Koppelaar: Peak Oil, Separating Facts from Fiction
Posted by Prof. Goose on October 25, 2006 - 10:28am
In the discussion about the date of peak oil production there is often a lack of a common framework. This makes it difficult to compare arguments concerning the date of peak oil / liquids production. In this post I outline a set of clear suppositions that, I hope, will help to understand the issue better.
#1) Liquids Production has not increased since the 4th quarter of 2004.
This is a very simple observation shown in the chart below.
Liquids production can be subdivided in five sources:
a. Conventional crude oil (including lease condensate recovered from associated and non-associated gas production)
b. Natural Gas Liquids (NGL): (liquids or liquefied hydrocarbons recovered from natural gas in separation facilities or gas processing plants.)
c. Non Conventional oil (Tar sands, bitumen, extra heavy crude, oil shale)
d. Processing gains (backflows to refineries returned from final consumers to refineries for processing)
e. Alternative liquid sources (coal to liquids / biomass to liquids / gas to liquids). The first streams of coal to liquids have been planned in China to start around 2011/2012. A few Gas to Liquids projects are underway, mainly from Shell. Both sources will not provide more then a few million barrels per day at maximum by 2020. Biomass could provide a significant amount of liquids by 2020, at the moment however, this seems unlikely to happen.
#2) Current World conventional oil + NGL production is declining at an approximate annual rate of 4%. For 2006 this means that 4% of 81.76 mb/d (added sum of world conventional oil + NGL production) needs to come on-stream from new liquid sources such as oil fields under development to keep production steady.
It is important to define what decline rate means, especially when reading figures from other people/institutes. In general for an oil field, there are two divisions between production declines:
Gross decline rate - the drop in production that would occur if oil companies would not try to halt declines, or the natural decline level. Decline can be halted by introducing new techniques / workovers / drilling more wells and so forth.
Net Decline rate - the drop in production that occurs when the efforts by oil companies to halt decline are included.
There are at least three methods to determine the rate at which new production needs to come on-stream to offset declining production in peaked fields and peaked countries.
a. By estimating the reserve base of all oil field/countries and combining this with the production rate. With the help of mathematical formulas this can deliver the right depletion rate (decline rate of reserves) and therefore decline rate (decline rate of production). A very difficult method, due to the uncertainty of oil reserve figures worldwide.
b. By combining decline rates from literature / oil companies press releases per oil producing country and other sources to give the added sum of the world decline rate for oil production.
c. By calculating the total amount of new oil production coming from oil fields under development for a given year (say 2006) and comparing this with actual production figures for that year. The difference between both figures gives the approximate decline rate.
Personally I work with method b and c due to the huge uncertainty involving reserves. In the latest ASPO NL Newsletter I have come to an approximate net decline rate of 4% by means of method C.
I have tried to see whether my analysis is correct by using method b. From various sources I have obtained gross decline rates for nearly all large oil producing countries in the world. This varies between 4% and 10% depending on the country and the type of production (onshore / offshore / deepsea).
Two examples:
By combining these gross decline figures with new techniques / workovers / drilling more wells and so forth one can determine the net decline level. When separate decline rates from various countries are taken together, they give an annual net decline rate for world oil production at the order of 4% to 5%. An illustrative example is shown below, which gives the expectation from the Indonesian government for their oil production.
#3) The increase in world liquids production from current developments in the oil industry is sufficient to offset declines until 2010 plus an increase in production to meet low to medium demand.
There are various publications that confirm this supposition. By gathering data on oil projects / oil field developments one can estimate the amount of production that comes on-stream in the near term future, necessary to offset declines and meet demand. There are three such works that are available in the public domain: The International Energy Agencies Medium term oil outlook, Chris Skrebowski's Mega Projects report from Petroleum Review and my own estimates for which the latest data (until 2007) is available in the ASPO Netherlands newsletter #5.
In addition there are also several publications that are available for a large fee or clients only, such as CERA's liquid capacities report, Merril Lynch their oil supply analysis (12 october 2005) and Credit Suisse oil supply analysis (15 march 2006).
All these publications confirm supposition number 3; they disagree on the point of future oil price predictions and on long term oil production levels.
#4) The Peak in world liquids production is mainly influenced by new discoveries and non-conventional production increases, not by increasing the recovery factor of an oil field.
This point often leads to a large discussion between "the early and the late peakers". Can technological innovation such as the "smart wells" from shell which influence the recovery factor postpone peak?
One needs to think in terms of production not reserves to understand supposition four. Basically we know that 22 of the 50 large oil producers (more than 100.000+ barrels per day of production) have peaked for sure. (This excludes countries such as Iran due to the large uncertainty of their reserve base and therefore peak production). The production in these 22 countries is declining every year. At best the production in these countries will stay stable for a few years or have a short production increase after which the relentless decline goes on. In order to postpone the world production peak, other countries need to offset this decline every year.
The other 28 countries that still manage to increase their production do so mainly due to new fields coming on-stream and/or non-conventional production. Thanks to technological advancement, more oil from a given field can be produced, but in general this only helps to lower the decline rate in an already peaked field.
There are various cases such as the Cantarell complex in which nitrogen injection helped to push the oil production of the complex to very high levels before peaking, but these are not the standard. New techniques are introduced in most fields when the peak has already occurred, causing a slower decline or at best a temporary increase in production. Some examples:
In order to increase production at the scale that is necessary to offset declines, a significant amount of new fields needs to be put on-stream annually, next to the introduction of techniques that help to produce non-conventional reservoirs. An old example of the latter is the Duri oil field in Indonesia (18 to 20 degrees American Petroleum Gravity or medium to extra heavy oil). This field reached high production thanks to steam injection, which greatly enhanced the oil flow.
#5) Oil Discoveries have been declining since the `60s. We are currently producing three to four times as much oil as is being found.
This observation was first clearly published by the well known Dr. Colin Campbell, one of the founders of ASPO International. The chart below, which is adapted from his work, shows the trend for conventional oil (excluding NGL and non-conventional oil).
