Peak Oil End of Cheap Energy??: Peak Oil End of Cheap Energy?? A Review of the Facts and Myths
For the past 10,000 years of civilization we have always had an expanding fossil fuel supply: For the past 10,000 years of civilization we have always had an expanding fossil fuel supply Now we are faced with a shrinking fossil fuel supply
One more Problem to deal with
Global Frame: Global Frame Knowing where you are is nine tenths of navigation
~ wise seaman David Room
denial > bargaining > depression > acceptance : denial > bargaining > depression > acceptance
Facts do not cease to exist just because they are ignored. Aldous Huxley : Facts do not cease to exist just because they are ignored. Aldous Huxley
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Peak Oil: Peak Oil Where did the term come from and what does it mean 8
Definition of Peak Oil: Definition of Peak Oil "Peak Oil" as a proper noun, or Hubbert's peak applied more generally, refers to a singular event in history: the peak of the entire planet's oil production.
Hubbert’s Peak : Hubbert’s Peak Dr Hubbert (1903 – 1989) Shell Oil Employee published his Peak Oil Model in 1949 (Science Magazine)
1956 predicted US Oil would peak in 1970, off by one year
Predicted the world would peak in 1995, off by only 10-20 years it appears but only off by 3% on production
Peak Oil Half Way point - Decline: Peak Oil Half Way point - Decline
U.S. Production Peak - 1970 : U.S. Production Peak - 1970 Measured in 1000 barrels per day 14
Countries that have Peaked: Countries that have Peaked
IEA International Energy Agency: IEA International Energy Agency According to the International Energy Agency, 43 of the 58 biggest oil-producing countries have passed their peak. All super-giant fields in the world are in decline. 16
The Big Question: The Big Question Are we at the Half Way Point?
2 Trillion?: 2 Trillion?
Data Paints the Picture: Data Paints the Picture 20
When in doubt examine the data again Wise Old Geologist Principle: When in doubt examine the data again Wise Old Geologist Principle
Oil Discovery (world): Oil Discovery (world)
Oil Discovery minus Consumption (world): Oil Discovery minus Consumption (world)
World Oil Consumption in Barrels per Year – Growing Demand: World Oil Consumption in Barrels per Year – Growing Demand
Presentation by C.J.Campbell December 2000 : Presentation by C.J.Campbell December 2000
The largest 1% of oil fields contain 75% of all the discovered oil. Till this day more than 42,000 oil fields have been found, but the 400 largest oil fields (1 per cent) contain more than 75 per cent of all oil ever discovered. The largest 3% contain 84% of the oil : The largest 1% of oil fields contain 75% of all the discovered oil. Till this day more than 42,000 oil fields have been found, but the 400 largest oil fields (1 per cent) contain more than 75 per cent of all oil ever discovered. The largest 3% contain 84% of the oil
Following Number Should Cause Us Grave Concern: Following Number Should Cause Us Grave Concern Most oil fields now discovered are less than ten million barrels, and ten million barrels will supply the United States with less than a 12 Hours worth of energy. 28
Slide31: Drowning in Sour Crude Non-OPEC, GOM crude quality deteriorating just as regulations are ridding world fuels of sulfur Non-OPEC crude quality Source: Wood Mackenzie, Deutsche Bank
Reserve Replacement Ratio 2005-2010 (EST): Reserve Replacement Ratio 2005-2010 (EST)
Oil Fields Discovered Larger than 500,000 Barrels, last super giant of 10 Billion Barrels was over 40 years ago: Oil Fields Discovered Larger than 500,000 Barrels, last super giant of 10 Billion Barrels was over 40 years ago 33
Currently, the US has approximately 600,000 oil wells in operation. Nearly 500,000 of those wells produce less than three barrels a day" from The (US Government) International Trade Resource Center : Currently, the US has approximately 600,000 oil wells in operation. Nearly 500,000 of those wells produce less than three barrels a day" from The (US Government) International Trade Resource Center 34
Baby Boomers: Baby Boomers
Average daily oil production, by month, from EIA and IEA, together with 13 month centered moving averages of each line, recursed once. : Average daily oil production, by month, from EIA and IEA, together with 13 month centered moving averages of each line, recursed once. 36
In the history of oil production, which is now extending over more than 150 years, we can identify some fundamental trends: : In the history of oil production, which is now extending over more than 150 years, we can identify some fundamental trends: The world's largest oil fields were all discovered more than 50 years ago.
Since the 1960’s, annual oil discoveries have decreased
Since 1980, annual consumption has exceeded annual new discoveries.
