Making up the difference

Kjell Aleklett has an excellent article in World Watch, which I read at the Energy Bulletin giving a broad view of the developing problem.  He begins with the changes that he saw in Sweden in the small village where he was born.  Oil was not used in the village when he was born, and its impact has been dramatic on Swedish life.

His comment reminded me of the village in South-West Scotland where my grandfather was the village blacksmith.  The impact of oil is such that this attractive  little community has changed from a farming village to a place where the houses are largely owned as vacation homes, and the locals are no longer able to afford to live there.  The local economy also suffered through mad cow and foot and mouth diseases, and thus the small, self-sufficient community of my youth (with the baker at the bottom of the street) has gone, and the skill levels largely with it. When I was a kid we harvested peat to heat the house, now they use gas.

Today's energy headlines are focusing on the announcement, by Jeffrey Rubin that conventional crude peaked in 2004, leaving the increased demand to be met by Deepwater and NGL increases, as the ASPO Ireland predictive curve suggests on page 2 of the current newsletter.  Currently China is anticipating 8.5 - 9% growth with major investments in energy and transport. US demand is anticipated to increase this year, and by some magic apparently US Gulf production is going to return to at least pre-Hurricane levels despite the loss of rigs and platforms that it will never be economic (according to those that know and have commented here) to re-establish. There is still 400,000 bd of oil and 1.8 bcf of gas that has not been restored.

(You should also note that ASPO USA is starting a weekly publication to overview issues as an e-mail, and the address to send for a copy should be posted on their website today.)

There has been significant discussion about the production from Deepwater resources, and the evidence seems to be that these will, on average, come in later than anticipated, and at higher cost. Nevertheless ASPO considers that they will increase production from 3.6 mbd today to around 12 mbd in 2010.  NGL are expected to increase from 6.9 to 9 mbd, and thus these are likely to be the sources that keep us out of worse trouble over the next five years, before Deepwater begins to decline.

NGL are the liquids that are extracted with natural gas, and separated from it before distribution.  Volumes can be quite significant, with Hawiyah being a part of the planned Khursaniyah project.

The Khursaniyah Oil and Gas Program will develop oil and gas production facilities for the onshore Abu Hadriya, Fadhili and Khursaniyah oil fields near Jubail Industrial City in the Eastern Province, with daily capacity reaching 500,000 barrels of crude oil by the end of 2007. The Hawiyah NGL Recovery Program will produce an additional 310,000 barrels of ethane and NGL products per day through the Hawiyah NGL Plant near the Ghawar Field and the Ju'aymah Gas Fractionation Plant near Ras Tanura (this is also undergoing expansion); this project is expected to be completed in early 2008.
 In some of the discussion that we have on future oil supplies this additional resource is sometimes counted and sometimes not.  If my memory serves I believe it is one of the legs upon which CERA build their argument for adequate supply.  Given this, it is probably appropriate that we include this more in our discussions.
I wonder what others think of the startlingly bearish oil depletion analysis by Jeff Rubin of CIBC Wold Markets. I haven't read the study, only accounts of it in the news and elsewhere. Rubin is one of Canada's top economists and is chief economist at CIBC World Markets. The organization has plenty of credibility, it seems, and certainly would (or should) have rigorously checked Rubin's analysis and conclusions in order to maintain that credibility.
On the other hand, there is surely plenty of incentive in Canada to try and attract finance for those expensive oil sands developments. In saying that, I do not mean to imply that Rubin and his employer purposely fiddled with the data. Rather, in sort of the mirror image of "there's plenty of oil" CERA and Daniel Yergin, maybe they were somewhat selective in their use of data.

In any case, below are a couple of links about the study.

The piece over at Energy Bulletin is incoherent - he's quoted as saying it peaked in 2004, but he's also quoted as saying there's small net increases anticipated in the next few years. I don't know a time series off hand that shows a 2004 peak - anyone?
I guess it all lies in what his assumptions of "conventional" are. No high sulphur, no oil sands, etc?
There's been discussion that light sweet crude (world production) peaked in 2004 but I can't substantiate it. From this Nymex info
Deliverable Grades
Specific domestic crudes with 0.42% sulfur by weight [sweet] or less, not less than 37° API gravity nor more than 42° API gravity [light]. The following domestic crude streams are deliverable: West Texas Intermediate, Low Sweet Mix, New Mexican Sweet, North Texas Sweet, Oklahoma Sweet, South Texas Sweet.

