Transcript Denver Slides - ASPO Australia

PEAKING OF WORLD OIL PRODUCTION:
IMPACTS AND THE SCOPE OF
THE MITIGATION PROBLEM
Presented at the Southern California Energy Conference
“Our Energy Future”
Los Angeles, March 2006
Roger H. Bezdek, Ph.D.
Management Information Services, Inc.
www.misi-net.com
This Presentation
•
PEAKING OF WORLD OIL PRODUCTION
•
LEARNING FROM THE PAST
•
TRANSPORTATION FLEET LIFETIMES
•
MITIGATION OPTIONS
•
THREE MITIGATION SCENARIOS
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MISI
No, we’re facing a liquid fuels crisis
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Production
Production
Why will conventional oil production peak?
Time - Decades
U.S Lower 48 States
1945
Oil fields
peak
Year
2000
Regions
(Many fields)
peak
The world
(All regions)
will peak.
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FUNDAMENTALS
Peaking is maximum production,
not running out.
It’s a liquid fuels problem.
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OBSERVATIONS
•
World oil demand is huge & growing.
•
Most past peaking predictions were wrong.
+ Hubbert was right on the U.S. Lower 48
+ Recent predictions may be right.
+ Wrong isn’t forever.
•
Why reconsider peaking now?
- World oil consumption outstripping new discoveries
- Extensive drilling worldwide - Large database
- Advanced technology: Modern geology & 3D seismic
- Many experts are pessimistic.
- The economic consequences are huge.
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World is Consuming More Oil
and Finding Less
60
60
Past
Billions of Barrels
50
50
Future
Production
40
40
30
30
Past discovery
by ExxonMobil
20
20
“Growing
Gap”
10
0
1930
10
1950
1970
1990
2010
2030
0
2050
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When?
No one knows for certain
Forecast
Source
2006-2007
Bakhitari (Iran)
2007-2009
Simmons (U.S.)
After 2007
Skrebowski (U.K.)
2008
Campbell (Ireland)
Before 2009
Deffeyes (U.S.)
Before 2010
Goodstein (U.S.)
After 2010
World Energy Council
2012
Weng (China)
2016
Doug-Westwood (U.K.)
After 2020
CERA (U.S.)
2031 or later
EIA (U.S))
5 years
5-10 years
> 15 years
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LIKELY TRENDS NEAR WORLD OIL PEAKING
3. Oil Price
2. Demand (Healthy World
Economy)
1.Production
(Peaks)
A LIQUID FUELS PROBLEM
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LEARNING FROM U.S. NATURAL GAS
• Experts overestimated North American natural gas
reserves & future production as late as 2001.
– National Petroleum Council - 1999
– DOE EIA - 1999
– Cambridge Energy Research Associates - 2001
• U.S. natural gas production is now in decline.
• Natural gas & oil geology are similar.
• If wrong on natural gas, what’s the risk on oil?
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Oil PRICE INCREASES HAVE CAUSED U.S. RECESSIONS
80
1
OIL
PRICE
0.9
70
0.8
60
0.7
50
0.6
0.5
40
(2003
$ per
barrel)
0.4
30
0.3
20
0.2
10
0.1
00
Recession
Over 30 years, four recessions followed oil price spikes.
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Experience: Two Oil Interruptions
• Impacts of world oil production peaking are exemplified by the
1973 & 1979 oil interruptions.
+ Inflation
+ Unemployment
+ Recession
+ High interest rates
• 1973 & 1979 were relatively brief.
• World oil peaking impacts could last a decade
or more.
The world has never faced a problem like oil peaking.
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Remember the 1970s?
Stagflation. . . recession.
That was only a short-term disruption.
_______________________________________________________________________________________________________________
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U.S. OIL USE
• U.S. 2003 consumption: ~20 MM bpd
~25% of world oil demand
~Two thirds used in transportation
• The U.S. transportation fleet
+ Very large
+ Huge investment
+ Evolves slowly
Details
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CHARACERISTICS OF U.S. TRANSPORTATION FLEETS
Fleet
Size
Median
Lifetime
(Years)
Cost to Replace
Half the Fleet
(2003 $)
Automobiles
130 million
17
$1.3 trillion
Light Trucks,
SUVs,etc.
80 million
16
$1 trillion
Heavy Trucks,
Buses, etc.
7 million
28
$1.5 trillion
8,500
22
$.25 trillion
Aircraft
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Transportation Equipment Changes
Efficiency improvements possible:
Large in some fleets, smaller in others,
BUT
Change is slow & expensive.
Fuel must be provided for existing fleets.
