By Michael Bellamy
Global Marketing Leader, GE Oil & Gas

The first 150 years

The modern oil and gas industry is about 150 years old. We can look back to Egyptian times when oil seeps were used to fill lamps but, according to the history books, the first person to drill for oil was Colonel Drake who, in 1859, drilled the first well at Titusville, Pennsylvania, in the United States.

Today, oil is used mainly as a transportation fuel. In earlier years, petroleum was used primarily for producing medicines, cosmetics and so forth. It took a while for the industry to get up and running but, by the 1950s, it was in full swing and the era of cheap oil had begun. It was a boom time until the oil crises of the 1970s when, in response to economic pressures, many oil companies downsized significantly and experienced tremendous difficulties in the oil fields.

Fast forward to the 1990s and today, limited by such factors, we now find ourselves with decreasing spare capacity. At the same time demand continues to increase. With this dynamic and the resulting high prices of oil and gas, ‘the end of oil’ has become a very popular topic of discussion. So, what will the future bring?

Supply and demand

There are many opinions on the condition of world supply. Academics at Sweden’s Uppsala University believe the industry’s reserve estimates are overstated and that oil supply will peak in about 10 years. If we look at oil and gas producing regions around the world, many have already passed their production primes – the United States peaked in the 1970s and the North Sea in 2001, for example. The Association for the Study of Peak Oil & Gas reports that reserves for all the regular oil, normal reserves, heavy oils, natural gas and NGLs currently being produced will peak around 2010. Yet a recent countervailing view from the chief executive of Saudi Aramco is that there is enough oil and gas, taking all factors including oil sands into account, to last for another 140 years. Who is right?

On the demand side, given projected economic growth rates, energy demands are expected to be 50% higher by 2025. The majority of that growth will be driven by emerging economies. There are many people in India and China who have yet to drive a car. Are we going to deny them the opportunity to drive that car by having used up all the oil?

Transportation will continue to be the biggest end-use, particularly for oil. Natural gas is also growing quickly as a cleaner fuel for power generation, so the electricity market is driving demand for gas. While the US is still the dominant demand centre (accounting for about 25% of world oil and 30% of world gas), Chinese and Indian demand are rising rapidly in the world market.

The new face of supply

Consumer and industrial markets are using the current supply of oil and gas faster all the time. In order to keep pace with continually increasing demand, we will have to find new sources of production. From where will all this demand be satisfied?

Many of the easily-reached sources of oil and gas have already been discovered and they are largely in the process of exploitation, if not already exploited.

New crude oil reserves tend to be more heavy and more sour. Gas reserves tend to be in locations quite distant from the points of consumption. And when it comes to offshore oil, exploration is moving into deeper and deeper waters – for example, the Jack Field in the Gulf of Mexico is nearly 7,000 feet below the surface.

But there are no easy alternatives to oil and gas around the corner. So we must find ways to keep their supply flowing to meet world demand. Therefore the focus of activity in GE’s Oil & Gas business is aimed at helping overcome the operational, logistical and technological boundaries that come with emerging areas of exploration and exploitation, including:

• Managing high sulfur gas
• Remote gas fields
• Oil sands
• Deep water exploration

Kazakhstan: managing high H2S content

The Kashagan oil field consists predominantly of gas with an extremely high concentration of potentially lethal hydrogen sulphide (23% H2S). If this field was managed using conventional sulphur extraction methods, it would have added an additional 3% to total world sulphur output. This option was unacceptable because not all the elemental sulphur produced would be an economically viable product. Gas flaring would have been another option, but it is becoming increasingly unsatisfactory due to its negative environmental impact. Nevertheless, this gas still had to be managed somehow. It could be processed into CNG, LPG and other fuels; but these procedures also emit CO2. Alternatively, the gas could be sweetened for commercialization and transported to distant markets via pipeline, but those processes would also result in potentially harmful atmospheric emissions.

The solution developed for Kashagan was to re-inject the H2S bearing gas to pressurize the oil field. Given the geology of that particular reservoir, this meant re-injecting it at the incredibly high pressure of 820 bar. The solution GE developed is the world’s highest pressure re-injection compressor. There are four of these machines installed as Phase 1 and we are now working with the KCO Consortium to develop Phase 2. As a result of these innovations, an impressive 49 tonnes of CO2 emissions per year have been prevented from being released into the environment because there is no flaring and 3% (1MM tons per year) of world sulfur is being put back into the ground. And the re-injection is boosting oil production. This solution qualifies as an ecomagination product (good for the environment and good for business) and GE is proud to have made that contribution.

