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THE OUTLOOK FOR PETROLEUM John P. Longwell Professor Department of Civil Engineering Massachusetts Institute of Technology I have been asked to discuss the outlook for petroleum, and I would like to begin by addressing the question of how much more expensive petroleum is going to get. I refer to Figure l. This is a figure that appears every year in an Exxon publication, and it is Exxon's estimate as to what the world's oil picture is going to look like in terms of oil reserves and production. It is interesting to watch this year by year because the picture is becoming progressively more pessimistic. A year ago the curve went up more steeply for production, indicating that people thought they were going to be using more oil than they are; but more importantly, the future discoveries estimate also was higher so that it actually was a little bit above production. This year it is less than productive. These are five-year averages of future discoveries. If future discovery rates are less than production roles, reserves are going to be drawn down. The reserve drawdown is the underlying factor that is going to determine price and supply. This changes every year, so any one set of such curves should not be taken too seriously. However, a very informed group of people feel that, despite reduced consumption of petroleum due to the price situation in the world, the future discovery rate is not going to be able to keep up. So, the people who have oil are likely to charge more for it. If this is, indeed, the picture, then oil is going to become -nore expensive. The kinds of numbers I have heard people quota—and they can't be taken too seriously—are a factor of two or three times the current price in l980 dollars for the end of this century. That would be based on a situation whereby an increasingly scarce but needed commodity is being sold. Maybe we will be lucky and it will turn out differently. One way to look at the tightening petroleum situation is shown in Figure 2. I want to look a little farther into the future than the 25

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time frame we are talking about here because I feel that, since our effort is to guide the research activity in aeronautics, we ought to be considering the period of maybe 2020-2030 as a target time—certainly not just the next l0 years because unconventional oil sources are not going to have much impact then. This particular set of curves is convenient to use. It appeared in Science magazine and was based on a large international study. These curves show more growth than is indicated in Figure l. The slope of the total oil demand curve is higher, and the estimates in the two figures do not correspond very well. But, this figure does give an integrated view of where the oil is going to come from. Although the Middle East has large reserves, they are being drawn down quite rapidly. Conventional oil reserves are projected to be severely depleted by 2030. Unconventional oil, which includes enhanced recovery, heavy crudes and oil shale, will help to make up the difference, with coal liquefaction not really coming in until around the turn of the century. If we are concerned about aircraft fuels in the period beyond about l995, we are going to be looking at an increasing variety of sources. In the period beyond 2000, oil from the new reserves probably isn't going to be much cheaper than oil produced from the unconventional sources because it will be so difficult to find and produce. One must state the framework of a discussion of this nature. Figure 3 shows that I am really looking way out in the future and am not trying to cope with the next l0 years. This view of the world's energy growth indicates that it is not going to be very rapid and probably not as rapid as the international study indicated. Worse than that, it is going to be erratic, in my opinion. We will probably have a series of crises. We will have times of real shortages and times like the present when the consumption has gone down a little bit below production and inventories are building up. So, it is going to be a very erratic situation; that is the pessimistic part. The encouraging part is that these problems are becoming increasingly obvious, and we are going to see a major effort in this country to convert solid resources into liquids. Our resources are solids, such as coal, shale, peat, and so on, and we will need new sources of liquids for the uses we anticipate. In addition, there is a major effort to conserve liquid fuels by improved technology and practices. This is the framework that I use in this discussion. A little bit of optimism on synthetic fuels is shown in Figure 4. What has happened during this last year is almost like a religious conversion in some of the major energy companies. There has been a rather sudden recognition that synthetic fuels offer a major opportunity. A year or two ago it was not like that, although there were groups in the oil companies that were pushing synthetic fuels. We now have major energy companies proposing very large synthetic fuel developments as something that the nation should have. I think they are correct in this case. In addition to that, companies that really haven't been in energy—chemical companies and the like—are developing the plans for synthetic fuels. The new synthetic fuels 26

