IEA World Energy Outlook for 2008 Is Out - The Oil Drum Analysis Will Begin Soon
Posted by Gail the Actuary on November 12, 2008 - 12:11pm
The IEA published their new report on the World Energy Outlook this morning. As expected, the report raised some alarms, but really didn't go far enough.
The Oil Drum staff is working on a series of posts analyzing this report. The first of these analyses should be up in the next hour or two.
IEA World Energy Outlook for 2008 Is Out - The Oil Drum Analysis Will Begin Soon
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IEA World Energy Outlook for 2008 Is Out - The Oil Drum Analysis Will Begin Soon
PDF version
40 comments
“What gets us into trouble is not what we don't know, it's what we know for sure that just ain't so.”
—Mark Twain
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If anyobody has the full report it would be a great benefit if the oildrum community could access it. If linking is not an option then perhaps emails would do the job?
As far as the IEA making an accurate appraisal of future oil production capability we’ll have to wait for “Part B of the OUTLOOK to discover their exact methodology. But I do believe I’ve read between the lines of the Executive Summery correctly and now understand their method. The most supportive statement they make of my conclusion was that the bulk of future oil production will come from reserves AS STATED BY THE OPEC PRODUCERS WHICH MORE THEN DOUBLED IN THE PERIOD IN THE 1980’S. You may recall this period: OPEC had changed the production allocation rules to take into account each country’s PROVEN RESERVES. Throughout the 80’s we saw those reserve values grow tremendously even though no new significant drilling was done. The OPEC countries just sat down with a new sharp pencil and found many billions of barrels of oil that were there all along but that they didn’t know about them.
We’ll have to wait for the details but it appears the IEA’s great new analysis of remaining oil reserves is based upon numbers supplied by OPEC and other producing entities for the most part. In other words, they haven’t studied one producing field themselves to determine a global reserve base. They just accept the numbers provided and ASSUME sufficient investments will be made to produce this “proven” reserve base. Another telling point is made by the IEA regarding decline rates of mega fields: they’ll have the lowest decline rates of all field size categories because of their huge reserve base. One little problem with this assumption: it doesn’t work with Cantarell Field. According to the IEA assumption, this field should be experiencing a 5% or so decline rate now that it has passed its peak instead of the 35%+ decline rate PEMEX has last reported. Rut row…could this be a faulty assumption? Another assumption I find very dangerous: enhanced oil recovery techniques can increase ultimate recovery and thus provide sustained high flow rates. The water injection at Ghawar and the N2 injection at Cantarell have certainly done that. But that wasn’t the primary goal of either effort or most other similar projects. These techniques were employed to maximize production rate. This actually shortens the production of every field. Again, Cantarell is a perfect example. The N2 injection program kept rates high and probably increased ultimate recovery 2 to 3 three fold ( such pressure depletion fields typically have a very low ultimate recovery…..10% to 25%). But these techniques eventually generate much higher decline rates then would be encountered if these reservoirs were allowed to decline naturally. Had not the water injection at Ghawar been implemented its max production rate would have fallen long ago. But when the water level starts hitting the majority of the producing wells the max rate will decline much faster then the IEA assumes. This not my opinion: this is the late stage decline rate seen in every water injected reservoir in the world. Water injection essentially accelerates natural water drive seen in the fields. But this also accelerates the decline phase also. Again, not my opinion, but a fact taught in every petroleum engineer school in the world.
Again, to be fair, we have to wait for the full report to confirm their methodology. But for now it appears they are making the same assumption as they have always made: future oil production rates will be dependent upon demand and not upon the actual physical capability to produce oil. There will always be enough oil to develop to meet demand for at least the next 30 or 40 years. But they do hedge their bets a little by saying any oil rate increases may be hampered by insufficient investments. But not by lack of opportunities.
I'm no law expert but I reckon that there's a case to be made that someone should sue the IEA, EIA and World Governments for criminal negligence. The fate of billions of people are in the hands of a few who have the decision making power to influence politicians and investors, the truth has been distorted for long enough IMO. OPEC countries should be made to fess up and allow independent audits of their reserves.
Why should they? They are sovereign nations with their own resources. If they choose to sell those resources to willing buyers then good luck to them. If they choose to husband them for their own growth then that also is their choice. To demand they usher in external auditors is quite frankly ridiculous. If we want energy security then we should go about getting it without relying on other countries to provide it for us.