The same observation is confirmed by the largest database company on oil & gas in the world, IHS Energy, for annual liquids discovered.
#6) Conventional oil production will likely peak in the beginning of the next decade.
The amount of nations that can increase production from their conventional resource base (including deepsea) is declining every year. As said before, 22 of the 50 large oil producing nations have peaked. Some of the largest producing nations such as Brazil, Russia, Angola and Algeria are expected to peak/ reach a plateau at the beginning of the next decade. The only producers that might have the possibility to increase their conventional oil production at the scale needed in the beginning of the next decade will be the countries in the Middle-East. However, it is very unlikely that they can do so. Most of the supergiant to giant fields in these countries are at or near the end of their plateau production. To give an example, the largest oil field in the world, Ghawar in Saudi-Arabia, will start declining in the coming five years (if it has not already happened). The International Energy Agency expects this to happen around 2010 (World Energy Outlook 2005).
The only way that conventional oil production peak can be postponed, is by making various giant to supergiant discoveries in the coming years, which is very, very unlikely.
#7) The increase of non-conventional liquids production has it's limits due to scalability effects.
Many tout the advancement of oil sands in Canada and other unconventional sources as a wonderful source of new oil. The basic idea behind this is shown below in a graph from the Resources to Reserves report from the International Energy Agency. This graph is often used by the IEA, oil company CEO's and sometimes journalists as "proof" that there are plenty of reserves out there. Based on this assumption they conclude that there is no peak in sight.
The point that the IEA makes regarding reserves is partially true, in the case of non-conventional oil. However, it totally misses the notion that the limiting factor for non-conventional oil is not the reserve base, but the extraction rate. Comparing conventional and non-conventional liquid sources as done in the graph above is
like comparing apples and oranges.
As an example, we take the most promising non-conventional source, the tar sands of Canada. The optimistic predictions from institutes such as the Canadian Association of Petroleum Producers state that a production of 3 to 4 million barrels per day around 2020 is possible from the Canadian tar sands. At the same time, conventional production is declining at an annual rate of 4%, which means a decline of more then 3 million barrels each year.
To summarize: The most promising source of non-conventional oil in the world cannot postpone liquids peak for more then a single year.
#8) Liquids production will probably peak in the next decade.
Given the arguments above I do not see how liquids production peak can be postponed much further then the end of the next decade. The increase in production from the conventional resource base (including deepsea) + NGL will probably plateau/peak at the beginning of the next decade. At this point, non-conventional sources may postpone a total liquids peak for a few years, but not much longer. At this moment, I see no reason to change my peak/plateau prediction for all liquids, which stands between 2012 and 2017.
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From your last peakoil report, you were predicting between 85.781 and 86.456 mbpd for 2006 (All liquids). The last 7 months EIA estimate is 84.33 mbpd. Have you tried to analyze what went wrong in your last forecast?
This suggests that the decline rate is not constant but increases with time. Have you ever tried to model the decline from the 22 declining countries using a logistic model instead of an exponential decline? the use of a logistic model will give you a decline rate that will slowly increase after the peak.I just wanted to say, excellent work, I really like the ASPO newsletter, as well. I like the mega-projects section at the end. It is something I have been working on, and am glad to see you've beat me to the punch. You certainly lit a fire under my ass.
Skrebrowskis and CERA's layouts are frustrating to say the least. I like how you have grouped things.
I do have one serious question, though.
You say 22 have peaked out of top 50. I have reviewed the top fifty and have come to a different conclusion.
I can only verify 12 peaking. I have 24 that have not peaked. I add to this the other 14 as "unclear"(is what I call it). I will submit that "unclear" amounts in essence to "not peaking." To me this says, 12 and 38 - or if you want to slpit the difference, 19 and 31. Not 22 and 28. I'm not intested in arguing. I'm fascinated by where we disagree.
I realize that these definitions, how they are calculated, and what they mean are highly problematic and subject to much debate.
I can submit a list here and we can talk about it(an idea I like since it would subject us to peer review), or we can continue this privately. I have no inherent interest in conducting any discussion publicly. You tell me. But for the hell of it, can you just name the 22?
I have detailed numbers and analysis regarding each of these 50 producers. I can email you information presently, but within a few days, I should have produced a comprehensive PDF, and hopefully will be able to direct you to a private website archiving this data.
I would seriously appreciate your input and analysis.
Sincerely,
Oil CEO
Rembrandt, Chris & Colin all engage in bottom up analysis. Their methodology lends itself to inherent upward revisions due to the lack of medium and long term production announcements by the oilco's. Most announcements are 3-7 yr timelines. As these companies see refinery enhancements in the 2012-2017 year time frame, imenent announcement of new and/or expanded projects will be forthcoming and with those, the annuan revisions to the above three models.
This has been the background to the merging of our twelve models over the past seasons. There is no evidence that a seachange is ahead in the next decade. The merging will continue and continued revisions in URR imply a Peak in the 2020-2030 era at earliest (subj to refinery capacity expansion) based on the history and magnitude of upward revisions by our conservative Models in the past three years ...
Conventional Oil reserves peaked in 1979 and have been falling ever since.
Peak oil has a number of factors, including an increasing recognition that burning oil at such massive volumes is a problem, in itself. This potential restraint to production is never considered by people who argue that oil production will increase, possibly because the entwining of the two subjects is just not clean enough - it is possible to accept the geology of peak oil, and its engineering aspects, but the entire framework of human society, including recognition that the short term must be balanced by a longer term? Too complex - and besides, people who think burning fossil fuels idiotic need to prove their position, while we all accept that economic progress through increased economic activity is in and of itself a public good beyond dispute. I have read there is some real cheap land available in West Virginia and Alberta - I wonder why people keep moving away from coal and tar sand mining operations, since cheaper land would seem to be the sort of economic benefit which would attract people, not repel them.
