We used to worry about ‘peak oil’. Then the technological revolution happened

No more peak oil? Image: REUTERS/Mike Hutchings

John Watson
CEO and Chairman, Chevron
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Oil and Gas

When you hear the words high tech, you probably imagine a smartphone, a driverless car, maybe even a spaceship.

Having been in the oil and natural gas business for 36 years, I picture 3D seismic imaging that enables scientists to see miles below the seabed floor; the world’s biggest carbon sequestration project; and precision drilling equipment that enables us to bore holes more than 35,000 feet below sea level and hit a target the size of a baseball home plate.

These technological achievements are what make the oil and natural gas business one of the world’s most high-tech industries, and they put us at the forefront of Industry 4.0 – the Fourth Industrial Revolution.

Fuel for the energy economy

Since the discovery of California’s Kern River oil field in the late 1800s, the industry has used technology to grow supplies and deliver affordable and reliable energy to the world. Continuous advances in technology have enabled us to keep 100-year-old oilfields producing, to develop cleaner-burning fuels, and to do so with an increasingly smaller environmental footprint.

You’ve heard some of the terms representing these advances – enhanced oil recovery, horizontal drilling, ultra-deepwater production. The foundation of all of these innovations is our ongoing commitment to advance technology to fuel our energy economy.

Today, the global energy system delivers the equivalent of more than 280 million barrels of oil every day from across all sources – oil, natural gas, coal, nuclear and renewables – of which oil and natural gas account for 149 million barrels. Meeting that total energy demand requires sufficient liquids to fill more than 18,000 Olympic-sized swimming pools each day, or more than 12 Olympic-sized swimming pools every minute of every day.

As you can imagine, the technology needed to support the global energy system is massive and requires continuous investment. Since 2007, Chevron alone has invested nearly $6 billion on research and development. We’re involved in every step of the technology development chain – from early-stage research to industrial-scale application.

We know ideas can come from anywhere, so our venture capital company scours the world for promising start-ups that can help develop emerging energy technologies. We work on fundamental research and development in partnership with world-class universities, national laboratories and government agencies such as NASA. Our investment focus is finding, developing, producing, processing, transporting and delivering energy – safely, affordably, reliably and at scale.

The end result is that we’re able to produce in places we once only dreamed of. In the early 1950s, in offshore operations, the industry had only the ability to drill in water depths of 100 feet – to a total depth of 5,000 feet. Today, we can drill in water depths of more than 10,000 feet – and then at least another 25,000 feet under the seabed (which, from the water’s surface, is further down than Mount Everest is tall). We’re operating in water depths that require remote-operated vehicles to place and monitor our equipment. And we’re extracting resources from rocks we once bypassed as too difficult or uneconomic.

Improvements in technology have advanced our understanding of the earth’s subsurface geology, making it easier for us to find resources. Dry holes – as a percentage of total US exploratory wells drilled across the industry – have fallen from around 75% in the 1970s and 1980s to around 40% recently.

This has been made possible by advances in earth modeling, 3D and even 4D seismic imaging, risk profiling, and computing power. In this new world, we’re storing vast amounts of data – in petabytes. Since 2002, the data we’ve stored has increased 250-fold, and that number continues to grow. In addition, our production is more efficient because our digital oil fields enable us to remotely monitor thousands of pieces of equipment on six continents in real time.

A transformation in the oil and gas industry

Some advances in technology have been truly transformative, such as those used to unlock US natural gas and oil from rocks with very low porosity, such as shale. Just over a decade ago, the United States was raising red flags about the decline in supplies of domestic natural gas. The industry felt the pressure and began building terminals to import liquefied natural gas, or LNG. But while those import terminals were being built, the industry made a major breakthrough.

Though we had been using hydraulic fracturing to extract hydrocarbons from formations for decades, when the industry combined that with horizontal drilling, we cracked the code to economically producing natural gas – and then oil – from shale. Companies were quick to apply these combined technologies to formations across the country and even advance them for more efficient production. In the process, the United States has re-established its reputation as an energy superpower.

The United States is now the global leader in total combined crude oil and other liquids production, overtaking both Saudi Arabia and Russia. In addition, we’re number one in terms of natural gas production. As a result, some of the LNG import terminals I mentioned above have been converted into export terminals.

In many cases, the world’s supply of natural gas is not located where the gas is needed. To move these fuels across oceans, we convert natural gas into LNG. LNG is natural gas that has been cooled to -260° F (-162° C), changing it from a gas into a liquid that is 1/600th of its original volume. This enables it to be shipped safely and efficiently aboard specially designed LNG vessels. After arriving at its destination, we return the LNG to its gaseous state for delivery through local pipelines. It’s a highly technical and innovative process that is literally lighting up our world.

Other technological advances are less transformative for the world energy supply, but they contribute to our efforts to limit the impact of our operations on the environment. For example, we use state-of-the-art drones for early detection of any unexpected emission releases. We use stationary infrared cameras to look for potential gaseous leaks to ensure the integrity of our equipment and operations. And we use technology to continually evolve our operations to meet tightening environmental standards, such as those to reduce sulfur content in US gasoline. We know it’s through technology that we’ll be able to continue to develop resources in the years ahead while addressing new or more stringent environmental challenges, such as climate change.

No more peak oil

We’re already moving in this direction. I mentioned earlier the world’s biggest carbon dioxide injection project, which we’re building at our Gorgon LNG facility in Australia. Although standard industry practice is to remove the CO2 from the natural gas and vent it to the atmosphere, at the Gorgon Project we plan to extract and inject the naturally occurring CO2 into a formation more than two kilometers beneath the surface. This is game-changing technology to protect the air.

At our neighbouring Wheatstone LNG facility, we’re using cutting-edge technology to micro-tunnel under the shoreline to transport natural gas without disturbing the barrier lagoon system. This system supports mangrove and estuarine habitats for a range of marine fauna, such as migratory shorebirds, turtles, sawfish, and recreational crab and finfish species.

The technology we’re using today has evolved so profoundly from the early years of the Kern River oil field that the topic of “running out of oil”, which once dominated every industry conference, is rarely discussed today. The advances in finding new resources and extending the life of existing ones are so far-reaching that we in the industry have a common refrain: “Tell me when technology will stop advancing, and I’ll tell you when we’ll reach peak oil.” Given how much we’ve advanced our industry – from the days of the simple land-based pump jack to today’s high-tech, digital oil field – I cannot imagine when that day might come.

Even as we celebrate these achievements, our focus is on the future. Chevron is a 137-year-old company active around the world and involved in all aspects of the oil and natural gas business. We’ve been able to thrive as long as we have by continuously finding new technologies and approaches to produce reliable and affordable energy while improving environmental performance – from the production of oil and natural gas to the consumer’s end-use emissions. Through our ongoing creativity and innovation, we’ll continue finding more economically and environmentally efficient ways to power the world in the decades ahead. This is our priority. We know that without continued technological advancements, Chevron and the industry will go the way of the horse-drawn carriage and the steam engine.

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