Jesse Bogan 10.30.08, 6:00 PM ETForbes Magazine dated November 24, 2008
Records are short-lived in the game of global hydrocarbons. The latest contender on the world stage is the Gulf of Mexico’s Perdido Development, which stands to become the deepest offshore oil-and-gas drilling and production hub. Shell, the lead operator, is angling 200 miles from shore in water starting at 7,500 feet deep. The oil in some areas is at least another mile below the seafloor. Perdido’s 50,000- ton hulk is being built so far from the pack that fuel for its helicopters is likened to water in the desert, its engineering to work on the moon. A fourth of the nation’s oil production comes from the Gulf, 1.3 million barrels a day. Perdido, which means “lost” in Spanish, will show how feasible it is to go after pockets of the estimated 3 billion to 15 billion barrels in the Lower Tertiary Trend, a geological play that extends from offshore Alabama to Mexico. Shell won’t say how much Perdido will cost or estimate its reserves down there, but energy consultancy Wood Mackenzie suspects a $6.7 billion tab to develop the three fields adjacent to the platform. Combined, they may hold the equivalent of 500 million barrels of recover able oil. Shell made its first discovery in these waters in 2002, when oil was $30 and 3,000 feet of water was deep. The collapse of oil’s price from $146 to $67 greatly lessens the profitability of deepwater drilling but does not eliminate it. Says Russell Ford, Shell vice president of technology for exploration and production in the Americas: “Shell takes a long-term view on oil prices in its investment decisions. Short-term price volatility will not impact the Perdido project.” When completed, Perdido will look like a giant hat on a 118-foot ( diameter) beer-can-shaped spar that’s tied down to the seafloor and designed to withstand a thousand-year storm. Shell will drill below the spar with spaghetti-like shafts tapping the seafloor in a 250-foot radius. Through subsea tiebacks, the spar will process oil and gas from wells drilled by a mobile unit as far as 9 miles away. The 22 wells directly beneath the spar will be drilled from the spar, which will be built to handle 130,000 barrels a day. First oil is expected around 2010. Out where Perdido floats, the subseafloor geology is like nothing else in the Gulf, so it’s unclear what types of wells will be needed, or how or if the medium-quality crude will flow between multiple fault lines. “We don’t have another next - door neighbor that says, ‘Well, this guy produces this way, so it will produce that way,’” says Bill Townsley, Shell’s development venture manager for Perdido. “Is the reservoir the size of this room or this building?” Shell hopes it won’t have to drill too often to find out if the pockets have mill ions of barrels or tens of millions. Noble Corp.’s monstrous floating machine called the Clyde Boudreaux began drilling wells for Perdido in July 2007. Such work can fetch $1 mill ion a day. Inside a container compartment on the steel island, Clay Groves, a 50-year- old superintendent for Oceaneering International, nears the end of a three-week shift. Sitting before a series of monitors, he “flies” a remotely operated vehicle the size of an elevator along the seabed. The robot is an industrial gofer that can retrieve 900 pounds of equipment, tighten valves with manipulator arms and relay video of progress or setbacks from below. At 9,300 feet the robot sub caught a lone shrimp in its headlights, and the frightened creature flitted out into the darkness, perhaps to avoid being eaten. Groves has seen “gelatinized blobs,” enormous squid and sharks, but he shrugs his shoulders at the latest reaches of the oil industry. “I am sure they will go deeper and deeper.” Extreme weather is one risk; the 2008 Hurricanes Ike and Gustav caused 75% of the oil production in the Gulf to be shut for a month. Technological uncertainty is another, as Shell combines old and untested techniques to get to deeper, more complex reservoirs. “The oil business has always been about taking risk— you just hope it is exploration risk, not project risk,” says Julie Wilson, Mackenzie’s senior analyst for Gulf of Mexico research. “Increasingly operators have to think about project risk and how to mitigate it. Very few have gone without a glitch.” BP’s Thunder Horse, 150 miles southeast of New Orleans, is claimed as the world’s largest floating platform. It is the size of a city block. Sitting on 6,200 feet of water, it is designed to