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PEAK OIL

The Looming Energy Crisis

J. R. WOOD GEOLOGY DEPT.

MICHIGAN TECHNOLOGICAL UNIVERSITY

ANNUAL PRODUCTION OF CRUDE OIL ACTUAL & PROJECTED

SOURCE: ASPO, 2004

U.S. energy consumption, 2001

US CRUDE CONSUMPTION

USA-OIL ANNUAL CRUDE OIL CONSUMPTION IN THE US & SOURCES 20 18 16 14 12 10 8 6 4 2 0 Rest-USA Texas NGL Net import Alaska 35 40 45 50 55 60 65 70 75 80 85 90 95 0

GDP AND OIL CONSUMPTION

DEPENDENCE OF NATIONAL GDP ON OIL CONSUMPTION: 67 COUNTRIES

WORLD ENERGY CONSUMPTION

EXXON-MOBIL

THE DEBATE OVER RESERVES

: PESSIMISTS AND OPTIMISTS

During the 1990’s, the debate over oil reserves generated controversy between the "pessimists" and the "optimists".

OIL IS POLITICAL

“Oil is so important that publishing reserve data has become a political act. Most of the dispute between the so-called pessimists (mainly retired geologists) and the optimists (mainly economists) is due to their using different sources of information and different definitions. The pessimists use technical (confidential) data, whereas the optimists use the political (published) data. “

Jean Laherrère "Future of oil supplies” Seminar Center of Energy Conversion Zurich May 7 2003

PESSIMISTS

•

the world is finite and so are its recoverable oil resources

•

all of the oil-bearing regions worth exploring have already been explored

•

the big fields have already been discovered

•

claim that official figures for proven reserves have been overestimated

•

world oil production is currently at its optimum (peak) and will decrease steadily

•

Geologists and physicists tend to hold this position.

OPTIMISTS

•

hold a “dynamic” concept of reserves

•

believe that volumes of exploitable oil and gas are closely correlated to technological advances, technical costs and price

•

tend to be economists

THE “FLAT EARTHER’S” PRODUCTION CURVE

“… often assumed by economists that oil production can simply be increased to keep pace with consumption until the wells finally and suddenly run dry.”

http://wolf.readinglitho.co.uk/index.html

Summary: Optimists and Pessimists

Will the hydrocarbon era finish soon? Oct. 2000

H. Rempel , Federal Institute for Geosciences and Natural Resources, Stilleweg 2, 30655 Hannover

World

- Regular Oil

140 120 100 80 60 40 20 0 1930 1950 Peak Discovery 1964 1970 High Prices Curb Demand 1990 2010 2050 40 35 30 25 20 15 10 5 0 2030

Ultimate : 1850 Gb To-date 2003: 920 Gb

DISCOVERIES

Oil discoveries worldwide peaked at 90 Gb in 1964 (except for an exceptional, solitary peak year in 1948 of 147 Gb. It clearly shows the fall in discovery. Even the successes such as North Sea oil in the mid-1970s do not halt the trend,. Source: ASPO

WORLD OIL DISCOVERIES



“You have to find it before you can produce it “



Production mirrors discovery after a time lag 3 YEAR AVERAGE

Production mirrors discovery …

Drilling more does not help

After a time lag of ~35 years for the US Lower 48.

Real Discovery Trend

60 50 40 30 20 10 0 1930 1950 1970 1990 2010

Past Discovery Future Discovery Production Past discovery by ExxonMobil

2030 2050

Production mirrors discovery …

Drilling more does not help

… for the world?

The Growing Gap

between Discovery and Consumption

60 40 20 0 -20 1960 1970 1980

Drilling more does not help

1990 2 2000 0 8 6 4 12 10

BUT “OFFICIAL” PROJECTIONS CONFUSE …

SOURCE: EIA & USGS

Regular Oil



How Much has been Found?

1700 Gb (rounded)



When was it found?

Peak discovery was in 1964

ESTIMATTES OF ULTIMATE RECOVERY

“The attached graph shows 76 estimates of ultimate recover estimates published by major oil companies and serious scientific institutions. There is a consensus, ... from which only a few eccentric high estimates depart (that) ... the average works out at 1930 Gb, of which 920 Gb, or almost half (48%), have been consumed.” 

How Much has been Found?

1700 Gb (rounded) 

When was it found?

Peak discovery was in 1964

Where is it?

