Post by ebrainsh on Nov 13, 2011 17:06:01 GMT
Peak Oil and the Future – Grim Reality or Conspiracy Myth?
"The era of cheap oil is over and will never come back… Conventional oil peaked in 2006," - Fatih Birol, International Energy Agency Chief Economist, 25 May 2011
There is perhaps no more divisive issue in the world energy markets than the concept of "peak oil," which has ignited vociferous debate on both sides of the issue.
Shorn of its complexities, peak oil boils down to a half-empty/half-full glass debate. The peak oil theory, first enunciated by Marion King Hubbert, a geologist working at Shell’s research lab in Houston, stated that any finite resource (including oil), will have a beginning, middle, and an end of production, and at some point it will reach a level of maximum output, to be followed by a decline, which cannot be effectively arrested. Elaborating upon his theory, Hubbert presented a paper to the 1956 meeting of the American Petroleum Institute in San Antonio, which predicted that U.S. overall petroleum production would peak between the late 1960s and the early 1970s, igniting fierce controversy, but Hubbert became famous when this prediction proved correct in 1970 when U.S. oil production did in fact decline.
Oil Production vs. oil consumption
In 1973 oil accounted for 46 percent of the world's total energy consumption; by 2005, its share had declined to 35 percent. But oil remains well ahead of other energy sources: coal meets 25 percent of the world's energy needs, natural gas is next with a market share of 20 percent and nuclear power provides 6 percent of the world's energy needs.
While there are more than 40,000 oil and natural gas fields worldwide, 94 percent of known oil is concentrated in fewer than 1,500 giant and major fields. Of these, 100 super-giant fields contain approximately 65 percent of cumulative production plus remaining reserves. Current world production and consumption remain heavily dependent on super-giant and giant oilfields discovered in the 1950s and 1960s, and only rarely in recent decades have discoveries equaled production. Instead, it’s usually been one barrel discovered for every three barrels produced.
Old super-giant fields are aging and their production is declining. Kuwait’s Burgan field, which has proven reserves of 70 billion barrels and has a daily output of 1.6 million barrels a day, the world's second-biggest field after Saudi Arabia's Ghawar field, was discovered in 1938 and peaked in 2005. Ghawar, containing 75 -83 billion barrels, was discovered in 1948 and production also reportedly peaked in 2005. Pemex’s Cantarell, discovered in 1976 in the Gulf of Mexico, peaked in 2004, earlier than anticipated. Alaska’s Prudhoe Bay, containing 13 billion barrels, was discovered in 1969 but production there began to decline in 1998, again, earlier than expected.
North Sea production, where reserves are estimated at 17 billion barrels, is also in decline. While primary oil demand in European Union countries is projected to increase by 0.4 percent per year from now to 2030, North Sea output peaked in 1999 and has been declining ever since. More than half of the North Sea oil reserves have been extracted, according to official sources in both Norway and the UK. British sources give a range of estimates of reserves, but even using the "maximum" estimate of ultimate recovery, 70 percent had been recovered at the end of 2006.
Western Siberia, which began production in 1959, contains 70 percent of Russia's oil and produces seven million barrels a day. Last year, the Russian Ministry of Energy reported that the recoverable oil reserves for Russia in general had a depletion rate of more than 50 percent; in the European part of Russia –65 percent.
In the United States production has been falling since 1970 despite the country having the best equipment, the largest infrastructure, the most money and the greatest financial incentives to produce.
New oil discoveries to the rescue?
Since 1996, 11 new super-giant oil and natural gas fields have been discovered, containing 5 billion or more recoverable barrels apiece. Skeptics of peak oil point to such discoveries as proof that the world faces no imminent production shortfalls, but a few caveats are in order.
These new finds are 1996 Bach Ho (White Tiger), Vietnamese field in South China Sea (5 billion barrels): 1999 Kra al-Marow, Kuwait, (up to 70 billion barrels): 2000 Kashagan, in Kazakhstan’s Caspian sector, (13 billion barrels): 2001 Azadegan, Iran, (26 billion barrels est.): 2003 Ferdows, Iran, (8 billion barrels est.): 2006 Gulf of Mexico, Noxal Field, off Veracruz, (20 billion barrels est.): 2006 Gulf of Mexico, off coast of Louisiana, (3-15 billion barrels est.): 2007 Bohai Bay, off the northeast coast of China, (7.5 billion barrels est.): 2008 Tupi, off the coast of Brazil, (5-8 billion barrels est.): 2008 Santos Basin, off the coast of Brazil, (40 billion barrels est.) and 2008 Carioca, off the coast of Brazil, containing an estimated 10-33 billion barrels.
First, eight of these new super-giant fields are in offshore waters, a situation greatly increasing lifting costs and in the case of Brazil, in water several miles deep. The three super-giant onshore fields are all located in the Middle East, and Iran’s petrochemical industry is severely constricted by U.S. economic sanctions threatening firms investing in the country’s hydrocarbon industries. Given the long development times and expense involved in developing the offshore fields, they will not come online for years and when they do, their production costs will be high.
