FOSSIL FUELS I
PETROLEUM

Approximately 83 % of the energy used in
the US comes from fossil fuels
 Oil and Natural Gas (Petroleum)
 Coal
 Oil Shale and Tar Sand
US Energy Sources (2010)
Formation Process
Results in various hydrocarbons (organic
compounds with mostly Hydrogen and
Carbon in them…more later). These can
be solid, liquid, or gas.
Liquid and gas migrate through porous rock
layer (sand stone) until they get caught
in a trap or escape.
Typical Deposit
A few miles across
 Approximately 1 mile down (sometimes
more.

VERY HARD TO FIND
Types of Oil Traps
Tools for Searching for Deposits

Gravitational/Magnetic Anomalies
Easy to do over a wide area, but is a very
coarse measurement. Good to pick out
regions for further study

Geological Survey
Look at the rocks and minerals in the region.
Certain types are indicative of hydrocarbon
deposits.
Tools for Searching for Deposits
Mapping of surface conditions begins with
reconnaissance, and if that indicates the presence of
hydrocarbons, then detailed mapping begins.
Originally, both of these maps required field work.
Often, the mapping job became easier by using aerial
photos.
After the mapping, much of the more intensive
exploration depends on geophysical methods
(principally, seismic) that can give 3-D constructions of
subsurface structural and stratigraphic traps for the
hydrocarbons. Then, the potential traps are sampled
by exploratory drilling and their properties measured.
Seismic Survey
Gives a detailed picture of the subsurface
 Very expensive
 Used over limited but promising areas.

Example Seismic Image
US Oil & Gas Locations
Eventually you must drill a wildcat well.
(1st well in a region.)
 Even with all of the research, only 1 out of
9 wildcat wells results in a commercially
viable well.
 Historically, it takes about 11 years for a
new discovery to begin producing.

Production
Primary Recovery
gets 15% of oil
 Secondary Recovery
(pumping water down
the well) gets another
20%.
 65% is still down
there.

Enhanced Production
Much more expensive
 Works by reducing surface tension and viscosity
of the oil

Enhanced Production Methods
Pump in pressurized Carbon Dioxide to
reduce viscosity
 Pump in steam to reduce viscosity
 Add detergent to reduce surface tension
with surrounding rock (then flood with
water.

What is in
Oil?
Hydrocarbons,
These are the Alkanes
CnH2n+2
Oil Refinery
Product
Percent of Total
Lubricants
0.9 %
Other Refined Products
1.5 %
Asphalt and Road Oil
1.9 %
Liquefied Refinery Gas
2.8 %
Residual Fuel Oil
3.3 %
Marketable Coke
5.0 %
Still Gas
5.4 %
Jet Fuel
12.6 %
Distillate Fuel Oil
15.3 %
Finished Motor Gasoline
51.4 %
One barrel contains 42 gallons of crude oil. The total volume of products
made from crude oil based origins is 48.43 gallons on average - 6.43
gallons greater than the original 42 gallons of crude oil. This represents a
"processing gain" due to the additional other petroleum products such as
alkylates are added to the refining process to create the final products.
Additionally, California gasoline contains approximately 5.7 percent by
volume of ethanol, a non-petroleum-based additive that brings the total
processing gain to 7.59 gallons (or 49.59 total gallons).
Fun Fact to know and tell…
The refining of oil
is a very energy
intensive process.
Approximately 8%
of the total US
energy
consumption goes
into running oil
refineries.
Gasoline Octane Rating
Normally, gasoline is composed of
hydrocarbons with 5 - 10 Carbon atoms.
 Each one burns differently.
 Octane: C8H18 is a standard for
comparison, it burns very smoothly.
 Heptane: C7H16 burns explosively, causes
inefficiency and engine “knock”