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corporation, just getting under way, makes it possible for the companies that haven't been in energy to consider really major projects, with financial backing available from fhe U.S. government. One position of the major energy companies is that, for the part they would play, they don't really need that backing. This varies from day to day, but generally this is the case. The federal goal is 2 million barrels a day by l992, with the hope of getting up to 6 or 8 million barrels a day by 2000, or roughly up to the present liquid fuel import rate. Synthetic fuels, it must be remembered, are not all liquids. Some are gas. What I include is the conversion of solids into either gas or liquids, although it could be broader. One might ask about tar sands. When they are dug up they are solids. Fundamentally, that is the problem. We have solid sources of energy, and we really want fluid sources. The reason for this sudden switch on the part of the energy companies and also nonenergy companies is that, at present world prices, it appears that some of the approaches would be good investments, assuming the current price structure projections. An Exxon proposal is shown in Figure 5 that indicates a production goal for synthetic fuels going up to as much as l5 million barrels a day by 20l0. They didn't choose the same time period as the federal government so there is a little ambiguity. While this estimate was based on supply and demand projections, it really boils down to a judgment on how fast the industry could be built up if we really tried. This proposal does stretch our national capabilities. It calls for an investment of about $800 billion, l980 dollars, for mining and production. This would employ almost a million people, including some very special kinds of people. Almost 500,000 of these people would be in mining, which is about 60 percent over the total in mining now. The number of people needed to run the process plants would be up about 55 percent, and design engineers would be up 35 percent over present levels. It certainly offers a major employment opportunity and will require a major training program. This is a very interesting study because it is, again, integrated. If we want to really do something about energy, this is what one group thinks could be done in the next 30 years. Where would this energy come from? As shown in Figure 6, shale is the big source. We have two kinds of shale operations, all out in Colorado and Utah; about 6 million barrels a day from surface mines and 2 million from underground mines have been proposed. If there is an interest in doing something really significant in terms of shale oil production, surface mining emerges as the way to go. It has probably less environmental impact, and it gives much higher overall resource recovery—in the range of 70 to 80 percent versus on the order of l5 to 20 percent for uining. Surface mining employs fewer people for the amount of oil that is produced, which is looked on as an advantage in Colorado because the impact of such a huge industry is of real concern. As for coal, much of it is in western regions, particularly the 27

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Powder River Basin. Quite a bit of eastern coal, largely lignite, is in the Gulf and the Texas-Arkansas areas. In the time period we are talking about, mostly gas would be produced from coal. Overall production would be about half liquids and half gas in the example shown. It should be recognized that production of gas in effect displaces liquids and can therefore reduce petroleum. Figure 7 considers the cost of synthetic fuels. Absolute cost in these areas is a very slippery sort of thing, so I have taken the coward's way out and used cost ratios. Shale oil was used as the standard since it is believed to be the cheapest synthetic liquid. Its cost is considered to be about the same or less than the current price of imported petroleum. Intermediate BTU gas, which is a carbon monoxide-hydrogen mixture, will be extremely important industrially and costs about the same as making liquid from shale. It would be manufactured from coal, and pipelined or shipped by rail into industrial areas. For high BTU gas (methane) the cost goes up to l5 to 25 percent over liquids from shale. Methanol is slightly higher and is the lowest cost coal-base liquid. Methanol promises to be an important fuel, but not for aviation. The cost of refined coal liquids is high. There is some hope that with more research and improved technology the cost will go down. That is why the international study I referred to didn't show coal liquids becoming very important in the near and mid-term. Let us look at the situation in other countries. As shown in Figure 8, the U.S. is fortunate. We have some major resources of almost everything except tar sands. Canada has good resources. They don't have much in the way of good-quality shale, but their tar sands produce oil at about the same cost as shale, so they are in about the same shape as the U.S. North America, then, is in pretty good shape as far as liquid fuel sources. Europe has limited supplies of the fuel sources mentioned. They can help themselves quite a bit by working with those but must rely as well on imports. Japan also must rely on imports. One of the points to recognize is that the fuel situation is going to be very different in different parts of the world. The dynamics of supply and manufacturing are going to be different, and the composition of the fuel could well be different. Predicted trends are shown in Figure 9. I really want to emphasize the probable increasing frequency of shortages. When shortages occur the specialty fuels—and jet fuels are classed as a specialty fuel because of their very restrictive specifications—immediately get very tight in supply. This has happened during the last two shortages. We are also going to have a shifting mix of projects in addition to the shifting raw material sources. Some projections trends are shown in Figure l0. In the industrial sector, the liquid fuel demand will be going down, even though the projections this is based on showed continued industrial growth in this country. Liquid fuel use has in fact been growing in industry as imported fuels were used to displace gas; however, that trend will be reversed as gas supplies improve. 28