Simply saying that it will be possible to pump that much is not enough. Which I don't quite imagine will happen anyways - both the Gulf and the Russians have been throwing some real wrenches into scheduling over the past few years, while the Nigerians are just being typically unstable, over the last few years - and as for Iraq, well, you can decide whether production is likely to go up or down in a society which seems to be increasingly violent and riven. But decline is real, and neverending in places like the U.S.A., Great Britain, Norway, and well, at some point, that list will include every oil field on the entire planet.
I am not sure that such heroic measures of oil recovery will be as acceptable in five years as they are among the brave pioneers at the frontiers of human technology making us all observers in a world wide, real time lab experiment to empirically see what happens when CO2 is re-introduced to the atmosphere on a geologic scale in a timeframe which has nothing much to do with geology, but an awful lot to do with our and our children's lives.
Consider how much production has been lost in the past 5 years due to non-geological, non economic forces. Imagine if you could graph that, and model it into the future.
My guess would be that, because of the impending defeat in Iraq, unrest in Nigeria, and Putin's actions, etc., there will be greater losses in the future than there have been in the past.
Thus, "peak 2010" might become "peak 2007" because of forces which would be difficult to anticipate, let alone graph.
Actually, that is pretty insightful, as long there is some recognition that some production can be quickly restored (freezing in winter) while other production is gone (sunk in the Gulf).
Not likely?
The reference to Alberta was to an article detailing how a family farm is shutting down due.
Based on the figures that I have in my database yes. It's simple mathematics with plus and minus. Figure out the decline rate, figure out the new oil production coming on-stream. These figures say that the plateau that we are on at the moment is only a temporary one. If you want to know where it will come from in 2007 look here, this is as detailed as it gets:
http://www.peakoil.nl/wp-content/uploads/2006/10/asponl_newsletter_5_2006.pdf
The appendixes in this newsletter give all the oil projects that i have in my database which have been obtained and doublechecked from a variety of sources (mainly oil companies but also other oil project reports for instance).
This method is simple and reliable. It is ofcourse always possible that several countries in the middle-east will not inrease their production because of political or because of geological reasons. One cannot predict that this will happen. Since it is very unlikely that this is the case (to my opinion) I am not integrating this in my prediction.
Very good post, but I suspect your 2007 figures of production may not be correct. If one is wrong, others must be too. Chinguetti, in Mauritania did not produce at all in 2005 but was supposed to come onstream in Feb 2006 at 75,000 per day but so far has only achieved 33,000. I am a shareholder in Woodside Petroleum and that is why I know of this information. Also a 4% decline wood likely be exponential over a few years and rise above this percentage, Schlumberger says 8%.
Look at Ghawar, producing a little over 5 million barrels per day in 1981 with water injection of 4 million barrels of water and now below 5 million and water injection of 9.5 million per day. That water increase tells the story.
Interesting regarding Chinguetti, I am not saying that all the figures I have are correct, since I don't have access to very expensive databases who doublecheck all the data.
Some will be in error, others will not be included, which matches out probably.
"Also a 4% decline wood likely be exponential over a few years and rise above this percentage, Schlumberger says 8%."
I don't see why this would rise exponentially, what kind of decline are we talking about? Schlumberger their 8% figure is that net or gross decline?
The questions with Ghawar is how slow or fast the decline will go... not when it peaks because it will soon peak.
Sorry to take time to reply. Firstly, nothing I posted was a criticism of you but merely pointing out that many of these reports don 't measure up when production finally starts. Schlumberger's statement was 8% net. Over the past three to four years Exxon's has been around 10% worldwide. Further investigation shows Mutineer/Exeter in Australia will be below 90,000 per day and reserves will be downgraded.
Tiof in Mauritania has not even produced yet and 70,000 barrels per day has never been mentioned. So there are three fields in that report which are known to be wrong from a transparent part of the world. I don't believe that many of these fields will produce at the rates stated and in the those time frames, hence the 4% decline is way too optimistic. North Sea is around 15%, Australia is 13% and rising,Mexico rapidly rising in it's decline rate. Sorry, just think 4% is too low
Here's a question for the long-term outlook: Would you say that your research suggests a long-term annual decline rate of 4-5% as something policy makers can reasonably expect once the peak is decisively past?
the decline rate after peak depends mainly on four variables of which three are not very certain.
- the decline rate of onshore countries, which is a quite certain factor which lies at the order of 2% to 5%, on average around 4%
- The decline rate in peaking offshore countries, which we see in the north sea, will be at the order of 10%. When Brazil, Angola and Nigeria peak, these will sharply increase decline rates. Double so because they will be the few suppliers that can increase their production by large amount (millions of barrels) in the coming 8 to 12 years depending on which country. WoodMackenzie predicts that most of these deepsea suppliers will peak around 2012,2013,2014,2015.
- The increase in production from non-conventional sources, this will not be very large due to the timescales involved. Maybe at best 1 million barrels per year. When counting a mass rush towards coal to liquids + biofuels maybe 2 million barrels per year increase
Uncertain:4) the decline rate of the very large fields of Saudi Arabia, Iran and so forth. Especially Ghawar, is not so certain. I can't give you any clue on the decline rate that these fields will have. My personal opinion is that Simmons his claim that there will be huge decline rates is an exaggeration. I do not have any data to back up this opinion, so that's just an opinion.
Overall I would say that when peak hits, there will be a short plateau due to non-conventional sources and price incentives that will bring a few of the good old expensive oil fields that are laying in the cupboard for a very long time on-stream. After that decline will start to decline and will soon reach approximately 5% or 6% per year for a while, after which it slows down a lot due to new production from non-conventional sources and maybe even level off (when including coal to liquids, biofuels and so forth).
By the way, to my opinion the future is mainly electric, much more potential.
From the Canadian experience we can't conclude hard limits on growth in non-conventional oil, particularly since its growth potential is hardly played out yet. When conventional oil depletion becomes obvious, and the oil majors themselves decide that its better to invest in non-conventional infrastructure than to return profits as dividends, the price floor will have been established and the capital shifts will fall with a thundering roar.
