by Carey W King
The discussion of the death of peak oil has ramped up along with the increased hydraulic fracturing and horizontal drilling into tight sands and formations across North Dakota and Texas. In fact, even people that think peak oil will correlate to significant problems for society shy away from the term. But just as it is becoming more difficult to define what “oil” is in energy databases (it is now popular to report “liquids” that have vastly different life cycles and energy densities), the definition of “peak oil” seems to be in the context of the penholder (or typist). Since I’m writing this blog, I of course get to define it for myself here, in what is a simple manner:
Peak oil is the concept that someday the rate of oil production for a country, region, or the world will reach a value that will never be exceeded
By Carey King
As a self-proclaimed energy dork, it’s somewhat exciting to see so much discussion of oil and gasoline (and petrol!) in the news recently. The discussions range from indicating that The Limits to Growth is still basically correct(http://www.smithsonianmag.com/science-nature/Looking-Back-on-the-Limits-of-Growth.html) to how technology is trumping all limits to enable the United States to soon be the world’s number one oil producer and start exporting oil within 10 or 20 years. Non-energy adept or interested persons can be confused easily, and unfortunately this is many. Of course, energy ‘experts’ don’t agree.
But the lay or ‘expert’ person can read recent articles from Time magazine (“The truth about oil(http://www.time.com/time/covers/0,16641,20120409,00.html),” cover article April 9, 2012) and The Economist (“Keeping it to themselves that are good for thinking about the situation relating to higher oil prices: increased demand from developing and exporting nations, and a lack of any practical increase in gross global oil extraction the last 5-7 years.
Last week the UK Guardian reported on leaked documents from the United States Embassy in Saudi Arabia that indicate a former executive of Saudi Aramco (the national oil company) believes that the publicly stated oil reserves and possible production rates of Saudi Arabia are overly optimistic.
The source for the information sent in the US embassy cable was Dr Sadad al-Husseini who served as Executive Vice President for Exploration and Production from 1992 until his retirement in 2004. I repeat a couple of the important passages from this document here:
“3. (C) According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described and the timeline for their production not as unrestrained as Aramco executives and energy optimists would like to portray. In a December 1 presentation at an Aramco Drilling Symposium, Abdallah al-Saif, current Aramco Senior Vice President for Exploration and Production, reported that Aramco has 716 billion barrels (bbls) of total reserves, of which 51% are recoverable. He then offered the promising forecast – based on historical trends – that in 20 years, Aramco will have over 900 billion barrels of total reserves, and future technology will allow for 70% recovery.
4. (C) Al-Husseini disagrees with this analysis, as he believes that Aramco’s reserves are overstated by as much as 300 billion bbls of “speculative resources.” He instead focuses on original proven reserves, oil that has already been produced or which is available for exploitation based on current technology. All parties estimate this amount to be approximately 360 billion bbls. In al-Husseini’s view, once 50% depletion of original proven reserves has been reached and the 180 billion bbls threshold crossed, a slow but steady output decline will ensue and no amount of effort will be able to stop it. By al-Husseini’s calculations, approximately 116 billion barrels of oil have been produced by Saudi Arabia, meaning only 64 billion barrels remain before reaching this crucial point of inflection. At 12 million b/d production, this inflection point will arrive in 14 years. Thus, while Aramco will likely be able to surpass 12 million b/d in the next decade, soon after reaching that threshold the company will have to expend maximum effort to simply fend off impending output declines. Al-Husseini believes that what will result is a plateau in total output that will last approximately 15 years, followed by decreasing output.”
This embassy cable concludes with the following paragraph:
“8. (C) COMMENT: While al-Husseini believes that Saudi officials overstate capabilities in the interest of spurring foreign investment, he is also critical of international expectations. He stated that the IEA’s expectation that Saudi Arabia and the Middle East will lead the market in reaching global output levels of more than 100 million barrels/day is unrealistic, and it is incumbent upon political leaders to begin understanding and preparing for this “inconvenient truth.” Al-Husseini was clear to add that he does not view himself as part of the
“peak oil camp,” and does not agree with analysts such as Matthew Simmons. He considers himself optimistic about the future of energy, but pragmatic with regards to what resources are available and what level of production is possible. While he fundamentally contradicts the Aramco company line, al-Husseini is no doomsday theorist. His pedigree, experience and outlook demand that his predictions be thoughtfully considered. END COMMENT.”
So basically al-Husseini is reported to be saying that Saudi Arabia may be able to produce 12 million barrels per day (MMBBL/d), but that it won’t last for very long. Note that world oil production has been approximately 84-86 MMBBL/d for the last five years. Note also that Saudi Arabia produced an average of 9.8 MMBBL/d in 2009 and a peak (to date) of 11.1 MMBBL/D in 2005.
Al-Husseini is suggesting that Saudi Arabia may be able to keep production near the range of 12 MMBBL/d for nearly 15 years (should it reach that level within this decade), but that after that time frame the total oil output will begin to decline never again to reach as high of a level of oil production. And in saying this, al-Husseini (see 8. (C) above) is also suggesting that his is not part of the “peak oil camp” (for finding out what the peak oil camp is about – see http:\\www.theoildrum.com), but it is unclear from the cable what he means other than suggesting not to agree with analyses by the late Matthew Simmons, and probably Mr. Simmons’ analysis as portrayed in his book Twilight in the Desert. In his book Simmons describes how the Saudis are fighting the uphill battle of depletion of their oil fields and that they are already using very clever and sophisticated engineering to maintain the current production rates. I don’t consider Simmons’ analyses a knock on the Saudis capabilities, but rather acknowledgment that they are employing many of the latest techniques and doing a very capable job. In short, Simmons says that the Saudis cannot keep increasing world oil production, and al-Husseini is broadly saying the same thing.