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The nonenergy (petrochemicals, etc.) commercial and residential consumption will actually decrease somewhat due to increased use of gas and electricity. The total transportation demand will stay about the same; if the two transportation categories are combined they total 9.9 million barrels per day in the first case, and l0 in the second. The auto and light truck demand, of course, is the one that is going down in a spectacular manner as the public insists on smaller automobiles and better mileage. However, the use of aircraft for transportation will grow and the use of diesel fuel will also grow for truck transporta- tion and the like. The transportation demand overall therefore becomes an increasing fraction of the total; however, the total has gone down slightly for the year 2000 and will continue to decrease as nonliquid energy sources are substituted. As an example of substitution, consider the electric power that is distributed in these consuming sectors. The liquid fuel demand is expected to go down from l.4 to 0.3 million barrels per day as we back away from the use of imported fuel. These changes in demand for U.S. petroleum products will have a very large effect on the operation of an oil refinery. One way to characterize an oil refinery is by the gasolina-to-distillate ratio (Figure ll). Distillate includes mostly jet fuel, home heating oil, and diesel fuel. Historically, the ratio of gasoline to distillate has been about l.7. American refineries have worked hard to make more gasoline and less distillate and have developed many processes for this purpose. We have considered two cases for the year 2000, one in which the use of the diesel automobile experiences only slight growth; the other case projects the higher rate of growth that is forecasted by the automobile industry. In the latter case, the ratio decreases to 0.7 versus l.7, which means, in effect, that the refineries would be working hard to make more distillates. This is an important change because when distillate quantity increases quality tends to decrease. There are some implications in this for aviation. It is clear that the competition for quality distillate fractions is going to increase because the automotive Rdiesel system will work better on a fuel of higher quality than on the present diesel fuel. For example, a better quality fuel will improve starting in winter and facilitate handling of emissions problems. Since the distillates represent a larger fraction of the total, the lower-quality cracked stocks will have to be used in larger proportion. It has been the practice to try to minimize cracked products in better-quality fuels such as jet fuel. Poor-quality fuels can be upgraded by hydrogenation; however, with increased cost and increased manufacturing energy consumption, special facilities would have to be justified and constructed and some flexibility in dealing with sudden changes in crude supply and composition would be lost. There are going to be supply disruptions and when that happens the product quality will tend to go down because it is very difficult to make high-quality, special products while maintaining supplies of the 29