Specific foreign crudes of not less than 34° API nor more than 42° API. The following foreign streams are deliverable: U.K. Brent and Forties, for which the seller shall receive a 30 cent per barrel discount below the final settlement price; Norwegian Oseberg Blend is delivered at a 55¢-per-barrel discount; Nigerian Bonny Light, Qua Iboe, and Colombian Cusiana are delivered at 15¢ premiums.
I am making an extra effort in my posts/comments lately to make sure terms get defined.
I had a post on that back when the claim was first made.
Thanks, I'll take another look at it.

Can't remember them all....
I asked this once before and got no answer. From what I can gather, the mean density of the worlds oil production is rising  and it is becoming more sulphurous. Various comments have implied that more energy absorbing cracking is needed for heavier grades to match the distribution of refinery products to market demand. Sulphur removal is also, I believe, energy absorbing. This will put a downslope on the curve of consumable products relative to the production curve.

Is anybody willing the to give a guess (or better) as to whether this effect is of significant magnitude to edge the peak of usable products a bit earlier than peak oil production?

This is an interesting twist.
Peak Oil is often discussed as a volumetric quantity.
Maybe we should be more focused on "Peak EROEI" for that determines the net work we can do
If your presumptions above are true, we must reach "Peak EROEI" before we reach Peak Oil.
Sorry, but I forgot to add:
It would be interesting to calculate EROEI at Peak Oil and then project at what point along the downslope tail that EROEI becomes one.
Perhaps we won't get a Gaussian curve afterall. Perhaps the tail will abruptly stop at some date: ER = EI.
this not only seems right to me but it links ecology and economics. In Economics 101 the competitive firm can only operate in a lens shaped region where marginal benefit exceeds marginal cost. Due to diminishing returns the cost curve always rises more steeply than marginal revenue at some point at which there is no additional net benefit. This assumes the revenue flow is intact. In predator ecology we require energy value of food intake (ER) to exceed the hunting metabolic rate (EI), which of course gets tougher as the number of predators increases. For whatever reason the dinosaurs couldn't get enough calories to sustain themselves, though a few raccoon-like critters made it. If we don't find new fuel or learn to use less we're headed the same way.
I assume this is from the article you are referring to:

He added that conventional oil production around the world apparently peaked in 2004.
Rubin expects 3.6 million barrels of new oil to come on stream in 2006, but 2.2 million barrels will go to replace declining reserves elsewhere, leaving just 1.4 million barrels of new oil.
He expects 1.5 million barrels of new oil in 2006 and 2007, but less than a million barrels a day in 2008.
Energy companies are finding new oil, but most of it will come from non-conventional sources. Ocean oil rigs are the primary source of new oil today, with Alberta's oil sands tomorrow, with expansion projects rivaling those of Saudi Arabia.

I don't see what is inconsistent. He states that conventional oil has peaked but non-conventional oil will cover the decline for a few more years.
ASPO of Ireland in its newsletter of changed its prediction to conventional oil peaking in 2004 and total liquids peaking in 2010.
I agree that NGLs should play a bigger role in our discussions. I try to be careful making the distinction between crude oil only and all liquids, meaning oil, NGLs and condensates.

But a big problem I have in doing research is that the term "oil" is used generically to mean "all liquids" by many sources. The usage is often not footnoted so I spend a lot of time trying to figure out just what is being referred to.

TOD folks should be aware of the distinction and the ambiguity that often arises.
In my local Peak Oil presentations, I have a slide that shows fossil fuels as a continuum, from methane on the left to coal on the right.  The progression goes from methane to NGL's, to condensate to light sweet crude to heavy sour crude to bitumen to coal (gas to liquids to solids).  

