Today we’re diving into the most important energy debate of our times – this one between the green chicken Doomberg and myself. This isn’t just about saving the planet or cutting back on emissions. It’s about our economy, our health, our future prosperity and our national security. If Doomberg is right, it’s cheap oil for the rest of everyone’s lifetime. If I’m right the world’s economy is in deep, deep trouble.
If you’re someone who loves a good debate or is curious about different viewpoints, then you’ve come to the right place. In today’s world, it’s easy to get caught up in our own beliefs and opinions. But what if I told you that having a healthy debate with someone who has opposing views can actually make us smarter and more open-minded, and get us closer to the truth? Indeed, the only thing that can save us is to have honest discussions.
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This was initially produced for my subscribers, but it’s too important to keep behind our paywall. It’s a series of three separate videos and are examples of “how” we go about having proper, open-minded conversations about vitally important topics that are shaping your world today.
Let the debates commence!
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For those who aren’t subscribers, or who perhaps missed my scouting reports somehow, here are the important parts of them reproduced from the subscriber-only area where they were initially posted. If you’re not a subscriber, these are examples of the sort of content I am producing several times per week for my subscribers. I am their private researcher, in effect, saving them time, and doing the hard work of being both an information scout and then sitting down and doing the hard thinking necessary to make sense of it all.
There have been 84 such reports since the beginning of August 2023 until today (Jan 12, 2024), to give you a sense of the volume (an average of more than 3 per week).
Ah ha! Doomberg responded. Excellent.
Let’s dive in. I *love* a good debate. Let’s see what Doomberg has got.
He begins by saying that geology has proven to be no match for clever engineers. Sadly, this flunks many tests.
For example, one wonders why all those brilliant chemists and engineers have not managed to reverse 50+ years of declining conventional oil production.
Surely there must be some reason for this? Are they not trying? Did they simply get bored with easy projects and decided to chase the much more intellectually stimulating shale projects?
Well, there too those chemists and petroleum engineers are letting us down!
Seems to me that geology is geology and that defines the box within which human cleverness must make its way. But geology and physics always have their way.
Now, onto the much more interesting core of his rebuttal – surprise! – it’s an amazing, proven piece of technology.
Ah. The Pearl Facility Shell built in 2010 (at a then cost of $20 billion…so double that now?)
Interesting. Let’s dive in. The Devil is always in the details.
It’s a Fischer-Tropshe facility converting methane to longer-chain things. CH4 gets turned into C8 and longer chains.
It sucks 1.6 billion CuFt/day from a dedicated pair of 30-inch feeder lines from a dedicated gas field.
Here’s Doomberg’s analysis:
Given that he considers natural gas to be effectively unlimited, and that he seems to evading the likely impact on price by siphoning off a bunch to covert into ‘gasoil’ (effectively diesel, and good diesel at that, he calculates that the ‘ceiling price’ for the input feedstock for GTL oil is somewhere between $18 and $60 per barrel.
But let’s remember that the Pearl Facility has a lifespan and is expected to produce the equivalent of 3 billion barrels of oil during that time.
Some of that is the 120,000 barrels per day (or 120 kbd, with the k for ‘kilo’ or thousand) of NGLs that are sucked out and sent off to market.
The rest is 140,000 bd of ‘gasoil’ which is pretty good stuff. It’s diesel, but *really* clean as the sulfur is removed during a prior step.
You should expect what follows to be inaccurate in its precision due to a variety of unknowns, but it’s directionally correct.
Here are my back-of-the-spreadsheet calc’s. They proceed from top to bottom, so everyone should be able to follow along:
In the blue box at the top, what is the total energy in BTU’s of the 1.6 billion cubic feet (bcf) of NatGas? Answer: 1.648 trillion (with a “t”) BTUs. Per day as input feedstock.
Then the green box calculates the BTU content of the NG Liquids (and ethane) that are siphoned off and sent to market.
Below the green box are the calculations for the remaining balance of BTUs which come out the back end as 140,000 barrels per day of gasoil.
Those conversions tell us that almost exactly half of the 1.6 billion input BTUs come out the other side as 0.817 billion BTUs of gasoil. The other 0.818 were used up.
In other words, there’s a 50% process loss of the input energy!