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major commodity fuels. As a nonaviation person, I am led to believe that the best position to be in would be to have aircraft that are capable of using a fairly wide range of fuels. One may not want to use the lower grades all the time or even as a standard, but there will be times when maybe that is all one can get. The question, then, is what can be done to extend the capability of aircraft to use a variety of fuels. Let us consider how jet fuel characteristics relate to performance and availability. The flash point is the temperature at which the vapor-air mixture above the fuel becomes flammable. At the present time this is set at around l00°F. Figure l2 presents estimates that were developed for an ASTM committee grappling with the question of whether the flash point could be reduced a little more. Reducing the flash point does make available substantially increased quantities of components. It doesn't guarantee that they will be available for jet fuel, but it does allow a lot more flexibility. If the flash point is reduced to 80°F, it allows a 22 to 30 percent increase in useable components. These are the fractions in the 80° to l00°F range that would otherwise be processed to go into gasoline. Use of these fractions would not interfere directly with diesel fuel production since diesel fuel has a higher flash point. Using more low boiling material allows use of more high boiling material while still meeting freezing point requirements. Flexibility is significantly increased. The question is one of safety. Certainly many areas experience temperatures greater than 80°F. Fuel flash point is a question that I think needs to be addressed because it is the easiest way to increase jet fuel supply flexibility. Another important characteristic of jet fuel Ls freezing point (Figure l3). Increasing the freezing point makes a big difference in the stocks that are available for jet fuel. Jet A-l, a European specification, has been practical because Europe had the stocks to meet this specification fairly easily. With Jet A-l as a base with a -50°C freezing point, a comparison with Jet A, which has a -40°C freezing point, shows a 45 percent increase in suitable components for Jet A. If the freezing point were set at -35°C, the increase in components would go up to 70 percent. Freezing point is a requirement that has a lot of leverage. Here, again, there are reasons for wanting it low. Freezing point requirements should be examined very carefully, and I believe it would be desirable to have the capability to use jet fuels with higher freezing points. Aromatics or hydrogen content is another important factor to be considered in jet fuel specifications (Figure l4). As distillate demand increases and more low-hydrogen-content refinery feeds such as tars are used, more and more cracked stocks will go into the distillate pools. As an example, Jet A fuel in the past has had 20 percent or less aromatic content. Some of the recent restrictions on crudes and refineries are leading to prediction of jet fuels with 25 percent aromatics. The distillate fuels derived from cracked stocks after treatment to improve stability and so on have an aromatics content in the 30 to 40 percent range. There will be continued pressure to use these cracked stocks. In the past, cracked solids 30

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have been sold as domestic heating oil and diesel fuel. Something can be done about it. Hydrogen can be added to reduce aromatics, but this is expensive. Hydrogenation wastes energy and requires long-term planning and special equipment, particularly if the hydrogen must be made from coal. This could be done, but it will increase the cost of air travel. As I noted earlier, the other major distillate fuels will contain 30 to 40 percent aromatics. The thing that is intriguing is that combustion systems can be built that will run satisfactorily on higher aromatic fuels. 3ut there are some trade-offs, and there have to be plans to do it. So, here again is an opportunity to increase the flexibility of aircraft that should be considered. The last important jet fuel property is thermal stability (Figure l5). In current aircraft, particularly high-performance aircraft, there is a tendency to use the fuel as a dumping ground for heat. This causes deposits and a variety of othsr problems. Current stability requirements limit the refinery streams that can be used in jet fuel. Even -nilily hydrogenated cracked stocks tend to go over the edge on jet fuel stability. In fact, about the only products that meet jet fuel stability requirements are the straight-run distillates that have been very carefully treated. As more cracked and high boiling stocks are put into jet fuel, even if they are partly hydrogenated, the stability problem arises. Therefore, one of the things that would really help on jet fuel supply flexibility would be for the new generations of aircraft to have less fuel stability requirements. What are the trade-offs and what are some of the things being done about the problem? Industry and government are working, through the American Society for Testing Materials, on jet fuel specifications and testing programs. I have mentioned the increases in aromatics that are being discussed. They are looking carefully at the flash point question, which I sensed is going to require more research. Of special importance to this meeting is the fact that NASA has initiated a major program to acquire the necessary data to reoptimize the aircraft fuel interface. It would be very difficult to make the case that a fuel composition based on past availability of relatively inexpensive petroleum is optimum for the future. What the future material should be isn't known. It could be higher quality for some uses, such as supersonic flight; it could be lower quality for other uses. The answer is not clear. NASA is not going to develop fuel specifications. The purpose of their work is to develop a data base to allow others to work the optimization problem and to match the requirements of the aircraft to fuel supply as time goes on. The Department of Defense has a substantial program largely related to assessing how well military aircraft can operate with the newer fuels and with the present equipment. AGARD and the NATO people are beginning to work on the problem on an international basis; they will participate with NASA in refinery simulations and will think the problem through themselves. As usual, there are quite a few viewpoints, but there is real interest in 31