Quite apart from the question as to who has the legal or moral authority to 'make' OPEC do anything they don't wish to! Our fate is in our own hands not in the hands of others. To believe or behave otherwise is to go back to kindergarten.
TW
Amen. Amen. Amen. I frequently hear/see the opinion expressed (on TOD, too) that the oil exporting countries owe it to the oil-consuming world to be honest and realistic in reporting their reserves. I say baloney. If we are fools enough to build our entire economy atop a resource over which we have little control, then we have no one to blame but ourselves when the well turns up dry.
I'm no law expert but I reckon that there's a case to be made that someone should sue the IEA, EIA and World Governments for criminal negligence.
HAHAHAHA!!! That's a good one. Sure. go for it.
The aggrieved: "Hi there IEA,EIA, and UN! you guys didn't tell us about how nasty this was going to be, so now we're going to sue you. Sure - it was a collection of industrial corporations and state enterprises that fucked it all up, but, hey - the CCCP doesn't exist any more, and GM, Dow, VW, Toyota, Ford, Fiat, US Steel, and all those other guys - well - they can afford better lawyers, so we'll sue YOU, the governments, because you didn't rat them out, even though there's a flea's pube difference between you and the corporations. so, we're suing."
The defendants: "OK. Fine. So we fucked up the planet. What do you want? Money? A new Planet? Some select bunch of us strung up from a gibbet? Sorry, but the money's worthless and the planet's toast and stringing people up isn't going to "make it all better". So, OK, sue us. Win your case. Now - what did that just prove? What could such a multimillion/billion dollar case possibley do to justify such an expense of time and resources?"
The Aggrieved: "Well... YOU SHOULD BE PUNISHED!!!! Justice must be served!!!"
The defendants: "What difference does it make? Why bother? If it's a fucked up as it seems to be, punishing people isn't going to change it. That's not justice, that's just revenge, and after all is said and done, the planet is still melting and you've just decapitated your societies of one group of people who are in a position to do something. Good move ace. Let me know how that works out for ya. Oh, that's right - I won't find out, 'cuz I'll be dead. Great. Have a nice apocalypse, ya boneheads."
The Aggrieved: "buh buh buh YOU SHOULD BE PUNISHED!!!"
The defendants: "Oh STFU, and get over it. Meanwhile, we need to talk amongst ourselves to figure out how to fix or at least reduce the consequences of this catastrophic blunder. So, don't bother me punk - can't ya see I'm tryin' to get some thinkin' done here?"
The defendants will say, BS, there is plenty of oil still down there, the problem is :technological development and too many wimps squawking instead of pitching in to help drilling, and not to worry.
The public will be bamboozled even after the Last Power Blackout.
Right. Here is what they claim in the summery:
That is more optimistic than the US Geological Survey.
There are multiple lines of evidence to support the view that will never happen:
We have the IHS database (petrologistics) of discovery showing slightly over 2.2 trillion ultimate (of which half is produced). This is well analyzed in the Energy Watch Groups Oil Report.
We have Logistic fits of current production showing 2.1 trillion ultimate.
3.5 trillion more will never happen, so the primary conclusion of the report is a fantasy. What will be interesting about this report is the field by field study of the largest fields and how that compares to Robelius' Doctoral Thesis on Giant Oil fields. The IEA sounds more pessimistic.
Stuart has a good paper on the danger of Ghawar watering out just as you (Rockman) discuss. There is a simulation showing the oil heading for the top of the reservoir. I will try to find it ("water in the gas tank" maybe).
I'm not sure I understand the relationship between giant fields reserves and decline rates and why this should be so but the implications sounds v. important.
-If they are making a relationship then am I correct in assuming that if only smaller finds are to be found then these -by implication- would have much faster decline rates? I.e. even if we found "4 new Ghawars" worth but in the form of 10,000 small fields they would peak and decline much quicker than if we found 4 giant fields...
[Edit] OK, I just had a look at slide 7 of the press release: smaller fields declining very fast with average of 14% (!!) in 2007 for non-OPEC and the AVERAGE rising from 6.7 to 8.6%... (I can't wait for the TOD analysis 'cus these look like some scary numbers to me...)
