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Is the era of easy oil over?

August 6, 2006 2:34 am

Part of an occasional series.

By PAUL SALOPEK

CHICAGO TRIBUNE

Last summer, a new gasoline station opened in South Elgin, Ill., an old farming village on the Fox River that's being swallowed by the westward sprawl of Chicago.

As service stations go, it's an alpha establishment. A $3 million Marathon outlet with 24 digital pumps, a computerized car wash, a Goodfella's sandwich shop and a convenience store lit up like an operating room, it sells everything from ultra-low-sulfur diesel to an herbal "memory enhancer" to Krispy Kreme doughnuts. Infrared sensors activate the faucets in its immaculate, white-tiled bathrooms. The coffee kiosk's floor is real hardwood.

Howard Dunbar's Tanker Truck 6 rolled into the station one chilly night last September. An amiable ex-cop, Dunbar drives for an independent fuel hauler. At 9:25 p.m., he stepped down from the cab, set out the safety cones, hooked up his hoses with a reassuring click, and then proceeded to unload 7,723 gallons of gasoline and diesel into the station's underground tanks.

It took Dunbar 29 minutes to empty his swimming-pool-size cargo--a workaday chore that reveals the triumphs of our motorized civilization but also the seeds of its possible end.

The diesel streaked past a tiny glass porthole on the truck's hoses in a smear of pale yellow, like beer, while the premium unleaded ran colorless as vodka. That particular night, according to one industry method of calculating the explosive energy locked away in crude oil, Dunbar dumped the liquid equivalent of 19.2 million hours of physical labor into the Marathon's storage tanks--or the power of a slave army of 2,200 men working around the clock for a year. This bonanza would be sucked dry by customers in 24 hours, a small, stark example of the nation's awesome petroleum appetite at a time when the planet appears to be lurching into an energy crunch of historic proportions.

By now, most Americans realize that something is profoundly awry in the global oil patch.

For the majority of motorists, like the "swipe and go" customers at the South Elgin Marathon, the evidence is painfully obvious: record-high fuel costs that have surpassed last year's infamous price spikes after Hurricane Katrina.

Yet to fully grasp the scope of the crisis looming before them, Americans must retrace their seemingly ordinary tankful of gasoline back to its shadowy sources. This is, in effect, a journey into the heart of America's vast and troubled oil dependency. And what it exposes is a globe-spanning energy network that today is so fragile, so beholden to hostile powers and so clearly unsustainable that our car-centered lifestyle seems more at risk than ever.

"I truly think we're at one of those turning points where the future's looking so ugly nobody wants to face it," said Matthew Simmons, an energy investment banker in Houston who has advised the Bush administration on oil policy. "We're not talking some temporary Arab embargo anymore. We're not talking your father's energy crisis."

What Simmons and many other experts are talking about is a bleak new collision between geology and geopolitics.

Below ground, the biggest worry is "peak oil"--the notion that the world's total petroleum endowment is approaching the half-empty mark, a geological tipping point beyond which no amount of extra pumping will revive fading oil fields. Peak oil theory is controversial. Many think it alarmist. Yet even Big Oil is starting to gird itself for possible fuel shortages: Chevron, the nation's second-largest oil company, has bluntly declared that "the era of easy oil is over" and is warning energy-hungry Americans that "the world consumes two barrels of oil for every barrel discovered."

Aboveground, things look little better. Most of the world's petro-states, aware that crude supplies are growing increasingly valuable, have limited drilling rights to their own oil companies.

In the meantime, humanity's thirst for petroleum continues to run wild. Producing nations are pumping at maximum capacity. Yet the competing energy demands of America and rapidly industrializing China and India now threaten to outstrip global oil output. China has displaced Japan as the No. 2 oil importer, after the United States. Chinese oil imports are projected to double to 14 million barrels a day over the next 20 years. Many credible analysts foresee a new "energy cold war" as the U.S. and China square off over the planet's last reserves.

