free html hit counter Peak Oil Debunked: 49. ENERGY INTENSITY OF OIL AND GAS PRODUCTION

Tuesday, August 23, 2005

49. ENERGY INTENSITY OF OIL AND GAS PRODUCTION

The U.S. Economic Census is a gold mine of data relating to EROEI. Here I use it to calculate the energy intensity of the oil and gas extraction industry as a whole -- e.g. "How much fuel does the industry use to find and extract oil and gas?" This is an important EROEI-related measure because peak oilers often say that oil production will stop "when it takes one barrel of oil to get one barrel of oil." Clearly the oil companies would be quick to notice if their fuel inputs were larger than their fuel outputs. So what is their fuel output/input ratio today?

The calculation gives the following results:

1) In 1997, the fuel intensity of oil and gas extraction (i.e. the ratio of oil-gas outputs to oil-gas inputs, in dollar values) was about 27 to 1. Extraction companies spent about 3.7% of their total revenues on fuel inputs. Clearly they are in no immediate danger of needing one barrel of oil to extract one barrel of oil.

2) 84% of the expenditures for input fuel went to natural gas. On a price per MMbtu (million btu) basis, gas was less expensive than oil products in 1997 (source), so it is clear that, as of 1997, natural gas (not oil) was the primary source of energy for the oil-gas extraction industry.

3) The direct EROEI of the oil and gas industry (only counting direct -- not indirect -- inputs) is at least 22. In other words, the industry uses one boe (barrel of oil equivalent) of energy to produce 22 boe of output energy. This is the case, even though the U.S. is 35 years past its Hubbert peak, so the idea that passing the peak will cause EROEI to drop below 1 (i.e. that it will take one barrel of oil to get one barrel of oil) is highly suspect.

4) Natural gas is the primary fuel of the oil and gas extraction industry, accounting for 88.5% of all input fuel energy. The lion's share of that is accounted for by gas produced on site and used as fuel.


===== CALCULATION DETAILS =====
I use two references:
The first is the 1997 Economic Census, Product Summary: Mining (pdf)
The second is the 1997 Economic Census, Materials Summary: Mining (pdf)

These two resources give detailed statistics on production and fuel consumption (by fuel) for each industry falling under the NAICS 21 (Mining) classification.

For example, on page 7 of the Product Summary, we find the total product shipments for NAICS 211111 (Crude Petroleum and Natural Gas).

Total value of all oil and natural gas shipped in 1997 (in 1997 $) = $77,300,748,000

Turning to page 7 of the Materials Summary, we find a complete breakdown of fuel consumed, by type, for NAICS 211111 (Crude Petroleum and Natural Gas Extraction):

The dollar figures for 1997 are:
Light fuel oil, light diesel used as fuel: $61,219,000
Heavy fuel oil, heavy diesel used as fuel: $20,259,000
Natural gas used as fuel: $459,812,000
Gasoline used as fuel: $105,255,000
On-site crude used as fuel: 600,000 barrels @ $30/barrel
= $18,000,000
On-site natural gas used as fuel: 715.9 bil cubic feet @ $2,709,558 per bil cubic foot = $1,939,800,000
Other fuels: $38,537,000
Undistributed (i.e. not classified): $217,520,000

Totaling these up, we get a grand total of $2,860,402,000 spent on fuel inputs to produce $77,300,748,000 worth of fuel outputs.

Dividing, we find that, in 1997, the fuel intensity for oil-gas (i.e. the ratio of oil-gas outputs to oil-gas inputs, measured in dollars) was about 27 to 1. Extraction companies spent about 3.7% of their total revenues on fuel inputs. Clearly they are in no immediate danger of needing one barrel of oil to extract one barrel of oil.

Another interesting fact: 84% of the expenditures for input fuel went to natural gas. On a price per MMbtu basis, gas was less expensive than oil products in 1997 (source), so it is clear that, as of 1997, natural gas was the primary source of energy for the crude/gas extraction industry.

--------

To humor the EROEI people, I also calculated the energy inputs and outputs of NAICS 211111 (Crude and Natural Gas Extraction) for 1997, using census statistics:

In 1997, the industry used 1031.8 trillion btu (TTbtu) of input fuel. The breakdown is as follows:

Distillate, light oil: 11.5 TTbtu (1.1%)
Residual, heavy oil: 4.1 TTbtu (0.4%)
Purchased natural gas as fuel: 175.0 TTbtu (17.0%)
Gasoline: 12.2 TTbtu (1.2%)
On-site crude used as fuel: 3.5 TTbtu (0.3%)
On-site natural gas used as fuel: 738.1 TTbtu (71.5%)
Other fuels: At most 13.1 TTbtu (1.3%)
Undistributed fuels: At most 74.3 TTbtu (7.2%)

Total: 1031.8 TTbtu

Purchased amount of electricity for NAICS 211: 80,149,784,000kwh
(Note: This is an overestimate because it also includes electricity consumption by another NAICS category 211112 "Natural Gas Liquid Extraction")

Purchased amount of electricity = 274 TTbtu

Total energy input to NAICS 211111(Crude and Natural Gas Extraction): 1305.8 TTbtu

--------

Now, let's look at the output side. Total product in 1997:
1990.7 million barrels crude oil and lease condensate
108.1 million barrels from stripper wells
14,606.2 billion cubic feet of gas
$7,788,301,000 in crude and gas not specified by kind (I assume this to be all crude in order to make the estimate of the output conservative. Gas gives more btus per unit price.)

