Fuelling energy’s future

Samuel Wright Bodman was sworn in as the 11th Secretary of Energy in February 2005. He leads the Department of Energy (DOE) with a budget in excess of US$23 billion and over 100,000 federal and contractor employees. The DOE is responsible for the Deep Trek program, which aims to foster greater R&D in smarter technologies that are tough enough to withstand the extreme temperatures, pressures and corrosive conditions of deeper drilling. In an exclusive interview with Louise Druce, Secretary Bodman discusses the benefits of the program and how his department is working in collaboration with the oil and gas industry to boost exploration and production to reduce the nation’s reliance on foreign oil.

LD. Fossil fuels currently provide more than 85 percent of all the energy consumed in the US and the DOE has identified the need for more R&D into future fossil energy technologies. What are you mainly focusing on and why?

SB. President Bush’s Administration, and the Department of Energy, in particular, are focusing on accelerating the research and development of a wide variety of clean energy sources and alternatives to petroleum to reduce our reliance on foreign energy sources from parts of the world that are less stable than we would like. Through President Bush’s Advanced Energy Initiative (AEI), which seeks to change the way we power our cars, homes and businesses as a result of increased funding for the research and development (R&D) of clean energy technologies, part of this focus also includes coal-related R&D efforts. The AEI aims to accelerate the development of technologies that foster a diverse supply of energy that is reliable, affordable and environmentally sound. Our goal is to substantially diversify America’s energy supply while also increasing efficiency.

To reduce America’s reliance on foreign energy sources, DOE is committed to, and is focused on, its oil and natural gas R&D efforts in areas where there is a clear government role – long-term, high risk research where there is no market incentive for industry to be involved. This includes research on injecting carbon dioxide (CO2) into oil reservoirs to enhance oil recovery and sequester the greenhouse gas. We are also working to develop natural gas production from methane hydrates. This potentially huge resource could be available within 10 to 15 years, supplementing our more-conventional resources.

LD. There is still less than a 4-in-10 chance that exploratory wells in the US will strike economically producible reserves. How is the DOE boosting this sector and where is the US now concentrating its exploration efforts to increase its chances of ‘striking it rich’?

SB. On a broad scale, DOE has and will continue to encourage Members of Congress to pass legislation that will open parts of the Arctic and the Outer Continental Shelf for more oil and natural gas exploration and development.
Programmatically, exploratory drilling success rates have improved significantly as new technologies have come in to widespread use. In the past 25 years, the exploratory well success rate has improved from 30 percent to 46 percent in spite of the fact that today’s fields are smaller, deeper and in more geologically complex settings. Many attribute this progress to improvements in two areas – drilling and seismic imaging.

DOE’s Deep Trek program aims to develop a “smart” drilling system that is tough enough to withstand the extreme temperatures, pressures and corrosive conditions of deep reservoirs, yet economical enough to make the natural gas affordable to produce. Deep Trek is currently helping develop high-temperature, high pressure downhole sensors. These sophisticated electronic systems can identify potential trouble spots on a real-time basis, allowing operators to make adjustments without interrupting and incurring costly work stoppages. DOE has also applied this geophysical expertise in its National Labs to improved seismic and electromagnetic imaging.

LD. The Deep Trek Program is an important initiative to develop technologies that lower the cost and improve the efficiency of drilling and completing deep wells. How else is the DOE advancing drilling R&D and how are you hoping to broaden this scope as technology improves?

SB. DOE’s Microhole Technology Initiative is a program focused on developing the capacity to drill small diameter boreholes (approximately two-inch diameter), improving the equipment to complete microholes, and improving the diagnostic tools needed to measure key reservoir characteristics. Due to microhole’s portability and reduced size, the environmental impact of drilling is reduced.

The drilling system of the future may employ the more rigorous advanced drill pipe materials developed via Deep Trek with the agility of microhole technology. This combination will substantially reduce the high cost and risk associated with dry holes both onshore and offshore, especially in ultra-deepwater.

LD. Thermal recovery, gas injection, and chemical injection are the three most popular enhanced oil recovery techniques but CO2 injection is showing a lot of promise. What are the benefits and pitfalls?

SB. Carbon dioxide injection is a commercial success in many targeted reservoirs. This process boosts productivity in older oil fields while capturing and removing carbon dioxide that would otherwise escape into the atmosphere. The Energy Policy Act of 2005 calls for the establishment of a competitive grant program to support projects that use CO2 injection for the purposes of enhancing oil and gas recovery and increasing the sequestration of CO2. Approximately 12 percent of US oil is produced by enhanced oil recovery technologies.