New oil cannot be instantaneously brought onstream and there will come a year when the production rate can rise no longer even though there is a lot more oil left to be produced, which will represent peak production. There is little argument now about whether this will happen, only when.
Accordingly, there is overwhelming evidence that the world will shortly reach a plateau where supply cannot continue to keep up with demand increase. Accordingly, hundreds of billions of dollars will need to be found if the world is to continue its oil addiction, and these massive investments will eventually be factored into increased oil costs.
Possible solutions
The interim solution now being belatedly being adopted in the U.S. is to increase conservation and thereby reduce oil usage. A major milestone was reached last month when automakers agreed to double the fuel economy of the vehicles they sell in the U.S. to a fleet wide average of 54.5 miles per gallon by 2025. The White House negotiated the proposal, which will take effect in 2017, with automakers including General Motors, Ford and Toyota.
Secondly, the U.S. military, the world’s single largest industrial consumer of oil is also moving both towards conservation and the development of renewable biofuels to lessen its dependence on traditional hydrocarbons. As a result of the global recession, which began in 2008 and the recent wrangling in Washington over budget cuts the U.S. Defense Department is beginning to look at the bottom line for its fuel costs, as every $10 increase in the price per barrel of oil costs the Pentagon an additional $1.3 billion.
These initiatives, while both laudatory and long overdue, are running up against a number of hard truths about global oil production, including the simple fact that if something cannot be sustained indefinitely, it will eventually be incapable of being sustained, but instead, ultimately it will shrink, as a resource that is finite cannot continually have its production increased. Furthermore, you cannot produce oil unless you first discover it and the majority of the world’s new oil finds are offshore, requiring massive investments before a single barrel of oil is produced, years in the future.
Hubbert himself saw a partial solution to the depletion of global oil reserves lay in diversification of energy resources, favoring the development of both solar power and nuclear energy. Given the dominance of the global energy markets by the oil industry for the last five decades however, alternative energy development funding has been starved of capital and except for nuclear power, other sources such as wind, tidal, solar and biofuels remain in their infancy.
Our future in a peak oil world
Overall the long-term prognosis is grim for the future of "cheap" oil, and the world must expect to get along without what has been our critical energy source in expanding the world’s economy for more than half a century. The sooner the world’s governments prepare for that eventuality and a transition to alternative energy sources the better, but the signs have hardly been encouraging up to now, with both the oil industry and its client nation-states keeping their fingers crossed and continuing "business as usual."
By John C.K. Daly for Dry Dipstick
www.drydipstick.com/
"The era of cheap oil is over and will never come back… Conventional oil peaked in 2006," - Fatih Birol, International Energy Agency Chief Economist, 25 May 2011
There is perhaps no more divisive issue in the world energy markets than the concept of "peak oil," which has ignited vociferous debate on both sides of the issue.
Shorn of its complexities, peak oil boils down to a half-empty/half-full glass debate. The peak oil theory, first enunciated by Marion King Hubbert, a geologist working at Shell’s research lab in Houston, stated that any finite resource (including oil), will have a beginning, middle, and an end of production, and at some point it will reach a level of maximum output, to be followed by a decline, which cannot be effectively arrested. Elaborating upon his theory, Hubbert presented a paper to the 1956 meeting of the American Petroleum Institute in San Antonio, which predicted that U.S. overall petroleum production would peak between the late 1960s and the early 1970s, igniting fierce controversy, but Hubbert became famous when this prediction proved correct in 1970 when U.S. oil production did in fact decline.
Oil Production vs. oil consumption
In 1973 oil accounted for 46 percent of the world's total energy consumption; by 2005, its share had declined to 35 percent. But oil remains well ahead of other energy sources: coal meets 25 percent of the world's energy needs, natural gas is next with a market share of 20 percent and nuclear power provides 6 percent of the world's energy needs.
While there are more than 40,000 oil and natural gas fields worldwide, 94 percent of known oil is concentrated in fewer than 1,500 giant and major fields. Of these, 100 super-giant fields contain approximately 65 percent of cumulative production plus remaining reserves. Current world production and consumption remain heavily dependent on super-giant and giant oilfields discovered in the 1950s and 1960s, and only rarely in recent decades have discoveries equaled production. Instead, it’s usually been one barrel discovered for every three barrels produced.
Old super-giant fields are aging and their production is declining. Kuwait’s Burgan field, which has proven reserves of 70 billion barrels and has a daily output of 1.6 million barrels a day, the world's second-biggest field after Saudi Arabia's Ghawar field, was discovered in 1938 and peaked in 2005. Ghawar, containing 75 -83 billion barrels, was discovered in 1948 and production also reportedly peaked in 2005. Pemex’s Cantarell, discovered in 1976 in the Gulf of Mexico, peaked in 2004, earlier than anticipated. Alaska’s Prudhoe Bay, containing 13 billion barrels, was discovered in 1969 but production there began to decline in 1998, again, earlier than expected.
