ASPO-USA is a non-partisan, not-for-profit educational initiative dedicated to informing audiences about our looming oil and gas supply challenges. Note: the “award winning house” (meets Platinum level LEED-type performance and construction standards) is located at 10,000’ of elevation 14 miles from Westcliffe (CO), in a very low-density environment won’t be nearly as “sustainable” in the long term (2050 – 2100), due to transportation energy constraints. Where we build is just as important as how we design and build.
This growth trend in energy consumption—especially oil consumption—isn’t sustainable. The Hirsch Report—”The Peaking of World Oil Production: Mitigation, Impacts & Risk Management,” published in Feb 2005—changed the paradigm. The focus shouldn’t be on the “when will oil production peak” question, but on the fact that the peak is likely to happen soon—any time between today and 2015 (most likely case—80% chance). If we haven’t planned and pro-actively responded to this challenge much sooner rather than later, the consequences of delay could be economically quite painful.
This is approximately the level of petroleum liquids consumption every day in the world today. What we face long term is a liquid fuels shortage, not just a general “energy shortage.”
Peak Oil is often trivialized by opponents as being “just a theory.” If so, it is in good company. Others notable theories include the Theory of Relativity, Germ Theory, Atomic Theory, the Theory of Evolution… Opponents view peak oil “concernists”—a moniker applied at the National Academy of Sciences two-day workshop on peak oil (October 20-21, 2005)—as gloom-and-doom pessimists. “Concernists” view opponents as blind optimists. Somewhere in the middle lies the truth. At the end of the day, however, the optimists do acknowledge that some day, daily production of petroleum liquids will hit an all-time high, an apex, before hitting a plateau (perhaps a long one) and eventually slipping into decline. So to a certain degree, the argument revolves around timing and consequences. ASPO-USA hasn’t been to the future and back so, like everyone else, it can’t tell audiences when world oil production will peak. But the risk of peaking anytime between now and 2015 increases with time. We believe this risk should be acknowledged, carefully evaluated for its potential consequences, and addressed as pro-actively as possible. Given major trend lines—e.g., the U.S. on-road fleet of cars and SUVs saw it’s mileage decrease by nearly 10% between 1985 and 2005—the prognosis is, at present, not optimistic. The sense-of-humor billboard above is located on I-70, in either Iowa or Nebraska.
Fields peak (+ Prudhoe), states peak, nations peak (US). The Prudhoe Bay peak was constrained by infrastructure (size of the Trans-Alaska Pipeline), but production from fields is controlled in order to optimize production, which doesn’t mean that field-by-field production shows a pronounced peak. Furthermore, note that the decline of the production curve, here and elsewhere, is often slower than the production rise. (This is particularly true of offshore oil fields.)
Three continents have already experienced peak production, as shown on PFC-Energy’s graphs above (from 2004). Note that the scales are all different, and that the Middle East is not pictured here.
When we add in the Middle East’s forecast production, and then total up all the continents, PFC Energy—respected energy analysts with offices scattered in the world—forecasted a peak in the 2014 time frame. Consider that a “best guess,” based on a suite of variables that are beyond anyone’s ability for forecast.
--Note that world-wide discoveries of oil peaked during the 1960s, and have been in a bumpy decline ever since. The Optimists say there is a lot more oil to be discovered, and that it will be discovered once prices stay higher longer and once large proven reserves become less plentiful. Furthermore, they point to a factor called “reserves growth” within existing fields that undercuts the need to discover new fields. It will be interesting to follow this claim. So far, during this century’s high-price regime, the new discoveries fail to match the size and quality of the super-giant fields discovered from 1930-1970, during oil’s heyday. --This is just a scenario. Peak oil could land a couple of years later. We could, as we show here, have several mini-peaks on a modest plateau (we’re showing). It might play out quite differently; for example, if the US bombed Iran and they responded by attacking oil freighters passing through the Straits of Hormuz and terrorists (or Iran) attacked Saudi Arabia’s Ras Tanura refining and export facility, we could experience peak oil within a month after that event. Another scenario would show that we are already on a pleateau of production and it won’t increase substantially for a number of years before it slips into decline. Another scenario would show production increasing intermittently another 8%-10% before declining immediately after that peak. No one knows the exact “when” and “what happens then” answers—no one.