One of the problems we face is that access to carbon dioxide sources is site specific and proximity to the target reservoirs is necessary. Reservoirs that are deep enough for CO2 injection/sequestration and that have favorable geology are required for use of this process. Once CO2 sources are identified, the challenge becomes getting them via pipeline to the various oil reservoirs in an economic way. Some heavy oil reserves are not amenable to recovery by CO2 injection. The economic investment required for CO2 capture, pipeline, pilot test and commercial deployment is high.

LD. Just one percent of methane hydrate could more than double the domestic natural gas resource base. Large deposits have been identified around the US, so what are the challenges in making it technically and economically recoverable?

SB. You are right about the potential of methane hydrate. It could possibly double the combined volume of all other known fossil fuels. The main technology needs for economic natural gas production from hydrates are the ability to locate the hydrate and predict the volume of the deposit prior to drilling and the ability to safely produce the natural gas at economic flow rates. We are making great progress in developing geologic models and high-resolution techniques to detect the location and volume of naturally occurring methane hydrate.

However, we are several years away from a production test, which is necessary to define and address any production issues. DOE has recently completed an “Interagency Methane Hydrate Research and Development Roadmap” that lays out the steps necessary to achieve our goal of safe, environmentally sound natural gas production from hydrates: http://www.fe.doe.gov./programs/oilgas/publication/

methane_hydrates/mh_interagency_plan.pdf.

LD. The Strategic Petroleum Reserve is the largest stockpile of government-owned emergency crude oil in the world but the recent Energy Policy Act has given the green light to filling it to a one billion barrel capacity. How did Hurricane Katrina impact this and what is/has been done to keep the program on track? How has this also impacted oil prices?

SB. During 2005, the Strategic Petroleum Reserve (SPR) had a goal of reaching an inventory of 700 million barrels, which it reached in August 2005. When Katrina hit the gulf coast, I immediately authorized a series of oil loans to specific refiners. Shortly after that, the President made a finding of a “severe energy supply interruption” and directed a drawdown and sale from the Strategic Petroleum Reserve in coordination with other International Energy Agency member countries. Since that time, most of the borrowed oil has been repaid leaving only 1.7 million barrels due in the second quarter of 2007. The 11 million barrels of oil sold in response to Katrina have not yet been repurchased, although the revenue from the sale is available to the department for that purpose.

Our current plan is to reinstitute the transfer of royalty oil from the Department of the Interior to the SPR in order to satisfy the requirement of the Energy Policy Act of 2005 to acquire oil for the Reserve as expeditiously as possible. The next opportunity to transfer that oil will be the contract cycle which starts April 1, 2007.

Despite the 2005 hurricanes, the department continued the required National Environmental Policy Act procedure required to select sites for expansion. The department conducted public scoping hearings, drafted and published an Environmental Impact Statement (EIS), held public hearings, and has been in the process of amending the EIS in response to the public comments. In the near future, the Department will issue a final EIS, and I will make a decision of record selecting the sites for expansion. After that, DOE must prepare a plan for submission to Congress.

The 2005 hurricanes destroyed much of the offshore infrastructure in the Gulf of Mexico and caused oil prices to rise to new highs. However, prices were stabilized by the use of strategic oil, although they stayed high through the remainder of 2005 and the first eight months of 2006. Now that the driving season is over for 2006 we are seeing prices retreat quickly.

The fill rate of the SPR is kept slow enough that the volume is unlikely to have had any significant impact on product prices during the years 2002-2005. In the future the fill rates will be closely monitored and studied to try to define any linkage between the rate of fill and changes in oil prices. The process assuring that the fill program does not unduly affect oil prices will be described in the procedures for acquiring SPR oil which have circulated for public comment, and which will be issued as final procedures in the near future.

LD. Environmental issues are always close to heart, pioneered by the Clear Skies Initiative. Which programs have been the most successful in achieving reduced emissions targets so far and what looks the most promising for the future?

DOE’s clean coal program supports technology development to dramatically reduce emissions from coal-fired electricity generation plants and dramatically reduce carbon emissions to achieve near-zero emissions power production. Programs to reduce air pollutants from coal-fired generation have been very successful to date.

In the near term, the focus of the program is to remove technological obstacles to meet all existing and anticipated environmental regulations and to increase the power generation efficiency for existing and new plants. Over the longer term, the aim is to nearly double energy plant efficiencies (from 33 percent to 60 percent) to produce low cost hydrogen from coal and to capture and store carbon from future coal plants.

LD. How does the DOE ensure close relations with the oil and gas sector to implement these programs to ensure that it is not just paying lip service to US citizens?

SB. DOE works closely with the oil and gas industry. And while we believe it is the government’s role to provide the research and support that is necessary to turn oil and gas companies into energy companies, we believe industry is the best place for changes and deployment of new, clean-energy technologies to originate. Having said that, we seek to be good stewards of taxpayer dollars by selecting projects through merit-based competition and require our industry partners – predominantly small independent producers – to provide a share of the costs.

