"120 million barrels per day will never be reached, never"
Posted by Chris Vernon on April 8, 2006 - 10:48am in The Oil Drum: Europe
Total's exploration chief reckons the output rise is impossible, given available resources and geopolitical constraints on gaining access to reserves in Opec countries.M de Margerie argued that the resources were simply not available. He said: "Take Qatar. How many projects can you have at the same time? You have more than 100,000 people working on sites. It's a big city of contractors. Now they have the problem of having to build a new power plant to supply a city of contractors."
The world lacks the means to produce enough oil to meet rising projections of demand for fuel over the next decade.
Forget 2030, he's talking about the next decade and suggests that the world is wrong to focus on oil reserves when the problem is the capacity to produce oil. This is a very important point - peak oil is all about capacity to extract, the flow rates and very little to do with the total reserves.
On a related subject last month the UK Government Foreign and Commonwealth Office published a document titled: Active Diplomacy for a Changing World, The UK's International Priorities Link (pdf). Amongst the rosy forecasts for the next 20 years we have come to expect from such publications (no doubt based on assumptions which don't include peak oil) there is this titbit:
Existing conventional oil reserves are projected to meet global demand until 2030, but investment of around £10 trillion (US$17 trillion) will be needed to turn resources in the ground into supplies for consumers.This is interesting for two reasons, firstly it is the first time I've seen government put an actual cost to the common statement of "there's enough oil given suitable investment" so often used when government talks about this subject. Secondly it is very different from the "more than $3 trillion (£1.72 trillion)" that the IEA claim. I guess it is 'more' but that has to be where any agreement breaks down.
Why the uncertainly? Can the world afford $17 trillion over the next 24 years ($700bn a year)? How much did the oil industry spend per year over the last few years? Is an admission that it will take $17 trillion to bring sufficient oil to market out to 2030 really an admission that we won't bring sufficient oil to market? What happens after 2030 - where presumably this situation breaks down and no investment will be able to bring oil to market.
Personnel
Editors
Contributors
Peak Oil Primers
Archives
- November 2010 (3)
- October 2010 (6)
- September 2010 (4)
- August 2010 (7)
- July 2010 (6)
- June 2010 (7)
- May 2010 (2)
- April 2010 (8)
- March 2010 (4)
- February 2010 (6)
- January 2010 (3)
- December 2009 (5)
- November 2009 (8)
- October 2009 (12)
- September 2009 (6)
- August 2009 (5)
- July 2009 (11)
- June 2009 (8)
- May 2009 (16)
- April 2009 (10)
- March 2009 (7)
- February 2009 (10)
- January 2009 (15)
- December 2008 (9)
- November 2008 (9)
- October 2008 (9)
- September 2008 (13)
- August 2008 (10)
- July 2008 (14)
- June 2008 (23)
- May 2008 (16)
- April 2008 (12)
- March 2008 (16)
- February 2008 (9)
- January 2008 (13)
- December 2007 (13)
- November 2007 (16)
- October 2007 (22)
- September 2007 (8)
- August 2007 (9)
- July 2007 (16)
- June 2007 (8)
- May 2007 (7)
- April 2007 (7)
- March 2007 (10)
- February 2007 (10)
- January 2007 (12)
- December 2006 (9)
- November 2006 (15)
- October 2006 (4)
- September 2006 (5)
- August 2006 (5)
- July 2006 (9)
- June 2006 (5)
- May 2006 (10)
- April 2006 (9)
- March 2006 (13)
Vital Trivia
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
Having read and listened to Matt Simmons it would appear that way before we really begin to see oil running out, many other factors connected with Peak Oil are going to make themselves known. For example, shortages of qualified oil workers, lack of rigs, shortages of steel pipes and drill-heads, not enough engineers...
This is all connected to demand racing ahead of our ability to ramp-up production at the same rate.
There was another part of the interview that I also found interesting. Mention of the 'geo-political' difficulties relating to OPEC and the cartels inability/reluctance to dramatically increase production. Increasingly these countries are going to realize that their oil reserves are going to be worth more and more the longer they remain in the ground. What is their incentive to rapidly increase production to satisfy our needs in the short and medium term? Aren't we rapidly moving towards a fundamental clash of interests here? Maybe their 'incentive' will increasingly be our promise not to invade them!
