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Petroleum Oil and Natural Gas

Oil and natural gas together make petroleum. Petroleum, which is Latin for rock oil, is a fossil
fuel, meaning it was made naturally from decaying prehistoric plant and animal remains. It is a
mixture of hundreds of different hydrocarbons molecules containing hydrogen and carbon that
exist sometimes as a liquid (crude oil) and sometimes as a vapor (natural gas).

How is Petroleum Formed?

Oil and natural gas were formed from the remains of prehistoric plants and animalsthats why
theyre called fossil fuels! Hundreds of millions of years ago, prehistoric plant and animal
remains settled into the seas along with sand, silt and rocks. As the rocks and silt settled, layer
upon layer piled up in rivers, along coastlines and on the sea bottom trapping the organic
material. Without air, the organic layers could not rot away. Over time, increasing pressure and
temperature changed the mud, sand and silt into rock (known as source rock) and slowly
cooked the organic matter into petroleum. Petroleum is held inside the rock formation, similar to
how a sponge holds water.
Over millions of years, the oil and gas that formed in the source rock deep within the Earth
moved upward through tiny, connected pore spaces in the rocks. Some seeped out at the Earths
surface, but most of the petroleum hydrocarbons were trapped by nonporous rocks or other
barriers. These underground traps of oil and gas are called reservoirs. Reservoirs are not
underground lakes of oil; they are made up of porous and permeable rocks that can hold
significant amounts of oil and gas within their pore spaces. Some reservoirs are hundreds of feet
below the surface, while others are thousands of feet underground.

How is Petroleum Found?

From ancient times through the early 1900s, finding oil and gas was largely a matter of luck.
Early explorers looked for oil seeps at the surface, certain types of rock outcrops and other
surface signs that oil might exist below ground. This was a hit-or-miss process. But science and
technology quickly developed to improve the industrys ability to determine what lies below the
Geologists study rocks on the Earths surface and underground. They make a map of the rocks
where they think oil and gas might be found. Engineers use the geology map to drill a well under
the Earths surface using a rig. If successful, the well will bring a steady flow of oil and gas to the
surface. After the rig is removed, a pump is placed on the well head. An electric motor drives a
gear box that moves a lever. The lever pushes and pulls, forcing the pump up and down, and
creates a suction that draws up the oil.
Three factors affect the amount of oil or gas that can be recovered from a known reservoir: rock
properties, technology and economics. While the industry cannot change the properties of the
rock, it can develop new techniques to remove more oil from the rock. The industry has also
made significant advances to enhance recovery from known reservoirs in the US and abroad,
adding to the reserves base.

Where is Petroleum Found?

The oil and natural gas that power our homes, transportation and businesses are found in small
spaces (called pores) between layers of rock deep within the Earth. Many offshore wells, for
example, are drilled in thousands of feet of water and penetrate tens of thousands of feet into the
sediments below the sea floor.
Natural gas is usually found near petroleum. Oil is then transported to refineries and distilled into
fuel or base chemical products. Natural gas is pumped from below ground and travels in
pipelines. Natural gas is difficult to transport across long distances. In most countries, natural gas
is consumed within the country or exported to a neighboring country by pipeline. Technology for
liquefying natural gas so that it can be transported in tankers (like oil) is improving, but the
volume of natural gas exported in this manner is still limited. As technology expands the options
for gas transportation, demand for natural gas is expected to grow.
More than 100 countries produce petroleum. Most of those countries produce both oil and natural
gas; a few produce only natural gas.
Many factors can affect oil production, such as civil unrest, national or international politics,
adherence to quotas, oil prices, oil demand, new discoveries, and technology development or
The larger subsurface traps are the easiest deposits of oil and gas to locate. In mature
production areas of the world, most of these large deposits of oil and gas have already been
found, and many have been producing since the 1960s and 1970s. The oil and gas industry has
developed new technology to better identify and access oil and gas:

Improved seismic techniques (such as 3D seismic) have increased the odds of correctly
identifying the location of smaller and more difficult to find reservoirs.
New drilling techniques can intersect a long, thin reservoir horizontally first that then turns
vertically making an L shape. This enables the oil or gas from the reservoir to be recovered
with fewer wells.