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working at the problem. One thing NASA did was decide that, if there was going to be a broad look at this problem, there should be an experimental fuel that could be used by all participants as a standard point of departure. The characteristics of this experimental fuel are shown in Figure l6. The aromatics content has been increased to match more closely the components that would be available from cracked stocks and synthetic fuels. There is no change in flash point. A substantial change was made in the freezing point. This change could make quite a difference in the supply picture. It was made on the basis that the higher freezing point would probably be satisfactory for about 98 percent of the flights. It was recognized that there would be some exceptions, such as very long, high-altitude flights or perhaps cold weather operations in Alaska. There is very little change in the stability temperature limits. The experimental temperature was set slightly lower, and it indicates what the experts thought might be done with very careful treatment of the higher aromatic fuel. This limit, however, falls short of providing for interchangeability with diesel fuel, for example. This fuel has been acquired. It is being worked with and used as a baseline fuel. There are some general conclusions that can be drawn from all of this (Figure l7). First, refining technology is capable of producing high-quality jet fuels from future stocks, and if we hae a steady, well-planned world there is no reason why we need to have poorer materials. But this doesn't mean that we should keep going just the way we are. I don't believe we can be assured of a well-planned, orderly future. To even maintain the present jet fuel specifications or to go to better ones will require a considerable amount of new, specialized equipment installed on a worldwide basis. The difficulty of meeting these specifications is going to vary considerably around the world. Some countries will be in relatively good shape and others will not. I believe that if the newer aircraft could accept a wider range of fuel properties we would be better off in the future than if we continue to be restrictive or become more so as far as jet fuel is concerned. The question is what it costs in terms of performance operating problems and capital investment balanced against the fuel costs. We don't have the answers now, and we need a substantial program to get the information to solve the problem. We should have the philosophy of developing, what I would consider, rugged types of equipment that can tolerate conditions that aren't quite ideal. The omnivorous airplane is probably too much to hope for, but I think we should be able to work out an optimum compromise. The message is that we really ought to look at fuel quality as a variable and build that into the advanced programs. 32

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CL O 10 - 1930 2000 FIGURE 1 World oil discovery and production rates from l930 to 2000, excluding the People's Republic of China, the Soviet Union, and Eastern Europe CExxon, l980) 1960 1990 2000 2010 2020 2030 YEAR FIGURE 2 Oil supply demand l975 to 2030 for the world, excluding centrally planned economics 33

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FRAMEWORK FOR THIS TALK Time Frame: l990 - 2030 World Energy Growth: Low and Erratic Due to a Series of Crises U.S. Response: A Major Effort to Convert Solid Resources to Liquids A Major Effort to Conserve Liquid Fuels FIGURE 3 SYNTHETIC FUELS Supply Instability and Price Increases Have Resulted in a Clear Economic Driving Force. - Major Energy Companies are Proposing Major Developments - Former Non-Energy Companies Developing Plans Stimulated by the U.S. Synthetic Fuels Corporation - Federal Goal is 2MB/D (Oil Equivalent) by l992 FIGURE 4 34

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ONE PROPOSAL FOR A MAJOR SYNTHETIC FUELS INDUSTRY Production Goal: l5 MB/D by 20l0 Investment for Mining and Production: 800 x l0 (l980 Dollars) Employment: 870,000 People FIGURE 5 PROPOSED SOURCES OF SYNTHETIC FUELS From Shale MB/D Surface Mines 6.0 Underground Mines 2.0 From Coal Powder River Basin 3.0 Other Western l.l Eastern 2.7 Gulf 0.2 Total ,l5.0 FIGURE 6 35

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COST OF SYNTHETIC FUELS Increase in Cost Over Shale Oil Shale Oil 0 Intermediate BTU Gas 0 Methane l5-25 Methanol 20-30 Refined Coal Liquids 40-60 FIGURE 7 GEOGRAPHICAL DIVERSITY OF LIQUID FUEL SOURCES U.S. Petroleum, Tar, Shale, Coal, Peat, Biomass Canada Petroleum, Tar, Coal, Peat, Biomass W. Europe Petroleum, Coal, Peat, Biomass Japan Primary Reliance on Imports FIGURE 8 36