I've been championing the cause of chiefly producing electricity with our FFs to power EVs and perhaps PEHV's as a long term trend in reaction to PO. Most people here though seem to feel that we will do away entirely with the personal car. Time will tell though I'm sure.
But we'll shrink it a lot, we'll minimize its use, and we'll drastically increase the number of smaller vehicles serving the same function - microcars, motorcycles, motorscooters, bicycles, etc. At the same time, we'll try to streamline the current form of the automobile, hybridize, electrify, etc. Given diminished use, we'll shift the social role of the automobile to where everyone doesn't have to own one - decentralized car-sharing programs are taking off now, carpooling hookup websites are sprouting up, and taxis are more numerous than private cars in some major cities. And any place that's currently busy enough to require a 4 lane road, we'll mass-transitize by some means.
Or something.
Hothgor said,
"That gives us enough time to moderate the massive economical impact peak oil will have on our society if we start with conservation and an Apollo scale build up of renewables such as wind and solar, and some EV's to boot. One can only hope that we get our act together before then."
Frankly, only if everything goes perfectly. The odds are not good. We are already facing a shortage of skilled technicians, researchers and fabricators across the board in any of the skilled technical trades, and demographically, this shortage is getting worse as the largest generation of "technocrats" are aging out (the boomers).
If we take the optimistic number given in these projections of 2017, that would give us essentially ONE DECADE. That is an astonishingly short amount of time. If we take the shorter number of 2012, that is essentially tomorrow.
The will to make the changes needed would have to be extraordinary. So far, no such will has been shown.
Interestingly, President Bush and some of his people have come closer than would be expected to trying to sound the alarm bells. I am no fan of the Bush man, but he has repeatedly said things that have not been taken seriously, due to his very poor credibility on all issues, such as "we must find a way to reduce our dependence on oil." When he says "we must", he may know whereof he speaks.
I heard, not too long after the State of the Union address, a speech given by a departing executive of the NREL (National Renewable Energy Laboratory) to his underlings, and it was absolutely moving and inspired, a call to arms, a sounding of the alarm, I am not kidding, almost reminiscent of Churchill before the Battle of Britain or during the Blitz. I still have it somewhere in a favorites folder but can't find it right now. He stated the absolute need to stay in the trenches, reminded the workers at the NREL of their coming pivotal role in American history, and thanked them for their virtually unnoticed and unappreciated efforts to date. His central message was that you must stay this fight because it is a fight we cannot lose, it is the destiny of a culture at stake.
The clock is running. Even if we listen only to the optimists, we must know that we are soon to be involved in a very hard struggle.
Roger Conner known to you as ThatsItImout
The best case scenario is prices keep slowly being pushed higher as demand increase and supply can't keep up. That will cause us to start cutting back. What's going to save us eventually is the return of the 55 MPH limit. We can save an extreme amount of oil consumption by just reducing our speed. The big revolution is not going to get to us in time to do any good.
The fact that it's not in a usable form (salt bearing seawater) and that much effort has to be expended to treat it for suitable use and to transport it for distribution is just is just a failure of the cornicopians to adequately plan and expend resources to deliver at the "required rate," right? (FREE, and I emphasize that word) Technology will save the day after all (Tongue firmly planted in cheek!).
I'm one of the oildrum's readers who have absolutely no background whatsoever in engineering, any science and certainly oil business.
regards,
Torion
Note, however, that a) Chris assumes a 5% decline, per Khebab above, and b) Chris predicts higher 06 production than we have managed so far this year. So, it looks as if even 5% is not accounting for the 2006 actual decline, which looks to be around 6% or so.
And, another point; there is reason to believe that the decline rate is increasing because a) most fields are now produced with water flood from the beginning, so there is no secondary production, eg ghawar, b) horizontal wells are far more common, which extend produciton but have very high declines, eg yibal/ghawar, c) a greater fraction of production is now from deep sea, which always has large decline rates. In this case, the new projects in 06-09 may be just enough to maintain our plateau... or may not.
Do you suppose that the disruptions in Nigeria could account for a chunk of the difference between predicted and actual production numbers for 2006 for both Chris and Rembrandt? It seems that it would be nearly impossible to account for that kind of intervention in the oil supply in either a geological or business/production-based model.
Just curious.
-Amy W.
Future predictions of production must include an assumption that, say, 1% of production will be continuously disrupted. So, it is unreasonable to say that had a disruption not occurred, output would have met somebody's prediction unless the disruption was off the scale.
Excellent work by the way, as always.
Anyway he also thinks deep and ultra deep decides the timing of world peak as they are the only major things left.
This is a great companion for the last issue of the ASPO NL Newsletter.
Just a question, what is your current projection for the peak daily production rate of Conventional Oil (or Conventional + NGL) ?
Many thanks.
Is the ES.1 chart available from a free publication? I checked the IEA site and couldn't locate it in the free documents. I would like to use it in my own energy presentations, and trying to scale up the one above would likely lose too much quality.
I notice that the production curve for the Minas field has a distinctly asymmetical shape. This is exactly what I think a lot of people (including me) expect to be the norm as we approach and pass peak oil and market prices continue to support more expensive extraction technologies. Add to this the production from deep water, ultra heavy, Arctic, etc. sources, and I think it makes an extremely compelling case for the "undulating plateau" model (as opposed to the crash-and-burn-and-we-all-die-shivering-in-a-cave-in-five-years model).
I hate to highlight my stupidity, but I'm having trouble grokking the chart labed "Figure ES.1" What do the different areas imply? For example, if a source is economical at $1/bbl it will be even more so at $2, so I assume the top of an area shows when the last of a source becomes economical.
What then does the area mean, if anything? and can we say anything about how fast the source will become more expensive to exploit?
I should say also, that there have been many posts alluding to companies' reluctance to start projects unless they will be profitable at a price significantly lower that the current one. Thus, the price needs to not only excede the point of profitability, when up and running, but people need to believe that it won't come down (soon).