Increasingly we are going to find ourselves getting more and more frustrated with the oil producers, they have the oil, yet for a variety of reasons they will not be willing/able to procuce it in the quantities we need. How will we react to this situation? Will we just sit back and watch them sleeping on the job? Surely the gap between demand and supply will grow wider and wider, and prices will go up and up. It's going to feel like we are being slowly strangled. I have an unpleasant feeling that we just go in and take the oil or gas, of course we'll find some acceptable excuse for our actions, but the important things is we'll have the oil/gas, one way or another, after all we're talking about the stuff that keeps our civilization going aren't we?
Investments might be lacking due to a perceived risk of future oversupply and price collapse though.
The incentive to exploit now rather than conserve in the expectation of higher prices later is that it is politically expedient to take the cash now rather than leave it for the next generation. Perhaps a heredetory monarchy might take the enlightened long term view (cf Bhutan)
production maximum theory is often called Peak oil theory
I guess it's possible.
However, when you mentioned the 700 billion dollar/year figure, I got to thinking.
An annual investment by countries/companies of 700 billion dollars/year divided by the number of barrels of oil produced in a year (say 100million*365 days - kinda halfway between present day supply and this reports expeceted supply) comes to a somwehat less than expected 19.18 dollars per barrel regarding the ave investment cost for each barrel.
The seemingly illusory number of 13 trillion (12zeroes by the way ssh!) is actually not that much at all.
If I'm wrong in this please, everybody, don't hesitate to flame me, or fire me, or whatever it is that people do on forums.
PS - I wonder what the above is for today's barrel.
PPS Good Luck with the Oil Drum Chris; How do you find the time??
Stef
Your remarks put a whole new spin on the old adage, "A few trillion here and a few trillion there, and pretty soon your talking about some real money!"
:-)
More interesting to me is the effect of all that money on the outbound side....by which I mean the oil producers can only hoard so much, and then in the interest of safety and diversification, the money has to come flooding out somewhere...
The first to benefit of course should be the drill, tool and machinery makers, and the construction contractors who will be in there building the oil production and refining capacity (what's a good multi billion barrel per day water injection system cost now, anyway?), and has anyone looked at the share price of companies like Jacobs Engineering lately?)
But of course, the lifting cost of oil still being low, we then have to invest the rest of that loot....I remember in the 1970's, there were Arabian owners of everything from Formula One Racing cars to bed and breakfast joints in New England, and there was still money to spare! Money has it's own kind of power...needless to say the cash strapped nations of the world will be more than willing to fawn a bit and cut a deal with an oil rich heir, and businesses will be providing everything from custom Airbus interiors to twin supercharged custom HUMMERS and Land Rovers in matched sets to the once again rich of the Middle East! It will be a businessman's dream, at least for a while, as the blue collar set watch on "The New Lifestyles of The Rich and Oily!" WHY DOES THIS FEEL SO MUCH LIKE 1978!!
Dubai
Tony
http://business.timesonline.co.uk/article/0,,13130-2124075,00.html
"There are not enough engineers, rigs, pipelines and drillers to increase current world output of 85 million barrels per day to 120 million, he says. "
"It is a problem of capacities and of timing," de Margerie says. "This is the real problem of peak oil."
If that is true, then that is a completely different defining of "Peak Oil" than I have been familiar with.
The WHOLE argument of true geological peak is that it is a GEOLOGICAL problem and NOT a logistical problem. My understanding of the Hubbert/Campbell/Deffeyes method was that it no matter how much machinery, money and manpower (the three MMM'S, which decide everything), the geology was the issue, not the logistical situation above ground.
This is of course exactly the argument that Daniel Yergin and CERA have been making, in a great turn of phrase, when they say, "the problem is above ground, not below it." Most "Peakers" have had a field day blasting CERA for that view. Is the new definition of "Peak" now a logistical problem? (in other words, the oil is out there, the investment and planning just fell apart?)
Gentlemen and any Ladies present, we need to call a forum.
Allow me to close by saying that I HOPE our French friend de Margerie is correct, because that is a hugely different problem than "geological Peak", and gives us FANTASTIC investment opportunity!
Gentlemen and any Ladies present, we need to call a forum.""
Peak oil is an economic problem caused by a logistical problem caused by a geological problem. These must be considered together.