We are after liquid transportation fuels--gasoline; diesel and jet fuel.  We can make liquid transportation fuels fuels from any of these fossil fuel sources, but the capital and energy required to convert the fossil fuel go liquid transportation fuels increases as we move to the left and right from light, sweet crude.  

Therefore, it makes sense that light sweet would be the first to peak--which it has done.  We are increasingly looking at the lighter end--methane, NGL's and condensate--and the heavier end--heavy sour crude, bitumen and coal--for liquid transportation fuels.

Sounds like a good clear way to think about it.

How much effort (money, energy) does it take to turn NGL's or condensates into gasoline products, compared with heavy crudes?  There's some asymmetry, because I assume it's easier to turn NGL's and condensates into useful non-gasoline/diesel products, whereas heavy/sour crudes pretty much are destined for gasoline or diesel products.

Westexas - anyway I could borrow/look at those slides? My email addy is listed on my account here. Is there a public way to view them? Thanks.
westexas - interesting point.  

I would like to see more analysis of both CTL and GTL technologies.  Costs, EROEI, scalability, expected growth rates, years to peak production, etc.  In particular, GTL has seen very little discussion compared to the competing technology of LNG.

Qatar is currently receiving huge capital investments for both LNG and GTL facilies.  I've seen a few analysts briefs that conclude that in most circumstances it acutally make more sense to build GTL plants rather than LNG supply trains.  The end product of GTL is ultra low sulfur diesel that requires no further refining.  No specialized LNG tankers or controversial LNG regassification terminal are needed for GTL.  It will be interesting to see which of these once obscure technologies, LNG, GTL, or CTL, will grow fastest as it becomes clear that the easy oil has peaked.

I think the market is starting to catch on a bit to the peaking concept. Though warm weather has caused a $5 drop in front month nat gas prices to from $15.70 to $9.40, 2008 contracts made all time highs this week. Also, today crude was up to $63.75 which is about $8 below its September high, yet 2007+ contracts closed right at all time highs.

This tells me the market isnt worried about 'running out' in the near term but is starting to recognize a structural problem.

On a related note, Neil McMahon at Sanford Bernstein indicated on a conference call Monday that oil finding costs would be at $60-$80 per barrel by 2010 (for new discoveries). While this comment was made in dollars, one could approximate that this might be approaching 1-1 EROI. (on an all in basis)

Yeah, $60 finding cost would definitely suggests it's not worth looking any more at that point.
Unless its $250 at that time...
CTL would be a much better investment.
You bring up an interesting point Stuart - looking ahead to your next posting, where you say we've used 192gb in US and the URR is 218+/-8gb. Perhaps at some EROI, we will never get the remainder of that oil and just start using coal, or other higher EROI alternatives. In other words, how does EROI fit into hubbert linearization, if at all? (Im sure it doesnt, but wonder if EROI<1 is the reason there is a difference between Hubbertian methods and some other methods that project huge reserves - those methods may be corrrect but if it takes more than a barrel to get each marginal barrel, what good are those reserves?
I suppose CTL woudl be a good investment if one discounted the destruction of what little remains of our forests (especially after people start logging for heatin fuel post nat gas cliff) destroyed by acid rain (although Maxxam would probably just use that as an excuse to push through more HCPs that are really clear cuts with a different name) and accelerate global warming. Wouldn't we be better off just reducing our net consumption, substituting coal where absolutely  needed (but not converting to liquids, its not like we NEED to drive our cars, we just think we NEED to (as does the economy if your Vehicle Miles to GDP correlation holds true)) and rebuilding a decentralized agragrain system (without centralized government, preferably without anything but local government unless something global like the oil depletion protocol could be implemented--what i know of state level government it has mostly caused more problems than it has solved--especially this country's)
While I agree that the markets are increasingly aware of the realities of oil and ng, I'd be careful about assigning too much significance to those contract numbers.  A lot of people and institutions playing in those markets are making decisions based on what they think other players will do or for purely administrative reasons (e.g. cashing in gains at the end of a calendar year), and not because of supply and demand fundamentals.
Hi. Can anyone tell me where I can subscribe Peak Oil Review?

On ASPO-USA's website it's not anymore (here's already the 12th).