Regards, Nick
That’s Ok noutram. I’ve been a petroleum geologist for almost 34 years and I’m sure I understand them either. I can offer a couple of points though. Enhanced recovery techniques do require a minimum mass to be practical. Very small fields might not have such measures taken. But I suspect the real basis for this “relationship” is that mega fields are just so big that there are an insufficient number of wells to deplete them as fast as smaller fields.
But the decline rate of any field is a function of the energy driving the oil to the producing wells. Two main types of drive: water drive (water pushing out the oil that floats on top of it) and pressure depletion (like shaking warm bottle of soda and cracking it open real fast). In water drive reservoirs like Ghawar the KSA has been pumping billions of barrels of water into it for decades in order to improve recovery and maintain high flow rates. Thus a field may show little of no decline for many years. But eventually the water level will reach the perforations in the producing wells and a very rapid decline will begin. This is the natural process and will occur whether a field produces 1 million bo or 10 billion bo. That’s not just my opinion: its physical law taught in every reservoir engineering school in the world.
And it happened in another mega field (Cantarell in Mexico). A huge pressure depletion reservoir which maintained a high flow rate thanks to PEMEX pumping huge amounts of nitrogen into it. But it is now showing a 35%+ decline rate according to PEMEX. And that’s how the late stage depletion grows in all such projects regardless of the original reserve size.
Not trying to put you on the spot but as a practicing geologist can you explain why oil reservoirs show a probability distribution that is 1/Size2?
Or do geology schools never teach or theoretically discuss why a certain statistical distribution comes about?
Web,
Explain "1/Size2" please.
That is telling. The volume size probability distribution goes as 1 divided by the square of the size of the reservoir. That means that for reservoirs that are 10 times larger than a particular size, they are 100 times more rare.
It's a non-free non-public-domain copyrighted document.
You can buy it at: http://www.iea.org/w/bookshop/add.aspx?id=353
If 120 Euros is too much for you then you can find summaries etc here: http://www.iea.org/
Thanks Meta,
That's the summery I read to reach my conclusion. I suppose if I want to back up my claim I'll have to bite the bullet and buy the doc. I expect a lot of folks will be referring to the conclusions and not be very interested in reading the boring technical side...like the methodology in Section B.
As far as suing them I'm not sure what your basis would be if they explain their methodology correctly. If they say they are assuming the OPEC reserve numbers are correct you could argue that's a poor assumption. But they are not responsible for the accuracy of numbers supplied by a third party.
In other words: same ole BS: IF my assumptions are correct then MY conclusions are correct.
ROCK - in re: investment, I was reading up a bit on "Project Kuwait" last night. What a boondoggle - their parliament hasn't even acted on the thing, usual xenophobic feet dragging - although I wouldn't look a XOM gift horse in the mouth either. No chance of them hitting 4 mb/d by '10 - although they are up ca. 200 kb/d over 2007 this year; I see that main target's been pushed back 10 years now. Come on, guys, we need that new KSA pronto!
I told many friends about the publication day of this report and told them there will be coverage in the media (here in Germany). It is indeed dramatic what is even told in the news, however it is just a kind of news we are - meanwhile in times of climate change and financial crisis used to. Did anybody notice the announcement of founding a natural gas OPEC by Russia and Middle East countries.
The oil price is falling once again today. This proofs again, the medium and long term prospects is of no interest on the markets. But the reality is different...
Is this report the one delayed by the Bush regime until after the US election, that we were led to believe would take a critical look at OPEC reserves?
I found their 2030 production totals for Saudi Arabia and Russia (15.6 Mbd and 9.5 Mbd, respectively) some of the most precarious. The report seems to me to be a best case supply picture, since the cooperation they urge between IOCs and NOCs/major producing countries shows little sign of developing...
The report is a great improvement from last year, and does a service in providing so much information - when you align their 6.7% average decline rate to the Megaprojects database it seems to indicate peak oil by 2012...
I post my full thoughts at: http://www.setenergy.org
Onwards to a sustainable energy transition,
Dennis
I'm going to save my 108 Euros.
The price of BS seems to be undergoing massive inflation.
Here is 'The Guardian' on it:
http://www.guardian.co.uk/business/2008/nov/12/oil-gas-companies-credit-...