The new Marathon station at Illinois Highway 25 and Middle Street in South Elgin turned out to be an ideal laboratory to parse these sobering issues.

A typical canopy-and-box structure, the station helps feed Chicago's explosive growth westward, into the exurban boomtowns where McMansions hit the corn. It sits at a stoplight some 40 miles from downtown Chicago. A gravel quarry operates across the street. Nearby, an old game farm once extolled by Ernest Hemingway has vanished under golf courses and shopping malls.

With a little research, and proprietary data supplied by the Marathon Petroleum Co., the Chicago Tribune could trace with unparalleled clarity virtually every bucketful of trucker Howard Dunbar's shipment back to its distant origins.

On the hydrocarbon menu that September night, in round figures: Gulf of Mexico crudes, 31 percent; Texas crudes, 28 percent; Nigerian crudes, 17 percent; Arab Light from Saudi Arabia, 10 percent; Louisiana Sweet, 8 percent; Illinois Basin Light, 4 percent; Cabinda crude from Angola, 3 percent; N'Kossa crude from the Republic of Congo, 0.01 percent.

Taken together, the fuel shipments revealed the immense human costs, the boggling technical investments, the hardball politics, the hidden exploitation and, ultimately, the alarming fragility of America's epic oil addiction--as seen through the prism of a local gas station. U.S. consumers and faraway producers were tethered by a clear oil trail.

This is how it begins, our travelogue of addiction.

It was September. Hurricanes Katrina and Rita had delivered their one-two punch to the energy-rich Gulf Coast, swamping New Orleans and disabling the offshore wells and pipelines that yield a third of America's domestic energy production. In South Elgin, population 20,000, gas prices at the Marathon had broken the $3-a-gallon barrier. And the Bubbas and Barbies--lingo for the working-class men and white-collar commuters who keep convenience stores solvent--were misbehaving. They were stealing Michelle Vargo's gasoline.

"You'd think it would only be the crummy cars, but people in nice cars are doing it, too," exclaimed Vargo, the frazzled station manager. "I never seen anything like it."

Vargo, 36, is too young to recall that this had happened before, during the OPEC oil embargo of 1973 and the Iranian hostage crisis of 1979. Nor did she and her small band of employees appear to fully grasp the ominous economic and political forces churning around their local gas station. Few Americans do.

In typically murky industry fashion, the station is branded and supplied by Marathon but actually owned by an independent fuel retailer--in this case, Prairie State Enterprises of Barrington, Ill. Freelance shippers called "jobbers" haul the gas. And even though much of the station's petroleum does in fact bubble from Marathon's own oil patches, the company as often purchases its oil from Exxon Mobil, Iraq's Southern Oil Co. or Venezuela's PDVSA, a swaggering national oil company with its own patriotic song.

In 1940, the United States was the Saudi Arabia of the world. It produced 63 percent of the planet's oil. Today, after years of frenzied pumping, it generates 8 percent.

About a third of Vargo's fill-up that day came from the last major pool of crude remaining in oil-starved America: the Gulf of Mexico. Trace it from seabed to suburbia, and you X-ray America's aging industrial innards.

It started 9,000 feet inside the Earth, in Miocene Epoch rocks that have the consistency of oil-soaked beach sand. The rocks simmer near the boiling point of water. This is known in the business as the "pay zone."

From that hellish place, the crude was sucked up into a 4-inch drill pipe that punctured the Atlantic floor near a submerged hillock called Viosca Knoll 786. It shot up 1,750 feet of pipe to an offshore production rig and got shunted ashore to a huge tank farm in St. James, La. There it began its long journey to the Midwest in a pipeline big enough for a person to walk in, albeit hunched over--a 632-mile-long artifact of our oil dependency that will doubtless astound future archeologists.