Converting the above to btus we get: 29,348 TTbtu. Thus, the direct EROEI for oil and gas in the U.S. is at least 29,348 TTbtu/1305.8 TTbtu = 22.

Now, let's compare this to the value calculated financially:
Fuel costs = $1,780,528,000
Electricity costs = $1,067,804,000
Total value of oil and gas produced = $77,300,748,000

(Value of energy produced)/(Cost of energy inputs) =
$77,300,748,000/$2,848,332,000 = 27

The financial value is only off by 5 percentage points, and thus gives a decent approximation of actual direct EROEI.

8 Comments:

At Tuesday, August 23, 2005 at 7:58:00 AM PDT, Anonymous Anonymous said...

Might be interesting to include the money spent on rigs, equipment etc for all the people that wave their hands and say 'but that doesn't include the energy used to make the rigs and drive the workers to work' etc. Including the costs spent on workers, equipment and everything relevant would put an absolute lower bound on the EROEI, as energy will only be part of each cost.

 
At Sunday, September 11, 2005 at 6:02:00 PM PDT, Blogger TheLastSasquatch said...

JD - I followed you here from oildrum replying to my question. This was a great link and thanks for doing that analysis! Do you think someone (me?) could do the same analysis for differing years? Since 1997, or is that the latest year you had available?
thanks,
Quinn

 
At Sunday, September 11, 2005 at 6:32:00 PM PDT, Blogger JD said...

Hi Quinn,
Apparently, the economic census is conducted every 5 years. I haven't dug through the previous years, but if you root around on the census site, you can probably find them. The latest census was conducted in 2002, and the data is just now being released. Here's the link:
http://www.census.gov/econ/census02/
The NAICS code for "Mining" is 21. Oil and gas extraction is 211. Root around in there, and you'll find lots of interesting stats on all types of mining.
If you do any calculations, let me know and I'll post them!
JD

 
At Monday, September 12, 2005 at 12:47:00 PM PDT, Anonymous Cutler J Cleveland said...

I read with interest ""49. ENERGY INTENSITY OF OIL AND GAS PRODUCTION""

You might be interested similar work at http://www.oilanalytics.org/netentop.html.

 
At Sunday, December 11, 2005 at 4:16:00 AM PST, Blogger Roland said...

That soundbyte that oil extraction will stop "when it takes one barrel of oil to get one barrel of oil" is slightly misleading. Oil is just a source of energy, after all. If energy from other sources is plentiful, but you really really want oil from under the ground for some reason (such as to display in a museum?), then you might use 1000 barrels-of-oil-equivalent in solar energy to extract it.

The statement should thus be modified:

"Oil production will stop either when nobody wants oil anymore, or when it takes one barrel of oil equivalent to produce a barrel of oil and there are no other energy sources available".

Despite what Matt Savinar may make people think, the second scenario is completely impossible, since we are never going to run out of other energy sources. I think oil production will stop because of condition one, because nobody wants it anymore. If JD is right, there's a good chance oil will still have a positive EROEI when this happens - but by that stage, who gives a damn anyway, because the energy invested will come from renewable sources and oil would just be a curiosity.

 
At Saturday, September 15, 2007 at 10:41:00 AM PDT, Blogger hopla said...

in canada (alberta) oil is extracted from tar sands; it takes 4 liters of oil to extract 5.

 
At Sunday, June 8, 2008 at 8:19:00 AM PDT, Blogger Stephan said...

Nice analysis, but I believe the main issue with peak oil is not about how many barrels of oil it will take to extract a barrel of oil, but rather about the supply/demand issue. Yes, it is true that we are 35 years beyond the peak oil in the US, but only about 1 year past it worldwide, according to M. King Hubbert. The reason oil/gas prices are rising so much, is due to the fact that China, and other developing countries, are buying up more and more oil. If we have passed our peak that does not mean it takes as much oil to extract as it produces, but rather that we are close to producing as much as we can, while demand continues to increase. THAT is the peak oil issue. From here on out there will be an increasing trend in the price of oil.

 
At Friday, April 13, 2012 at 8:59:00 AM PDT, Anonymous Anonymous said...

Not Sure where you get that info about the Alberta sands I believe 1/8 of output goes to in production consumtion.. you can check it out on Wikipedia - Alberta Oil Sands..

I want to bring everyone's eye to something far more interesting. The reality is we are all looking for better alternatives to oil. Does anyone have any info on what happened with the possibility of mining Helium 3 from the moon which can be optimal for nuclear power plants as the by product has no radiation levels. On earth we have no Helium 3 or next to none maybe 3 months of supply but on the moon it's everywhere. The Solar Energy equivalent used to mine H3 has an energy ratio to output of 250 to 1. This looks much more economical than Oil which at the best locations in the world i.e. near surface GCC area oil.
G Chan

 

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