The historical maximum of oil discoveries has to be followed after some time by a maximum of oil production (the “peak”). 37
USGS Les Magoon: USGS Les Magoon
Why Oil Is Important: Why Oil Is Important 40
Oil – Our Slaves: Oil – Our Slaves 41
Income Relationship to OIL: Income Relationship to OIL
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Consequences of Peak Oil: Consequences of Peak Oil 44
Real Threat: Real Threat The real threat is not that world is running out of oil, the real threat is a shortage of 5% in Supply vs. Demand
Last Half: Last Half Sour & Heavy
Hard to extract, low EREI
Location is problem
Who is Speaking Out On Peak Oil What Reports Support Peak Oil: Who is Speaking Out On Peak Oil What Reports Support Peak Oil
Dr Colin Campbell : Dr Colin Campbell 48
From Scientific America: From Scientific America
Kenneth S. Deffeyes: Kenneth S. Deffeyes 50
Matt Simmons: Matt Simmons 51
Reports on Oil Summit Rimini, Italy Oct 30, 05: Reports on Oil Summit Rimini, Italy Oct 30, 05 53
Ex-CIA Chief Predicted 'Peak' Oil Crisis In 1999 CFR Paper : Ex-CIA Chief Predicted 'Peak' Oil Crisis In 1999 CFR Paper 54
Slide55: 55 Alan Greenspan
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Tom Whipple: Tom Whipple 57
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Congressman Bartlett & Udall: Congressman Bartlett & Udall 59
Studies and Reports IEA – World Energy Outlook 06 London Financial Times 11/06: Studies and Reports IEA – World Energy Outlook 06 London Financial Times 11/06 60
NY Times Editorial by Robert B. Semple Jr. March 2006: NY Times Editorial by Robert B. Semple Jr. March 2006 61
Peter Maass NY Times 8/21/05: Peter Maass NY Times 8/21/05 62
Mr. Nansen Husseini ex-senior Aramco Official: Mr. Nansen Husseini ex-senior Aramco Official 63
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The Private Oil Companies: The Private Oil Companies 65
Chevron Corporation’s two full-page ad that began appearing in July in the Wall Street Journal, the Economist, the Financial Times and elsewhere. : Chevron Corporation’s two full-page ad that began appearing in July in the Wall Street Journal, the Economist, the Financial Times and elsewhere. 66
Private Oil vs Nation States: Private Oil vs Nation States 67
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Hirsch Report PEAKING OF WORLD OIL PRODUCTION: IMPACTS, MITIGATION, & RISK MANAGEMENT Robert L. Hirsch, SAIC, Project Leader Roger Bezdek, MISI Robert Wendling, MISI February 2005 : Hirsch Report PEAKING OF WORLD OIL PRODUCTION: IMPACTS, MITIGATION, & RISK MANAGEMENT Robert L. Hirsch, SAIC, Project Leader Roger Bezdek, MISI Robert Wendling, MISI February 2005 69
Army Corp Report Energy Trends and Their Implications for U.S. Army Installations Donald F. Fournier and Eileen T. Westervelt September 2005 : Army Corp Report Energy Trends and Their Implications for U.S. Army Installations Donald F. Fournier and Eileen T. Westervelt September 2005 72
CFR 2006 Report John Deutch and James R. Schlesinger Chairs: CFR 2006 Report John Deutch and James R. Schlesinger Chairs National Security
Consequences of
U.S. Oil Dependency 73
Chris Skrebowski Editor of Petroleum Review Author/tabulator of: Megaprojects, a list of oil fields that are expected to come on stream by 2013 : Chris Skrebowski Editor of Petroleum Review Author/tabulator of: Megaprojects, a list of oil fields that are expected to come on stream by 2013
Important Side Issues: Important Side Issues
Saudi Factor: Saudi Factor
I hereby find that the defense of Saudi Arabia is vital to the defense of the United States.: I hereby find that the defense of Saudi Arabia is vital to the defense of the United States. Franklin D. Roosevelt - 1943
Ghawar: Ghawar
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OPEC Reserves Jump: OPEC Reserves Jump 81
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CERA’s Data: CERA’s Data 85
ERonEI: ERonEI For example, when oil was originally discovered, it took on average one barrel of oil to find, extract, and process about 100 barrels of oil. That ratio has declined steadily over the last century to about three barrels gained for one barrel used up in the U.S. (and about ten for one in Saudi Arabia).