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THREE MITIGATION SCENARIOS
• Scenario I
-
No action until peaking occurs
• Scenario II -
Mitigation started 10 years before peaking
• Scenario III -
Mitigation started 20 years before peaking
Assumptions:
» All mitigation initiated immediately
» Crash program implementation
Optimistic limiting case
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MITIGATION OPTIONS
Focus: Technologies that can be implemented now for liquid
fuels applications…...Commercial or near-commercial
Options Considered:

Vehicle Fuel Efficiency
 Gas-To-Liquids (GTL)
 Heavy Oil / Oil Sands
 Coal Liquefaction
 Enhanced Oil Recovery (EOR)
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OPTIONS NOT INCLUDED
Option
Reasoning
– Nuclear
– Wind
………... Electric / Not liquid fuels
– Solar
– Hydrogen……………Neither ready nor economic
– Biomass……………. Not economic
– Shale Oil……………. Not commercial
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Increased Vehicle Efficiency
____________________________________________________________________________________________________
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MITIGATION OPTIONS & ISSUES - I
VEHICLE FUEL EFFICIENCY
• Automobiles & light trucks (LDVs) are the largest liquid fuel
consuming opportunity.
– Diesel engines are up to 30% more efficient than gasoline engines.
– Hybrids are 40% more efficient in small cars / 80% in medium cars.
– Enhancements to existing technologies can also contribute.
Our savings estimates based on 30%, then 50% improvements
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Coal, Oil Shale, Oil Sands, and Gas to
Liquid Fuel Plants
____________________________________________________________________________________________________
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MITIGATION OPTIONS & ISSUES - II
GAS-TO-LIQUIDS
• Now commercial & could be significant
• Must compete with LNG
• Non-U.S. resource
Our production estimates based on 2x current GTL projections
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MITIGATION OPTIONS & ISSUES - III
HEAVY OIL / OIL SANDS
•
•
•
•
•
•
•
Canada + Venezuela: 3-4 trillion barrels
~600 billion barrels economic
Only part clean fuels - Canada: 0.6 of 1.0 MM bpd
Current plans - Canada: 3 MM bpd synthetic oil by 2030
Large energy input required
Oils harder to refine
Significant environmental problems
Our production estimates based on 2-2.5x current projections.
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MITIGATION OPTIONS & ISSUES - IV
COAL-TO-LIQUIDS
•
•
•
•
Now commercial / near-commercial.
Cost: $30-35/bbl
Huge coal resource in U.S., elsewhere
Liquids don’t need refining
Our estimates based on five new 100,000 bpd production
plants/year.
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MITIGATION OPTIONS & ISSUES - V
ENHANCED OIL RECOVERY
• EOR has been utilized for decades.
• It’s usually applied after primary and secondary recovery.
• It helps recover additional oil from reservoirs past peak production.
Our production estimates paced by CO2 availability.
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WEDGES USED TO SHOW MITIGATION
Impact
Barrels/ Day
Prepare
Produce
Actual
Vehicle
Fleet
Fuel
Saved
Wedge
Approximation
0
10
20
30
Time - Years
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WEDGES VALUES IN THIS STUDY
Preparation
Delay
Mitigation Option
Impact 10 Years
Later
(Years)
– Vehicle Efficiency 3
(MM bpd)
2
– Gas-To-Liquids
3
2
– Heavy Oils / Oil Sands
3
8
– Coal Liquids
4
5
– Enhanced Oil Recovery
5
3
Potential contributions vary greatly.
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SUM OF WEDGES
30
EOR
20
Impact
(MM bpd)
Coal Liquids
Heavy Oil
10
GTL
Eff. Vehicles
0
0
5
10
15
Years After Crash Program Initiation
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U.S. LOWER-48 OIL PRODUCTION
PEAKED & DECLINED
3.5
3.0
Actual (EIA)
2.5
Production
Approximation
2.0
(Billions of
1.5
Barrels per Year)
1.0
0.5
0
1950
1960
1970
1980
1990
2000
Year
A huge, complex & geologically varied oil province.
We used this pattern as a surrogate for the world.
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WORLD OIL SUPPLY & DEMAND:
LOWER 48 PRODUCTION PATTERN & EXTRAPOLATED DEMAND GROWTH
Extrapolated Demand Growing World Economy
120
Shortage
100
80
PRODUCTION 60
(MM bpd)
40
L 48 production
pattern
Assumed:
• Demand @ 2%
20
• Oil Decline @ 2%
• Peak @ 100 MM bpd
0
-20
-10
0
+10
+20
(Not a prediction)
YEARS BEFORE / AFTER OIL PEAK
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The only solution:
Start Early!