World oil production comes from more than 800,000 oil wells. More than 500,000 of these wells
are in the United States, which has some of the most mature producing basins in the world. On
average, an oil well in the US produces only 10 B/D, compared with 248 B/D in Russia, 3,077
B/D in Norway, and 5,762 B/D for a well in Saudi Arabia. Comparable data for natural gas wells
are not readily available.
There are still many oil and gas reserves left to be discovered and produced. Future discoveries
will be in deeper basins and in more remote areas of the earth. Advanced technologies also can
be used to locate small reservoirs found in existing oil and gas areas.

Largest Oil Reserves by Country 1 January 2010



Proved Reserves (billion barrels)

Saudi Arabia












United Arab Emirates



















United States




















Top 20 Countries


Rest of the World




Proved Reserves (billion barrels)

World Total


Notes: Proved reserves are estimated with reasonable certainty to be recoverable with present technology and prices.
Source: U.S. Energy Information Administration (EIA).

Natural Gas: Oil Byproduct, Valuable Resource

Natural-gas use is growing across all economic sectors. Natural gas burns cleaner than oil or
coal, and this environmental benefit has encouraged its use. While decades ago natural gas was
seen as an unwanted byproduct of oil and may have been wasted, its value has been recognized
today. Most natural gas is distributed by pipelines, which is a limiting factor for remote resources
that are not near the major consuming markets. But there is considerable development of
technology to convert natural gas to liquids to enable more widespread transportation.
For more information on shale gas and horizontal drilling, see Modern Shale Gas: A Primer from
the U.S. Department of Energy.

Largest Natural Gas Reserves by Country 1 January 2009



Reserves (TrillionCubic Feet)

Percent of World Total









Saudi Arabia



United States



United Arab Emirates






















Reserves (TrillionCubic Feet)

Percent of World Total































Top 20 Countries
Rest of World

Source:Oil & Gas Journal, Oil & Gas Journal, Vol. 106.48 (December 22, 2008).

New Exploration Methods for Oil and Gas

In the unrelenting search for more oil and gas, innovation plays an unquestionable role. As large
oil and gas fields become increasingly difficult to find, geologists, geophysicists and engineers
employ new technologies, such as seismic, to uncover resources that just 10 years ago were
unimaginable. Seismic is a technology that bounces sound waves off rock formations deep below
the surface of the Earth to provide explorers with a picture of the subsurface, often revealing
locations where oil and gas may be trapped. The technology of finding oil has even incorporated
3D visualization tools from Microsofts Xbox game console! The system will help geoscientists
examine and interact with 3D models of the Earth.
In order to process the massive amounts of information collected from seismic surveys,
mathematicians, physicists and other scientists are constantly developing new computer
algorithms to find complex patterns that enhance our understanding of the land beneath us. If we
are to continue finding new fields hidden deep inside the Earth, breakthroughs in computer
processing power and data management are necessary.

How Do We Get to the Oil?

The oil and natural gas we use today have been trapped deep inside the Earth for millions of
years. Although it is tempting to think of oil and gas reservoirs as large pools and wells with giant
straws that suck the fluid to the surface, oil and gas is actually locked inside the rocks like water
in a sponge. Just like the small holes in a sponge that collect and hold water, there are tiny
spaces or pores in rocks that fill with oil and gas. For the past 100 years, oil and gas was
extracted from rocks with small pores that were still big enough that the fluids flowed easily. If you
were a tiny molecule of oil, flowing through these rocks would be like driving on a highway in the
express lane. During this time period, geologists and engineers knew about other large quantities
of hydrocarbons trapped in rocks with even smaller and more complex pores, but were unable to
harness the resourcethe oil and gas flowed too slowly or not at all from these rocks. Instead of
driving on a large and fast highway, flowing through these rocks would be like driving on a small
two-lane road with many stoplights and intersections. Conventional gas wells drilled into these
formations were considered uneconomic since the gas locked in the rock would flow out of the
tiny pores in the rock at such low rates. This picture changed, and changed in a big way, with the
advent of stimulated horizontal wells.

Drilling Location
Before the technology advances of the past few decades, the best place to put a well was directly
above the anticipated location of the oil or gas reservoir. The well would then be drilled vertically
to the targeted oil or gas formation. Technology now allows the industry to drill directionally from
a site up to 5 miles (8 km) away from the target area. Engineers can even target an area the size
of a small room more than a mile underground! This directional drilling technology means that the
industry can avoid placing wells in environmentally sensitive areas or other inaccessible locations
yet still access the oil or gas that lies under those areas.