The DOE is responsible for the Deep Trek program, which aims to foster greater R&D in smarter technologies that are tough enough to withstand the extreme temperatures, pressures and corrosive conditions of deeper drilling. In an exclusive interview with Louise Druce, Secretary Bodman discusses the benefits of the program and how his department is working in collaboration with the oil and gas industry to boost exploration and production to reduce the nation’s reliance on foreign oil.

LD. Fossil fuels currently provide more than 85 percent of all the energy consumed in the US and the DOE has identified the need for more R&D into future fossil energy technologies. What are you mainly focusing on and why?

SB. President Bush’s Administration, and the Department of Energy, in particular, are focusing on accelerating the research and development of a wide variety of clean energy sources and alternatives to petroleum to reduce our reliance on foreign energy sources from parts of the world that are less stable than we would like. Through President Bush’s Advanced Energy Initiative (AEI), which seeks to change the way we power our cars, homes and businesses as a result of increased funding for the research and development (R&D) of clean energy technologies, part of this focus also includes coal-related R&D efforts. The AEI aims to accelerate the development of technologies that foster a diverse supply of energy that is reliable, affordable and environmentally sound. Our goal is to substantially diversify America’s energy supply while also increasing efficiency.

To reduce America’s reliance on foreign energy sources, DOE is committed to, and is focused on, its oil and natural gas R&D efforts in areas where there is a clear government role – long-term, high risk research where there is no market incentive for industry to be involved. This includes research on injecting carbon dioxide (CO2) into oil reservoirs to enhance oil recovery and sequester the greenhouse gas. We are also working to develop natural gas production from methane hydrates. This potentially huge resource could be available within 10 to 15 years, supplementing our more-conventional resources.

LD. There is still less than a 4-in-10 chance that exploratory wells in the US will strike economically producible reserves. How is the DOE boosting this sector and where is the US now concentrating its exploration efforts to increase its chances of ‘striking it rich’?

SB. On a broad scale, DOE has and will continue to encourage Members of Congress to pass legislation that will open parts of the Arctic and the Outer Continental Shelf for more oil and natural gas exploration and development.
Programmatically, exploratory drilling success rates have improved significantly as new technologies have come in to widespread use. In the past 25 years, the exploratory well success rate has improved from 30 percent to 46 percent in spite of the fact that today’s fields are smaller, deeper and in more geologically complex settings. Many attribute this progress to improvements in two areas – drilling and seismic imaging.

DOE’s Deep Trek program aims to develop a “smart” drilling system that is tough enough to withstand the extreme temperatures, pressures and corrosive conditions of deep reservoirs, yet economical enough to make the natural gas affordable to produce. Deep Trek is currently helping develop high-temperature, high pressure downhole sensors. These sophisticated electronic systems can identify potential trouble spots on a real-time basis, allowing operators to make adjustments without interrupting and incurring costly work stoppages. DOE has also applied this geophysical expertise in its National Labs to improved seismic and electromagnetic imaging.

LD. The Deep Trek Program is an important initiative to develop technologies that lower the cost and improve the efficiency of drilling and completing deep wells. How else is the DOE advancing drilling R&D and how are you hoping to broaden this scope as technology improves?

SB. DOE’s Microhole Technology Initiative is a program focused on developing the capacity to drill small diameter boreholes (approximately two-inch diameter), improving the equipment to complete microholes, and improving the diagnostic tools needed to measure key reservoir characteristics. Due to microhole’s portability and reduced size, the environmental impact of drilling is reduced.

The drilling system of the future may employ the more rigorous advanced drill pipe materials developed via Deep Trek with the agility of microhole technology. This combination will substantially reduce the high cost and risk associated with dry holes both onshore and offshore, especially in ultra-deepwater.

LD. Thermal recovery, gas injection, and chemical injection are the three most popular enhanced oil recovery techniques but CO2 injection is showing a lot of promise. What are the benefits and pitfalls?

SB. Carbon dioxide injection is a commercial success in many targeted reservoirs. This process boosts productivity in older oil fields while capturing and removing carbon dioxide that would otherwise escape into the atmosphere. The Energy Policy Act of 2005 calls for the establishment of a competitive grant program to support projects that use CO2 injection for the purposes of enhancing oil and gas recovery and increasing the sequestration of CO2. Approximately 12 percent of US oil is produced by enhanced oil recovery technologies.

One of the problems we face is that access to carbon dioxide sources is site specific and proximity to the target reservoirs is necessary. Reservoirs that are deep enough for CO2 injection/sequestration and that have favorable geology are required for use of this process. Once CO2 sources are identified, the challenge becomes getting them via pipeline to the various oil reservoirs in an economic way. Some heavy oil reserves are not amenable to recovery by CO2 injection. The economic investment required for CO2 capture, pipeline, pilot test and commercial deployment is high.