These are listed by size of production in 2005-2006. Some notes by country: #1 Russia: is still increasing and may soon exceed their production achieved when they first peaked in 1988. But PFC Energy and others agree that Russia has only a few additional years of production increases in the pipeline, and the recent rapid rate of increase has slowed dramatically. Furthermore, growth in net exports probably stopped in 2006, due to increasing domestic demand exceeding new domestic production. #3. Deepwater production increases were supposed to have kept US production flat. That has proven difficult, due to the impacts of hurricane damage. #4: Iran: they could increase production, but the trend and geopolitical forces are all going in the wrong direction. Annual production has slipped below 4 million barrels a day, while domestic consumption is increasing. Reversing this trend will take several years—if it can happen at all. Given those realities, it is unlikely that Iran will ever exceed their 1974 production peak of 6 million barrels per day. #5. Mexico’s daily oil extraction peaked in 2004 and has slipped slightly in the following two years. However, Mexico’s largest field—offshore Cantarell (one of the world’s four largest oil fields)—is declining rapidly. It remains to be seen if Mexico can stave off an accelerating overall decline in production by focusing their efforts on expanding production from other fields. Furthermore, domestic production continues growing. Key point: Mexico’s largest source of government revenues is their oil revenues pulled in from Pemex (the national oil company); the government is “starving” Pemex’s future production capacity by not reinvesting sufficiently to keep production declines from accelerating soon. #6 China may peak this year or next. Their Daquig field—one of the world’s four largest—is past peak production. Meanwhile, their overall consumption continues to accelerate. Once their production peaks, their need for imported oil will accelerate rapidly each year thereafter. Since that demand is unlikely to be met, this will drive up prices enough to kill off demand somewhere in the world. No one can accurately forecast the “when or how much” involved with energy prices here. #7: Norway’s daily production peaked in 2001 and is in steady decline. #9: Venezuela’s internal politics plus their resurgent resource nationalism are likely to continue the trend of slowly declining annual production. This is unlikely to be reversed with the current political leadership. #11: In Kuwait, Burgan—one of the world’s four largest oil fields—has hit peak production and has slipped into decline. Reports indicate that Kuwait may have only half as much oil reserves as previously claimed. Kuwait is one of several countries in the Middle East that are raising internally the question: is it in our long-term interests to substantially increase oil production, even if we can do it? (The US government ASSUMES Kuwait and others will substantially increase production; this appears to ASPO-USA to be an unwise assumption.) #15. The UK’s production has been dropping relatively steadily since it peaked in 1999. Declines have averaged close to 10% per year. #17. Libya is one of several OPEC nations that is steadily increasing production capacity. However, they are unlikely to increase past their 1970 peak of roughly 3.3 million barrels/day. # 20. Indonesia first peaked during the 1970s, then hit a natural production peak in 1994; production is down substantially since then.
If we hit peak oil without a plan to reduce the associated pain, the economic wheels could fall off and the landing could be painful.
With admirable insight, Hubbert set the table in 1956. At that time, in his famous paper “Nuclear Energy and the Fossil Fuels,” he created the construct of peak oil for the US oil industry. Anyone who breaks trail as he did isn’t going to get it perfectly right for those who follow along many years later, and he’s no exception. However, he gets more than his share of slings and arrows from those who don’t seem to have read his work; for example, he didn’t say that the production curves had to symmetrical or that they had a single peak. (When he presented his 1956 paper, the two states he used as examples—Ohio and Illinois—had twin peaks and showed a asymmetrical production curve.) We credit the prize-winning Hubbert for his extraordinary original work, but we don’t focus on his formulae at this time. Yet at the end of the day, every country will have peaked, as will the world; the timing will be determined by a host of reasons, but ultimately, when it comes to oil production, geologic limits will rule because the resource is finite, despite expanding technology, changing economics, etc. Increasingly, the peak oil story is playing out as a mixture of the geologic limits factor (a slowing shifting target) and non-geologic limits (a suite of factors that is growing seemingly every day).
Several of the OPEC nations reached an early peak during the 1970s, then constrained production per the cartel’s strategy. Additionally, the Iraq-Iran war impacted production within OPEC. So in most of the OPEC nations, what might have been production peaks reached by geologic limits have been completely obscured by the group’s production targets and other internal events.