Apologies if these are irrelevent questions or if they seem derogatory, I really do thank you for your efforts.
Figure ES.1 comes from the resources to reserves report from the International Energy Agency which you can buy for 100 dollars (if i remember correctly).
The different areas imply the range at which the sources becomes economical according tot the IEA
The area represents the amount of reserves that can be produced under which economic conditions.
You cover the supply side very well.
Do you have(or know of) any equally detailed review of the DEMAND side, so we can estimate when a supply-demand gap might first appear?
Increased consumption in China, India - and within the oil producing countries themselves - could cause such a gap to appear some years before the physical supply peaks.
Thanks.
Demand is very very difficult to predict, I'm monitoring China quite a bit, but can't tell how and what.
Increased consumption in India is pretty much exaggerated, China is interesting.
"could cause such a gap to appear some years before the physical supply peaks."
Very likely
That's quite a big question isn't it...
Sorry, Rembrandt, I don't belive your forecast.
If you're right, Matt Simmons and Sadad al-Husseini (the ex saudi oil chief) are wrong. Saudi Arabia will not face a crisis damaging it's oil fields for pushing production too far.
And also you said it yourself the 4% depletion number is a little optimistic, well in my opinion is more than a "little". Depletion is rising every year and, I think, is hiting 5% and beyond.
I think is clear also, that you're not taking political events and possible natural disasters into account. Well, I don't know about natural disasters but political events are shaping oil supply now and will continue to do so until 2012, with intensifying force.
I thnik your argument is the same of Skrewbovsky latest revisions, it's deepwater, deepwater production will raise it all. I think that's a mistake, deepwater will not go as far as mny people think. I mean look at the North Sea, deepwater has huge decline rates post-peak, it's going to be tight all the way to 2010.
You really think we will get to 91, 92 million b/d of production? I don't thnik so... I see enough dificulty in getting to 90 million barrels/day of the ASPO/Skrewbovsky forecast.
What I could consider is a production plateau lasting to 2012... but only a plateau, with no increases in production.
The silly 20+ mbdp IEA forecasts are bollocks, of course, and according to a very reliable source the IEA bosses very well know their forecasts (both Saudi and global) are bollocks.
It is imperative to remember that the International Energy Agency is really the OECD Energy Agency. It was created as a counterpart to OPEC and has a political agenda of minimizing costs for oil importing countries.
The IEA forecasts should be viewed as having the same reliability as the OPEC reserve revisions of the 80's.
Deep water might have very high decline rates, but they also ramp up really fast. If you'd like I might get hold of a slide showing the ASPO deepwater production forecast. It's real pointy.
Re Increased activity in the oil industry
Of course, this is contradicted by the drilling and production histories of the regions that have crossed the (HL) 50% of Qt mark, notably the Lower 48 and the North Sea, where no amount of drilling has so far reversed the long term decline trend. The Texas case history was particularly noteworthy, where a 14% increase in producing wells from 1972 to 1982 resulted in about a 30% drop in production, following a 1,000% in oil prices.
As I pointed out in the "The World Shortest Peak Oil Article" on the EB, the world is now about where the Lower 48 and the North Sea were at when the peaked,and the world has made about 142 million barrels less crude and condensate (EIA) than if we had just maintained our December, 2005 production rate.
As I also pointed out, it is very likely that all four of the fields now producing one mbpd or more are in long term decline. I do not see any reasonable expectation of increasing production when all of the current one mbpd and larger fields are almost cerainly in long term decline.
He keeps going and going and going...
But we shall see who is correct (hopefully we haven't peaked yet..)
In a more general sense, the longer peak is put off the more people are on the stage, which is already buckling under the weight. THere is already talk of 400 million in the US alone by 2040.
I had a few questions:
- Do you account for "project slippage" as does Skrebowski? We are seeing projects set back for a variety of reasons; political, technical, and logistical. Wondering about your thoughts on this.
- In the decline calculations, I have commented on Skrebowski using the 2004-2005 changes as the basis for a baseline decline rate. My comment was that prior surplus capacity which gets produced in essence disguises actual decline rates. Actual production rate increases in the early part of this decade seemed to come about half from OPEC surplus capacity being produced and the rest from new projects esp in Russia. If you only look at new projects and not surplus capacity additions to production, you will underestimate the decline, because the presumption is the new production by itself compensated for the combination of field decline and overall increase, which was not actually the case. Any thoughts?
- As others have noted, it is only during this or last year that declines from Cantarell, Ghawar, Burgan may start being manifest. Since these are such enormouis contributors to the total, they are likely to have a significant effect on the decline rate that would not be reflected in any past years' statistic. I know we can't really quantify this yet, but this could represent a profound alteration in the conclusions drawn without taking this into account. Any thoughts?
Thanks again so much for your efforts.Lets say for the sake of arguement a typical decline rate is 4%.
Now look at say the whole of a country peaking, say Indonesia, (which has obviously peaked) - and which produces approx 1m/b/d and declining - if you lose 4% a year then thats 40,000b/d
BUT the real problem is that we are potentially looking at some enormous particular individual resources peaking around now. Thus Cantarell declining at 4% removes upwards of 80,000b/d/devery year, and Gwahar a staggering 200,000b/d would be lost every year. Thats oil which would have to be made up from somewhere else. And within 3 years just those 2 fields declining at that rate has removed 1m b/d.
Cantarell looks a done deal in terms of decline, although the jury is still out on Gwahar........
Posted below is my Reddit comment to help jog more eyeballs to your much appreciated hard work:
Koppelaar has done an excellent keypost that all should read and consider. My primary disagreement is not derating his timeline due to diminishing returns and political upheaval [in fairness, he fully acknowledges this optimistic bent in his analysis]. Yes, these effects are practically impossible to predict, but my 'gut feel' is that moving up the Peak by 3 years to account for these trends would add greater accuracy.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
I think that to fufill the economic picture we must add consumption effects. In particular we need to address inelastic demand for oil products.