process 250,000 barrels of oil and 200 mill ion cubic feet of natural gas per day. The estimated $8.3 bill ion project opened in June after being delayed three years when the 2005 Hurricane Dennis hobbled the structure. Later subsea welds on the well equipment didn’t hold under the extreme pressure. Chevron’s Tahiti project, also in the Gulf and a $4.7 billion investment, was delayed a year by metallurgical problems discovered after the mooring shackles were set in 4,000 feet of water. Lessons learned there are being applied to Perdido, says Rick A. Wright, deepwater manager for Chevron, which has a 37.5% interest in Perdido, along with Shell’s 35% and BP’s 27.5%. But Perdido hasn’t been immune to mistakes. An enormous blowout preventer broke free of its riser as it was being lowered. It crashed on the seafloor. Logistics are also a bit of a challenge. The 555-foot-long spar, costing perhaps $1.8 bill ion, was set in place in August. Nine polyester mooring lines, each 2.4 miles long, tether it to the seafloor. The spar was built in Finland and then shipped 8,200 miles to Ingleside, Tex., where Peter Kiewit Sons’ is constructing the production platform and living quarters for 150 people. Heerema Marine’s Thialf, the only construction vessel in the world stout enough for the job, will lift the topside in one hoist onto the spar next year. Thialf is off the coast of Africa at the moment. Shell had to get in line three years in advance. The heart of Perdido will be in the darkness of 40-degree Fahrenheit water. There will be enough natural pressure in the wells to move oil and gas to the seafloor but not to the spar. Oil and gas will be separated below, then boosted up top by 1,500hp pumps powered by gas turbines on the spar. The U.S. Minerals Management Service (MMS) welcomes Perdido because it brings infrastructure to an isolated section of the Lower Tertiary Trend, says Lars Herbst, director of the Gulf region. He expects the development will expedite fut re projects because a new platform won’t be needed. Other companies could link to it several miles away through subsea tiebacks. Williams Inc. of Tulsa is investing $480 mill on, including 184 miles of new oil and gas pipeline, to hook Perdido up to the existing network that brings oil and gas to refineries onshore. Perdido is Shell’s largest effort yet in the Gulf, and a sizable portion of the stress behind its success or failure rests on the back of Ford, the vice president. Inflation in the oil industry has doubled since 2004, but he says Shell is fine with the cost and timing. “The challenge is you are the first one there, but the reward is, you’ll understand more than anybody else.”
Showing posts with label energy. Show all posts
Showing posts with label energy. Show all posts
Friday, November 7, 2008
Beaker Fuel
Robert Langreth 10.30.08, 6:00 PM ETForbes Magazine dated November 24, 2008
Designer biofuels looked great at $140 oil. How about $65?
Dartmouth college engineering professor Lee R. Lynd hit upon an unlikely source of transportation fuel three decades ago: bacteria from compost heaps. While working on a farm one summer, he became fascinated by how the bacteria could degrade all sorts of plant matter and produce heat. He envisioned creating designer bacteria that could digest fibrous plants and spit out barrels of fuel. But when he tried to convince venture capitalists in the early 1990s to form a company based on the idea, he got nowhere. Gas was cheap and renewable energy, a backwater. One government agency rejected his grant proposal five years in a row. "People said, 'You seem like a bright guy. Why are you in this dead field?'" says Lynd.
These days Lynd's basement lab is bustling with activity as grad students brew plant-eating bacteria in glass fermenters filled with brownish liquid. Another 70 researchers work down the road in Lebanon, N.H. at the biofuels company he founded, Mascoma. It has snagged $100 million in funding from investors including General Motors (nyse: GM - news - people ) and Marathon Oil, plus millions more in government grants, and aims to produce ethanol from wood chips in 2009 using genetically engineered bacteria.
"This will be a transformative technology," boasts Lynd, 50. He foresees a vast network of biofuel farms and refineries spread across the country a few decades from now. Lynd is a practicing acolyte of the renewability religion: He drives a Prius, heats his house with wood he cuts himself and generates most of his home's electricity with photovoltaics.