Arriving at the Robinson refinery in southern Illinois, it got cooked and cooled for five days inside 23-story towers monitored by hard-hatted engineers who pedal around the facility on bicycles. Then it gushed through 16- and 12-inch fuel pipelines for three days until it reached a 40-year-old tank farm near O'Hare International Airport. Finally, it traveled its last 12 miles to the South Elgin Marathon inside Howard Dunbar's truck.

The enormous cost of this elaborate capillary system, built over generations, helps cement our reliance on hydrocarbons.

"Takes a bit of power to bring it up," hollered Ferrell Martin, 52, a senior mechanic aboard Petronius, a drilling platform that juts above the Gulf's waves near Viosca Knoll. "Our generators could electrify a small town."

The platform, co-owned by Chevron and Marathon, came on line in 2000. It cost more than $500 million to build, nearly what the United States shells out every 24 hours to buy imported crude. A masterpiece of high technology, it pumps the energy equivalent of 60,000 barrels of oil and natural gas a day--a gusher that matches Pakistan's national output and is only slightly behind Italy's.

Petronius is gigantic, almost beyond imagining. If the steel-legged platform were the 110-floor Sears Tower, the ocean's bed would muddy the lobby, and the sea's surface would lap at the antennas. Go 40 feet higher, and you would finally reach Martin's workplace--a swaying 10-story cube of valves, piping, generators and windowless crew quarters inhabited by about 90 men.

Petronius is impressive, a fitting monument to America's empire of oil. More than 100 such gargantuan structures dot the Gulf. As do 6,500 other oil-related features such as wells, pumping stations and helipads, not to mention some 30,000 miles of submerged pipelines tangled like spaghetti across the Gulf floor. On any day, swarms of oil company helicopters mutter through the gauzy marine air. Armadas of supply boats chalk the lime-peel-green ocean surface. On the horizon, gas flares burn palely.

This is Martin's strange, metallic, largely womanless world. Almost certainly, it is also America's last great oil rush.

"The future is here," said Martin, a big, friendly Cajun with a nose like a hatchet. "The onshore fields are fading."

One man who keeps Michelle Vargo's gas-guzzling Suburban rolling doesn't have an oil worker's rough hands. He sits in a red granite skyscraper in Houston and speaks in what sound like Zen koans: "the topography of sound," "sand is silent" and "the trick is not to know when to believe your data, but to know when not to believe it."

Jeff Rutledge, a senior geophysicist for Marathon, was making a point about the increasingly difficult search for the world's last accessible pockets of conventional crude. "No question, we're facing a whole new game," said Rutledge, a sandy-haired New Orleans native. "Sure, there's a lot of resources still out there, but they're getting riskier to invest in, much harder to find and more expensive to reach."

The quest for oil is tireless, exhaustive, obsessive--and if Marathon's technology and exploration department is anything to judge by, highly eccentric. Brainy geologists use their office windows for blackboards, scrawling equations on the glass with felt-tipped pens. Others wear strange goggles in a small, theater-like room, peering up in silence at 3-D chunks of the Earth's crust. Desks are piled with what look like old eight-track tapes: computer drives that contain volumes of exploration data that beggar belief. Seismic surveys, the industry's main tool for locating oil, involve setting off small shock waves at the Earth's surface and recording millions of "echoes" from the rock below.

"One typical seismic project contains about the same amount of data as your DNA code," Rutledge said. "Two or three surveys together contain the equivalent of all the information available on the Internet today."

Progress reports from 10 to 20 of these fantastically pricey, high-tech quests from Africa, Russia and the North Atlantic land on Rutledge's desk every day.

According to industry optimists, such herculean efforts to squeeze out Earth's last high-quality oil are the best retort to doomsayers who worry that the world is running on empty.

Out in the Gulf, for instance, Petronius' 19 wells do things engineers couldn't dream of a quarter-century ago. They snake downward through almost 1,800 feet of seawater, bore vertically through a mile and a half of rock, and then veer off laterally under the stony seabed for distances of up to 5 miles. This is the oil-patch equivalent of drawing blood from a hidden vein--with a hypodermic needle 180 feet long.