Even the greatest optimists—OPEC and the Cambridge Energy Research Associates—said that non-OPEC oil production would peak by around 2010.
The last point is least appreciated. Several OPEC nations are internally questioning whether it is their best interests to meet the production targets forecasted for them by the US Energy Information Administration and the International Energy Agency. Increasingly, the answer is “no.”
--Even as Nigeria’s offshore oil production grows, their on-shore production is being hammered by violence that is unlikely to subside soon.
The world won’t “run out of oil” during the lifetimes of anyone of any age reading this document today. Yet CERA and the Oil Optimist Club use this as a club to attack the peak oil concept all the time. The real issue is much more complicated: how long can the relentless decline of producing oil fields (estimated by CERA at 5% of annual production) be offset by new fields and by expanded development in existing fields? We’ll need 20 million barrels of new production by 2015 just to keep world oil production flat. That’s the equivalent of the two largest oil producing nations in the world today: Russia and Saudi Arabia. The worlds four largest oil fields—Ghawar (Saudi), Cantarell (Mexico), Cantarell (Mexico) and Daqing (China)—are all in decline. These national treasures must be replaced by twice as many smaller fields just to keep production flat.
--The world’s largest oil company is Saudi Aramco. Mexico’s PEMEX produces more oil than ExxonMobil as do a number of others (Iran, the United Arab Emirates, etc.). --Russia has been slowing down the flow of gas to European nations, in an effort to get former partner nations (in the former Soviet Union) to pay their fuel bills. Russia is also effectively forcing foreign oil companies to sell large portions of their operations in Russia back to Russian-owned oil companies.
--Read the Chevron ad campaign. It’s a curious mix of PR and truth-telling --The deepwater GOM (Gulf of Mexico) fields are harder to production than the shallower water fields in the North Sea and Cantarell. --We’ve been producing more than we’ve been finding for over 20 years.
During our participation in phone teleconferences with the National Petroleum Council over the last four weeks, they appeared most impressed by this point; it didn’t sound as if they had considered it previously, though that could be an erroneous impression.
There appears to be a lot of dreaming by proponents, not grounded in reality, about the role that unconventional petroleum and other alternative fuels can and likely will play in the future. That lack of grounding runs from top to bottom. There’s nothing wrong with hope, but at some point realism needs to be grounding this line of thinking. The “when and how much” factors aren’t reassuring and keep receding. --Peak oil is climate change’s “evil twin.” Several of these unconventional fuels—especially oil melted from shale and coal burned out of coal—would substantially worsen climate change per barrel of oil produced unless carbon capture and sequestration (CCS) is incorporated from the start. Yet in the rush to develop these and other fuels, there is the distinct probability that CCS won’t occur—certainly in the early projects—due to the added cost. However, this very political football is in play, so it remains to be seen how we proceed. Yet even then, to melt 100,000 barrels a day from the shales of NW Colorado (by heating the rock to 600-700 degrees F for 3-4 years…after “freezing” the perimeter down to 4000’—would require the larges power plant (1,200 MW) ever built in Colorado.
This list lays out what incremental liquid fuel (or substitutes for fuel) could be produced by 2015. The upside—around 3 million barrels a day of new production—is highly unlikely. That could be matched by crash programs in efficiency and mode shifting. The US response to supply problems has nearly exclusively been stuck on stupid: increasing supply at the nearly total exclusion of any effort to decrease demand. This has put us competitively at a disadvantage compared to Europe and other developed nations, and that policy failure makes us the world’s most vulnerable nation to supply disruptions anywhere.
Society runs on Net Energy—what’s left over after extraction, processing and distribution—not on Gross Energy. The energy inputs for ethanol from corn aren’t ethanol; they’re natural gas, diesel, and—increasingly—coal. So, it’s better to think of these barrels as barrels of Btus, not a particular form of energy. The higher the
These are rough figures. Most are based on research over the years by Cutler Cleveland and Robert Kaufmann (Boston University) and Charlie Hall (State University of New York). Oil sands figures come from Canadian sources. Ethanol figures come an average of US sources (1.3 to 1.6); some sources (David Pimentel and Ted Padzek) state that the figure for ethanol for corn is less than 1 to 1.