The limitations of corn-derived ethanol have sent biotech researchers scrambling to devise new biofuels from agricultural waste, algae and other sources that are cheaper, more abundant and don't compete with the food supply. Ethanol producers used 23% of our corn crop last year to make 5% of our car fuel supply. Says gene hunter turned biofuel researcher Craig Venter: "We can't have fuels competing with food. It is already a semidisaster, and it is only going to get worse." People in the corn ethanol business disagree.
Scientists like Lynd are trying to convert any type of plant matter, not just sugar, into liquid fuels. With exotic gene-engineering techniques, they are breeding crops that could thrive on marginally arable land and are contemplating farms of bioengineered algae. Using all of a plant might produce four times as much fuel per acre as current biofuels. With better technology, "One percent of the surface of the Earth could produce all the transportation fuel that the world needs," says biochemist Chris R. Somerville, who heads BP's $35 million (annual budget) biofuels research center at UC, Berkeley. Adds University of Massachusetts microbiologist Susan Leschine: "Biomass is the only source of liquid fuels that can replace petroleum."
Venture capitalists poured $637 million into biofuels in 2007, up from almost nothing in 2004, says PricewaterhouseCoopers. Big companies like Chevron (nyse: CVX - news - people ) and Royal Dutch Shell (nyse: RDSA - news - people ) are investing. Spurring them on is the government, with grants for construction of new biofuel plants, plus big per-gallon subsidies. "There are so many people that this almost feels like the oil land rush of the mid-1800s," says Joe R. Skurla, who is leading a $140 million joint venture between DuPont (nyse: DD - news - people ) and Danisco to produce cellulosic ethanol. Predicts MIT chemical engineer Gregory Stephanopoulos: "This will be a $150 billion industry."
Living up to the hype will require some serious feats of industrial engineering. Making ethanol from sugar is a straightforward fermentation. Converting biomass to fuel is not. Cellulose, the fibrous stuff that holds plants together, resists breakdown into simple sugars. Methods for doing so using heat, acid and enzymes are complex and expensive. No U.S. company makes cellulosic fuel on a commercial scale today.
To find a better way, some biotech researchers are going back to nature to optimize obscure microbes that break down plant matter. Lynd is focusing on Clostridium thermocellum, one of the most efficient cellulose eaters known. This bacterium can quadruple its mass eating cellulose in only eight hours, producing ethanol as a by-product. Lynd wants to supercharge its ethanol yield by subtracting genes that make unwanted by-products. This will be tricky. Genetic engineers have been so focused on medical applications that little work has been done to develop tools to insert genes into anaerobic microbes. But Lynd plans to do it in two years. He has already engineered another bacterium that digests the plant component hemicellulose and spits out ethanol.
Lynd's friendly competitor is U Mass' Leschine, whose group found an ethanol-spewing bacterium near the Quabbin Reservoir a decade ago. She didn't know what she had until, in the lab, it started devouring the filter paper it was growing on. She founded SunEthanol after she couldn't get oil companies interested. It plans build a pilot plant by 2011.
Coskata, a two-year-old company in Warrenville, Ill. whose angel is General Motors, rashly claims it can extract ethanol from garbage for $1 per gallon. This does not represent a gold mine. The figure ignores capital costs, and it is equivalent (given ethanol's lower energy content) to gasoline costing $1.50 a gallon, which is about what gasoline is worth before taxes and markups are added.
Coskata's means of production is a bacterium discovered on the bottom of a pond in Oklahoma. The recipe calls for heating biomass to 1,800 degrees Fahrenheit, forming a mix of carbon monoxide and hydrogen. Cooled gas is passed over the microbe, which converts it to ethanol. It won't be known whether this process is economical until Coskata builds some plants. That is supposed to happen by 2012.