Such whiz-bang technology has encouraged the U.S. Minerals Management Service to boost the Gulf of Mexico's potential oil reserves by 15 percent, to 86 billion barrels. That's enough, in theory, to meet U.S. demand for another decade. Much of that, however, lies in deep, environmentally sensitive waters near the Florida coast and is prohibitively expensive to extract using current technology.

"Cost aside, we don't see any immediate shortage in the resource at the global level," said Bob Greco, an analyst with the American Petroleum Institute, the industry lobbying group. "Innovation will keep pushing the envelope of what's recoverable."

Many oil executives also insist that much of today's oil woes are actually man-made: Environmental restrictions and stingy foreign governments keep valuable reserves locked up.

Skeptics, however, dismiss this as mere wishful thinking--a "cornucopian" belief that, somewhere, somehow, nature will still bail humans out.

The United States gulps a quarter of the crude pumped on the planet, industry critics point out, yet it sits atop just 3 percent of the globe's reserves. No amount of new drilling will change this. The awesome and costly platforms that stride ever-deeper into Gulf waters are symbols of a junkie's desperation, they say, not hope.

"You can drill in the Arctic National Wildlife Refuge, on every continental shelf and atop every hill in America for that matter, and you still won't reverse the fact that our oil production is in permanent decline," said Rep. Roscoe Bartlett, R-Md., a senior member of the House Science Committee. "We're just sopping up what's left, digging ourselves into a deeper hole."

In the beige corridors of Marathon's Houston skyscraper, certain absences hinted at the waning age of cheap, easily tapped crude oil. Because of the high costs and diminishing returns of modern exploration efforts, Rutledge said, Marathon's technology and exploration staff has shrunk. Much of the exploration work is farmed out. Also, oil discoveries are getting smaller; hardly the giant "elephant" finds of bygone eras, most are like elusive rabbits.

Rutledge gazed out his window at the overcast city below. Small homes in the neighborhood were being torn down and replaced by hulking trophy houses.

Using available technology, he said, Petronius' bounty likely will shrivel in 12 to 15 years.

Ferrell Martin's ancestors had fished and trapped the watery maze of Bayou Terrebonne, a fabled swamp about 60 miles southwest of New Orleans, for more than 200 years. But today, Louisiana's lush wetlands, the richest in America, are dying, crumbling into the sea.

Home from his usual two-week shift aboard Petronius, Martin was getting hopelessly lost. The strapping Cajun oil worker knelt at the bow of a bass boat steered by one of his numberless bayou relatives, trying, again and again, to get the boat unstuck from hidden bars of mud.

"I can't even find the same fishing holes anymore," Martin said, fanning away mosquitoes. "The whole place is just sinking away."

It's been widely known for decades that flood-control measures on the Mississippi River are chewing away at Louisiana's biologically rich coasts. The river's sediments are being flushed disastrously out into the deep sea. And the swamps aren't being replenished; a marshland the size of Delaware has already washed away. But new studies suggest that oil and natural gas extraction may be another culprit.

The U.S. Geological Survey believes land in and around Bayou Terrebonne is starting to sag like a deflating wineskin as fossil fuels are pumped out in massive quantities. In some places, it has settled 11 inches. For a landscape that is in many cases only a few feet above sea level, the implications are ominous. Erosion and subsidence have eaten away at least 2 miles of coastline near Ferrell Martin's modest house in Montegut, La.

He recognized the irony: Oil has yanked thousands of once-impoverished Cajuns into the middle class, but it is now helping swallow their ancestral homes.

"Everything's a trade-off, I guess," Martin said, baiting a hook with a sardine and casting his line into what used to be dry cattle pastures in his youth.

This, too, gets burned up by the cars in South Elgin: a clod of southern Louisiana.