Top 10 Reasons why Peak Oil arrives sooner rather than later
Top Ten Reasons Why Peak Oil Arrives Sooner Rather Than Later For Clear Creek Watershed Forum Steve Andrews ASPO-USA March 21, 2007
This isn’t sustainable… Eight fold increase Source: Dr. Peter Wells, Neftex (11/05)
We need a common frame of reference <ul><li>85 mmb/day – world’s daily dose </li></ul><ul><li>21 mmb/day – US </li></ul><ul><li>14 mmb/day – US transport sector </li></ul><ul><li>9.5 mmb/day – US gasoline </li></ul>
There are two camps, two views about the peak oil “theory”
Fields peak, then regions, then nations… Prudhoe Bay extraction history
Eventually continents peak… Source: PFC Energy (2004 slides) ! ! !
Timing : add regions and the world peaks Source: PFC Energy
1. Geologic and non-geologic factors <ul><li>M. King Hubbert (1956)—for the big picture </li></ul><ul><ul><li>There are geologic limits </li></ul></ul><ul><li>Numerous other synergistic constraints against expanding production in a timely way </li></ul><ul><ul><li>Timely investment </li></ul></ul><ul><ul><li>Logistics </li></ul></ul><ul><ul><li>Equipment shortages </li></ul></ul><ul><ul><li>Skilled manpower </li></ul></ul><ul><ul><li>Weather / extreme environments </li></ul></ul><ul><ul><li>Political or military conflict </li></ul></ul>
2. Oil is geographically concentrated, and large producers are flagging <ul><li>20 countries = 83% of production </li></ul><ul><li>Half have peaked for various reasons </li></ul><ul><ul><li>Geologic limits: US, Norway, UK, Indonesia (China peaking soon) </li></ul></ul><ul><ul><li>Political/financial/geologic: Mexico, Russia (now increasing; repeaks soon) </li></ul></ul><ul><ul><li>OPEC/political: Iran, Venezuela (daydreaming of doubling) </li></ul></ul><ul><ul><li>Mixed: Iraq, Kuwait, Libya (incr.), </li></ul></ul>UK (ASPO-Ireland) Note: the depletion slopes shown here could well be more gradual Russia (ASPO-Ireland)
3. Non-OPEC to peak soon <ul><li>Everyone agreed at National Academy of Sciences peak oil workshop (Oct 20-21, 2005) </li></ul><ul><ul><li>PFC Energy </li></ul></ul><ul><ul><li>ExxonMobil, Chevron </li></ul></ul><ul><ul><li>OPEC </li></ul></ul><ul><ul><li>CERA </li></ul></ul><ul><ul><li>ASPO-Ireland </li></ul></ul><ul><li>Canada, Brazil, Kazakhstan not enough </li></ul>FSU Non-OPEC/FSU Source: Dr. Peter Wells, Neftex Note: the depletion slopes shown here could well be more gradual
4. Most oil in the Middle East; risks abound <ul><li>Riven by religious and cultural conflict </li></ul><ul><li>Cauldron for geopolitical and military conflict </li></ul><ul><li>Muslim countries control 2/3 of remaining conventional oil </li></ul><ul><li>Most are bitterly opposed to US policies </li></ul><ul><li>Resource for expanding production is larger than the current desire/ability to do so </li></ul>
5. Production from non-Gulf OPEC <ul><li>Unlikely to compensate for production declines elsewhere </li></ul><ul><li>Nigeria’s problems persist </li></ul><ul><li>Indonesia declining </li></ul><ul><li>Venezuela’s spiral not finished </li></ul><ul><li>Newcomer Angola not large enough </li></ul>
6. Relentless depletion <ul><li>If world average decline rate is 5%, we lose 2.5 million barrels/day per year </li></ul><ul><li>If true, we’ll need 20 mbd new by 2015 just to offset depletion </li></ul><ul><li>Largest fields sagging </li></ul>Cantarell