Drilling Process
In simplified terms, the drilling process uses a motor, either at the surface or downhole, to turn a
string of pipe with a drill bit connected to the end. The drill bit has special teeth to help it crush
or break up the rock it encounters to make a hole in the ground. While the well is being drilled, a
fluid, called drilling mud, circulates down the inside of the drill pipe, passes through holes in the
drill bit and travels back up the wellbore to the surface. The drilling mud has two purposes:

To carry the small bits of rock, or cuttings, from the drilling process to the surface so they
can be removed.

To fill the wellbore with fluid to equalize pressure and prevent water or other fluids in
underground formations from flowing into the wellbore during drilling.

Water-based drilling mud is composed primarily of clay, water and small amounts of chemical
additives to address particular subsurface conditions that may be encountered. In deep wells, oilbased drilling mud is used because water-based mud cannot stand up to the higher temperatures
and conditions encountered. The petroleum industry has developed technologies to minimize the
environmental effects of the drilling fluids it uses, recycling as much as possible. The
development of environmentally friendly fluids and additives is an important area of research of
the oil and gas industry.

Even with the best technology, drilling a well does not always mean that oil or gas will be found. If
oil or gas is not found in commercial quantities, the well is called a dry hole. Sometimes, the well
encounters oil or gas, but the reservoir is determined to be unlikely to produce in commercial
Technology has increased the success rate of finding commercial oil or gas deposits with less
waste and a smaller impact on the surface. While conventional oil and gas wells are typically
vertical, contacting only a limited amount of the target reservoir rock, horizontal wells look like a
large L. The long horizontal wellbore, sometimes more than 4,000 feet long, contacts a large
portion of the productive reservoir. The surrounding rock formation is then hydraulically fractured
to release the oil or gas trapped inside. In hydraulic fracturing, massive trucks pump thousands of
gallons of fluid into the rock at very high pressures in order to force the rock to crack. These
cracks are then propped open with sand to allow a highly conductive passage through which the
oil or gas can flow.
In shale fields, as many as 15 major fractures are placed along the horizontal wellbore, serving to
connect all those small two-lane roads to wide boulevards and even larger, faster highways.
Currently, the limits of this technology are being pushed back every day in order to unleash giant
gas resources. In the future, this technology will have to go even farther to allow more fractures
and longer horizontal wells. Advances in this area will undoubtedly transform our energy
For more information on shale gas and horizontal drilling, see Modern Shale Gas: A Primer from
the U.S. Department of Energy.

Drilling Costs
Once a company identifies where the oil or gas may be located, it then begins planning to drill an
exploratory well. Drilling a well is expensive: Shallow offshore wells or deep onshore wells can
cost more than $15 million each to drill!

Getting the Oil Out

Locating a suitable site for drilling is just the first step in extracting oil. Before drilling can begin,
companies must make sure that they have the legal right to drill, and that the impact of drilling on
the environment is acceptable. This can take years. Once they finally have the go ahead, drilling
begins. The exact procedure varies, but the idea is first to drill down to just above where the oil is
located. Then they insert a casing of concrete into the newly drilled hole to make it stronger. Next,
they make little holes in the casing near the bottom, which will let oil in, and top the well with a
special assembly of control and safety valves called a Christmas tree. Finally, they may send
down acid or pressurized sand to break through the last layer of rock and start the oil flowing into
the well. (Source: Oil and Natural Gas, Society of Petroleum Engineers, Richardson, TX.)

In the petroleum industry, production is the phase of operation that deals with bringing well fluids
to the surface and preparing them for their trip to the refinery or processing plant. Production
begins after drilling is finished.
The first step is to complete the well that is, to perform whatever operations are necessary to
start the well fluids flowing to the surface. Routine maintenance operations, such as replacing
worn or malfunctioning equipment known as servicing are standard during the wells
producing life. Later in the life of the well, more extensive repairs known as workovers may
also be necessary to maintain the flow of oil and gas. The fluids from a well are usually a mixture
of oil, gas, and water, which must be separated after coming to the surface. Production also
includes disposing of the water and installing equipment to treat, measure, and test the oil and
gas before they are transported away from the wellsite.
So production is a combination of operations: bringing fluids to the surface; doing whatever is
necessary to keep the well producing; and taking fluids through a series of steps to purify,
measure, and test them. (Source:Fundamentals of Petroleum, Petroleum Extension Service, The
University of Texas at Austin, Austin TX)