We find and extract the biggest and best fields first. These biggest and best fields are limited in number due to geological factors. Geological history has also left us with a huge variety of small, hard-to-find, deep, remote, sour, viscous, hot and otherwise undesirable fields. As we move from the best oilfields through the mediocre and on to the remainder then we need to use increasing levels of a variety of resources to extract the oil. Also as oilfields get old they demand more resources to maintain production. The resources utilised include oil, other energy, good people, metals etc. Most commentators agree we have more than 1 giga barrel of oil left, in that sense there is no lack of reserves, however we lack the ability to extract this oil fast enough, which is the logistic problem. We can't drill enough wells fast enough to get the oil out fast enough. Also if it takes a hypothetical 1000 barrels of oil to find and drill an oil well then all oil pockets of less than 999 barrels of oil will get left in the ground. Extra resources cost extra money so the price of oil goes up. As oil extraction declines demand outstripping supply causes shortage and again prices go up. These price rises in turn cause demand destruction, after which prices could fall as users find a different way to run their affairs. If it costs more to drive to work than your salary you will eventually leave your job, move house or go bankrupt.
I think if humanity set itself the task it could achieve 120mbd within geological and logistic limits . Perhaps by using nuclear powered drill rigs and pumps. However it would require a dedicated allocation of resources that would not justify the returns i.e. it wouldn't be economically or politically feasible. Working for a target of 120mbd is not as desirable as putting a man on the moon. The collapse in production after a 120mbd peak would be a special thing too.
Before we go any further, let's look at an amusing little post that a poster listed as Biffernon gave me in reply to my remarks about where the oil money is going. These are photos of construction and boom times in Dubai, and please scroll through them, and think about the EROEI on these projects.
http://forum.skyscraperpage.com/showthread.php?t=101057
Now we are being told that there is not enough steel, workforce, or money to continue increasing oil production. There seems to be a lot of resources in Dubai, but we will leave that, and allow me to play through my issue here, that being a true understanding of the use of the term "Peak Oil".
Let us take a sample oil field, it doesn't matter where. It is reasonably simple in construction, take if you like East Texas in the U.S. or Ghawar in Saudi Arabia. You find it, you study it, you estimate it's reserves in place, you drill it. Now, as you drill, you find out more how it behaves, you learn reservior pressures, and you get an even better idea of it's size and composition. You adjust your early numbers, and look at what is ultimately recoverable and how much will someday be left in place, because you can never get the last drop.
A good geologist (a Colin Campbell or a M. King Hubbert) can give you a pretty good estimate of total quantity, and calculate depletion rate, and know that at half of Qauntity, the production will begin to fall. In fact, sooner in many cases, if you do not introduce technology. That technology has been mostly directional drilling, and the mother of all recovery methods, water injection.
But that only speeds the depletion, so if beginning point of drilling was year 1, and original halfway was year 50, with the field trailing off to almost year 1 production by year 100, the introduction of water injection pushes production so that half way point moves to year 25, and the field trails down to year one production by year 75. These numbers are of course examples only, and give a somewhat expected progression.
NOW, HERE IS THE IMPORTANT POINT: This is not, repeat NOT a logistical problem. You can keep adding drills, manpower, money, etc., and you will only speed the depletion, AND the production will NEVER COME BACK UP TO YEAR 50. Once you have drank a half a mug of beer, you will never get more than a half a mug out of that one (you can search for new mugs, but that one is over half gone!) That is my understanding of Peak Oil.
Is it possible that our French friend is misunderstanding the term?
Remember, he is talking about new projects. Is he talking about completely new fields? Because if he is, THOSE FIELDS CANNOT HAVE REACHED PEAK INDIVIDUALLY. Now, if there are not enough of them being found to cover the depletion rate world wide, that's a different issue, AND DECIDEDLY NOT a logistical, money, manpower, or machinery issue.
And here's the clincher: If he is talking about enough oil recoverable to match or exceed the depletion rate being out there, and just needing the investment to get it, then it is a logistical problem.
But if he is saying "the oil's out there" but then saying the discovery rate is not matching the depletion rate, then for all practical purposes the oil is DECIDEDLY NOT out there in the needed volume. He is simply incorrect. There may be trillions of barrels, but what we need to know is this: If you had 10% more money, manpower, machinery, would oil production go up 10%? If you had 20% more, would oil production go up 10%? IF YOU HAD TWICE AS MUCH MONEY, MANPOWER, AND MACHINERY, HOW MUCH WOULD OIL PRODUCTION RISE?
