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Old 04-13-2008, 08:18 AM   #15
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Having worked in the oil industry for 30 years, refinery and production I find this thread very interesting. As mentioned the crude source is locked into shale and very very expensive to extract. Wells won't work, it would have to be mined which they are doing now in Alberta.

The other major problem with much oil left in the world is that it is low gravity and high sulfur. Both of which mean very high refining costs with a limited value crude. Sulfur is overly abundant. The crude would have to be cracked to make diesel - it appears to look like root beer and smells really bad. Cetane improvers are required to bring it up to speck. High paraffinic crudes produce yellow diesel with that sweet aroma and cetane improvers are not needed.

A lot of the problems you see with present refineries has to do with the lack of high gravity low sulfur crude. It is very easy for a small refinery i.e. to loose $40,000/day or it can make $40,000/day. This has led many to leave the business and go into oil trading which is what much of our pricing is do to today. You often can make 2 -6 cents a gallon of diesel by hauling it from LA to Bakersfield.

A 3 billion dollar refinery in Utah would be huge, not for 15 wells.

The 100,000 bbl/day refinery in Bakersfield originally owned by Gettya/Marathon. Texaco bought the 2 refineries, combined them, operated them for sometime then sold them to Shell. Shell operated them for a few years then decided to close them. They were finally sold to an independent. The problem was low gravity high sulfur crude. If Kern County was a state it would be the 4th largest oil producing State so they had crude, just not economic.

In the refinery I worked in each month a huge computer program was run to determine which crude to buy and what products to make to yield the most profit. It could change daily and often the refinery was shut down during really bad periods. The lighter the product the more profitable, solvents for example. The heavier the product the less profit, heating oils and diesels.

What is needed is a huge source of high gravity, high paraffin low sulfur sweet crude.
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Old 04-13-2008, 08:46 AM   #16
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It is my understanding from authoritative sources, that oil shale such as is found in ND, CO, UT, AB, can now be recovered with new technologies. They are currently doing so in the Bakken fields.

See- Could There Be Billions in the Bakken?
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Old 04-13-2008, 09:04 PM   #17
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Forrest, since you've been in the oil business for 30 years, I've always been curious, as to whether it would be possible for the Oil companies to manipulate refinery output to keep fuel inventories low so as to justify maintaining high prices at the pump?

Not suggesting they would resort to such unethical practices, but I've always wondered if such a practice could possibly exist.

Thanks, Jim
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Old 04-13-2008, 09:18 PM   #18
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Our country has huge resources in oil and gas shales. One gas shale, known as the Antrim Shale and is huge in Michigan / Ohio etc. In Kern County California there are huge deposits of oil in the diatomite zone. This zone is up to 5,000' thick. This is a high quality crude but there is also high CO2 - corrosive.

Horizontal drilling has been done for some time and now they are applying new fracing techniques. One of the problems of low permeability wells is that they are very prone to damage of the well bore and formation. but with the price of oil being around $100/bbl more can be done profitably. The Williston Basin is noted for it's high paraffinic high gravity crude but that also presents production problems.

There is a huge shallow high paraffinic oil in Prudhoe Bay. This is about 5 times the size of the original discovery. Problem is how do you produce a low pour point crude through perma frost?

So oil is there and even some of it is high quality but it is more and more expensive to drill and produce. Get used to $4 gallon gas and diesel.
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Old 04-14-2008, 11:15 AM   #19
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<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">Originally posted by LVJ58:
Forrest, since you've been in the oil business for 30 years, I've always been curious, as to whether it would be possible for the Oil companies to manipulate refinery output to keep fuel inventories low so as to justify maintaining high prices at the pump?

Not suggesting they would resort to such unethical practices, but I've always wondered if such a practice could possibly exist.

Thanks, Jim </div></BLOCKQUOTE>

Hey Jim,

Good question. It would be very difficult and very expensive for refineries to manipulate inventories in my opinion. Crude oil is purchased by the refinery by contract. They have X number of Barrels coming in each day. They also have X number of barrels of products going out each day often on a contract basis. Tank storage is very very expensive and time consuming to construct. If they slow down production they have to slow down the incoming crude - difficult. But then they have all the employees and what do they do with them. They also have huge and I mean huge energy expenses. The refinery process is basically a distillation which means all the crude is heated to very high temperatures and various fractions are removed at various points of the tower. This is the tallest and largest diameter tower in the refinery.