I see the biggest effect of reduced oil supply as effecting the lowest markets first which work in the castofss of a cheap oil society.
This includes
1.) Asphalt for road construction
2.) Bunker fuel for commerical boilers
3.) Bunker fuel for electric generators
4.) Bunker fuel for ships
5.) Propane for third world cooking
6.) Diesel for third world electric generators
The problem is oil is overall a supply and demand equation.
Most peak oil researchers do not address the demand side of the equation at all yet demand destruction is a big part of the overall price of oil once people are priced out of the market in these areas you will see the price of oil skim the boundary layer that keeps demand in these areas destroyed.
Next for more modern societies focused on fueling their SUV's the loss of Asphalt for road construction will have a far large impact then the price of gasoline.
I think the work presented in this article is fantastic but I think its time we begin to show true demand destruction is taking place.
A big part of the current price drop in oil is demand destruction resulting from the housing bubble collapse in western nations and resulting slow down in consumer spending. This is of course not one of the criteria I'm suggesting but unless we start including examples of demand destruction in our literature we are missing and obvious part of the equation in convincing people that peak oil is real and needs to be considered.
Finally I don't see that people recognize the paradox of expensive oil. This is as oil becomes more expensive then the cost of production rise making the oil more expensive.
This is the situation that alternative oil sources run into as traditional sources deteroriate. So its cost effective to exploit the oil sands in Canada using conventional oil sources for production but if the only source was tar sands the price of production is ridiculous. Thus these resources can only be explotied for a short window when convetional oil is still plentiful but in short supply.
You're forgetting that the Tar Sands operation can use its own refined product to drive its diesel trucks/mining equipment.
Ultimately I see the tar sands operations needing a couple of CANDU nukes up there to provide process steam heat and thermocatalytic produced hydrogen for bitumen upgrading.
This will probably happen as a matter of course once the NG becomes too scarce/expensive to consume.
I see no major economic or engineering reason that the tar sands operations couldn't keep going for a long time. They may have to get on top of their water consumption issue though but that can be done with enough cash.
The big issue, as always, is money. So long as Canada can find buyers of its expensive syncrude in the long term then I'm confident that the oil will flow.
I also believe that as oil becomes more scarce, expensive to produce oil, may be sold under fixed long term contracts much the way NG is today. This gives both buyers & producers a stable economic platform to operate from.
Plus if you compare the recoverable resources to the extraction rate it looks more like a coal mine than an oil field, inasmuch that it will produce for a long long time.
I ran some interesting back of the envelope calculations for the Tar Sands.
Assuming that 3 Mpd is maintained. 3 Mpd = 174 Billion litres of crude a year.
Assuming that 20% of this can be refined to diesel
Another 25% can be refined to gasoline
The rest is bitumen (for road building), bunker fuel, jet fuel and the inherent energy required to run a refinery etc.
This will give you approx 34 billion litre a year of Diesel
And approx 43.5 billion litres of gasoline a year.
That amount of Diesel will easily run Canada's agricultural/off highway equipment, most of its essential road haulage fleet and all of its trains.
That amount of gasoline (assuming per car demand of 2000litres/car/year) will keep approx 21.7 millions cars on the road.
Now I don't know how many cars are in Canada buts that's a fair amount of vehicles to keep the population moving. And that's before you start to factor in efficiency improvements from Hybrids and PHEV's.
So the rest of us may be screwed but odds are Canadians will be ok for a long time.
andytk said,
"You're forgetting that the Tar Sands operation can use its own refined product to drive its diesel trucks/mining equipment."
Yes, but if it does, then the amount it has to sell will drop. The issue of repair and replacement parts on said vehicles still hangs out there. The industry was recently almost brought to a standstill by the lack of tires (and these are no small tires, either! Does the tar sand industry hope to make it's own tires on site?
andytk said,
"This will give you approx 34 billion litre a year of Diesel
And approx 43.5 billion litres of gasoline a year.
"That amount of Diesel will easily run Canada's agricultural/off highway equipment, most of its essential road haulage fleet and all of its trains."
Yes, if all of the Diesel and gasoline were staying in Canada. But since a very great of the investment money going into developing Canada's tar sand industry, why would that be the case. The American companies buying up interests in and investing capital in must assume that some of that Diesel/gasoline is going to come across the border for it's customers.
andytk says,
"That amount of gasoline (assuming per car demand of 2000litres/car/year) will keep approx 21.7 millions cars on the road."
Well, that's something, but even accepting your optimistic number of 2000litres per car per year, if every drop stayed in Canada, it would indeed be enough for their cars, given that "In Canada, there are roughly 18 and a half million vehicles, and 32 million people.
But in the U.S. market, it would fall a good deal short:
So says the Transportation Department, which reports that there are 107 million U.S. households, each with an average of 1.9 cars, trucks or sport utility vehicles and 1.8 drivers. That equals 204 million vehicles and 191 million drivers, said the Bureau of Transportation Statistics Friday.
http://www.usatoday.com/news/nation/2003-08-30-outnumbered-cars_x.htm
So, if we lay aside the water depletion, which we all admit to, the natural gas depletion, which is huge, unless the tar sand can turn it's own product back to processing (plus, producing Diesel for it's trucks and equipment!), and we ignore the massive expense in heavy steel and speciality equipment, ohhhh, and there was that "little issue" concerning carbon release and Kyoto....
but of course, slinging in a few nuclear reactors will make it all balance out, just throw that into the "Miscellaneous expenses file" because we all know nucks are cheap...oh shiit, now we have to get the uranium for them, and dispose of nuclear waste, and the security issue of course...does that count into the EROEI?
...and people laugh at onsite renewable production of hydrogen!
Roger Conner known to you as ThatsItImout
At 3 Mbd the tar sand are producing approx 453,150 Tonnes of crude oil a DAY.
I'd be shocked if their collective truck/mining equipment fuel requirement was much more than 500 tons/day for the entire region.