Ultra-deep Water Operations

A major obstacle to producing tomorrows oil and gas resources is operation in ultra-deep water.
The frontier of oil exploration continues to be offshore, over 10,000 feet/3,048 meters below sea
level. Operating in this environment requires billions of dollars and boundless technical expertise.
Safely and economically bringing oil to the surface requires experts in everything from
underwater vehicles that install subsea equipment to structural engineers that make sure the
huge floating platforms can withstand large waves. Operators must be able to hit a seemingly tiny
target that they cannot see over 30,000 feet/9,144 meters under the surfaceall while floating on
waves. To put this in perspective, it is a bit like a quarterback trying to throw a football to his wide
receiver more than 100 football fields away! Innovation will continue to drive this frontier into new

Environmental Care
We depend on oil and gas for a host of products we use in our everyday lives, and we will
continue to depend on them for years to come. And while oil and gas production may contribute
to the greenhouse effect on the environment, the industry is doing its part to offset those effects
while still meeting the worlds petroleum demands.
Already great strides have been made to ensure that oil and gas producers make as little impact
as possible on the natural environments in which they operate. This includes drilling multiple
wells from a single location or pad to minimize damages to the surface, employing
environmentally sound chemicals to stimulate well production, and ensuring a seamless
transition from the wellhead to the consumer. While conventional oil and gas operations have
been streamlined to maximize human safety and environmental protection, development of
unconventional resources like Canadas oil sands and Colorados oil shale will require major
technological innovations.

Exploitation of these resources will be important in meeting tomorrows energy demand, but
current methods consume large quantities of water and depend on expansive surface operations.
How can the vast potential locked in these resources be tapped in a more efficient,
environmentally sound manner? Research today focuses on inserting heaters into rock
formations below the surface to convert the heavy hydrocarbons into liquid that can then be
drained and produced by more conventional oil wells. Such a process would dramatically reduce
the impact of these unconventional sources on the surface. However, the next generation of
engineers and scientists must further refine this technology or generate new ideas in order to
tackle these problems

Are We Running Out of Oil and Gas?

Countries with Largest Known Oil Reserves

Saudi Arabia





United Arab Emirates






No one can know for certain how much oil and gas remains to be discovered. But geologists
sometimes make educated guesses.
The total amount of oil or gas in the reservoir is called original oil, or gas. For a specific reservoir,
engineers estimate this amount using information about the size of the reservoir trap and
properties of the rock. Some of the original oil and gas deposited millions of years ago has been
discovered, while some remains undiscoveredthe target of future exploration.
Discovered (or known) resources can be divided into proved reserves and prospective or
unproved (probable and possible) resources.

Proved reserves are the quantities of oil or gas from known reservoirs that are expected
to be recoverable with current technology and at current economic conditions.

Prospective resources are those that may be recoverable in the future with advanced
technologies or under different economic conditions.
The Oil & Gas Journal (OGJ) estimates that at the beginning of 2009, worldwide reserves
were 1.34 trillion barrels of oil and 6,254 trillion cubic feet (Tcf) of natural gas. The oil
estimate is 16 billion barrels of oil higher than in 2007, reflecting additional discoveries,
improving technology and changing economics.

Continental North America and much of continental Europe have already been explored heavily,
and any new discoveries are likely to be small. But many areas of the globe are largely
unexplored, and large new deposits are waiting to be found. Global hot spots that may house
significant new oil and gas reservoirs include:

Offshore Brazil

The Gulf of Mexico


Offshore western Africa


Areas across Asia and the Pacific.

These are just a few of the current areas of growth. Most observers agree that significant
deposits of oil and gas remain undiscovered in the Middle East.
The largest reserves of natural gas are found in Russia, Iran, Qatar, Saudi Arabia, the United
Arab Emirates, the United States, Algeria, Nigeria, Venezuela and Iraq.
At current consumption levels, the remaining reserves represent 44.6 years of oil and 66.2 years
of natural gas. Does this mean that the world will be out of fossil fuels in 50 years or so? That
theory has been around since the 1970s. In fact, the figures for years of remaining reserves have
remained relatively constant during the past few decades as the industry has balanced
consumption with newly discovered oil and gas deposits.