Qatar: minimizing production costs

Qatar has the world’s second largest gas field, and the most dense in terms of gas reserves per square mile. While its size is a tremendous asset, its location is a tremendous disadvantage since the big markets for gas are Europe, North America and the Far East.

LNG was the obvious solution to the geographic challenges, but competitive pricing was still a key issue since many other producers are much closer to the key markets. Production costs became a differentiating factor – they had to be driven low enough to overcome the significant shipping distances.

We adapted our Frame 9 gas turbines (usually about 100 MW) for mechanical drive duty in huge compression trains. These ‘supertrains’ – the largest in the world – are designed to deliver nearly 8 million tonnes per year in production capacity. Working with the Qatargas team, including Qatar Petroleum and Exxon Mobil, we cut production costs in half compared to the Frame 5 solution. This solution is enabling Qatar to exploit its enormous gas reserves and compete in the critical destination markets, despite significant geographic distances.

Oil sands: supplying the whole supply chain

GE’s Oil & Gas business deals mainly with rotating equipment, but the company’s activities extend far beyond. On a wider scale, GE is pulling all its resources together into a single service offering for our oil sands customers because we understand that there are great challenges to be met in order to exploit this resource. Recognizing the strain it puts on investment and infrastructure, we are simplifying the way in which our customers gain access to all the things they need to increase production. 

Starting with the extraction process for SAGD, we provide water treatment technologies developed by our Water Solutions business and applied by our Oil & Gas specialists. We provide dispersants and dust controls for mining; separation technologies; process additives for demulsifying and so on. Then, when it comes down through the pipeline, we have pumps, corrosion inhibitors and pipeline integrity services. For upgrading, we sell huge heavy-wall reactors, plant and compression equipment. At the refinery level – perhaps the area most commonly associated with GE’s Oil & Gas business – we provide process compressors and power plants.

And these examples are just in the process end of the application. With the total breadth of GE, we provide support in areas such as modular space as well as upstream lease financing for much of the earth moving and mining machinery in the area. So, we are clearly, extremely committed to servicing the entire Oilsands industry.

Subsea: moving into deeper water

The offshore industry started with fixed, gravity-based platforms that sat on the seabed, close to shore, in relatively shallow water. Then the industry shifted deeper and introduced floating structures tethered to the seabed and tied back to infrastructure which took the product back to shore.

Now, as we move into even deeper waters and more hostile areas, the cost of floating platforms and tie-back systems – sometimes hundreds of kilometres from shore – is becoming prohibitive. GE’s objective is to move all production equipment to the seabed, with nothing on the surface. With no platform, however, there is no way to move product back to shore. So we have been working with our partners to enable compressor installation on the seabed.

We started prototype development fifteen years ago, tested it together with ENI and have moved forward through the years as production and engineering companies have become more comfortable with the technologies involved. All our work has now paid off and we’ve recently been awarded the pilot for a 12.5 MW compressor which will push gas from a subsea installation in the North Sea to an onshore processing plant 120 km away.

GE’s mission for oil and gas

These case studies illustrate not only our corporate mission, but the real advantage we offer customers in the world’s most competitive industry.

These successes are all highly dependant on technology. Our approach is based on the evolution of existing technology – taking well-proven technologies and applying them to new applications in which completely novel technologies would be too risky. GE now has global research centres in many parts of the world through which we are tapping into much broader global talent and intellectual resources.

Conclusion

As exploration pushes past old boundaries into more remote territories, challenging methods and deeper waters, no one can say for certain how long oil and gas supplies will last. Regardless of this uncertainty, we all have to find more efficient ways of using the resources we have. GE’s commitment is to continue working to develop technologies that enable exploitation of previously hard-to-reach reservoirs and to improve the amount of oil that we recover from every reservoir. In these efforts we must also work to minimize the environmental impact of the recovery process.

Whether oil and gas resources will last another 150 years, nobody can say. But GE is ready to push technology boundaries in order to help our customers meet the world’s oil and gas demand as far into the future as anyone can realistically imagine.