Octane rating
 Pure Octane:
 Pure Heptane:
 90% Oct, 10% Hep

100
0
90
Using additives we may also produce a fuel
with the same level of “engine knock” as a
given Octane-Heptane mix. This is given
the same octane rating (tetraethyl lead
was the old additive… it is now illegal.)
Burning of Gas (Ideal)
2C8H18 + 25 O2  16 CO2 + 18 H2O + energy
 Octane + Air  Carbon Dioxide + Water + energy

Realistically,
2C8H18 + 25O2 14 CO2 + 2CO + O2 +
18H2O + energy.
In addition, since there is Nitrogen in the
air we get nitrous oxides (big part of
smog) NOx
N2 +2O2  2NO2
N2 +O2  2NO
Gas Taxes (Chicago)
After cost of gasoline (oil, refining, transportation),
taxes are the largest contributor to the cost at
the pump.
$0.579 for gasoline $0.657 for diesel
Federal – $0.184
 Illinois - $0.201
 Cook County - $0.0647
 City of Chicago - $0.1275
 $0.003 for underground storage tank fund

Discussion Question:
Should federal and/or state gas taxes be
raised or lowered?
Explain your reasoning.
Profits! (2010):
Biggest Companies
Revenues
($billions)
Net Profit
($billions)
Profit Margin
Wal-mart
408.2
14.3
3.4 %
Exxon – Mobil
284.7
19.3
6.8 %
Chevron
163.5
10.5
6.4 %
General Electric
156.8
11.0
7.0 %
Bank of America
150.5
6.3
4.2 %
ConocoPhilips
139.5
4.9
3.5 %
AT & T
123.0
12.5
10.2 %
Ford Motor Co.
118.3
2.7
2.3 %
JP Morgan Chase
115.6
11.7
10.1 %
Hewlett-Packard
114.6
7.6
6.6 %
Berkshire Hathaway
112.5
8.1
7.2 %
Citigroup
108.8
-1.6
-1.5 %
Company
Profits! (2010): Most Profitable
Rank
Company
Revenues
Profit
margin
85
Merck
27,428.30
12,901.30
47.03645505
39
Goldman Sachs Group
51,673.00
13,385.00
25.90327637
94
Philip Morris International
25,035.00
6,342.00
25.33253445
36
Microsoft
58,437.00
14,569.00
24.93112241
72
Coca-Cola
30,990.00
6,824.00
22.02000645
33
Johnson & Johnson
61,897.00
12,266.00
19.81679241
75
Abbott Laboratories
30,764.70
5,745.80
18.67660013
40
Pfizer
50,009.00
8,635.00
17.26689196
58
Cisco Systems
36,117.00
6,134.00
16.98369189
22
Procter & Gamble
79,697.00
13,436.00
16.85885291
56
Apple
36,537.00
5,704.00
15.61157183
98
Travelers Cos.
24,680.00
3,622.00
14.67585089
20
International Business Machines
95,758.00
13,425.00
14.01971637
50
PepsiCo
43,232.00
5,946.00
13.75370096
19
Wells Fargo
98,636.00
12,275.00
12.44474634
62
Intel
35,127.00
4,369.00
12.43772597
7
AT&T
123,018.00
12,535.00
10.18956575
59
Comcast
35,756.00
3,638.00
10.17451617
9
J.P. Morgan Chase & Co.
115,632.00
11,728.00
10.1425211
65
Prudential Financial
32,688.00
3,124.00
9.557023984
Profits! (2007)
Company
Revenue ($billions)
Wal-mart
351
Exxon-Mobil
347
General Motors
207
Chevron
200.5
ConocoPhillips
172.4
General Electric
168.3
Ford Motor
160.1
Citigroup
146.8
Bank of America
117
AIG
113.2
JP Morgan / Chase
100
Berkshire Hathaway
98.5
Profit ($billions)
11
39.5
-2
17.1
15.6
20.8
-12.6
21.5
21.1
14
14.4
11
%
3.13
11.38
-0.97
8.53
9.05
12.36
-7.87
14.65
18.03
12.37
14.40
11.17
Taxes!
From 1977 to 2004, federal and state governments extracted $397 billion by
taxing the profits of the largest oil companies and an additional $1.1 trillion in
taxes at the pump. In today's dollars, that's $2.2 trillion.
From a Feb 2008 article…Over the last three years, Exxon Mobil has paid an
average of $27 billion annually in taxes. That's $27,000,000,000 per year, a
number so large it's hard to comprehend.
Here's one way to put Exxon's taxes into perspective.
According to IRS data for 2007, the most recent year available:
Total number of tax returns: 154 million
Total Adjusted Gross Income: $ 8.6 trillion
Federal Revenue from Income Taxes: $1.55 trillion
Number of Tax Returns for the Bottom 50%: 77 million
Total Income Tax Paid by the Bottom 50%: $44.8 billion (2.89 %)
People earning less than $32 900.
Exxon-Mobil’s effective tax rate is 41 %.
Taxes!
Paying Dearly to Drill
"Our industry is one of the most heavily taxed in the world," says Gantt Walton,
an Exxon spokesman. "While our worldwide profits have grown, our worldwide
income taxes have grown even more." Walton says.
From 2003 to 2007, Exxon's earnings grew by 89%, while income taxes grew by
170%. Much of that growth was overseas. Oil-producing countries charge
companies like Exxon dearly to dig for oil. Arrangements vary from country to
country, but Russia and Libya charge companies up to 90% of the revenues they
collect for extracting oil, according to Fadel Gheit, senior analyst for Oppenheimer.
These arrangements—whether production share agreements or royalty
contracts—are not disclosed by companies and governments.
Discussion Questions:
Do oil companies make too much money?
Do oil companies pay enough or too much
in corporate taxes and other fees?
In general, what are your thoughts on
individual wealth, taxes and government?
Explain your reasoning.
WORLD & US OIL Proven
RESERVES
WORLD has around 1300 billion barrels
 US - 23 billion barrels (1.9%)
 Canada – 178.5 billion barrels