History of Petroleum
280 to 345 million years ago Carboniferous period; fossil fuel formation begins.
Around 3 million years ago Stone Age; Vast underground oil reserves seep to the surface in
sticky black pools and lumps, called bitumen. Hunters use bitumen (also called pitch or tar) to
attach flint arrowheads to their arrows.
70,000 years ago Prehistoric people discover that oil burns with a bright, steady flame. The
first oil lamps are made by hollowing out a stone, filling it with moss or plant fibers and setting the
moss on fire. Oil lamps remained the main source of lighting until the gas lamp invention in
Victorian times. The Greeks improved lamps by putting a lid on the bowl.
6,500 years ago People living in marshes added bitumen to bricks and cement to waterproof
their houses from floods. They soon learned that it could be used to seal water tanks, waterproof
boats (now known as caulking) and glue broken pots.
7th century BCE A magnifying glass is used to concentrate the suns rays on a fuel and light a
fire for light, warmth and cooking.
6th century BCE Persians discover that a thinner form of bitumen, called naft, could be lethal
in battle. Persian archers put it on their arrows to fire flaming missiles at their enemies.
2,000 years ago The Chinese begin to drill wells in Sichuan. They used bamboo tipped by iron
to get brine (salty water) for medicine and preserving food. They found oil and natural gas as they
drilled deeper. The natural gas was burned under big pans to boil off the water and obtain the
salt. The Chinese refined crude oil for use in lamps and in heating homes.

323-30 BCE Ptolemaic period; Ancient Egyptians preserve their dead as mummies by soaking
them in a brew of chemicals such as salt, beeswax, cedar tree resin, and bitumen.
146 BCE When the Romans set the ancient city of Carthage on fire, the bitumen on the roofs
ensures the flames spread rapidly and completely destroy the city.
67 CE Middle Ages; When enemies try to scale the walls of a castle of fortified town, defenders
pour boiling oil down on them. The first use of boiling oil was by Jews defending the city of
Jotapata against the Romans in 67 CE. The idea was later adopted to defend castles during the
Middle Ages. Oil was extremely expensive, so the technique was probably not used often.
1750 A French military officer notes that Indians living near Fort Duquesne (now the site of
Pittsburgh) set fire to an oil-slicked creek as part of a religious ceremony. As settlement by
Europeans proceeded, oil was discovered in many places in northwestern Pennsylvania and
western New Yorkto the frequent dismay of the well owners, who were drilling for salt brine.
1780s Swiss physicist Aime Argand (1750-1803) realizes that by placing a circular wick in the
middle of an oil lamp and covering it with a chimney to improve airflow, the lamp would burn 10
times brighter than a candle, and also cleanly. This was the greatest breakthrough in lighting
since the time of the Greeks. It revolutionized home life, making rooms bright at night for the first
time in history.
1847 The worlds first oil well is drilled in Baku on the Caspian Sea, what is now Azerbaijan.
Known as the Black City, Baku produced 90 percent of the worlds oil by the 1860s.
1853 Polish chemist Ignancy Lukasiewicz discovers how to distil oil on an industrial scale. He
set up the worlds first crude oil refinery in Poland.
1858 James Williams (1818-90) digs a hole in Lambton County, Ontario, Canada, and found oil
bubbled so rapidly he could fill bucket after bucket. This was the first oil well in the Americas.
Within a few years, simple derricksframes for supporting the drilling equipmentdotted the
1859 Edwin L. Drake drills down 70 feet (21meters) in Titus, Pennsylvania, and struck oil to
create the US first oil well. Oil was first discovered when a homemade rig drilled down 70 feet
and came up coated with oil. This rig was near Titusville (in northwestern Pennsylvania) and was
owned by Colonel Edwin L. Drake.
1896 Henry Ford built his first automobile, the quadricycle, to run on pure ethanol.
1930s By the 1930s, petroleum is the primary source for fuel because of more supply, better
price and efficiency.
1950-present Oil becomes our most used energy source because of automobiles.
1970 Production of petroleum (crude oil and natural gas plant liquids) in the US lower 48 states
reaches its highest level at 9.4 million barrels per day. Production in the lower 48 states has been
declining ever since.
1972 Deep-well drilling technology improvements lead to deeper reservoir drilling and to
access to more resources.
1973 Several Arab OPEC nations embargo, or stop selling, oil to the United States and Holland
to protest their support of Israel in the Arab-Israeli Yom Kippur War. Later, the Arab OPEC
nations added South Africa, Rhodesia and Portugal to the list of countries that were embargoed.
Arab OPEC production was cut by 25 percent, which caused some temporary shortages and
helped oil prices to triple. Some filling stations ran out of gasoline and cars had to wait in long
lines for gasoline.