But why bother with ethanol at all? Amyris, a biotech firm in Emeryville, Calif., and LS9, in South San Francisco, aim to engineer microbes that will produce longer-chain hydrocarbon molecules like those found in gas and diesel. What makes this possible is a radical new biotech process called metabolic engineering that replaces whole swaths of genes inside microbes to turn them into tiny chemical factories. A few years ago Amyris engineered yeast to produce a malaria drug now being developed by Sanofi-Aventis (nyse: SNY - news - people ). In the course of this medical discovery researchers realized that one molecule the yeast makes is related to diesel fuel. Since then they have tinkered with dozens of genes to optimize fuel production. The Amyris fermentation lab smells like a bakery. Inside the steel fermenters, puddles of oil float to the top.
Across the bay LS9 has rejiggered the bacterium E. coli to produce a diesel-like product. Both firms aim to produce for $60 a barrel. "We make no-compromise biofuels" that will work in existing cars and pipelines, says Amyris cofounder Neil Renninger. His first plant, under construction with a partner in Brazil, will produce diesel from sugarcane starting in 2010. The method could be combined with future refineries that will turn cellulose into sugar.
Trees and sugarcane aren't the only things that use the sun's rays to turn carbon dioxide into fuel. Algae can do this. Craig Venter's company, Synthetic Genomics, is modifying algae (which naturally produce diesel-like oils) so that the oil is more accessible and more plentiful. The firm has engineered algae that secretes fuel to simplify the collection process. He envisions putting high-tech algae farms next to oil refineries, factories or power plants and diverting the smokestack CO 2 onto the algae. Oil could be continuously extracted. "This is my plan to replace the global petrochemical industry," Venter says grandly.
Range Fuels, a company in Broomfield, Colo., plans to open a plant next year that will use heat and catalysts, but no bugs, to turn cellulose into ethanol. Bio-free approaches might prove to be better, says U Mass chemical engineer George Huber.
High-tech visions like these face daunting hurdles moving into the commodity world of energy. With oil prices plummeting, biofuels firms could be priced out of business before they start. None of the methods have proved themselves commercially, and capital costs of building new plants will be high.
Cornell University ecologist David Pimentel is a perennial skeptic. The biofuel fixation is "a bit foolish" and "just not logical," he says. Why? Biofuels are an inefficient way of harnessing solar energy, given the complexity of processing plant material. When he first studied the matter in 1980, "It didn't add up," he says, "and it still doesn't. At the very best, biofuels will be a minor contributor."
Now it is beginning to dawn on environmentalists that biofuels are a mixed blessing. In an April 2006 FORBES column Peter Huber argued that the discovery of an economic method of turning cellulose into transportation fuel would be a disaster for the world's jungles, since then people living near them would have a powerful incentive to chop them down.
Princeton University research scholar Timothy Searchinger says that when productive land is used for fuels in one place, crop prices will rise, driving others to clear land somewhere else to replace it. Since forests hold carbon, the net effect is to boost greenhouse gases, he calculated in the journal Science, contradicting earlier studies that found ethanol had a lower carbon footprint. "You can make as much biofuel as you want if you are willing to drive up crop prices four- or sixfold" and don't care about global warming, he says. Biofuels come out greenhouse-gas-positive if they're made from waste or grown in unproductive areas, he points out.
Dartmouth's Lynd fights back: "There is a big spectrum between the biofuels on the ground now and the ones that could exist someday," he says. One possibility is dual-use land, with a summer food crop and a winter fuel crop. He figures that between cellulosic technology, high-yield energy crops and more efficient cars, we might one day grow most of our fuel on only 50 million acres, a plot the size of Nebraska.
Designer biofuels looked great at $140 oil. How about $65?
Dartmouth college engineering professor Lee R. Lynd hit upon an unlikely source of transportation fuel three decades ago: bacteria from compost heaps. While working on a farm one summer, he became fascinated by how the bacteria could degrade all sorts of plant matter and produce heat. He envisioned creating designer bacteria that could digest fibrous plants and spit out barrels of fuel. But when he tried to convince venture capitalists in the early 1990s to form a company based on the idea, he got nowhere. Gas was cheap and renewable energy, a backwater. One government agency rejected his grant proposal five years in a row. "People said, 'You seem like a bright guy. Why are you in this dead field?'" says Lynd.