Where are the Proven Reserves
Rank
Country
Proven Reserves in Billion
Barrels
1
Saudi Arabia
266
2
Canada* (tar sand)
178
3
Iran
138
4
Iraq
115
5
Kuwait
104
6
United Arab Emirates
97.8
7
Venezuela
87
8
Russia & East Europe
99
9
Libya
41
10
Nigeria
36
US Oil Produced and Found
What about ANWR?
The Alaska National Interest Lands Conservation Act (1980) established the
Arctic National Wildlife Refuge (ANWR). In section 1002 of that act, Congress
deferred a decision regarding future management of the 1.5-million-acre coastal
plain in recognition of the area’s potentially enormous oil and gas resources and
its importance as wildlife habitat. A report on the resources, including
petroleum, of the 1002 area was submitted to Congress in 1987 by the
Department of the Interior (DOI). Since completion of that report, numerous
wells have been drilled and oil fields discovered near ANWR, new geologic and
geophysical data have become available, seismic processing and interpretation
capabilities have improved, and the economics of North Slope oil development
have changed significantly.
What about
ANWR?
A new assessment estimates that the total quantity of technically recoverable oil
in the 1002 area is 7.7 BBO (mean value), which is distributed among 10
plays. Most of the oil is estimated to occur in the western, undeformed part of
the ANWR 1002 area, which is closest to existing infrastructure. Furthermore,
the oil is expected to occur in a number of accumulations rather than a single
large accumulation. Estimates of economically recoverable oil, expressed by
probability curves, show increasing amounts of oil with increasing price. At
prices less than $13 per barrel, no commercial oil is estimated, but at a price of
$30 per barrel, between 3 and 10.4 billion barrels are estimated. Economic
analysis includes the costs of finding, developing, producing, and transporting oil
to market based on a 12 percent after-tax return on investment, all calculated in
constant 1996 dollars.