LD. Just one percent of methane hydrate could more than double the domestic natural gas resource base. Large deposits have been identified around the US, so what are the challenges in making it technically and economically recoverable?

SB. You are right about the potential of methane hydrate. It could possibly double the combined volume of all other known fossil fuels. The main technology needs for economic natural gas production from hydrates are the ability to locate the hydrate and predict the volume of the deposit prior to drilling and the ability to safely produce the natural gas at economic flow rates. We are making great progress in developing geologic models and high-resolution techniques to detect the location and volume of naturally occurring methane hydrate.

However, we are several years away from a production test, which is necessary to define and address any production issues. DOE has recently completed an “Interagency Methane Hydrate Research and Development Roadmap” that lays out the steps necessary to achieve our goal of safe, environmentally sound natural gas production from hydrates: http://www.fe.doe.gov./programs/oilgas/publication/

methane_hydrates/mh_interagency_plan.pdf.

LD. The Strategic Petroleum Reserve is the largest stockpile of government-owned emergency crude oil in the world but the recent Energy Policy Act has given the green light to filling it to a one billion barrel capacity. How did Hurricane Katrina impact this and what is/has been done to keep the program on track? How has this also impacted oil prices?

SB. During 2005, the Strategic Petroleum Reserve (SPR) had a goal of reaching an inventory of 700 million barrels, which it reached in August 2005. When Katrina hit the gulf coast, I immediately authorized a series of oil loans to specific refiners. Shortly after that, the President made a finding of a “severe energy supply interruption” and directed a drawdown and sale from the Strategic Petroleum Reserve in coordination with other International Energy Agency member countries. Since that time, most of the borrowed oil has been repaid leaving only 1.7 million barrels due in the second quarter of 2007. The 11 million barrels of oil sold in response to Katrina have not yet been repurchased, although the revenue from the sale is available to the department for that purpose.

Our current plan is to reinstitute the transfer of royalty oil from the Department of the Interior to the SPR in order to satisfy the requirement of the Energy Policy Act of 2005 to acquire oil for the Reserve as expeditiously as possible. The next opportunity to transfer that oil will be the contract cycle which starts April 1, 2007.

Despite the 2005 hurricanes, the department continued the required National Environmental Policy Act procedure required to select sites for expansion. The department conducted public scoping hearings, drafted and published an Environmental Impact Statement (EIS), held public hearings, and has been in the process of amending the EIS in response to the public comments. In the near future, the Department will issue a final EIS, and I will make a decision of record selecting the sites for expansion. After that, DOE must prepare a plan for submission to Congress.

The 2005 hurricanes destroyed much of the offshore infrastructure in the Gulf of Mexico and caused oil prices to rise to new highs. However, prices were stabilized by the use of strategic oil, although they stayed high through the remainder of 2005 and the first eight months of 2006. Now that the driving season is over for 2006 we are seeing prices retreat quickly.

The fill rate of the SPR is kept slow enough that the volume is unlikely to have had any significant impact on product prices during the years 2002-2005. In the future the fill rates will be closely monitored and studied to try to define any linkage between the rate of fill and changes in oil prices. The process assuring that the fill program does not unduly affect oil prices will be described in the procedures for acquiring SPR oil which have circulated for public comment, and which will be issued as final procedures in the near future.

LD. Environmental issues are always close to heart, pioneered by the Clear Skies Initiative. Which programs have been the most successful in achieving reduced emissions targets so far and what looks the most promising for the future?

DOE’s clean coal program supports technology development to dramatically reduce emissions from coal-fired electricity generation plants and dramatically reduce carbon emissions to achieve near-zero emissions power production. Programs to reduce air pollutants from coal-fired generation have been very successful to date.

In the near term, the focus of the program is to remove technological obstacles to meet all existing and anticipated environmental regulations and to increase the power generation efficiency for existing and new plants. Over the longer term, the aim is to nearly double energy plant efficiencies (from 33 percent to 60 percent) to produce low cost hydrogen from coal and to capture and store carbon from future coal plants.

LD. How does the DOE ensure close relations with the oil and gas sector to implement these programs to ensure that it is not just paying lip service to US citizens?

SB. DOE works closely with the oil and gas industry. And while we believe it is the government’s role to provide the research and support that is necessary to turn oil and gas companies into energy companies, we believe industry is the best place for changes and deployment of new, clean-energy technologies to originate. Having said that, we seek to be good stewards of taxpayer dollars by selecting projects through merit-based competition and require our industry partners – predominantly small independent producers – to provide a share of the costs.