Home again

I just got home after spending three days in far southern Illinois at a workshop on the Illinois oil and natural gas industry.

While this is not the normal topic taught in physics, we are spending more and more time in my lower level class talking about alternative energy and the problems with petroleum depletion.  Thus, I thought that this would be a workshop I might get something out of.  I am still figuring out how to incorporate all of the information into the class, but I did learn a great deal.

1.  I was completely unaware that during WWII, Illinois was the #1 or #2 producer of petroleum in the United States.  Illinois trailed only Russia and Venezuela in petroleum production at the time.  If oil won the war, Illinois was a big part of that.  Illinois is a shadow of itself today ….15th in the nation.

2.  The petroleum that does come out of the ground in Illinois is light sweet crude, which I learned means that the petroleum is lower in density and has a higher concentration of the lower mass alkanes that are useful for fuels.  In addition, light crude tends to flow through the rocks easier.  Sweet crude is low sulfur, which means it takes less money to clean it up for use as a fuel.

3.  Most of the oil in the more porous rock is gone.  The next phase in oil development is to attack the shales where the oil is contained, but doesn’t flow as easily.  It is a more expensive extraction process, and oil companies typically won’t do this until the price of oil is high enough.  Right now, it isn’t.  when it gets over $100/barrel, it will.

4.  There is some belief that, including the shales, Illinois has about as much oil left in the ground as it has taken out in about 75 years.

5.  One of the biggest things I learned is that the big oil companies (Texaco, Chevron, BP, Exxon, etc) long ago left Illinois.  All of the remaining oil extraction is handled by small companies that typically employ less than 10 people.  Some are old family operations.  They gave me a taste of just how expensive and how much of a gamble it is to hunt and extract oil.  I would describe it as:

Its like playing poker as a team against the house.  The company uses its own money, and employs card counters (geologists).  Rather than opening with a small blind, the player places a massive amount of money on the table, and then pays the dealer a small sum of money for the next card, and promises a fraction of the profit if there is a win.  As this happens with each card, the geologists are constantly giving advice on whether you keep playing or cut your losses and stop.

On top of all this, many companies don’t have the money to even get into the game, so they often have to line up investors to give them money with a promise of a fraction of the profits, if the game pays off.

Risk is a part of life, but there’s no way I could get involved at the risk levels these folks pay at.  One of the moderators for the conference was an oil company president who is a third generation owner, and described how, while he was an oil exec, he often times had to have two side jobs just to make sure he could manage payments on his house and save for his kids’ education back when oil prices were really low.

If anything, it gave me an appreciation for these small companies that you never hear about, and while you think these folks take treasure baths once a day, they in fact have to work very hard to keep their businesses afloat in a very, very uncertain world.  It gave me a renewed appreciation for entrepreneurship.

We also learned a little about petroleum and natural gas geology, the legal aspects of land ownership (amazing how a homeowner or a farmer can own the land, but have no rights to the oil or coal under the ground, and they have no legal way to block access to this under their own land … the attorney who gave the lecture on this was pretty interesting).  Part of the workshop involved visiting a drilling site, a refinery, and a pumping field.

Two days started at 7 am, the other started at 6:30 am … two days went until 6 at night, the third day ended at noon.  It was a packed couple of days, I’m dead tired, but  it was an educational experience!

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2 Responses to Home again

  1. Beth says:

    That does sound like an interesting conference. It is unfortunate that we don’t ever hear about “the little guys” in gas/oil. (I can get pretty vitriolic on rants about the big guys, so I appreciate the insight)

    PS – Happy Birthday!!

    • teganx7 says:

      It may be interesting (or expected) that the little oil companies didn’t have a lot of good things to say about their big brothers either.

      One of the things that this Illinois Petroleum Resources Board does is collect money from the small oil companies, and then petitions more money from the state (when it is available, which for the last few years, it hasn’t been), and they go around and try to cleanup the roughly 3,000 sites that were never cleaned up from the days when Big Oil was here. Today, when an oil company leases property, it is fairly typical that cleanup is a part of the contract (the company has to escrot money to clean up the job … so that even if the company goes under, the local farmer can still cleanup the site. In the old days it wasn’t, and has left a mess that the current group is trying to rectify, even though this process involves its own red tape.

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