Fully half of all the initial BTUs in the natural gas have been consumed in the process of turning that natural gas into gasoil.
So there’s a lot less natural gas abundance than we might initially think due to these process losses. I am not surprised to find losses of this magnitude either. They are well within the usual ball park of conversion losses when an energy source is pushed **up** the density curve. Every conversion of energy from one form to another leads to process losses. It’s a physical law.
Also, NG so deployed wouldn’t be available for other uses, such as heating or other industrial processes. And, I should endeavor to mention, all the natural gas produced already has a defined use, so the extent to which additional GTL processes are brought online would necessitate either the loss of that gas from other uses, or an expansion of production.
And none of this factors in the capital cost of the facility nor maintenance nor staffing.
According to Shell:
Pearl GTL’s control room is the nerve centre of one of the largest and most sophisticated plants ever built in the energy industry.
The control room includes almost 1,000 circuitry control cabinets and 200 computer servers programmed with 12 million separate software codes. The system is linked to every part of the plant by almost 6,000 kilometres of cables, which would stretch from Doha to London if laid end-to-end.It takes 800 operators and technicians to run Pearl GTL, now that the plant is in full operation.
At a $150k salary per FTE (guessing wildly here), that’s a $120,000,000 staffing cost per year.
All in I would say that this one example, built over a decade ago, is hardly the magic technology that we could scale up quickly.
It’s massively complex, takes very specialized workers, and it requires a massive gas field that can deliver for the 30-year amortized capital life of the project.
But even if it were to be pursued as ‘the solution’ this one plant, as massive as it is, is currently producing 51.1 Mb per year against a global consumption of 30 Gb of C+C (82M * 365) which pencils out to 0.16%.
Looked at another way, to offset a single 1Mbd decline in C+C would require the building of 7.1 of these facilities. So if the world falls from 82 to 81 Mbd of C+C as Dennis Coyne’s model suggests (which may or may not be accurate, I am merely using the data and models we have in hand) then that implies building 7 of these Pearl-scale GTLs by ~2029/30:
Then building 7 more every 3 years thereafter forever.
Does this seem likely to you? If so, how much of our future prosperity would you be willing to bet on this?
Finally, to me, using NG to “upgrade” into gasoil is a tragedy, not a triumph. It’s an unspeakably grave loss of 50% of the native energy capacity of natural gas to make up for our inability to plan properly.
We should instead convert our ICE vehicles to burn compressed NG directly and get closer to 100% of the energy from NG (less the cost of compressing it). This is a known, proven and workable concept that does not require a now-$40 billion facility with *“1,000 circuitry control cabinets and 200 computer servers programmed with 12 million separate software codes. The system is linked to every part of the plant by almost 6,000 kilometres of cables, which would stretch from Doha to London if laid end-to-end.”*
Beyond being a boneheaded thing to do, I judge this GTL concept as unworkable over the time frames needed to make a real difference.
In other words, Doomberg presented us with a too-light-on-the-math response that relies on a massive technological response (that may not even be feasible given the gas basins we have at our disposal) coupled with an overly strong flavoring of “aren’t humans clever?” mixed in.
It’s quite a lot to bet everything on…
As a closing point, Doomberg proposes that building out 5 – 10 Mbd of GTL capacity would do a lot to alleviate the pressure on oil supplies.
My quick run at the math makes this seem impractical as at the 10 mbd level that represents 100% of current US production which itself is slightly more than a quarter of current global NG production.
Each 1 Mbd of gasoil would consume a full 2.9% (rounding up) of current global natural gas production.
That is not insignificant.
Doable, sure, but it bears noting that 100% of produced natural gas (that is not merely flared and wasted) is already spoken for.
Increasing production is itself a very expensive proposition.
To put that in US terms where the US currently produces around 105 mbd, each 1 Mbd of gasoil would consume ~10% of US NG production, so 10 Mbd would consume 100%.
Again, how likely does this seem? Even installing a 1Mbd plant in the US, right on top of the Marcellus, would instantly consume 10% of US production. Europe would have to be told to take a hike because that alone would pretty much eat up the entire current surplus that is being exported as LNG.
Again, it’s quite a lot to bet everything on…
by chiara-fjm