Consumption/Discovery & EREI Ratios: Consumption/Discovery & EREI Ratios
Exponential Math: Exponential Math
Read speech by Dr Albert Bartlett
Time Line of Oil Production: Time Line of Oil Production 100 Years 25 Years Less than 30 Years
Remember a 6% decline rate halves production in 11.7 years, a 7% decline rate in 10 years and an 8% decline rate in 8.75 years. And we’re seeing those decline rates already: Remember a 6% decline rate halves production in 11.7 years, a 7% decline rate in 10 years and an 8% decline rate in 8.75 years. And we’re seeing those decline rates already
Scalability Issues: Scalability Issues
Time to Market Issue: Time to Market Issue Rich but not Rich
China: China
Slide95: Oil Consumption Change from 1965 to 2005
CONSUMPTION COMPARISON: CONSUMPTION COMPARISON The average American consumes 30 barrels of oil a year.
In China the average is 1.3 barrels a year; in India, less than 1 barrel per year.
Alternatives denial > bargaining > depression > acceptance : Alternatives denial > bargaining > depression > acceptance
Alternatives: Alternatives Ethanol
Shale Oil
Tar Sands
Bio Fuels
Hydrogen
Coal Liquids
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What are Governments Doing about the Issue: What are Governments Doing about the Issue Sweden, Norway, and Australia
San Francisco, Portland OR, Seattle
US Government
Peak Oil Caucus
Energy Committee Meetings
GAO Study
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Opposing Arguments: Opposing Arguments
Can the Experts that Discount the Peak Oil Concept be Wrong? CERA & Daniel Yergan: Can the Experts that Discount the Peak Oil Concept be Wrong? CERA & Daniel Yergan 103
Global Resources, Conventional and Unconventional CERA Projection : Global Resources, Conventional and Unconventional CERA Projection
Slide105: During the past four years, the Energy Information Administration, the US' energy data agency, continued to tell US citizens the oil price would fall. The Australian Bureau of Agriculture and Resource Economics, did the same. So did Europe's IEA.
Americans need to decide who is correct – Peak Oil Doomsayers or Flat Earth Economist : Americans need to decide who is correct – Peak Oil Doomsayers or Flat Earth Economist The Peak Oil followers use data as their arguments
The optimist use politics and economics
Problems even if Peak Oil is Wrong: Problems even if Peak Oil is Wrong
Slide110: Alan Greenspan & Natural Gas
Natural Gas: Natural Gas
Senator Luger: Senator Luger
Solutions: Solutions 118
NUMBERS: NUMBERS
Numbers : Numbers World uses 31 Billion Barrels per yr - 84.5 Million Barrels per day or 3.5 Billion Gallons
US consumes 25% but only 4% of population and 2% of worlds reserves
Have used app 1 Trillion Barrels, Perhaps 1 Trillion to go
ANWR: ANWR Recoverable Estimates – 95% Probability 4.3 billion. The U.S. consumes about 20 million barrels daily. ANWR’s oil would compute to 215 days supply Wikipedia
Resources: Resources
Americans need to decide who is correct – Peak Oil Doomsayers or Flat Earth Economist : Americans need to decide who is correct – Peak Oil Doomsayers or Flat Earth Economist The Peak Oil followers use data as their arguments
The optimist use politics and economics
Where is the Humor??: Where is the Humor??
Bumper Sticker: Bumper Sticker Please God, give us one more Oil Boom. We promise we won’t blow it this time.
We can always recycle!: We can always recycle!
End: End
www.nyswda.org
Fredrik Robelius Giant Oil Fields – The Highway to Oil : Fredrik Robelius Giant Oil Fields – The Highway to Oil
Another Example: Another Example 500,000 Barrels of oil found in a new field is considered large but only equals 6 days supply for the world
Money and Markets Wednesday, January 3, 2007: Money and Markets Wednesday, January 3, 2007 Supply remains tight. The Western oil majors — like ExxonMobil, Chevron, BP, and Shell — are failing to replace the reserves they pump. In 1997, they were able to replace 140% of their reserves; in 2005, they were able to replace only 75%! This indicates just how hard it’s becoming to find oil.
Slide138: American drivers may choke at present prices, but with a rising population and longer trips, demand still grows. Only four years ago, the US used 18 million barrels a day; four years later it is using an extra 3.5 million barrels a day, which means just 4.4 per cent of the world's population needs a new Kuwait every four years.
By Bill Henderson Al-Jazeerah, September 5, 2005 : By Bill Henderson Al-Jazeerah, September 5, 2005 Most oil producing countries have peaked: America, Norway, Venezuela, UK, Indonesia, Iran, etc. Most of the major oil companies have peaked: Chevron's production in the second quarter of 05 is down 6% from last year, Exxon 5%; Shell 3%; Conoco 3%; Major oil company production has been falling for several years and several companies have had to substantially reduce estimates of reserves.