Regular Oil

ME.Other

East W. Europe Africa L. America N. America Eurasia ME Gulf

-250 -150 -50 Produced Reserves Yet-to-Find 50 150 250 350 450

RESERVE ESTIMATES

 RESERVES ARE: ORIGINAL OIL IN PLACE – PRODUCTION  RELIABLE DATA ARE HARD TO COME BY  “RESERVE GROWTH” IS REAL BUT SOMETIMES HARD TO VERIFY  PRIME DIFFERENCE BETWEEN “OPTIMISTS” AND “PESSIMISTS”

“Political” Reserves

 Companies officially under-report where they can. Stock Exchanges encourage under reporting  Countries variously – Under-report based on company returns – Over-report, for example, for OPEC quota – Simply fail to update - 68 countries in 2003

1000 900 800 700 600 500 400 300 200 100 0

“Reserve Growth”

Large field Small fields

STANDARD SOURCES OF DATA

STNADARD SOURCES

•

OIL & GAS JOUIRNAL

•

WORLD OIL

•

BP STATISICAL REVIEW

•

API (DOE)

•

OPEC “Reserves published as “proved” by Oil & Gas Journal (OGJ), World Oil, BP Statistical Review, American Petroleum Institute and OPEC, can be called “political” (or financial).”

Jean Laherrère "Future of oil supplies” Seminar Center of Energy Conversion Zurich May 7 2003

OGJ and World Oil simply report what governments and companies send them BP uses OGJ & WO data but does not filter, QC or apply institutional knowledge API and OPEC are meant to be political

World Discovery

The Popular Image

2500 2000 1500 1000 500 0 1930 1950 1970 1990 2010 Based on non-backdated revisions 2030

Reality and Illusion

2500 Flat-earth illusion 2000 1500

Inflection due to falling Discovery

1000 500 0 1930 1950 1970 1990

OPEC “quota war”

2010 Reality 2030

1000 900 800 700 600 500 400 300 200 100 0

Evolution of Reporting

Large field Small fields

Spurious OPEC Reserve Revisions

OPEC PRODUCTION QUOTAS DEPEND ON STATED RESERVES THE TEMPTATION TO EXAGGERATE PROVED IRRESISTABLE

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 92.2

92.2

Abu Dhabi 28.0

29.0

30.6

30.5

30.4

30.5

30.0

31.0

92.2

Dubai 4.0

4.0

4.3

4.0

1.4

1.3

1.4

4.0

Iran 92.9

92.9

89.3

88.2

93.0

89.7

58.0

57.5

57.0

55.3

51.0

48.5

47.9

48.8

92.9

Iraq 31.0

30.0

29.7

41.0

43.0

44.5

44.1

47.1

100

100 100 100 100 100 100 100 112.0

112.5

92 92 95 94 94 94 94 94 94 94 94 94 94 94 Kuwait Neutral Zone 65 66 65 64 64

90 92 92 6.1

6.0

5.9

5.7

5.6

5.4

5.3

5.2

5.0

170

258

258 258 259 259 259 259 259 259 261 261 261 261 Saudi Arabia 163 165 165 162 166 169 169 167 167 Venezuela

In billions of bbls.

58 59 59 63 63 65 65 65 72 73 73 77 78 78 18 18 20 22 25 26 26 25

Misleading Reporting

by BP Statistical Review

1200 1000 800 600 400 200 0 1970

Genuine revisions not back dated !

1975 1980 1985 1990 1995 Middle East Rest of World

WORLD OIL RESERVES - BP STATISTICS

The BP statistics for the world's proved reserves of oil are unrealistic, showing the unsupported OPEC leap in the 1980s and a steady increase despite years when consumption was greater than discovery. Source: BP

THE CRUDE OIL CRISIS

So, what does it mean …

•

if WORLD CRUDE PRODUCTION IS PRESENTLY PEAKING,

•

if MOST OF THE WORLD’S OIL HAS BEEN DISCOVERED,

•

and if WORLD DEMAND CONTINUES TO GROW?

if WORLD CRUDE PRODUCTION IS PRESENTLY PEAKING End of cheap oil Exxon stock anyone?

Really a stretch, Dr. Wood Population crash?

Just the perception that oil is peaking will be a problem

•

Financial markets can be counted on to react badly

•

Governments too; some may even

consider going to war

•

General population will bear the brunt, esp. in poorer, undeveloped countries

if most of the World’s oil has been discovered The OPEC/Middle East Crossoverv

One consequence: •OPEC is expected to produce more than 50% of the world's oil around 2010, •How will Western economies cope?

Oil production comparing OPEC with the Rest of the World. Source: ASPO

•

and if WORLD DEMAND CONTINUES TO GROW?