There are many other smaller processes going on and these also require heat. Products which have a very low pour point are kept in heated tanks.

Most refineries will have from 5 - 7 days crude storage. Usually the tanks are about 2/3 rds full. The same storage for the products is not true, it is less. If any one of the products accumulates and can not be sold and shipped then the whole system has to be slowed and the whole process which has fixed costs means the refinery profits decrease. This is something they do not want to happen and why refineries have pretty good marketing groups. BTW all refineries supply all products to everyone.

So let's manipulate diesel and gasoline. If you are buying a crude to maximize diesel and gasoline production you only have about 2 days worth of crude tankage left and you are full. So let's assume you will continue to refine. On the products side you have even less storage. Once your product tanks are full you have to start shutting down and this process takes days to do and days to undo. The process when planned is called a turnaround. It usually happens about once a year and a huge number of contract workers come in and everything is taken apart, checked, maintained, replaced or whatever needs to be done. The expense is huge because there is no production and you have all your regular employees plus all the contract employees.

There are three types of tanks in a refinery - crude storage - production and blending tanks and then sales tanks. Sales tanks have to meet ASTM and state standards all the time. If W&M comes in and any sales tank is off spec let's say octane or vapor pressure the fines are huge - from $100,000 to $1,000,000.

Refineries don't want this liability, the sooner they sell it the better. N

Now come the oil traders and I believe in my own mind this is a different story. They are specialists in pricing, holding and trading. They may or may not be related to a refinery. In my own mind I believe this is where the shenanigans occur. They have little to no fixed costs, there labor force is small, no energy costs etc. They have the opportunity and the ability to manipulate. They also have the dollars. A small trading company (15 employees) I know of made more $/day than a small 20,000 bbl/day refinery (200 employees). Storage they can find - even jumbo tankers.

Once we had a jumbo with Chinese 87 octane gasoline that a major bought and trucked to our refinery for holding and sales in our sales tanks through their trading group. Problem was the gasoline tested in our engines as 86.9 octane not 87. Outside independent labs gave it an 87 but we didn't (they don't do many). The major's lab gave it an 87 but we didn't. We used 87 Oct. standards and had our fuels that met 87 and theirs knocked at a different level. So since we didn't round up I would not sign the spec sheet. The refinery manager blew and since he was a Chemical Engineer I handed him the spec sheet to sign - he wouldn't. We had to reblend the entire tanker to 87 octane at a huge cost but in our lab all the data was consistent. If we had to lower one we had to lower all and that we could not do.
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Old 04-14-2008, 04:13 PM   #20
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Forest, I truly appreciate your detailed explanation of the refining process and how it would be somewhat difficult to manipulate the fuel inventory.

My curiosity was prompted by a news report several years ago about a whistleblower in the oil industry who gave a copy of a letter prepared by a major oil company to one of our Congressman or Senators.

Per the news report, the content of the letter basically urged Independent oil companies to slow down their refining process so as to maintain higher gas prices.

The interesting note was that I never heard or read about any follow up on the issue.

Again, thank you, Jim
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Old 04-15-2008, 06:27 AM   #21
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So what are the manufacturing problems or possibilities with drilling here
<span class="ev_code_RED">4.3 billion barrels of oil can be recovered from the Bakken shale formation in North Dakota and Montana, using current technology.</span>
Huge Oil Reservoir May Lie Under Northern Plains



<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">Originally posted by Forest Grump:
Our country has huge resources in oil and gas shales. One gas shale, known as the Antrim Shale and is huge in Michigan / Ohio etc. In Kern County California there are huge deposits of oil in the diatomite zone. This zone is up to 5,000' thick. This is a high quality crude but there is also high CO2 - corrosive.

Horizontal drilling has been done for some time and now they are applying new fracing techniques. One of the problems of low permeability wells is that they are very prone to damage of the well bore and formation. but with the price of oil being around $100/bbl more can be done profitably. The Williston Basin is noted for it's high paraffinic high gravity crude but that also presents production problems.