Only 3 new Saudi's by 2015!
Phew! That's a relief! For a minute I thought we could be in trouble.
Good find Dave! That was the most intelligent interpretation of the report I have seen by any major news-provider today. A lot of the focus has been on the short term demand destruction, but this article takes the longer perspective on things and sees through the intendes sugarcoating parts of the report (such as the unrealistic production increase forecasts).
This is the the first article that actually sees between the lines and extracts the vital bits of information provided by IEA. The only thing wrong about the article is that it doesn't state the degree to wich they have had to filter away the comforting BS.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3442376...
Luis sent round this link earlier today. Medvedev sure looks happy. I can't help feeling that chaos in Russia and $50 oil are mutually exclusive.
I think you mean that chaos in Russia is inevitable with $50 oil.
Things are not much better elsewhere in Europe.
$2.1 trillion of debt needs rolling over in the next 3 years:
http://blogs.telegraph.co.uk/ambrose_evans-pritchard/blog/2008/11/11/sp_...
For once, the UK is not the worst of the major economies.
For once, the UK is not the worst of the major economies..
Or UK bankers are bigger liars
cheers
They will lie as much as thye can get away with, but AFAIK roll-over figures of this sort are not something it is possible to fiddle extensively - it would be a bit difficult to explain why several hundred million had moved in your accounts.
We can add another article, this time about Russian tax folly to the mix at:
http://business.timesonline.co.uk/tol/business/industry_sectors/natural_...
Seems Russian regulators can't keep up with price swings. Netbacks fall to low or negative. This is the ELM model with a bullet. No mention of the IEA report but I coldn't find anywhere else to post a useful article in the time available.
These, from the Fact Sheet (6 pg pdf)
And all of this will cost HOW MUCH?
OK, so this is where the 9.1% depletion rate was "edited" down to 8.6% - and also pushed out to 2030. Note that they DON'T say that it will be 2030 before it rises to 8.6% -- which means that we could see it much sooner.
That massive investment in massive capacity addition won't happen, because the money simply isn't there.
The problem is that most people dont realize the scale of oil demand pressure coming from the emerging world. There is a very strong correlation between GDP per capita and oil consumption. Here is a list of some consumption figures:
Saudi Arabia: 32 annual barrels /person
US: 25 b/person
South Korea: 17 b/person
Western Europe: 11 b/person
Belarus: 7 b/person
Mexico: 7 b/person
Dominican Republic: 5 b/person
El Salvador: 2,7 b/person
China: 2 b/person
Vietnam/Phillippines/Indonesia: 1,4 b/person
India: 0.8 b/person
China and other Asian countries are growing strongly. In 5 years, China will be as rich as the Dominican Republic today on a per capita basis. That could easily mean a doubling of Chinese oil demand to more than 4 b/person. And when the Chinese reaches Mexican standards of living in 10 years, the demand could triple from today's level, meaning consuming more oil than the US today. We saw exactly that happen in Japan and Korea when the were at the same level of development as China today, in the early 60s and early 80s, respectively, as the consumer base really starts to take off.
At normal trend growth rates for different Asian countries, China at around 9%, India at 7-8%, Vietnam 7-8%, Indonesia 6% etc, the GDP per capita of these countries will by 2020 reach levels that will increase oil demand many-fold from today's level. The prices have to skyrocket to curb this demand pressure from Asia. What type of prices do IEA have in mind for this to happen?
Have you got the figures for Japan? Their GDP, AFAIK, is produced at a substantial energy discount to the US.
It is also not the case that correlation implies causation, as wee have traditionally been living in a low energy cost environment, and so had little incentive to economise on oil burn.
It would be reasonable to expect an impact, perhaps severe, from shortages of oil, but it is far from the case that the linkage needs to be 1:1.
Japan is at 14 b/person. Higher than Western Europe.
These figures really tells what demand pressures we can expect coming from Asia in the years ahead. If prices stay at 2006 prices, this is what we would get. I think people believing that China would somehow just consume 30 or 40% more than today by 2020 at 2006 prices are delusional. The prices have to skyrocket.
Yea, this is partly explained in the Export Land Model here in the TOD. Also the IEA writes about it. But as always they issue a cloudy mix of warnings "supply crunch" and appeasements "enough oil for 40 years".
