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FOSSIL FUELS I

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					FOSSIL FUELS I
  PETROLEUM
   Approximately 83 % of the energy used in
    the US comes from fossil fuels
        Oil and Natural Gas (Petroleum)
        Coal
        Oil Shale and Tar Sand
US Energy Sources (2010)
Formation Process
Results in various hydrocarbons (organic
   compounds with mostly Hydrogen and
   Carbon in them…more later). These can
   be solid, liquid, or gas.
Liquid and gas migrate through porous rock
   layer (sand stone) until they get caught
   in a trap or escape.
           Typical Deposit
 A few miles across
 Approximately 1 mile down (sometimes
  more.

         VERY HARD TO FIND
Types of Oil Traps
Tools for Searching for Deposits
   Gravitational/Magnetic Anomalies
      Easy to do over a wide area, but is a very
      coarse measurement. Good to pick out
      regions for further study
   Geological Survey
      Look at the rocks and minerals in the region.
      Certain types are indicative of hydrocarbon
      deposits.
Tools for Searching for Deposits
 Mapping of surface conditions begins with
 reconnaissance, and if that indicates the presence of
 hydrocarbons, then detailed mapping begins.
 Originally, both of these maps required field work.
 Often, the mapping job became easier by using aerial
 photos.

 After the mapping, much of the more intensive
 exploration depends on geophysical methods
 (principally, seismic) that can give 3-D constructions of
 subsurface structural and stratigraphic traps for the
 hydrocarbons. Then, the potential traps are sampled
 by exploratory drilling and their properties measured.
              Seismic Survey
 Gives a detailed picture of the subsurface
 Very expensive
 Used over limited but promising areas.
Example Seismic Image
US Oil & Gas Locations
 Eventually you must drill a wildcat well.
  (1st well in a region.)
 Even with all of the research, only 1 out of
  9 wildcat wells results in a commercially
  viable well.
 Historically, it takes about 11 years for a
  new discovery to begin producing.
                 Production
 Primary Recovery
  gets 15% of oil
 Secondary Recovery
  (pumping water down
  the well) gets another
  20%.
 65% is still down
  there.
         Enhanced Production




 Much more expensive
 Works by reducing surface tension and viscosity
  of the oil
    Enhanced Production Methods
 Pump in pressurized Carbon Dioxide to
  reduce viscosity
 Pump in steam to reduce viscosity
 Add detergent to reduce surface tension
  with surrounding rock (then flood with
  water.
What is in
  Oil?

Hydrocarbons,
These are the Alkanes
CnH2n+2
Oil Refinery
                                Product                    Percent of Total
                                Lubricants                             0.9 %
                                Other Refined Products                 1.5 %
                                Asphalt and Road Oil                   1.9 %
                                Liquefied Refinery Gas                 2.8 %
                                Residual Fuel Oil                      3.3 %
                                Marketable Coke                        5.0 %
                                Still Gas                              5.4 %
                                Jet Fuel                             12.6 %
                                Distillate Fuel Oil                  15.3 %
                                Finished Motor Gasoline              51.4 %

One barrel contains 42 gallons of crude oil. The total volume of products
made from crude oil based origins is 48.43 gallons on average - 6.43
gallons greater than the original 42 gallons of crude oil. This represents a
"processing gain" due to the additional other petroleum products such as
alkylates are added to the refining process to create the final products.
Additionally, California gasoline contains approximately 5.7 percent by
volume of ethanol, a non-petroleum-based additive that brings the total
processing gain to 7.59 gallons (or 49.59 total gallons).
   Fun Fact to know and tell…
The refining of oil
is a very energy
intensive process.
Approximately 8%
of the total US
energy
consumption goes
into running oil
refineries.
      Gasoline Octane Rating
 Normally, gasoline is composed of
  hydrocarbons with 5 - 10 Carbon atoms.
 Each one burns differently.
 Octane: C8H18 is a standard for
  comparison, it burns very smoothly.
 Heptane: C7H16 burns explosively, causes
  inefficiency and engine “knock”
 Octane rating
 Pure Octane:          100
 Pure Heptane:           0
 90% Oct, 10% Hep       90

Using additives we may also produce a fuel
 with the same level of “engine knock” as a
 given Octane-Heptane mix. This is given
 the same octane rating (tetraethyl lead
 was the old additive… it is now illegal.)
          Burning of Gas (Ideal)
 2C8H18 + 25 O2  16 CO2 + 18 H2O + energy
 Octane + Air  Carbon Dioxide + Water + energy
Realistically,

2C8H18 + 25O2 14 CO2 + 2CO + O2 +
 18H2O + energy.

