August 18th, 2007

Refinery capacity?

Ok, when did "refinery capacity" become a code word for "taking this peak production thing in the teeth"?

I just bumped into this again while catching up on the dilbert blog. The oil industry keeps trying to claim that the limiting factor on oil production is refinery capacity. This is silly.

For those of you who don't remember "peak production", it doesn't mean there's no more oil in the ground, just that we can't extract it any faster than we're doing. It's easy to understand why we've already found all the existing oilfields of any real size: the bigger they are the easier they are to find, and we had sattelite geosurveys back in the 70's and reasonable computer models by the mid-80's. The planet's only so big and we've been over every inch of it, including most of the oceans. We can only get so many barrels per day out of a given oil field, and since we've already found and developed all the interesting oilfields you can't suck oil out of the ground any _faster_ than we're doing right now, but demand keeps increasing (with the big spike between 2001 and 2005 being due to China going from essentially no imports to the second largest importer in the world very quickly).

Why can't we get oil out of existing oilfields faster? Has to do with geology and flow rates through rock. The fastest way to get oil out of the ground is steam injection. (If you try to just suck oil out you create a vacuum and the oil won't come, something has to go back down to fill in the hole you make taking out the oil. So we pump steam down one pipe to push oil up the other. Luckily, oil floats on top of water anyway.) When the largest field in Saudi Arabia first started using steam injection it got 80% oil and 20% water back up the output pipes. By 2002 the output pipes were averaging 20% oil and 80% water. Sinking more wells just ups the oil-to-water ratio because beyond a certain density you get the waste water from nearby wells. (And that's ignoring the fact it's a waste of money to sink more wells to go after a finite amount of oil in the oilfield, which we expect to be able to extract all of with the existing equipment.)

But the thing about refineries is you can build more (or expand the existing ones) and parallelize production all you want. Yes, they're expensive, but not as much as microchip fabs and we keep building more of THEM. The chemistry to covert crude oil into gasoline was something we were managing basic versions of when the Model T came out a century ago, and the modern version of this technology is not beyond the reach of even the third world. Yes there are significant environmental problems too (these suckers are dirty) that keeps us from building new domestic refineries in the US, but A) not from expanding the ones we've already got, B) this is a problem for Iran how?

Have you heard about the huge glut of unrefined crude oil backing up in tankers around the world, waiting for refinery capacity to become available to process it? Me neither. If the oil companies are letting refinery capacity stay flat or even dwindle, there's probably a _reason_ for it.

I'm reminded of the old joke about someone coming into the doctor complaining about a sore elbow, and the doctor hitting their foot with a hammer. "But you're not worrying about your elbow anymore, are you?"