter (+28.4%) from 2005 to a total of 67.8 billion Euro in 2006 alone; the estimated peak in 2008 brought a total of 83 billion Euro with a further rise of +10% on the previous year’s tally. Figures from the Federal Office of Statistics for the period from 1995 to 2008 inclusive indicate that petroleum and natural gas imports increased from 14.44 billion to no less than 82.26 billion Euro, rising from an initial proportion of 4.3%, to represent 10% of all imports.

According to provisional figures up until November, the most important petroleum and natural gas supplier for Germany in 2009 was Russia, with a third (33.2%) of all commodity imports at a value of 34,708 billion Euro. This was followed by Norway, whose petroleum and natural gas deliveries amounted to 14,220 billion Euro, or 14% of all imports. The third-most important supplier for Germany was the United Kingdom, with deliveries to the value of 10,636 billion Euro, which made up a total of 10% of all German imports of petroleum and natural gas. In light of the drop in North Sea oil yields (a reduction of 590 kilobarrels/day to 980 kilobarrels/day by 2014), this ranking may well be ceded to Libya in the next few years.