Making up the difference
Posted by Heading Out on January 11, 2006 - 2:59pm
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.
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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.
http://www.energybulletin.net/12001.html
http://www.cbc.ca/story/canada/national/2006/01/10/cibc-060110.html
Can't remember them all....
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?
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.
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 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.
http://www.peakoil.ie/downloads/newsletters/newsletter56_200508.pdf
Read page 1 and 6-9 ...
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.
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.
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.
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.
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)
On ASPO-USA's website it's not anymore (here's already the 12th).