Although it seems as if the IEA starts to realize that "something" is going wrong out there and they notice the first time that such things like renewables might be of importance (or perhaps they added this part because they realized that soon they'll have to deal with a competitor called IRENA.
But again, this report summary contains a lot of contradictions. In the end it is just like Delphi's Oracle - you can pick out what suits best to you.
Note, with my pulling apart of the exec summary graph, I think they may be pulling multiple fast ones in the results they provide.
In particular I would be interested if anyone with access to the full report can get better data for the base, existing field, decline rate. Looking through it I think the figures reported in the graph are AFTER infill drilling, expansions, etc. to existing fields and the 8.6%-9.1% decline rate for 2030 that they report maybe masking a faster rate around 2020. If they actually give better data in the report it would be interesting to see if that's true - the 'do nothing' decline rate around then could be in double digits.
Of course you can play with the assumptions on new fields, total new discoveries, etc. and most realistic tweaks bring in a peak in around now. In particular the 28Mbpd hump of new fields developed that are already known by around 2020 would need some serious justification - do they provide it?
Garyp,
My reading of the executive summary found a 10.5% natural decline rate in 2030, up from 9% natural decline rate now (mitigated by EOR, etc. to be 6.7% now to 8.6% in 2030).
These big numbers seem to me to support pre-2015 peak oil...
Nice work being on top of this news OilDrummers!
www.setenergy.org
Can anyone explain how between 2010 and 2030 the oil price can stay between $100...$120(real terms) whereas the present cost margin of new projects is between $70 and $100 (Goldman Sachs; not even mentioning things like arctic oil) + even the IEA is not sure if there will be sufficient investments, which may result in a supply crunch by 2015. Do they know about a special reserve of untapped, secret extra-cheap oil in Saudi Arabia's Empty Quarter?
Otherwise I simply don't see any logic here.
Or how about this one:
"oil production in total is not expected to peak before 2030"
but
"production has already peaked in most non-OPEC countries and will peak in most others before 2030".
My logic says that "most others" = OPEC, but it also wonders who the heck will be the oil sheikh that bails out the rest of the world with his oil in order to prevent the global peak before 2030.
Here again logic = {}
My understanding of their logic/story:
Your mention of high cost projects that need $70-$100 oil to be profitable describes the Canadian oil sands, Brazilian Tupi/Carioca, etc. But that new projects in Saudi Arabia, Kuwait, Iraq, Iran, etc. only require prices above $35-$55 to be profitable. The IEA would like to waive a magic wand and make the $350+ billion/year in investments and put them on the cheapest projects (mostly in OPEC).
But, like you, I am skeptical of this cooperation between IOCs and NOCs. And you ask how they see global oil output increasing through 2030 - well 5.5 new Mbd's are from Saudi Arabia pumping at 15.6 Mbd, 4 from Iraq as they almost triple production to 6.4 Mbd, Russia stays up at 9.5, 1 up for Iran, UAE, and Kuwait, 2 Mbd up for Qatar at ~3.5... I'm pretty skeptical of many of those numbers as well.
I wrote a bit more at www.setenergy.org
Onwards,
Dennis
Thanks Dennis,
yes, meanwhile I found IEA's reasoning: Investment opportunities outside the OPEC vanish, so only the low-cost OPEC oil remains, so that overall costs go down. Obviously Claude Birol has a blind trust that OPEC won't think of playing the old game of the 70s again. Well, he worked for OPEC before.
Maybe we should all get used to pray to Mecca, even if we aren't muslims - just to make sure that the sun never goes down in the desert.
BTW: You probably can skip Russia: its government has already announced peak oil.
Dennis,
where did you write this at www.setenergy.org.
As I am looking for the oil production cost in the OPEC countries I hope you can give me more details. Thanks!
Let's have a look at crude oil production (from EIA, International Petroleum Monthly, published in November with August 2008 data). Let's call July 2008 the "Olympic peak".
.
A peak of the hitherto growing group is shaping up
Saudi Arabia lost swing role in 2006-2007, Iraq is now back on pre-war level
These are updated graphs to this original article:
http://www.theoildrum.com/node/3793
Does anyone know about the press conference? How many journalists attended? What did they ask?
Doing what TOD is so good at. Thanks Gail and all the rest. Full speed ahead with the analysis.