There is a huge shallow high paraffinic oil in Prudhoe Bay. This is about 5 times the size of the original discovery. Problem is how do you produce a low pour point crude through perma frost?

So oil is there and even some of it is high quality but it is more and more expensive to drill and produce. Get used to $4 gallon gas and diesel. </div></BLOCKQUOTE>
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Old 04-15-2008, 04:04 PM   #22
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Just because you can drill does not mean you can produce. Oil shales have high porosity but low permeability. Basically this means they have a lot of space for oil but these spaces are not connected by large openings. A well bore has just so much surface area. You can increase this surface area in the zone of interest by increasing the diameter of the well bore or by horizontal drilling. Also to increase surface area the well is often fraced, high pressure is used to pump fluids into the well bore and then fracture the zone at the desired intervals. Sand is often used to keep the fractures open. Water causes shales to swell so other carrier fluids need to be used. Horizontal wells can be fraced. Fracing large zones such as a horizontal well is expensive.

All the Fluids and materials used in a tight formation need to be ultra clean if not the well bore will be plugged. Often the materials from the frac process remain in the well bore as skin damage which prevents oil from entering the well bore.

The areas of oil that we are speaking about are shale and diatomaceous earth formations that are very tight. This creates the problems talked about above plus there can be other problems dealing with the type of oil itself - high or low gravity, high or low pour point, presence of paraffins and asphaltenes. This oil is high gravity and paraffinic. Trying to squeeze paraffin through a narrow opening is difficult. Paraffins often plug not only the well bore but also the well and production lines. Any place there is a pressure drop paraffin if present can and will come out of solution.

An 6,000' foot well can cost $1 million dollars to drill and another million to complete. Now you have a well but you also need production facilities. This can add another million or more for each well. Corrosion and scale can require the replacement of all tubulars each year if not treated. Paraffin can plug the tubulars requiring them to be pulled and replaced.

Also oil formations contain gases. In addition to petroleum gasses they can contain carbon dioxide and/or hydrogen sulfide. Both are toxic and both are corrosive. Tubulars need to be protected from the corrosion and any H2S produced needs to be removed and not released into the environment.

Reservoirs also contain water/brines and all of the associated problems with corrosion and scale and bacteria. It is not uncommon for a shale to have a produced water which is incompatible with the water in neighboring zones.

So what this means is dollars and lift costs. How many dollars it costs to lift each barrel. As lift costs approach the sales price of the crude the profitability of the project declines. Then there are the refining expenses and value of the crude itself as to the pruducts that can be made.

The oil that remains is going to cost a lot to produce and refine because of the nature of the oil and where it is located.
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Old 04-15-2008, 04:39 PM   #23
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Actually they are currently drilling and pumping oil from the Bakken fields. Yes, the oil is high paraffin but even that can be processed and/or traded for other oils that are more conducive to gasoline cracking.

BTW, I was talking to my sister in SD today, and she told me there is an effort afoot to build a refinery near Elk Point, SD. I told her there hadn't been any permits issued for years.

Anyway, I went to Google and found some interesting information.

- SD Refinery

Just as here in Arizona, the greenies have put on a mis-information/dis-information plan to scare the locals into keeping the refinery from going ahead.

My God, people have been living around refineries which were built dozens of years ago and may not and are not likely to be up to the standards of construction of any new planned operation. Are there thousands of people living near these old plants dying in droves&gt; I think not.

These are the same sleazy tactics the far left greenies have been using to keep us from having a source of gasoline that would comply with our VERY unique formulation standards.

This crap has been going on for 20+ years and MUST STOP. But it is up to us, the voters to stem the tide of irrational radical leftists.
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Old 04-15-2008, 06:29 PM   #24
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You got that right Hamguy!

Not just, gas prices but food prices too.

Farmers are growing corn for Ethanol instead of food driving up the prices of food and animal feed. Farmers who were growing soybeans and wheat have switched to corn driving up the price
of those foods and grains.