500 Tonnes compared to 453,150 tonnes makes their collective fuel requirement about 0.1% of their output. So small its negligible. And tyres are even less, the bottleneck is simply a logistics one. Same as all the other problems they've got. Its all logistics. Sustained $100 barrel oil will soon sort that out.
Lets face it from a mining perspective these guys are running at least an energy balance of 1000 to 1 return on their input energy.
Their biggest problem is labour and complexity of capital equipment. Oh, and water.
As to the issue of nukes its safe to say, that if its profitable, then it will be done.
Assume the Tar sands need 3 nukes at 1000MW each. The combined cost would be absorbed by the aforementioned 21 million motorists, plus householders heating oil, plus diesel sales.
Now at 10 billion per nuke (capital cost, which is a massive overestimation) that would only be $1,428 per motorist. Not to mention everyone elses contributions.
Put it like that and it doesn't sound so expensive.
Of course in reality it will be the increased barrel oil cost that ultimately pays for the nukes.
And again at a thermal output of 2500MW each the nukes will be contributing a max of 180,000 MWh per day.
Again the tar sands output of 453,150 tonnes day will provide you with approx 3.7 Million MWh per day.
And that's assuming that final refining takes 20% of the initial energy.
So once again, the nuclear thermal input is only of the order of about 5% of the total energy output.
That looks like quite a good return on energy investment to me. (EROEI of 20 to 1)
As to the security issues, well if Canada can manage its existing reactors then I don't see the problem with another 3.
And, yes once everything goes pearsheaped I would assume the Canadians will try and use legal manoeuvrings to ensure that they can keep their oil production for themselves. So, yes Americans are indeed up s**t creek without a paddle.
Andy
'...the bottleneck is simply a logistics one. Same as all the other problems they've got. Its all logistics.'
Followed by -
'Their biggest problem is labour and complexity of capital equipment. Oh, and water.'
So I guess water is just a logistics problem?
Or is it just hydrogen that is the logistics problem?
Hmmm.
You know, there is a reason that coal is not considered a hydrocarbon, and a lot of 'unconventional' oil sources come pretty close to being hydrocarbon free if hydogen is the measure of hydrocarbon.
Almost poetry, plugging in the numbers and then simply announcing the solution to this problem or that is 'logistics.' Add hydrogen to carbon - hydrocarbon problem solved.
Technically, peak oil too is just a logistics problem - produce more oil, no peak oil. I bet if you installed a nuke or two over an oil field to warm it sufficiently over a period of years, have it provide the energy to fracture the rocks or to drill ever more wells, you could increase oil production - work the numbers for fun, at 200 dollars a barrel or whatever level you wish.
At some point, you realize this becomes insane, right?
Peak oil is indeed a logistics problem. There is plenty of solar & wind energy simply capturing it is the "logistics" problem.
So, yes, everything is a logistics problem.
Your example of coal is a bit far fetched. Hydrogen requirements for upgrading tar sands is far less (by a coupe of orders of magnitude) than if you wished to "upgrade" coal to hydrocarbons.
Now, magnitude of orders matter to people like engineers. This is why we don't try and upgrade coal to oil. If you wish to do that then coal gasification is better.
As for things like shale oil, the problems with this are far greater and much more challenging. This is WHY we DO have tar sands but not shale oil as of yet.
I also have another interesting belief. And that is, that if indeed parking a nuke on top of an oil field and using it with an EROEI of 0.8 (ie, for every MWh of electricity you obtained 0.8 MWh of oil), then this WOULD actually happen.
Why??? Because oil is a storable, highly dense source of energy that can be used to release great mounts of power on demand. So you use one resource (that is cheaper) to produce another resource that contains less energy but has a higher commodity (or value) placed on it.
From an EROEI perspective, its madness. From an accountancy/fiscal stancepoint its perfectly reasonable. Depending of course on the cost of energy in society.
See, now its not just the engineers that you have issues with, it's the accountants too.
This is one of the reasons I'm sceptical on windpower. The "value" that the energy grid places on wind power capacity is less due to its variability. And thus they would price its output lower (except they can't as there is framework in place to ensure wind purchase by the grid in most of Europe)
But let's figure it this way....if the picture he paints could happen, why would the Americans be up a creek? Look, it will take every ounce of production, at billions of dollars of investment, just to provide for Canada's cars and trucks....but "if the picture he paints is true" then popping a few of them discount nukes over the top of our oil shale should be a piece of cake....and the volume would dwarf any possible Canadian output!
The logic would be the same, that is, a few nuclear plants to provide the process heat and out comes one pound of hydrogen type fuel for every what, 5,000 pounds of "tailings" as we call them in Kentucky in the coal business (that is, scrap rock, tons of water discharge, and dust, ohhh, that sweet dust and ash, over miles of landscape! ohhh, that's right, we have to move a few tons of dirt to get there...., just logistics), and then we can decide what to do with millions of tons of carbon later....because that is what tar sand, oil shale and coal have in common, as the other poster pointed out, tons of carbon and filth for every ton of fuel....but we have an advantage over our Canadian neighbors....we 100 million plus vehicles to spread the cost over...
Are you guys still sure that renewable hydrogen from solar with no carbon in the mix (and no nukes, no "tailings" no miles of black ashen landscape) and small unit distributed local generation is REALLY that bad of a balance?
THINK about it.
Roger Conner known to you as ThatsItImout
To be clear.
I think that with effort the issues the Canadians face regarding water consumption can be technically solved. One of the companies working in the region is already trialling a process which will cut water use dramatically.
Secondly, I'm tired of being rubbished for daring to suggest that tar sands are feasible "at a high enough price"
How feasible do you think deepsea oil would be at $25 Barrel?? Indeed the North Sea tanked with the early 80's oil market collapse.
The same is true of the tar sands. The fundamental energy balance is very very good. With enough return on investment (ie, high oil price), your capital plant cost problem simply goes away. Sure, as energy gets more expensive this will drive up operating costs, but critically it also drives up the value of your output faster. Plus it drives up the value of your investment in equipment.