Jon Thompson - President of ExxonMobil’s Exploration Company: Jon Thompson - President of ExxonMobil’s Exploration Company For example, we estimate that world oil and gas production from existing fields is declining at an average rate of about 4 to 6 percent a year. To meet projected demand in 2015, the industry will have to add about 100 million oil-equivalent barrels a day of new production. That’s equal to about 80 percent of today’s production level. In other words, by 2015, we will need to find, develop and produce a volume of new oil and gas that is equal to eight out of every 10 barrels being produced today. From The Lamp
More Numbers Indicating Trouble: More Numbers Indicating Trouble 70 percent of all current oil production comes from fields discovered over 30 years ago.
US Production Peaked in 1970 at 9 million barrels per day, now at 6 million
Exxon is saying the last year when we found more oil than we burned was 1987
Deffeyes says 97% of Worlds Conventional Oil has been found
Executives at Exxon Mobil predict that more than 50 percent of oil and gas consumption in 2010 must come from new fields and reservoirs
Discovery peaked in 1964
U.S. Federal Reserve Bank chairman Alan Greenspan testified repeatedly before Congress that LNG was the only solution on the horizon for the projected chronic natural gas shortage. : U.S. Federal Reserve Bank chairman Alan Greenspan testified repeatedly before Congress that LNG was the only solution on the horizon for the projected chronic natural gas shortage.
Slide143: North America will probably experience a natural gas shortage before any other region of the world.
North America has only 4.6% of the world's gas reserves but consumes 30.3% of the world's production. The reserves to production ratio is only 9 years at current consumption (2001). BP Statistical Review of World Energy (2002)
Costs of LNG: Costs of LNG Costs for LNG tankers about US $280 million
Regasification terminal costs US $100 million to more than US $2 billion
Liquefaction plant could cost $1.5 to $2.0 billion
Charter ships as high as US $150,000 per day
Will We Hit $100 a Barrel? Cont.: Will We Hit $100 a Barrel? Cont. Over the past 20 years, spare production capacity has fallen from 15 percent to barely more than 1 percent worldwide, with no immediate prospect of relief.
China & India: China & India The two countries with the highest rate of growth in oil use are China and India, whose combined populations account for a third of humanity. In the next two decades, China's oil consumption is expected to grow at a rate of 7.5% per year and India’s 5.5%. (Compare to a 1% growth for the industrialized countries). It will be strategically imperative for these countries to secure their access to oil. (From Institute for Analysis of Energy Security)
China: China
Blueprints: Blueprints
Falls Church News-Press by Tom Whipple 11/11: Falls Church News-Press by Tom Whipple 11/11 Two weeks ago Congressman Roscoe Bartlett of Maryland, who heretofore had been the only member of Congress speaking out about peak oil, introduced a resolution in the House of Representatives to the effect that peak oil is coming and we had better do something about it—now. The preamble to the resolution reads as follows:
"Expressing the sense of the House of Representatives that the United States, in collaboration with other international allies, should establish an energy project with the magnitude, creativity, and sense of urgency that was incorporated in the `Man on the Moon' project to address the inevitable challenges of `Peak Oil'."
What was interesting about this resolution was not that Congressman Bartlett introduced it, but that he had 14 other members of Congress, including Falls Church's Jim Moran, sign on to it. Fifteen is a start. Not enough to pass a peak oil mitigation program, but a lot better than one.
San Francisco’s Peak Oil Resolution: San Francisco’s Peak Oil Resolution RESOLVED, That the Board of Supervisors of the City and County of San Francisco acknowledges the unprecedented challenges of Peak Oil; and, be it
FURTHER RESOLVED, That the Board of Supervisors supports the adoption of a global Oil Depletion Protocol to provide transparency in oil markets, control price swings, address issues of equity in access to remaining oil resources, and provide a framework of predictability within which municipal governments can adjust to increasing oil scarcity; and, be it
FURTHER RESOLVED, That the Board of Supervisors urges the Mayor to provide funding and direction to city departments for the development of a response plan.
Power-down \ \ n 1: the energy famine that engulfed industrial nations in the early 21st century; 2 : the deliberate process of contraction and conversion that enabled humanity to survive…: Power-down \ \ n 1: the energy famine that engulfed industrial nations in the early 21st century; 2 : the deliberate process of contraction and conversion that enabled humanity to survive…
Natural Gas: Natural Gas
Slide160: StockInterview: How do you view the long-term fundamentals for gas?