In addition, since there is Nitrogen in the
  air we get nitrous oxides (big part of
  smog) NOx
        N2 +2O2  2NO2
        N2 +O2  2NO
                 Gas Taxes (Chicago)


After cost of gasoline (oil, refining, transportation),
   taxes are the largest contributor to the cost at
   the pump.
$0.579 for gasoline $0.657 for diesel

 Federal – $0.184
 Illinois - $0.201
 Cook County - $0.0647
 City of Chicago - $0.1275
 $0.003 for underground storage tank fund
Discussion Question:

Should federal and/or state gas taxes be
raised or lowered?

Explain your reasoning.
                       Profits! (2010):
                     Biggest Companies
                      Revenues      Net Profit
Company               ($billions)   ($billions)   Profit Margin
Wal-mart                408.2          14.3          3.4 %
Exxon – Mobil           284.7          19.3          6.8 %
Chevron                 163.5          10.5          6.4 %
General Electric        156.8          11.0          7.0 %
Bank of America         150.5           6.3          4.2 %
ConocoPhilips           139.5           4.9          3.5 %
AT & T                  123.0          12.5          10.2 %
Ford Motor Co.          118.3           2.7          2.3 %
JP Morgan Chase         115.6          11.7          10.1 %
Hewlett-Packard         114.6           7.6          6.6 %
Berkshire Hathaway      112.5           8.1          7.2 %
Citigroup               108.8          -1.6          -1.5 %
       Profits! (2010): Most Profitable
Rank                 Company                Revenues      Profit       margin
85                    Merck                 27,428.30    12,901.30   47.03645505
39            Goldman Sachs Group           51,673.00    13,385.00   25.90327637
94          Philip Morris International     25,035.00    6,342.00    25.33253445
36                   Microsoft              58,437.00    14,569.00   24.93112241
72                  Coca-Cola               30,990.00    6,824.00    22.02000645
33              Johnson & Johnson           61,897.00    12,266.00   19.81679241
75             Abbott Laboratories          30,764.70    5,745.80    18.67660013
40                     Pfizer               50,009.00    8,635.00    17.26689196
58                Cisco Systems             36,117.00    6,134.00    16.98369189
22              Procter & Gamble            79,697.00    13,436.00   16.85885291
56                     Apple                36,537.00    5,704.00    15.61157183
98                Travelers Cos.            24,680.00    3,622.00    14.67585089
20        International Business Machines   95,758.00    13,425.00   14.01971637
50                   PepsiCo                43,232.00    5,946.00    13.75370096
19                  Wells Fargo             98,636.00    12,275.00   12.44474634
62                     Intel                35,127.00    4,369.00    12.43772597
 7                     AT&T                 123,018.00   12,535.00   10.18956575
59                   Comcast                35,756.00    3,638.00    10.17451617
 9           J.P. Morgan Chase & Co.        115,632.00   11,728.00   10.1425211
65              Prudential Financial        32,688.00    3,124.00    9.557023984
                      Profits! (2007)
     Company       Revenue ($billions)   Profit ($billions)     %
     Wal-mart            351                     11            3.13
   Exxon-Mobil           347                    39.5          11.38
  General Motors         207                     -2           -0.97
     Chevron            200.5                   17.1           8.53
  ConocoPhillips        172.4                   15.6           9.05
 General Electric       168.3                   20.8          12.36
    Ford Motor          160.1                  -12.6          -7.87
     Citigroup          146.8                   21.5          14.65
 Bank of America         117                    21.1          18.03
        AIG             113.2                    14           12.37
JP Morgan / Chase        100                    14.4          14.40
Berkshire Hathaway       98.5                    11           11.17
                                   Taxes!
From 1977 to 2004, federal and state governments extracted $397 billion by
taxing the profits of the largest oil companies and an additional $1.1 trillion in
taxes at the pump. In today's dollars, that's $2.2 trillion.