Because that will set the definition: On the day the oil people can shake their head and say, "I don't care if you gave me a thousand times more money, manpower, and machinery, the total production of crude oil will never be higher than it is today." THAT IS TRUE GEOLOGICAL PEAK.
Right now, the public is very, very suspicious of the words of oil companies and governments. The confused language, back tracking, mixed terms, and back biting by the industry assures us one thing: almost no one is buying into the Peak Oil idea because even those who use the term use it in so many contradictory ways.
He is laying out the same PO theory but approaching it from the point of view of IOCs. All he does is avoid the forbidden words 'geological constraint' with that same old "there is plenty of oil out there".
So what is the PO theory saying? That after some point it will become impossible to increase and than to maintain oil extraction and it will start gradually falling - slowly at first and then faster and faster. Now he is explaining as to why this is happening from an oil industry perspective, and actually why we are (for all practical purposes) at peak oil about now.
One would say - what if we simply poured enough money, built enough rigs, train engineers etc. etc... Then it would be possible to increase production for a while, right? Well - I would say there are reasons why this does not/did not happen. It is a result a complex interaction of factors (mostly economical) and the geological constraints starts kicking in here. The reason we are in this situation is that discovery rates have been falling for years... and if you have low discovery rates and low ROI on discoveries you are reluctunt to invest in everything else long-term - nobody will build rigs, enroll an engineering school etc.etc - all investments that pay for decades. Nobody would invest if there is a very good chance these rigs/engeneers etc. will not be needed in only 10 years or so. And it is not realistic it will happen large scale in future. He is right - we will never see 120mln.bpd, even if this is theoretically possible.
An oil industry specialist complaining of bottlenecks in production is like a farmer complaining that the soil is losing fertility - a valid argument, but one that is quite predictable and has many and sometimes complex underlying causes.
I don't think there is a difference between geological peak and logistical peak.
Call it a logistics problem? I call it peak oil. Peak oil is due to the logistical problem of trying to extract oil at faster and faster rates from a diminishing reserve. Once upon a time 5 guys in a truck could erect a derrick, drill a few hundred feet and have 50,000 barrels per day spurting into the air. These days it takes billions of dollars to produce oil.
Tony
now, on the sentence,
<I don't think there is a difference between geological peak and logistical peak.>
I don't know if there is or isn't in this case, but we know that a "logistical" peak must be possible, even without a geological peak being a precondition...
If for example, I have an oil field in Texas, and I know that 20 rigs on it will produce say 10,000 barrels a day....I call everywhere, and can only get 10 rigs...then that sets the logistical peak at say 5,000 barrels a day...the geology isn't the limit, the logistics are. So the oil price goes up, more people go in the rig business, NOW I can get 20 rigs...I produce 10,000 barrels a day....so why not try 30 rigs?
I do, but the flow rate is not as high to each rig, the reservior pressure drops fast, and even with 30 rigs, I am stuck at 10,000 barrels production a day....what abouot 40 rigs, or 50?
The rusults are no better, and now I am loosing money because of the extra expense of the rigs producing no extra oil....that folks is GEOLOGICAL PEAK.
Is there oil there. Yes. But can I ever get over the 10,000 limit, NO MATTER HOW MUCH I SPEND? No, the geology prevents it. Thus, when Christophe de Margerie says "120 million barrels a day, never...", and then begins to talk about equipment and manpower issues, he himself leads the discussion away from true geological peak into logistical issues.
One more MAJOR POINT: At true geological peak, the price won't matter. Say you can get $100, $150, even $200 a barrel. It won't matter, the geology will dictate production, not price, it just won't come out of the ground any faster.
But if it's a logistical peak....you will be amazed at how fast the logistics will line up at over $100 a barrel!
Historically, the price has went up, the logistics cured themselves, and production shot up. If we are actually at geological peak, no price rise will make enough of a difference to bail us out.
You are not right to separate logistics or economics from geology. Your example was fine - at some point it is not worth investing in a field expansion because it will not pay-off because of geological constraints. So logistic investment depend both on geology and economy (oil price), right? At first oil price is the king... then after you start running out geology is the limiting factor and you have to balance between them - yes, you can invest more money to realise quick profit at those higher prices but you will not choose just to pour all you can without thought, right? You will consider whether to be more aggressive or conservative depending on your goals long-term. So at first it is economy, than it is economy and geology and in the end it is only geology.