North Sea production, where reserves are estimated at 17 billion barrels, is also in decline. While primary oil demand in European Union countries is projected to increase by 0.4 percent per year from now to 2030, North Sea output peaked in 1999 and has been declining ever since. More than half of the North Sea oil reserves have been extracted, according to official sources in both Norway and the UK. British sources give a range of estimates of reserves, but even using the "maximum" estimate of ultimate recovery, 70 percent had been recovered at the end of 2006.
Western Siberia, which began production in 1959, contains 70 percent of Russia's oil and produces seven million barrels a day. Last year, the Russian Ministry of Energy reported that the recoverable oil reserves for Russia in general had a depletion rate of more than 50 percent; in the European part of Russia –65 percent.
In the United States production has been falling since 1970 despite the country having the best equipment, the largest infrastructure, the most money and the greatest financial incentives to produce.
New oil discoveries to the rescue?
Since 1996, 11 new super-giant oil and natural gas fields have been discovered, containing 5 billion or more recoverable barrels apiece. Skeptics of peak oil point to such discoveries as proof that the world faces no imminent production shortfalls, but a few caveats are in order.
These new finds are 1996 Bach Ho (White Tiger), Vietnamese field in South China Sea (5 billion barrels): 1999 Kra al-Marow, Kuwait, (up to 70 billion barrels): 2000 Kashagan, in Kazakhstan’s Caspian sector, (13 billion barrels): 2001 Azadegan, Iran, (26 billion barrels est.): 2003 Ferdows, Iran, (8 billion barrels est.): 2006 Gulf of Mexico, Noxal Field, off Veracruz, (20 billion barrels est.): 2006 Gulf of Mexico, off coast of Louisiana, (3-15 billion barrels est.): 2007 Bohai Bay, off the northeast coast of China, (7.5 billion barrels est.): 2008 Tupi, off the coast of Brazil, (5-8 billion barrels est.): 2008 Santos Basin, off the coast of Brazil, (40 billion barrels est.) and 2008 Carioca, off the coast of Brazil, containing an estimated 10-33 billion barrels.
First, eight of these new super-giant fields are in offshore waters, a situation greatly increasing lifting costs and in the case of Brazil, in water several miles deep. The three super-giant onshore fields are all located in the Middle East, and Iran’s petrochemical industry is severely constricted by U.S. economic sanctions threatening firms investing in the country’s hydrocarbon industries. Given the long development times and expense involved in developing the offshore fields, they will not come online for years and when they do, their production costs will be high.
New oil cannot be instantaneously brought onstream and there will come a year when the production rate can rise no longer even though there is a lot more oil left to be produced, which will represent peak production. There is little argument now about whether this will happen, only when.
Accordingly, there is overwhelming evidence that the world will shortly reach a plateau where supply cannot continue to keep up with demand increase. Accordingly, hundreds of billions of dollars will need to be found if the world is to continue its oil addiction, and these massive investments will eventually be factored into increased oil costs.
Possible solutions
The interim solution now being belatedly being adopted in the U.S. is to increase conservation and thereby reduce oil usage. A major milestone was reached last month when automakers agreed to double the fuel economy of the vehicles they sell in the U.S. to a fleet wide average of 54.5 miles per gallon by 2025. The White House negotiated the proposal, which will take effect in 2017, with automakers including General Motors, Ford and Toyota.
Secondly, the U.S. military, the world’s single largest industrial consumer of oil is also moving both towards conservation and the development of renewable biofuels to lessen its dependence on traditional hydrocarbons. As a result of the global recession, which began in 2008 and the recent wrangling in Washington over budget cuts the U.S. Defense Department is beginning to look at the bottom line for its fuel costs, as every $10 increase in the price per barrel of oil costs the Pentagon an additional $1.3 billion.
These initiatives, while both laudatory and long overdue, are running up against a number of hard truths about global oil production, including the simple fact that if something cannot be sustained indefinitely, it will eventually be incapable of being sustained, but instead, ultimately it will shrink, as a resource that is finite cannot continually have its production increased. Furthermore, you cannot produce oil unless you first discover it and the majority of the world’s new oil finds are offshore, requiring massive investments before a single barrel of oil is produced, years in the future.
Hubbert himself saw a partial solution to the depletion of global oil reserves lay in diversification of energy resources, favoring the development of both solar power and nuclear energy. Given the dominance of the global energy markets by the oil industry for the last five decades however, alternative energy development funding has been starved of capital and except for nuclear power, other sources such as wind, tidal, solar and biofuels remain in their infancy.
Our future in a peak oil world
Overall the long-term prognosis is grim for the future of "cheap" oil, and the world must expect to get along without what has been our critical energy source in expanding the world’s economy for more than half a century. The sooner the world’s governments prepare for that eventuality and a transition to alternative energy sources the better, but the signs have hardly been encouraging up to now, with both the oil industry and its client nation-states keeping their fingers crossed and continuing "business as usual."
By John C.K. Daly for Dry Dipstick
www.drydipstick.com/