From a Feb 2008 article…Over the last three years, Exxon Mobil has paid an
average of $27 billion annually in taxes. That's $27,000,000,000 per year, a
number so large it's hard to comprehend.


Here's one way to put Exxon's taxes into perspective.
According to IRS data for 2007, the most recent year available:

Total number of tax returns: 154 million
Total Adjusted Gross Income: $ 8.6 trillion
Federal Revenue from Income Taxes: $1.55 trillion
Number of Tax Returns for the Bottom 50%: 77 million
Total Income Tax Paid by the Bottom 50%: $44.8 billion (2.89 %)
        People earning less than $32 900.

                                  Exxon-Mobil’s effective tax rate is 41 %.
 Taxes!



Paying Dearly to Drill
"Our industry is one of the most heavily taxed in the world," says Gantt Walton,
an Exxon spokesman. "While our worldwide profits have grown, our worldwide
income taxes have grown even more." Walton says.

From 2003 to 2007, Exxon's earnings grew by 89%, while income taxes grew by
170%. Much of that growth was overseas. Oil-producing countries charge
companies like Exxon dearly to dig for oil. Arrangements vary from country to
country, but Russia and Libya charge companies up to 90% of the revenues they
collect for extracting oil, according to Fadel Gheit, senior analyst for Oppenheimer.
These arrangements—whether production share agreements or royalty
contracts—are not disclosed by companies and governments.
Discussion Questions:

Do oil companies make too much money?

Do oil companies pay enough or too much
in corporate taxes and other fees?

In general, what are your thoughts on
individual wealth, taxes and government?

Explain your reasoning.
    WORLD & US OIL RESERVES
 WORLD has around 1300 billion barrels
 US - 23 billion barrels (1.9%)
 Canada – 178.5 billion barrels
Where are the Proven Reserves
Rank   Country                Proven Reserves in Billion
                              Barrels
1      Saudi Arabia           266
2      Canada* (tar sand)     178
3      Iran                   138
4      Iraq                   115
5      Kuwait                 104
6      United Arab Emirates   97.8
7      Venezuela              87
8      Russia & East Europe   99
9      Libya                  41
10     Nigeria                36
US Oil Produced and Found
What about ANWR?




The Alaska National Interest Lands Conservation Act (1980) established the
Arctic National Wildlife Refuge (ANWR). In section 1002 of that act, Congress
deferred a decision regarding future management of the 1.5-million-acre coastal
plain in recognition of the area’s potentially enormous oil and gas resources and
its importance as wildlife habitat. A report on the resources, including
petroleum, of the 1002 area was submitted to Congress in 1987 by the
Department of the Interior (DOI). Since completion of that report, numerous
wells have been drilled and oil fields discovered near ANWR, new geologic and
geophysical data have become available, seismic processing and interpretation
capabilities have improved, and the economics of North Slope oil development
have changed significantly.
   What about
   ANWR?

A new assessment estimates that the total quantity of technically recoverable oil
in the 1002 area is 7.7 BBO (mean value), which is distributed among 10
plays. Most of the oil is estimated to occur in the western, undeformed part of
the ANWR 1002 area, which is closest to existing infrastructure. Furthermore,
the oil is expected to occur in a number of accumulations rather than a single
large accumulation. Estimates of economically recoverable oil, expressed by
probability curves, show increasing amounts of oil with increasing price. At
prices less than $13 per barrel, no commercial oil is estimated, but at a price of
$30 per barrel, between 3 and 10.4 billion barrels are estimated. Economic
analysis includes the costs of finding, developing, producing, and transporting oil
to market based on a 12 percent after-tax return on investment, all calculated in
constant 1996 dollars.

				
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