Moreover, the ludicrous thing is that not only does Ethanol have less energy than gas, it is more polluting to manufacturer and takes 600 gallons of water to grown the corn and manufacture one gallon of Ethanol.

Global warming and eco-radicals is one of the greatest frauds ever perpetrated!

<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">Originally posted by hamguy:
Actually they are currently drilling and pumping oil from the Bakken fields. Yes, the oil is high paraffin but even that can be processed and/or traded for other oils that are more conducive to gasoline cracking.

BTW, I was talking to my sister in SD today, and she told me there is an effort afoot to build a refinery near Elk Point, SD. I told her there hadn't been any permits issued for years.

Anyway, I went to Google and found some interesting information.

- SD Refinery

Just as here in Arizona, the greenies have put on a mis-information/dis-information plan to scare the locals into keeping the refinery from going ahead.

My God, people have been living around refineries which were built dozens of years ago and may not and are not likely to be up to the standards of construction of any new planned operation. Are there thousands of people living near these old plants dying in droves&gt; I think not.

These are the same sleazy tactics the far left greenies have been using to keep us from having a source of gasoline that would comply with our VERY unique formulation standards.

This crap has been going on for 20+ years and MUST STOP. But it is up to us, the voters to stem the tide of irrational radical leftists. </div></BLOCKQUOTE>
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Old 04-16-2008, 05:38 AM   #25
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[QUOTE]Originally posted by apackof2:
So what are the manufacturing problems or possibilities with drilling here
<span class="ev_code_RED">4.3 billion barrels of oil can be recovered from the Bakken shale formation in North Dakota and Montana, using current technology.</span>
Huge Oil Reservoir May Lie Under Northern Plains

Let's not lose the point here.
All of these resources can be extracted and refined. It is a question of at what cost.
The costs of getting these resources to the pump are exponentially more.
The point is not whether or not there is enough oil.... the issue is around availability of CHEAP oil.
There is an inflexion point hanging out there that would allow these alternative sources to be practicial but it is far higher than 150 a bbl. Do not worry whenever it becomes pratical to extrat and refine these resources it will be done.
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Old 04-16-2008, 07:51 AM   #26
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The cost of producing ethanol remains significantly higher than the cost of producing fuels from petroleum. The U.S. Government, since 1978, has applied tax incentives intended to make ethanol competitive with gasoline in the motor fuel marketplace.


In other words, you the taxpayer is subsidizing the cost at the same time building permits for new oil refineries are being denied.

There are already companies drilling in the Bakken but where are the refineries to receive the oil being drilled?



<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">Originally posted by Gossen:
[QUOTE]Originally posted by apackof2:
So what are the manufacturing problems or possibilities with drilling here
<span class="ev_code_RED">4.3 billion barrels of oil can be recovered from the Bakken shale formation in North Dakota and Montana, using current technology.</span>
Huge Oil Reservoir May Lie Under Northern Plains

Let's not lose the point here.
All of these resources can be extracted and refined. It is a question of at what cost.
The costs of getting these resources to the pump are exponentially more.
The point is not whether or not there is enough oil.... the issue is around availability of CHEAP oil.
There is an inflexion point hanging out there that would allow these alternative sources to be practicial but it is far higher than 150 a bbl. Do not worry whenever it becomes pratical to extrat and refine these resources it will be done. </div></BLOCKQUOTE>
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Old 04-16-2008, 09:52 PM   #27
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[QUOTE]Originally posted by hamguy:
Actually they are currently drilling and pumping oil from the Bakken fields. Yes, the oil is high paraffin but even that can be processed and/or traded for other oils that are more conducive to gasoline cracking.

High paraffin high gravity is a high value crude especially if it is sweet. It does not need to be cracked. Low gravity crudes are those that are cracked. High paraffinic crudes make excellent jet fuels and diesels.
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Old 04-16-2008, 09:57 PM   #28
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Most crude is transported to the refinery by pipeline, second is trucking and third is railroad. As existing crude supplies are depleted and new supplies become economical there is plenty of existing capacity in the transit system to get the crude to the a refinery.

This year farmers are not planting the same amount of corn as they did last year, hmmmm farmers will control the price of ethanol by controlling the amount of corn they grow.
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