Countries such as France and Japan, which had relied heavily on oil for electric generation (39%
and 73%, respectively) invested in nuclear power due to the oil crisis. Today, nuclear power
supplies about 80% and 30% of the electricity in those countries, respectively.
The OPEC oil embargo and the resulting supply shock suggested that the era of cheap
petroleum had ended and that the world needed alternative fuels. The development of hydrogen
fuel cells for conventional commercial applications began.
1988 Ethanol begins to be added to gasoline for the purpose of reducing carbon monoxide
2003 Ethanol begins to grow rapidly as the oxygenating factor for gasoline in the US.
Flex-fuel vehicles are introduced. These vehicles can run on straight ethanol, straight gasoline or
a blend of the two. Today, the majority of new cars sold in Brazil are flex-fuel.
Today In the future, water will replace fossil fuels as the primary resource for hydrogen.
Hydrogen will be distributed via national networks of hydrogen transport pipelines and fueling
stations. Hydrogen energy and fuel cell power will be clean, abundant, reliable, affordable and an
integral part of all sectors of the economy in all regions of the US.

Petroleum Oil and

Natural Gas
Uses for Petroleum
Where would we be without petroleum? You can kiss lipstick goodbye!
Not only does petroleum provides fuel to run our vehicles, cook our food, heat our homes and
generate electricity, it is also used in plastics, medicines, food items, and countless other
products, from aspirin to umbrellas, and yeslipstick! Transportation needs use 66% of all
available petroleum to fuel cars, buses, trucks and jets. That means 34% of oil is used for all the
other items that make our daily lives easier. Most people have no idea how often they come in
contact with things made from oil or natural gas.
Here are some of the many items made from petroleum
Artificial Hearts
CD Players

Compact Discs/DVDs
Credit Cards
Digital Clocks
Food Preservatives
Garbage Bags
Golf Balls
Hair Dryers
Hang Gliders
House Paint
Life Jackets
Medical Equipment
MP3 Players
Patio Screens
Photographic Film
Piano Keys
Roller Blades
Shaving Cream
Soft Contact Lenses


Meeting Higher Demands for Petroleum

In areas of the world that are still developing, businesses and individuals are demanding greater
mobility for themselves and their products. World vehicle ownership is projected to increase from
122 vehicles per thousand people in 1999 to 144 vehicles per thousand in 2020, with the largest
growth occurring in developing nations. The total consumption of liquid fuels worldwide is
expected to increase by 25% from 2006 to 2030.
World population is currently around 6 billion people but is expected to grow to approximately 7.6
billion by 2020. That will mean a huge increase in the demand for transportation fuels, electricity
and many other consumer products made from oil and natural gas.
Advanced technology helps the oil and gas industry find the energy resources the world needs.
Technology advances enable more accurate drilling and extraction of a higher percentage of oil
and gas from each field, extending the life of each well. Advanced technology also allows
engineers to tap sources that were once impossible, such as deep-sea fields and oil and gas in
very deep reservoirs. Together, these new sources of oil and gas will replace production from
existing wells as they decline and help to assure adequate oil and gas supplies to meet world
energy needs for the foreseeable future.

Reducing the Environmental Impact of Fossil Fuel Consumption

Substantial work will be required to address the impact of oil and gas consumption, notably the
emission of carbon dioxide as a major byproduct. Among the proposed solutions to this problem
is the sequestration, or storage, of carbon dioxide in old oil and gas fields. Storage of carbon
dioxide from power plants and other industrial facilities would require collecting and processing
the gas, compressing it to high pressures, and then injecting it into the small spaces between
rock grains deep below the surface. Here, the key challenge is capturing and storing the CO2
emissions on a sustainable scale in a reliable and cheap manner.