These days Lynd's basement lab is bustling with activity as grad students brew plant-eating bacteria in glass fermenters filled with brownish liquid. Another 70 researchers work down the road in Lebanon, N.H. at the biofuels company he founded, Mascoma. It has snagged $100 million in funding from investors including General Motors (nyse: GM - news - people ) and Marathon Oil, plus millions more in government grants, and aims to produce ethanol from wood chips in 2009 using genetically engineered bacteria.
"This will be a transformative technology," boasts Lynd, 50. He foresees a vast network of biofuel farms and refineries spread across the country a few decades from now. Lynd is a practicing acolyte of the renewability religion: He drives a Prius, heats his house with wood he cuts himself and generates most of his home's electricity with photovoltaics.
The limitations of corn-derived ethanol have sent biotech researchers scrambling to devise new biofuels from agricultural waste, algae and other sources that are cheaper, more abundant and don't compete with the food supply. Ethanol producers used 23% of our corn crop last year to make 5% of our car fuel supply. Says gene hunter turned biofuel researcher Craig Venter: "We can't have fuels competing with food. It is already a semidisaster, and it is only going to get worse." People in the corn ethanol business disagree.
Scientists like Lynd are trying to convert any type of plant matter, not just sugar, into liquid fuels. With exotic gene-engineering techniques, they are breeding crops that could thrive on marginally arable land and are contemplating farms of bioengineered algae. Using all of a plant might produce four times as much fuel per acre as current biofuels. With better technology, "One percent of the surface of the Earth could produce all the transportation fuel that the world needs," says biochemist Chris R. Somerville, who heads BP's $35 million (annual budget) biofuels research center at UC, Berkeley. Adds University of Massachusetts microbiologist Susan Leschine: "Biomass is the only source of liquid fuels that can replace petroleum."
Venture capitalists poured $637 million into biofuels in 2007, up from almost nothing in 2004, says PricewaterhouseCoopers. Big companies like Chevron (nyse: CVX - news - people ) and Royal Dutch Shell (nyse: RDSA - news - people ) are investing. Spurring them on is the government, with grants for construction of new biofuel plants, plus big per-gallon subsidies. "There are so many people that this almost feels like the oil land rush of the mid-1800s," says Joe R. Skurla, who is leading a $140 million joint venture between DuPont (nyse: DD - news - people ) and Danisco to produce cellulosic ethanol. Predicts MIT chemical engineer Gregory Stephanopoulos: "This will be a $150 billion industry."
Living up to the hype will require some serious feats of industrial engineering. Making ethanol from sugar is a straightforward fermentation. Converting biomass to fuel is not. Cellulose, the fibrous stuff that holds plants together, resists breakdown into simple sugars. Methods for doing so using heat, acid and enzymes are complex and expensive. No U.S. company makes cellulosic fuel on a commercial scale today.
To find a better way, some biotech researchers are going back to nature to optimize obscure microbes that break down plant matter. Lynd is focusing on Clostridium thermocellum, one of the most efficient cellulose eaters known. This bacterium can quadruple its mass eating cellulose in only eight hours, producing ethanol as a by-product. Lynd wants to supercharge its ethanol yield by subtracting genes that make unwanted by-products. This will be tricky. Genetic engineers have been so focused on medical applications that little work has been done to develop tools to insert genes into anaerobic microbes. But Lynd plans to do it in two years. He has already engineered another bacterium that digests the plant component hemicellulose and spits out ethanol.
Lynd's friendly competitor is U Mass' Leschine, whose group found an ethanol-spewing bacterium near the Quabbin Reservoir a decade ago. She didn't know what she had until, in the lab, it started devouring the filter paper it was growing on. She founded SunEthanol after she couldn't get oil companies interested. It plans build a pilot plant by 2011.
Coskata, a two-year-old company in Warrenville, Ill. whose angel is General Motors, rashly claims it can extract ethanol from garbage for $1 per gallon. This does not represent a gold mine. The figure ignores capital costs, and it is equivalent (given ethanol's lower energy content) to gasoline costing $1.50 a gallon, which is about what gasoline is worth before taxes and markups are added.