I would recommend UK TODers to watch the show. I am sure it will be repeated again.
http://www.robnewman.com/news.html
Anyway, I'm not even sure it really matters all that much. As a provocative and deliberately ill-difined aside, I think we're going to see 'peak economics' 'peak politics' and 'peak war' rearing their ugly heads, way before the effects of logistical or geological peak, really start to kick in. There are times when I don't think our society, as we know it, will get anywhere near real, Peak Oil.
I believe Iraq and Iran are 'proofs' of my gloomy contention. If Peak Oil really is the Big Deal we assume it is; a truly gargantuan shift in our society/civilization for the worse, then I don't think most of us will ever see it: not in our lifetimes. I'm not really sure that I 'believe' this Doom scenario. I certainly know I don't want to. I have children I'd like to see them mature and have good lives. On the other hand I have this feeling/comprehension that my pessimism/realism may be justified. At least that's how I feel today, thinking about the United States and Iran and the escalating conflict between them. In the following I've lumped us in with the Americans. Maybe Blair has used up all his 'political capital' and is too weak to support Bush with anything more than words, but I wouldn't count on it!
I think Iran is the litmus test for a lot of things pertaining to the true nature of our civilization. If we really live in democratic societies, then we, the people should be able to stop yet another totally unjustified, illegal and imoral, war. We cannot let it happen again, not in our name, can we? Iraq was only the prologue. A prologue where we literally destroyed a defenceless and 'innocent' country. Haven't we in reality 'wiped Iraq off the map.' If we attack Iran, especially after Iraq, and we use nukes, then I think we've had it. First kiss what's left of 'democracy' goodbye, then comes the Strong State. 'Democracy' will, in my opinion, no longer really exist. Endless war, coupled with democracy - I don't think so. In the run up to the Iraq war, did 'democracy' really function in Britain? Shouldn't the situation more properly have been defined as de facto dictatorship? Didn't one man, Tony Blair, surrounded by a handful of retainers at his 'court'. function as monarch, and drag the county into an illegal war? One can argue there was a vote in Parliamentt, but it was not a free vote and clearly misled and lied to his party, Parliament and the country. This wasn't democracy in acttion, rather it was tyranny in action.
Attacking Iran will be proof that our civilization has effectively degenerated into a form of high-tech barbarism. It'll be them and us, the good guys versus the bad guys, those inside the walls and those outside. As Blair has stated, a war between 'civilization' and 'the others' outside civilization. After Iran I'm not sure we'd be all that much better than the Nazi's. It's a horrid thought, maybe our 'civilization' doesn't really deserve to survive. Not if we do this terrrible, shameful, thing.
The following may sound a little drastic, dramatic and even be deemed 'unrealistic'. The alternative is do nothing and Iran will be attacked. I'm talking about mass, direct action and people power. There are contemporary precidents for such a course of action. I think our only hope is to follow the lead of the French, the Poles and the Ukranians, and shut society down, just switch it off. We will have to use the weapon of the General Strike as well. We will have to demonstrate in our millions and occupy the streets of our cities and literally bring everything to standstill for as long as it takes. A state cannot go to war, if the state no longer exists, if the people have engulfed it. Forget Parliament and Cogress and their 'debates' and voting rituals. Bush and Blair will not be stopped from attacking Iran that way. We cannot form a political party overnight and wait for an election. We simply haven't got the time for all that.
Realistically I think our only hope of stopping an attack on Iran is massive and concerted direct action, designed to paralyse and disrupt the apparatus of the state until Bush and Blair are forced out of office, and preferably put on trial for their previous crimes in Iraq. Only then should we begin even talking about new elections and chosing new leaders. One can argue that this is a recipe for chaos and disorder. I realise this isn't a perfect solution, and it could get a bit messy with so many people confronting the power of the state, but I just don't think there is another way to stop the coming madness.
I have been struggling to disagree with you. First I don't want to believe that our system has declined to the point that shouting on the streets is the only way to get a point across and second because I don't want to believe that even Blair / Bush are really demented enough to consider this Iran war. Unfortunately, with the assistance of our American collegues on TOD I have to conclude that you are right. The question is can we get the numbers on the street to affect the supine dullards that pass for the government party in parliament to stop it? Clearly Bush can go alone even if we manage to stop Blair backing him so we need Americans on the streets as well. I could go on and on but that would be ranting, I'm really having trouble believing that this is not just a bad dream and I want to wake up NOW.
However, we haven't even heard the arguments yet. How do you expect people to take a position at this stage?
Tony