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PREDICTED TRENDS Increasing Frequency of Shortages Recurring Tight Supply of Specialty Fuels Shifting Product Mix Shifting and Varied Raw Material Mix FIGURE 9 DYNAMICS OF LIQUID FUEL USE United States Consuming Sector Industrial Non Energy Plus Commercial/Residential Transportation Auto plus L. Truck Other Transportation Total DEMAND MB/D l980 2000 2.8 2.2 Major Trends Current Growth Reversed Decrease Due to Gas and 5.l 4.2 Electricity Substitution 7.l 4.5 Will Become an Increasing Fraction of the Total 2.8 5.5 l7.8 l6.4 Continued Decrease Electric Power l.4 0.3 FIGURE l0 Elimination of Heavy Fuel Oil Use 37

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U.S. PETROLEUM PRODUCTS DISTRIBUTION Year Gasoline/Distillate Ratio Min. Diesel Growth Max. Diesel Growth l975 l.7 1.7 l980 l.5 l990 l.2 2000 l.0 0.7 FIGURE ll FLASH POINT Decreasing Flash Point is an Effective Means of Increasing the Range of Refinery Stocks Suitable for Jet Fuel Flash Point % Increase in C (°F) Suitable Components 38 (l00) Base 32 (90) l0-l8 27 (80) 22-30 Takes Advantage of Future Reduced Gasoline Consumption Minimum Interference with Diesel Fuel Production Makes Possible Addition of Higher Boiling Components FIGURE l2 38

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FREEZING POINT Increasing Freezing Point Greatly Increases Refinery Stocks Suitable for Jet Fuel Freezing Point % Increase in Fuel C Suitable Components Jet A-l -50 Base Jet A -40 45 -35 70 The Same Higher Boiling Fractions are Useful for Diesel and Heating Oil The Higher Boiling Fractions Tend to Increase Liner Heating and Smoke FIGURE 13 HYDROGEN CONTENT (AROMATICS) Increased Distillate Demand and Low Hydrogen Content Refinery Fuel Will Result in Increased Use of Cracked Stocks in Distillate Products % Aromatics Jet A 20 Revised Jet A 22/25 Distillate Fuels from Cracked Stocks 30-40 - Hydrogenation will Reduce Aromatics But is Expensive, Wasteful of Energy and Requires Special Equipment - Other Major Distillate Fuels Will Contain 30-40% Aromatics - Properly Designed Combustion Systems Can Satisfactorily Burn High Aromatic Fuels. FIGURE 14 39

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STABILITY Stability Requirements Limit Refinery Streams That Can Be Included in Jet Fuel Other Distillate Products Do Not Meet Jet Fuel Stability Requirements Cracked and High Boiling Stocks Increase The Stability Problem Aircraft With Less Severe Stability Requirements Would Greatly Increase Future Fuel Options FIGURE l5 EXPERIMENTAL BROAD SPECIFICATIONS FUEL Experimental Jet A Fuel Hydrogen Wt Percent ^*l4 ^* l3 Aromatics Vol Percent ^25 ~» 35 Flash Point °C > 40 > 40 Freezing Point °C -40 -29 Break Point Temp °C >260 > 240 FIGURE l6 40

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GENERAL CONCLUSIONS Refining Technology is Capable of Producing High Quality Jet Fuels from Future Fuel Stocks This Will Require Increased Use of Specialized Equipment as Feed Stock Quality Decreases and Competition for Distillate Fuel Increases The Difficulty of Meeting Specifications Will Vary Greatly with Location Especially in Times of Crisis Fuel Shortages Aircraft Capable of Accepting a Substantially Wider Range of Fuel Properties Appear to Fit the Future Better than Aircraft with Restrictive Fuel Requirements A Substantial Program is Needed to Acquire the Information Needed for Future Aircraft/Fuel Optimization. FIGURE l7 4l

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