Coskata's means of production is a bacterium discovered on the bottom of a pond in Oklahoma. The recipe calls for heating biomass to 1,800 degrees Fahrenheit, forming a mix of carbon monoxide and hydrogen. Cooled gas is passed over the microbe, which converts it to ethanol. It won't be known whether this process is economical until Coskata builds some plants. That is supposed to happen by 2012.
But why bother with ethanol at all? Amyris, a biotech firm in Emeryville, Calif., and LS9, in South San Francisco, aim to engineer microbes that will produce longer-chain hydrocarbon molecules like those found in gas and diesel. What makes this possible is a radical new biotech process called metabolic engineering that replaces whole swaths of genes inside microbes to turn them into tiny chemical factories. A few years ago Amyris engineered yeast to produce a malaria drug now being developed by Sanofi-Aventis (nyse: SNY - news - people ). In the course of this medical discovery researchers realized that one molecule the yeast makes is related to diesel fuel. Since then they have tinkered with dozens of genes to optimize fuel production. The Amyris fermentation lab smells like a bakery. Inside the steel fermenters, puddles of oil float to the top.
Across the bay LS9 has rejiggered the bacterium E. coli to produce a diesel-like product. Both firms aim to produce for $60 a barrel. "We make no-compromise biofuels" that will work in existing cars and pipelines, says Amyris cofounder Neil Renninger. His first plant, under construction with a partner in Brazil, will produce diesel from sugarcane starting in 2010. The method could be combined with future refineries that will turn cellulose into sugar.
Trees and sugarcane aren't the only things that use the sun's rays to turn carbon dioxide into fuel. Algae can do this. Craig Venter's company, Synthetic Genomics, is modifying algae (which naturally produce diesel-like oils) so that the oil is more accessible and more plentiful. The firm has engineered algae that secretes fuel to simplify the collection process. He envisions putting high-tech algae farms next to oil refineries, factories or power plants and diverting the smokestack CO 2 onto the algae. Oil could be continuously extracted. "This is my plan to replace the global petrochemical industry," Venter says grandly.
Range Fuels, a company in Broomfield, Colo., plans to open a plant next year that will use heat and catalysts, but no bugs, to turn cellulose into ethanol. Bio-free approaches might prove to be better, says U Mass chemical engineer George Huber.
High-tech visions like these face daunting hurdles moving into the commodity world of energy. With oil prices plummeting, biofuels firms could be priced out of business before they start. None of the methods have proved themselves commercially, and capital costs of building new plants will be high.
Cornell University ecologist David Pimentel is a perennial skeptic. The biofuel fixation is "a bit foolish" and "just not logical," he says. Why? Biofuels are an inefficient way of harnessing solar energy, given the complexity of processing plant material. When he first studied the matter in 1980, "It didn't add up," he says, "and it still doesn't. At the very best, biofuels will be a minor contributor."
Now it is beginning to dawn on environmentalists that biofuels are a mixed blessing. In an April 2006 FORBES column Peter Huber argued that the discovery of an economic method of turning cellulose into transportation fuel would be a disaster for the world's jungles, since then people living near them would have a powerful incentive to chop them down.
Princeton University research scholar Timothy Searchinger says that when productive land is used for fuels in one place, crop prices will rise, driving others to clear land somewhere else to replace it. Since forests hold carbon, the net effect is to boost greenhouse gases, he calculated in the journal Science, contradicting earlier studies that found ethanol had a lower carbon footprint. "You can make as much biofuel as you want if you are willing to drive up crop prices four- or sixfold" and don't care about global warming, he says. Biofuels come out greenhouse-gas-positive if they're made from waste or grown in unproductive areas, he points out.
Dartmouth's Lynd fights back: "There is a big spectrum between the biofuels on the ground now and the ones that could exist someday," he says. One possibility is dual-use land, with a summer food crop and a winter fuel crop. He figures that between cellulosic technology, high-yield energy crops and more efficient cars, we might one day grow most of our fuel on only 50 million acres, a plot the size of Nebraska.
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