As to the Canadian American oil distribution politics, OK, I'll put my hands up and admit I was taking "artistic licence"
I doubt that Canada and the US will part ways as a trading block, but just think. If cars fall out of use, the tar sand oil will keep you all in heating oil for a helluvalong time.
So at least you won't freeze to death in the Great White North.
Andy
"Oi, I never said Shale Oil was technically feasible. Stop taking my posts out of context."
Oi, and I never said you did! What I said was if it's that easy to pop a few nukes on the ground anywhere you want them, provide the fuel to them, provide the budget to build and run them, provide the cooling water to them, and then use the process heat to crack open tar sand, then anything is of course possible.
Not you, BUT I am saying that if the tar sand is feasible using nuclear power, then I, NOT YOU, am saying that the oil shale sure as hell is....and with HUGE amounts of fuel to be freed up...(I hope you understand that, as you say, to be clear, I think trying to free that much filthy crap, tar sand OR shale oil, with nuclear power is idiocy...once you have gone the nuclear route, why bootstrap the filth that is tar sand or oil shale onto it....use the nukes to make electric power and hydrogen...and cut out the carbon and solid waste and water tailings altogether....
Roger Conner known to you as ThatsItImout
"The river used to be blue. Now it's brown. Nobody can fish or drink from it. The air is bad. This has all happened so fast," said Elsie Fabian, 63, an elder in a native Indian community along the Athabasca River, a wide, meandering waterway once plied by fur traders. "It's terrible. We're surrounded by the mines."
Not to mention a huge chunk of Canada itself:
"The digging -- into an area the size of Maryland and Virginia combined -- has proliferated at gold-rush speed, spurred by high oil prices, new technology and an unquenched U.S. thirst for the fuel. The expansion has presented ecological problems that experts thought they would have decades to resolve."
Then there's the global warming thingy that affects us all:
"Heating the water and processing the crude bitumen -- a heavy, viscous oil -- produces carbon dioxide, a greenhouse gas that is linked to global warming. The oil sands mines have become the largest contributor to Canada's increase in greenhouse gas emissions, according to Pembina's research.
"If you grow production of the oil sands, you are going to grow greenhouse emissions," Ruigrok said.
From the Washington Post
It should be noted that 4 MBPD is approxiately 35% of North American demand of some 11 MBPD. It is highly likely that the tar sands will be treated as a North American rather a world or solely Canadian resource. The Canadian and US economies are far too integrated for it to be attractive for Canada to deep six the US economy (assuming the military capability to keep the resource exists). With the US cooperation it probably will be possible to exclude other buyers of this resource. In this case what can happen is very likely to happen.
There is a lot of water that goes by the tar sands operations as the Athabasca River floods each spring. If some of this water is diverted to reservoirs, there should be sufficient water to run the tar sands. The ecological cost of this water would be some ecological damage to the Athabasca delta. I hate to think of the damage to migratory waterfowl nesting sites, but I suspect that if oil supply gets short the birds would lose out.
So it is probably worth looking a scenario in which peak oil occurs in approximately 10 years with 4, 5 and 6% annual declines in production with a base production of 4 MBPD from the tar sands. Bio fuels are already ramping up. The production of 10% of current production from bio-fuel is possible.
There should probably be something on the order of 5 MBD of conventional production from Canada, land based fields in the US, deep sea fields, etc.
It should be possible to achieve 30% savings from conservation and efficiencies given leadership, higher oil prices, and a legislated solution mandating conservation.
Naively, it looks there should be approximately a 10% to 40% shortage in US and Canadian oil (1 MBPD) when oil peaks. The size of the shortage depends on the success of conservation efforts, the success in ramping up the oil sands, oil shale, and biomass sources.
A 10% shortage sounds painful, but could potentally be handled. A 40% shortage sounds like it would be very difficult to handle without social order collapsing.
There is I believe one serious difference between you and me in our "professed semi-optimisms."
You have all the tattoos of a cornucupian. It's no wonder you draw so much flak.
I study the numbers seriously and think most doomers and peak-oil zealots are either seriously misinformed, stupid, or mildly retarded. Some peak-oilers like Simmons and Pickens are at the end of their days, could give a shit, and are just cashing in. Unfortunately many of their followers don't understand this.
I like Rembrandt. He seems to keep focused on the numbers. I spent much of my free time, since I saw his post, studying his post and researching his and Khebab's discussion about the decline rates. I would say that 4% might be a bit too pessimistic. It obscures some things. But I undersatnd how it was derived. This to me is the key. I'll be sharing my thoughts with RK and Khebab soon. I am indebted to their work. Nonpartisanship is important.
I suspect there is much common ground between us. I have been watching you for some time and am quite amused by attempts to paint you as things you are not. To paint you as a troll, whatever. You have made a fool of almost everybody who has attacked you. Good Job. You've kept it real.
But don't think the shale is an answer. It might be a silver BB, as ethanol and other stop gaps.
In the end we must cut consumption. Drastically.
I was glad to see Kunstler saying positive things about Obama today. But why wasn't Kunstler talking about oil?...
Or maybe he was.
We are all pallid dwellers on deep sea fumeroles. Arguing about the date the fumeroles of the world go cold is short term thinking.
Arguing about whether we have enough body fat to migrate to an adjacent fumerole and displace the occupants is also short term thinking.
Thats fine if you are a crab that has adapted too far and are fumerole dependant.
Its all about retained body heat as we ascend to sunlight on the ocean surface, the distance, the speed,the strategies, the freedom we have now to act before the fumerole goes out.
The Canadian/US way of life is so incredibly inefficient that a 40% reduction in oil use is (IMHO) relatively easy to achieve if you're put in a position where you have to.
Andy
WAG: Political, social, economical, climatological and other non-geological influences can make the situation only worse, not better.
Or is there a case that all these non-geological factors are already accounted for in the projections?
Cheers,
Davidyson