Given the impending reality of peak oil production in both the world overall and Saudi Arabia, the rulers know that the oil wealth is not to be squandered and that leaving some oil in the ground is as good of a strategy as any. This statement is supported by another leaked document here, with the relevant excerpt:
“Quoting King Abdullah’s recent comments (ref B) that Saudi Arabia would cap production capacity at 12.5 million bpd and “leave crude in the ground for its children”, Bourland remarked, “There are more accidents, there are escalating costs (in the oil sector). I think the King is reaching the conclusion that the money is safer in the ground than in the bank. He doesn’t want to see it squandered.”
My view of peak oil is not that there will be a particular shape of the oil production curve over time (meaning oil production vs. time), but that it will indeed reach a point where production rates will stop increasing and begin decreasing. That is to say the slope of the curve on the oil production decline may not be an exact mirror image of the production curve of the oil production increase of the last 100 years. This curve is commonly approximated as a bell curve, and there are laws of statistics that say this is
a reasonable approximation given the large number of oil fields in the world. However, this curve is best applied to regions with rather open and capitalistic markets. Upon the peak occurring, should oil production become more of a geopolitical tool instead of primarily a market tool, the world oil production decline could be steep (leading to much instability) or perhaps rather gradual as long as possible (trying to maintain maximum stability) if production is held back today and in the near future to keep it relatively high in the longer future.
Peak world crude oil production has already occurred (see US data at the Energy Information Administration), and peak total oil production will follow. This is realized clearly by those how pay attention and study the statistics. Because globalization is literally powered and enabled by oil, and relatively cheap oil (< $100/BBL), the impending decline in oil production signals the impending decline in globalized trade and travel. There will not be an abrupt end to globalized trade any time soon by any means, but upon peak oil production becoming realized in the mainstream of business, there will be a significant reshuffling of priorities in terms of what goods do get shipped around the world. But for more on this topic, you can read Jeff Rubin’s book, Why Your World is about to get a Whole Lot Smaller, and one of his last reports while Chief Economist at CIBC, also summarized on The Oildrum.
This week I attended the meeting of the US chapter of the Association for the Study of Peak Oil and Gas (ASPO-USA) in Washington, D.C. (http://www.aspousa.org/worldoil2010/. With all of these backgrounds, the basic consensus of the group is that oil production is in fact peaking now as production has been within 5% of the same level of production around 83 to 85 million barrels per year over the last five years, and will begin to irreversibly decline within the next five years. Additionally, the current economic downturn and high unemployment levels are directly tied to the precipitous rise in oil price from 2003 to summer of 2008.
Simply put, the world economy, and primarily that of the US and the rest of the OECD, could not afford and is not structured to function in a world of oil price > $100/BBL. Southeast Asia is growing up in an oil economy as it peaks out, but they are adjusting from transport systems such as scooters and bicycles. Additionally, as Jeff Rubin (http://www.jeffrubinssmallerworld.com/meet-jeff/, this is how the world will get smaller. Oil simply gets too expensive to “lubricate” world transportation of goods and raw materials that is necessary for much of globalized trade.
The opinion of more and more “mainstream” organizations are accepting the reality of peak oil production. Widely mentioned and quoted at the conference was a report by the US military from the Joint Chiefs of Staff: the Joint Operating Environment (JOE) (http://www.jfcom.mil/newslink/storyarchive/2010/JOE_2010_o.pdf, and I quote a few passages here:
As the figure at right shows, petroleum must continue to satisfy most of the demand for energy out to 2030. Assuming the most optimistic scenario for improved petroleum production through enhanced recovery means, the development of non-conventional oils (such as oil shales or tar sands) and new discoveries, petroleum production will be hard pressed to meet the expected future demand of 118 million barrels per day.”
“By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD.”
These statements are strong support for the oncoming peak oil scenario, but the rest of the section on energy does little to make me think that the JOE report is going too far on a limb due to the caveats and continuing discussion of possible 100 million barrel per day (MMBBL/d) production in the future. If you are a real peak oil person, then you believe we’re at the peak now near 85 MMBBL/d.
On the notion of other fossil fuels, there was a good presentation on the “true” economics and production levels from natural gas shales from Arthur Berman – who has often presented interpretations of well data and financial statements that support his view that is quite contrary to the shale gas producers. Presentations from David Rutledge and David Summers regarding much less coal production (and hence CO2 emissions from coal) than used for emissions scenarios (so-called SRES) for the various Intergovernmental Panel on Climate Change (IPCC) climate model simulations. The data are compelling, and along with the recent paper from Tad Patzek on the soon-to-peak world coal production (i.e. 2011). Granted there were audience members who greatly disagreed that we are anywhere near peak coal production, and obviously we do not precisely know the speed of development of new coal mining areas. However, I’d say the evidence is leaning toward a near term peak coal scenario given the remoteness and coal quality of some virgin coal field locations (e.g. lignite in Eastern Siberia).
Please visit the ASPO-USA website for more information as the presentations are uploaded for public viewing and download in the future (http://www.aspousa.org/worldoil2010/.
By Liz Kalaugher
While you might assume that a peak and subsequent decline in oil production would be good news for the climate, there’s so much coal left that the effect is likely to be limited. “The amount of oil is not very important in determining future carbon dioxide emissions,”
said Ken Caldeira of the Carnegie Institute. “Coal is the big bear on the block.”
That said, the way that we replace oil is still significant. “Will the end of oil usher in a century of coal or a century of low carbon technologies?,” pondered Caldeira. “The need
for liquid fuels could drive coal liquefaction.”