Peak Oil: Get Ready for the Oil-Supply Crunch, IEA Says
Lower oil prices these days are both a result of the economic slowdown and a possible cushion. But they could be a very mixed blessing. The Paris based International Energy Agency is worried about an oil supply crunch in coming years. It’s not due to geology—the IEA says the world has plenty of oil, in one form or another. But trying to match oil supplies to growing oil demand in coming years is a Herculean task made all the harder by cheapish crude prices which make oil companies think twice about new investments.
The biggest challenge will come between 2010 and 2015, the IEA says in its 2008 World Energy Outlook. For the next couple of years, the oil pipeline is well supplied. But that trails off after 2010. By 2015, the world needs to find an additional 7 million barrels per day of oil above and beyond the projects currently in the pipeline. And to get that oil to market those projects need to get started now. But now’s not a good time . . .
Unfortunately, recent market events, only indirectly related to oil, will now likely set July 2008 in stone as the date of maximum world oil production, despite the 'best-best case' scenario portrayed in the IEA report. Up against near double digit depletion rates and higher cost (lower energy gain) prospects, the oil industry now also faces a growing lack of confidence in the international financial system where near herculean investment is needed ($26 trillion = 37 times the recent controversial $700 billion bailout package in US), and credit, especially when the price of oil is well below the marginal cost of extraction (at 86mbpd) makes approving new projects, let along continuing existing production, problematic. Though not explicitly stated, one may infer that there is now increased risk that these investments will not be made.And where are we going to get $26 Trillion to eke out a peak in 2030 when our economy is being killed by a credit crunch that itself is being caused by the just-barely-beginning-of-the-unwinding of over ONE QUADRILLION DOLLARS IN DERIVATIVES?!?! Even more so, when the price in oil is being hammered daily by the collapse of the commodities bubble, which so recently caused great inflation in consumables (food, fuel, etc)?
What the key statistics are telling us is that we are so severely screwed. And the recent July 1008 of an all-time high (so far) of oil production shows us that politics have more to do oil production than anything else. Whether another all-time high can be achieved two or three decades from now remains to be seen.
" 'It has also been proven that the maximum amount discovered in any one year, globally, was in 1964. In the US that event was in the 1930s and peak oil production in the US was in 1971 and has declined ever since. The key is not the actual amount of proven reserves but the actual production! And since 2005, oil production has been on an irregular, bumpy plateau.'
"As shown above, the is 180 degrees backwards. 2008 might top 1964 with the huge strike off the coast of Brazil."
And as shown above, even if "the is 180 degrees backwards," we are still not out of the woods, and likely never will, so long as we, the world, remain oil-dependent. And the "huge strike off the coat of Brazil" wasn't that big to begin with. And the amount of reserves that hit was reported to contain was, from what I remember, reduced.
I will have choice words to say about 'proven reserves' a little further down in this post. But first...
" ' "These are both based on data from the American Society of Petroleum Engineers."
" 'It would be nice of you to provide a link.'
" It doesn't take too much effort on your part to google up that group. They are the source for oil statistics, just like NEMA is the standard for electrical codes and electrical safety."
Well I did google that group up, and guess what: it doesn't show up. Which probably means, it doesn't exist, PERIOD. HAHAHA. The closest relatives that do exist are the Society of Professional Engineers and the American Society of Petroleum Operation Engineers.
So I looked for petroleum statistics and guess what I found: Statistics on proven reserves by the USGS. Source: http://http://www.spe.org/spc-site/spe/spc/industry/reserves/OGR_Mapping_Final_Report.pdf Scroll down to page 21.
Quote: "Users should be aware of the 'reserves' terminology used in current USGS reports as illustrated in this chart based on results information in the USGS World Petroleum Assessment 2000."
