13-11-03 The leader of an international petroleum-industry research group believes technology will raise the amount of oil ultimately produced to three or four times currently estimated levels of reserves. Olivier Appert, chairman and CEO of Institut Français du Petrole, Rueil-Malmaison, France, expects growth in conventional reserves to come from a combination of increased rates of recovery from reserves now on production, from discoveries and extensions, and from improved recovery from the deposits yet to be found. Recovery improvements from non-conventional resources, such as extra-heavy oils and tar sands, will yield further supply.
IFP, which operates as both a research centre and industrial group, treats the natural limits of fossil-energy resources as one of two key, long-term challenges for the industry. The other challenge is climate change.

Future supply
Future discoveries and extensions of known fields, Appert estimates, will add more than 100 bn tons to oil reserves, currently estimated at 145 bn tons.
"The main difference is that future discoveries will be smaller than past ones and more difficult to find," he says.
Advances in enhanced-recovery techniques can boost the average recovery factor for conventional deposits from 35 % at present to 50 % by about 2020, he believes. The improvement will raise conventional reserves by 110 bn tons in existing fields and by 40 bn tons in fields yet to be discovered.

Technology also can increase the recovery factor for non-conventional heavy oils, now 8-10 %. IFP estimates volumes of extra-heavy oils and tar sands in place at 685 bn tons of oil equivalent.
"We may consider that potential recoverable reserves of Alberta in Canada and the Orinoco belt in Venezuela may be the equivalent to present Middle East reserves," Appert says. "That's why we consider that technology may push the limits of oil reserves and improve the available reserves of petroleum product by a factor of three or four."

Appert notes that the two energy-market sectors most closely linked with economic growth-energy for electricity generation and oil for transportation-have the most rapid demand growth and highest emissions of greenhouse gases. And their inherent challenges differ. For electricity, the main hurdle is investment; for oil in transportation, it's the natural limit of supply.
Although hydrogen holds promise, the IFP chief says, it won't be widely available for transportation "for decades." That's why it's important to extend reserves. An IFP strategy asserts that the "first substitute [for] conventional oil is technological oil."

Among recent examples of work in the technology of oil drilling and production, IFP has:
-- Entered into a partnership with Schlumberger to market software that manages uncertainty in production forecasts.
-- Developed technologies for seismic monitoring in cooperation with Gaz de France, Generale de Geophysique (CGG), and Magnitude.
-- Developed and tested hybrid peripheral lines made of specialty materials to lower the mass of risers on offshore drilling units.

Fuels mix, engines
Two other IFP strategies are diversification of the mix of liquid fuels and improvement of internal combustion engines. The group pursues technologies that improve the yields of transport fuels from crude oil, reduce carbon dioxide emissions by refineries, and make liquid fuels from non-oil energy sources such as natural gas, coal, and biomass.
Appert expects refinery conversion and upgrading to improve from a combination of enhancements to existing processes and development of new ones. He notes the movement of processing operations to the oil field, such as conversion of tar sands in Canada and extra-heavy crude in Venezuela into synthetic crude.

"This economic model may be implemented in other parts of the world," Appert says. "The price differential between heavy, sour crude and light, sweet oil is high enough to cover the cost of significant upgrading."
For vehicle engines, IFP seeks toreduce energy consumption, cut emissions of air pollutants and greenhouse gases, and develop liquid fuels with high hydrogen concentrations.

CO2 sequestration
A final priority of IFP strategy is CO2 sequestration. In February, the group led the launch of Europe's Castor project, a technical goal of which is to cut by half the cost of capturing and separating CO2 from flue gases to EUR 20-30/ton. The project involves 30 companies and research institutions from 11 European Union countries.
Much of the research on capture, representing 70 % of the 4-year Castor budget of $ € 15.8 mm, will occur at a pilot plant able to treat 1-2 tons/hr of CO2 from real flue gases. It will be the largest such unit in the world.

Castor partners will conduct storage research in the abandoned Casablanca oil reservoir off Spain, a deep saline aquifer in Snoehvit gas field in the Norwegian Sea, a depleted deep gas reservoir owned by Gaz de France off The Netherlands, and a depleted shallow gas reservoir owned by Rohoel-Aufsuchungs AG in Austria. IFP hopes to lower the cost of CO2 capture and sequestration.
"This option is still expensive," Appert notes.

IFP and markets
Appert describes IFP as "more market-driven than technology-pushed." As an applied-research centre, he explains, "our mission is to provide products and services required by the industry."
The mission requires that the group stay in touch with industry to understand its needs and with academia to retain access to the best expertise. IFP dedicated 87 % of its 2003 budget of EUR 296.4 mm to research and development. Of the R&D spending, 40 % each went to upstream and downstream subjects and 20 % to engines and related energy subjects.
Public funding covers about two thirds of IFP's budget. Private funding comes from dividends on the group's industrial holdings, which include direct interests in Technip, CGG, Axens, and Beicip-Franlab, among others. IFP started several of the commercial companies in which it holds interests. IFP also receives revenue from bilateral and multilateral research contracts and worldwide licenses.

Changing R&D
Appert notes "a significant change" in the general approach to research and development by oil and gas companies "due to the mergers and acquisitions in the sector and the pressure of the financial market."
Oil companies in the US, he says, have cut their R&D spending in half during the last decade. R&D cuts by European companies have been slightly lower. Service and supply companies have only partly compensated for the oil-company cuts, raising their R&D spending by 60 % during the same period.

"As a result, the global expenditure in R&D of the oil sector has decreased by 30 %," Appert says.
Oil companies now focus R&D on the relatively few technologies that confer competitive advantage. They buy technologies not in this category.
"This may change," Appert adds. "I anticipate a renewed interest from oil companies on technologies to increase reserves, improve the recovery factor, or increase conversion." At that point, they'll need to revive investment in R&D but will face a challenge.

"I am afraid it would be very difficult in many companies to rebuild R&D teams which have been shut down," Appert says. He believes industry leaders fully understand the challenges that confront them from growth in energy demand. He urges them to "consider more seriously" the challenges of climate change and hydrocarbon-resource limits.
"But I am optimistic," he adds, "because more and more industry leaders are concerned about the greenhouse effect and the issue of fossil fuel reserves."