7. National Oil Companies (NOC)s hold the cards <ul><li>Roughly 80% of the world’s oil </li></ul><ul><li>Some longer term thinking (e.g., oil for the grandkids) – UAE, Kuwait </li></ul><ul><li>A finger in the eye – Venezuela </li></ul><ul><li>World energy power flex – Russia </li></ul><ul><li>ExxonMobil—12 th rated producer, riding a plateau </li></ul><ul><li>Project delays now increasingly the norm </li></ul>
8. Discovery rates falling <ul><li>The big easy oil is gone (Chevron) </li></ul><ul><li>Large non-OPEC finds rare – no repeat cavalry of the 1960s and 1970s </li></ul><ul><li>Offshore West Africa, Caspian, Brazil and GOM are smaller, more complex, more $$ than Prudhoe, North Sea, Cantarell </li></ul><ul><li>Producing 2-3 barrels for every one we find </li></ul>“ 2005 will go down in history books as perhaps the poorest year for exploration since World War II…” World Oil magazine 8/06
9. Domestic consumption in exporting countries will play a growing role <ul><li>2006 Russian consumption increased faster than production increased, so exports dropped (based on early reports) </li></ul><ul><li>Iran, Mexico, Venezuela in worse situation </li></ul><ul><li>“ Peak exports” probably impact before peak/plateau production </li></ul><ul><li>ASPO-USA anticipates peak/plateau production any time between now and 2015 (2020 at the very outside) </li></ul>
10. Unconventional petroleum resources won’t substantially impact peak <ul><li>Not all barrels are equal (“oil shale” is vastly different from tar sands and conventional oil) </li></ul><ul><li>Development is expensive, technically arduous and slow – think delays and dollars </li></ul><ul><li>Other issues </li></ul><ul><ul><li>Timing of flow--mostly post-peak? </li></ul></ul><ul><ul><li>Rates of flow—can slow but not offset declines </li></ul></ul><ul><ul><li>Carbon/environmental footprint </li></ul></ul><ul><ul><li>Demand for power, other infrastructure </li></ul></ul><ul><ul><li>Net energy </li></ul></ul>
<ul><li>Oil from sands: 0.5 – 1.5 mmb/day </li></ul><ul><li>Gas-to-liquids: 0.4 to 0.75 mmb/day </li></ul><ul><li>Ethanol (corn): 0.3 to 0.4 mmb/day (% of crop?) </li></ul><ul><li>Coal-to-liquids: 0.1 to 0.4 mmb/day </li></ul><ul><li>Oil from shale: 0 to 0.1 </li></ul><ul><li>Biodiesel 0.1? </li></ul><ul><li>Electricity for PIHEVs: 0 to 0.2 </li></ul><ul><li>Hydrogen: zero (25 fueling stations today) </li></ul><ul><li>Efficiency: 1.0 – 2.0 mmb/day </li></ul><ul><li>Mode shifting: 1 to 3 mmb/day </li></ul>Additional unconventional fuels by 2015 (potential peak)
Alt fuels: net energy is really important Input Output U. S. oil industry today: 1 to 15 Ethanol from corn: 1 to 1.3 Kerogen from marlstone; oil from tar sands SAGD 1 to 3 +/- Impacts and form matter ? ?
<ul><li>Texas oil 1930: 100 to 1 </li></ul><ul><li>US oil 1970: 30 to 1 </li></ul><ul><li>Wind today: 18 to 1 </li></ul><ul><li>US oil today: 15 to 1 </li></ul><ul><li>Ethanol ( Brazil) 8 to 1 </li></ul><ul><li>Coal to liquids, gas to liquids: 6-1 to 8-to-1 (est.) </li></ul><ul><li>Oil sands SAGD: 3 to 1 (mining =higher EROEI) </li></ul><ul><li>Oil shale: 3.5 to 2.0 to 1 (Shell’s fig.) </li></ul><ul><li>Ethanol from corn 1.5 to 1 (ave. gov’t figures) </li></ul><ul><li>Electricity from coal: 0.35 to 1 </li></ul><ul><li>Solar (6 to 1?), nukyalur? cellulosic ethanol? H2? </li></ul>Net Energy; also known as “Energy Returned on Energy Invested” Many of these have ranges. Wind and solar vary with location. Ethanol from corn varies from irrigated to non-irrigated crops. Source: Cutler Cleveland, Boston Univ.