Eric Nut tall: North American natural gas production has been in decline for several years. Most incremental production is coming from smaller, more expensive-to-drill, thinner economic, higher decline pools and reservoirs. Over the past five years first-year decline rates on natural gas wells have doubled to 50 percent. The base decline rate has also doubled to approximately 25 to 30 percent. Pool size has also decreased materially over that time frame. The Western Canadian Sedimentary Basin and much of the US producing basins are mature. Consequently, higher and higher natural gas prices are required to create incentive for producers to drill increasingly marginal wells.
StockInterview: And do you expect a continuation of declining natural gas production? And that is that your premise for higher natural gas pricing?
Eric Nuttall: Conventional gas production has been in decline for many years, and the growth areas have largely been unconventional, such as the Piceance Basin (tight gas), the Barnett Shale (shale gas), and the Jonah Field (tight, deep gas). Also, many of the growth assets, such as the Barnett Shale, are already a few years into development, and because the wells have such a steep decline rate in the first few years, it is only adding to the depleting base that we have to make up. It is unlikely that over the next three years, the increase in unconventional gas can offset the decline in conventional, because the depleting base is so much larger. The major natural gas basins in North America are mature. Decline rates are increasing. Pool size is decreasing. Rig count is increasing yet production is at best flat. Until LNG imports increase in a material way, which is not expected for at least four or five more years, I think the case for healthy natural gas prices is intact.
StockInterview: Earlier, you noted drilling was more expensive.
Eric Nuttall: Over the past year, onshore drillings costs are up over 15 percent while operating costs are up over 10 percent. A recen t Wall Street Journal article commented on how rig rates for the Gulf of Mexico, on very deep drilling platforms, are as high as $520,000 per day, up from $185,000 a few years ago. And the drilling platforms are still leaving the Gulf of Mexico! Although many are leaving the Gulf of Mexico to go to more prospective areas such as the West African Coast, the current rig situation is still somewhat tight in the Gulf. We have only begun to see signs of moderating rig rate pricing.
Slide161: North America will probably experience a natural gas shortage before any other region of the world.
North America has only 4.6% of the world's gas reserves but consumes 30.3% of the world's production. The reserves to production ratio is only 9 years at current consumption (2001). BP Statistical Review of World Energy (2002)
LIQUID NATURAL GAS: LIQUID NATURAL GAS The volume of natural gas is reduced by a factor of 600 when it is liquefied.
The chemical energy in a loaded LNG ship is equal to the explosive power of 55 Hiroshima size nuclear bombs.
One ship can carry enough natural gas to supply the needs of the United States for one hour.
Slide163: North America will probably experience a natural gas shortage before any other region of the world.
North America has only 4.6% of the world's gas reserves but consumes 30.3% of the world's production. The reserves to production ratio is only 9 years at current consumption (2001). BP Statistical Review of World Energy (2002)
Slide164: "I'm quite surprised at how little attention the natural gas problem has been getting, because it is a very serious problem." --Alan Greenspan, May 21, 2003 Secretary Abraham warned that next winter's heating bills could increase as much as 19 percent in the Midwest. "It is a national concern that will touch every American,“
--Secretary of Energy, Spencer Abraham,
July 1, 2003
Slide165: It is easy to see that present consumption rates cannot be maintained for long without importing large amounts of LNG (Liquid Natural Gas)
LIQUID NATURAL GAS: LIQUID NATURAL GAS The volume of natural gas is reduced by a factor of 600 when it is liquefied.
The chemical energy in a loaded LNG ship is equal to the explosive power of 55 Hiroshima size nuclear bombs.
One ship can carry enough natural gas to supply the needs of the United States for one hour.
Slide168: In 1993 natural gas was used to generate 9% of the electrical power consumed in the United States. In 2003 that figure was 18%. (In 2003 the US storage levels were at their lowest point since record-keeping started in 1976.)
Almost all major cities in the US use natural gas for their primary heating requirements.
Natural gas is also the starting point for countless chemicals and plastics--the most important of which is nitrogen fertilizer.
WHAT ARE THE OPTIONS FOR CONTINUED NATURAL GAS USE IN THE US: WHAT ARE THE OPTIONS FOR CONTINUED NATURAL GAS USE IN THE US An entire fleet of LNG ships would need to be built NOW at 170 million dollars each.
If we are supplied by the middle east, one ship will only complete 4 trips per year, equivalent to 4 hours of supply at current consumption.
This would require 2,190 ships to supply all of our current consumption at a cost of $372 billion (not to mention the cost of LNG Terminals)
In 2003 there were only 140 LNG ships
The World Oil Supply Report 2004 - 2050 (3rd edition) The future for global oil production by Douglas -Westwood : The World Oil Supply Report 2004 - 2050 (3rd edition) The future for global oil production by Douglas -Westwood
Mexico: Mexico