Friday, May 23, 2008


“Everything you wanted to know about oil but were afraid to ask.”
“Oil for Dummies”
By Doug Maurstad
Chapter 3. Are you familiar with the game of chess? The reason I am asking is that this whole Hyperion Refinery thing is coming across to me as a bunch of moves in a chess game, and here is why.
Chess is a war game involving strategies to reach the ultimate objective of capturing the king. This oil refinery is coming off as a strategy to build an oil refinery, but the unanswered question is where? I don’t think Hyperion plans or has even planned to build a refinery in Union County, South Dakota. They still have not said that Union County is THE PLACE. If you look at all the things that are happening, it leads to one conclusion. They are going to build a refinery, but are using Union County as a sounding board on how to “grease the skids” on where they really want to put it. Let me expound on this and see if you don’t reach the same conclusion that I do.
1. In chess, there is the opening. You move your pawns in attacking probes to occupy strategic spots on the chess board to allow your stronger men (knights, bishops, queens and castles) to attack the king. This Hyperion thing started up here over 3 years ago. It isn’t coincidence that Mr. Al Huddleston shows up at Dakota Dunes for a golf tournament at the tri-state Governors conference at Dakota Dunes. It isn’t coincidence that he meets with Governor Rounds. He might have even played in the same foursome. Mr. Huddleston is probing South Dakota to see if we might be receptive to “Economic Development”. The governor takes the bait and can’t get back to Pierre fast enough. He gets his staff together and actively pursues this possibility. (Kings pawn to kings pawn 4).
2. Mr. Huddleston goes back to Dallas and rounds up his staff and says “It’s a go.” Start sending people up there to start taking land options. (Kings Bishop pawn to king’s bishop pawn 3). For about a year and a half, people are running around southern Union County like a bunch of ants collecting options on land from Burbank to Elk Point and from Elk Point north to Highway 48. Rumors are rampant about someone coming into South Dakota paying astronomical prices for options on farmland. (Queen’s Knight to Queen 3)
3. Finally in June of last year, a company called Hyperion Resources comes out with a press conference that Union County is a finalist for a site for this super duper oil refinery. People start going nuts. Meanwhile, Hyperion is practically taking out options on 12 square miles of land in the heart of the richest farm ground in the state. (Kings Knight to King Bishop 4)
Do you see where this is heading? Even after the commissioners voting 5-0, Hyperion still has not said they are coming to Union County. It is my firm belief that this summer, Hyperion is going to come out and say “Well, Union County, we have decided that because of circumstances beyond our control we are not going to build a refinery in Union County, BUT we are going to keep your land. Then they trot off to Kansas to build the refinery there which is where they wanted it in the firsts place, but had to see how all this played out.
Now back to my story about oil. The following is quoted from O&G Next Generation Oil and Gas
Today, in northeastern Alberta, Canada, a new gold rush of sorts is taking place. The sought after prize is not gold, but rather the oil contained in bituminous sands of the terrain in that region. The discovery is anything but recent, as companies have been involved in extracting oil from the “tar sands,” as they are known, for decades. Bitumen is a semisolid form of oil, which is too viscous to flow under normal conditions.
The bitumen (oil) is contained within a mixture of clay, sand and water making it extremely difficult, and expensive, to extract effectively. Even after the extraction from the sand, bitumen has the viscosity of molasses, so it will not flow in pipelines. Expensive diluents,such as condensates and natural gas liquids must be added to enable it to be pumped. In the past several years, ever-increasing economic incentives to supplement the available oil supply, as well as advancements in equipment and technology, have made developing and producing the reserves more feasible.
Extraction from the oil-rich sands presents some unique challenges, according to Heusinkveld. First, there's the upstream production to extract the bitumen from the sands.Two methods are used: open pit mining for deposits within 50 meters of the surface, and in situ production for deeper deposits, which involves steam heating and gravity separation into horizontal production wells to extract the oil from the sands. This method commonly is referred to by the acronym SAGD, for steamassisted gravity drainage. The scale of these production facilities is enormous, as two tons of oil sands must be processed to yield one barrel of synthetic crude oil.
The second aspect is upgrading the bitumen. “The majority of Dresser-Rand equipment applications are found in the upgraders; there are few on the production end,” Heusinkveld noted. “Upgrading looks like the front end of a traditional petroleum refinery. Different companies are taking various approaches. Some will do a lot of upgrading to create high-quality synthetic crude at the site; others will perform a minimal upgrade and have a major upgrade at the refinery. One company is upgrading just enough to take out some of the sulfur, metals, and ashphaltines to achieve 20° API, so the product can flow down a pipeline.
But it will require significant additional refining. Others are performing substantial local upgrading, requiring minimal additional refining. So there is no standard design.” Regardless of the method, a greater number of turbocompressors, reciprocating compressors, and pumps requiring drivers such as steam turbines are needed for bitumen upgrading than for conversion of high-quality sweet crude. Whether at the production site or downstream at the refinery, bitumen upgrading will involve hydrotreaters and hydrocrackers requiring hydrogen makeup and recycle compressors, cokers requiring wet gas compressors, and the waste streams requiring additional compression.
There are many terms used here that will appear many times in future articles, so you might want to be ready to G-oogle some of this.
Till Next time, Happy Oiling


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