The chart that follows:
World Excluding United States (conventional)
Oil - billion barrels
F95 F50 F05 Mean
1 - Cumulative Production 539
2 - Remaining Reserves 859
3 - Known Reserves (1+2) 1398
4 - Reserves Growth 192 612 1031 612
5 - Undiscovered 334 607 1107 649
6 - Future Volumes (2+5) 1508
7 - Future Grown Volumes (2+4+5) 2120
8 - Total Endowment (1+2+4+5) 2659
The USGS defines "reserves" as cumulative production plus remaining reserves that are still in ground. HAHAHA. These clowns actually include the amount that has already been extracted, shipped or piped, refined, shipped or piped again, SOLD, and BURNT or otherwise CONSUMED by the end user! If you or I went into a bank to get a loan, and the banker asks us how much savings we have, would we include the amount we have already withdrawn from our various savings accounts and SPENT? HAHAHA. Yet that is the logic the USGS uses here. No wonder the amount of "reserves" have been at an all time high this year in 2008, and have been higher each decade than the decade before going back to 1890!
If I include the amount of money I have spent since finishing college as 'wealth,' I, an ordinary middle-class citizen, would be fabulously wealthy!
And note how the USGS gets at the 'proven' numbers: by obtaining the mean, not by 95% probability (F95) of attainment! For clearly the future volumes will be dependent on politics and finance, assuming the Total Endowment is the amount that's already hit upon. If we are talking about future hits in this Endowment, then good luck with the hits, given the current credit crunch and geopolitical climate! HAHAHA.
So, let us get a more realistic set of numbers, given the current financial and political issues that are out and about:
World Excluding United States (conventional) (2000)
Oil - billion barrels
F95 F50 F05 Mean
1 - Cumulative Production 539
2 - Remaining Reserves 859
3 - Known Reserves (1+2) 1398
4 - Reserves Growth 192 612 1031 612
5 - Undiscovered 334 607 1107 649
6 - Future Volumes (2+5) 1192 1466 1966 1508
7 - Future Grown Volumes (2+4+5) 1385 2078 2997 2120
8 - Total Endowment (1+2+4+5) 1924 2617 3536 2659
And one can add to these numbers 228 billion barrels for Total Endowment per M. King Hubbert or 362 billion barrels per USGS for the United States to obtain global totals. So for Total Endowment, 95% probability, we get 1924 Gb plus (assumed) 228 Gb for a conservative planetary Total Endowment of 2.152 trillion barrels. Much closer to M. King Hubbert's estimated planetary Global Endowment than the USGS's mean of 3.021 trillion! THESE ARE NOT COMFORTING DATA, PEOPLE!
And Mr. Deffeyes shows that by data he is privy to that in 2005 the cumulative production (and consumption) was about 1 trillion barrels. Just less than half of 2.152 trillion. And peak oil is likely to happen when about half the oil endowment is consumed!
" ' "If the amount of proven reserves keeps going up, and we are not even actively exploring many promising areas, then how can one state that peak oil is even in the near future, let alone happening now?" '
"We are not exploring at rates that we have in the past because we have such high proven reserves. We don't need to find more oil, we need to pump the oil that we already know about. Oil wells are expensive to drill and operate. You maximize your profits by using existing wells more rather than drilling new wells.
" 'Define "many promising areas." Sometimes those areas prove not to hold as much oil as promised, or have potential extraction costs that make exploitation uneconomical or even unfeasible, even with environmental regulations waived."
Of these three paragraphs, the last is mine. The second appears to be Mr. Weeks' response to it.
We are also not exploring at rates that we have in the past because we have a shortage of exploratory drilling rigs - all such rigs are spoken for by exploration commitments for the next five years! And it is not likely that exploration will expand due to the credit crunch. And 'wildcat' wells will be few and far between, for not only being obviously expensive to drill and operate, they are also chancy. Even with the perquisite non-drilling exploration (seismic survey, remote sensing, etc.) that is likely to precede them -- even more so, now that that credit is so much tighter than ever since the Great Depression. So of course the oil producers are going to maximize their profits by using their present wells, as much as they can. That is stating the obvious.