Look at the scenarios
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SCENARIO I: MITIGATION @ PEAKING
120
Mitigation
100
Shortage
80
PRODUCTION 60
(MM bpd)
40
20
0
-20
-10
0
+10
+20
YEARS BEFORE / AFTER OIL PEAK
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SCENARIO II: MITIGATION 10 YEARS BEFORE
120
Mitigation
100
Shortage
80
PRODUCTION 60
(MM bpd)
40
Start
Oil Decline
Delayed
20
0
-20
-10
0
+10
+20
YEARS BEFORE / AFTER OIL PEAK
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SCENARIO II: MITIGATION 20 YEARS BEFORE
120
Mitigation
100
80
PRODUCTION 60
(MM bpd)
40
Oil Peaking
Further
Delayed
Start
20
0
-20
-10
0
+10
+20
YEARS BEFORE / AFTER OIL PEAK
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Scenarios Analysis Conclusions
Basis: Immediate crash program implementation
Scenario
Result
Wait for peaking
Oil shortages largest,
longest lasting
Start 10 years early
Delays peaking; still
shortages
Start 20 years early
Avoids the problem;
smooth transition
No quick fix!
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Why so long to mitigate?
• Energy is inherently very large scale.
- It’s not computers or electronics
- No magic bullets, only poison pills
• Long time to build capacity & savings
• Long lifetimes
• Inherently expensive
Options not in the study may contribute locally but
will not change the overriding world problem.
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SOME ISSUES
• Skilled workers & industrial capacity worldwide are in short
supply for the level of effort described herein.
• Massive commercial crash programs are rare. Startup will
almost certainly be much slower than assumed in this
analysis.
• Some countries may delay, others will proceed rapidly with
mitigation. China may have started (Canada, Venezuela).
• It is not clear how environmental protection will fare if there is
widespread joblessness, high inflation & severe recession.
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COST AS A FUNCTION OF START TIME - NOTIONAL
Cost of
Error
Premature
Start
Time
- 20 Years
Scenario III
- 10 Years
Scenario II
Peaking
Scenario I
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SUMMARY & CONCLUSIONS
 Oil peaking timing is uncertain.
• It may be soon.
• “Soon” is less that 20 years hence.
 It’s a world liquid fuels problem.
 A number of mitigation technologies are ready.
 With timely mitigation, economic damage minimized.
 Prudent risk management argues for early action, not
reaction after the fact.
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LOOK AGAIN AT THE SHORTFALL
Extrapolated Demand
120
The
“shortage”
after 20 years
could be 80%
of today’s
world oil
consumption
Supply & Demand
= 2%
100
80
PRODUCTION
(MM bpd)
60
Peaking Assumed at 100
MM bpd
65 / 82 ~ 80%
40
Oil Decline = 2%
20
0
-20
-10
0
+10
+20
YEARS BEFORE / AFTER OIL PEAK
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PRES. BUSH: “REDUCE OIL IMPORT DEPENDENCE”
FIRST THING TO DO: STOP DIGGING!
30
Supply Gap
20
Projected
Production
15
10
Im ports
held at 2005
level
5
20
24
20
22
20
20
20
18
20
16
20
14
20
12
20
10
20
08
20
06
0
20
04
million barrels per day
25
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It might happen again!
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THREE POLICY RECOMMENDATIONS
1. The federal government should increase vehicle fuel efficiency
standards and initiate substitute liquid fuels mitigation options.
2. State and local governments should encourage smart growth,
telecommuting, mass transit, and other transportation fuel
efficiency options and facilitate and expedite the siting of
substitute liquid fuels plants.
3. All levels of government should educate the public to the fact
that we face a serious liquid fuels problem that will require
controversial and unpopular measures to reduce demand and
increase supply.
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THIS PRESENTATION
• Nine myths and realities
1. World is “running out of oil”
2. Oil shortages wrongly predicted for 100 years – no
need to worry now
3. Higher prices will create more oil
4. Not to worry, world will muddle through
5. Just another “energy crisis”
6. Renewables will save us
7. Government intervention not required
8. Plenty of time to address the problem
9. Oil peaking means “end of civilization as we know it”
• Implications
• Recommendations
Note: Global warming is currently a major concern.
However, peak oil will likely occur suddenly and have
severe consequences in the near future.
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1. WORLD IS “RUNNING OUT OF OIL”
• In one sense, this is correct, because oil is a finite resource
that we started to deplete when we extracted the first barrel.
• However, if “running out” is interpreted as the world not
having any oil in the near future, we are not.
• Estimates of remaining oil are in range of 1 – 2 trillion barrels.
• There will never be a shortage of oil: At appropriate price
supply will always equal demand.
• However, world oil demand is huge & growing.
• Worldwide production of conventional oil (>95% of current use)
will not be able to keep up with demand and will peak – reach a
maximum and then go into decline.
• This could happen relatively soon, possibly within next decade.
• Peaking is maximum production of conventional oil, not
“running out;” beware of red herrings.
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LOCAL CONTACT INFORMATION
While in Australia through July 6,
Dr. Bezdek can be contacted via ASPO Australia
Association for the Study of Peak Oil and Gas
International
Australia
www.ASPO-Australia.org.au
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