TOTAL ENERGY CONSUMPTION

100

2003

10 1 0.1

0.1

Iceland Qatar UAE Singapore KuwaitNorway Canada USA Belgium Saudi Arabia New Zealand Austria Turkmenistan Bulgaria Taiwan Kazakhstan Portugal France UK Italy Ukraine Belarus Malaysia Russia Japan Romania Argentina Mexico Algeria Thailand Turkey Brazil Egypt Ecuador Colombia Peru Indonesia China India AVE Bangladesh

1 10 100

POPULATION (millions)

1000 10000

Population Trends – Less & More

Developed countries may squeak by IF energy alternatives can be found and put on line quickly enough.

If these population projections are at all correct, then less developed countries have no chance. Developed countries will not let their economies crumble under the oil threat. As long as significant quantities of oil remain, the developed countries will fight to maintain share.

Less developed countries will suffer in comparison as they will be shut out of oil markets, probably even if they own the supplies.

Source: UN Population Trend Data

THE ANTHROPOLOGIST’S PERSPECTIVE?

The Olduvai Theory of Industrial Civilization

EXAGGERATED? PERHAPS, BUT THE OIL AGE WILL BE REMEMBERED AS A TIME WHEN MANKIND WENT THROUGH 100’S OF MILLIONS OF YEARS OF HYDROCARBON RESOURCES IN LESS THAN 200 YEARS.

The Olduvai Theory: Sliding Towards a Post-Industrial Stone Age. Richard C Duncan, Ph.D. Institute on Energy and Man, June 27, 1996

THE CRITICAL IMPORTANCE OF GIANT FIELDS

Saudi Arabia has over 300 recognized reservoirs but

90% of its oil comes from the five super giant fields

discovered between 1940 and 1965. Since the 1970s there haven't been new discoveries of giant fields.

IAGS, 2004, “New study raises doubts about Saudi oil reserves “

AAPG EXPLORER, JAN., 2005

• HISTOGRAM CONTAINS 876 FIELDS WORLDWIDE • RATE OF DISCOVERY CLEARLY IN DECLINE • DISCOVERY PEAKED IN 1966

GIANT OIL FIELDS

* 250 200

* >500 MILLION BBLS

WORLD GIANT OIL FIELDS

Fit Results Fit 1: Normal Number of data points used = 876 Average X = 1966.26

Standard Deviation = 21.5462

N 150 100 50 0 1860 1880 1900 1920 1940 1960 1980 2000 2020 2040 2060

Saudi Arabia's Ghawar Field

Discovered in 1948, Ghawar is the world's biggest oil field, 174 miles in length and 16 miles across and encompasses 1.3 million acres.Current estimates, for cumulative oil production are 55 billion barrels. Average production for the last 10 years is five million barrels per day. Ghawar accounts for more than one-half of all oil production in Saudi Arabia

ANNUAL PRODUCTION OF CRUDE OIL

SOURCE: ASPO, 2004

WORLD OIL & THE HUBBERT CURVE

Peak Discovery 1964 140 120 100 80 60 40 20 0 1930 1950 1970 1990 2010 2030 10 5 2050 0 40 35 30 25 20 15

World - Regular Oil Ultimate :1850 Gb To-date 2003 : 920 Gb

The yellow line in the graph is the Hubbert curve and shows how oil production would have expanded and then contracted if it had been governed solely by physical constraints.

The red line shows the amount of oil actually produced up to 2003 and what is likely to be produced in the future. The actual curve followed the theoretical curve very closely until the early 1970s when five OPEC producers gained control of more than 30% of the world market. This pushed up prices, limiting demand. High oil prices can be expected to cause world oil demand to stay on a plateau until around 2010. After that, output will fall whatever the price because fields will be becoming exhausted.

All Oil & Gas

50 40 30 20 10 0 1930 Non-con Gas Gas NGLs Polar Oil Deep Water Heavy Regular 1950 1970 1990 2010 2030 2050

ENERGY CONVERSIONS

1 BARREL OF OIL = 6.1 GJ = 5.8 X 10 6 BTU = 1,700 kilo-watt-hr (kWh) = 42 gallons (U. S) 7.2 BARRELS OF OIL = 1 ton of oil (= 42-45 GJ)

“Reserve Growth” misleads



“Reserve Growth”

misleads.



It is widely attributed to technology, market forces or good management, but is simply a reporting phenomenon.



Proved Reserves grow by definition



Proved & Probable Reserves do not



Revisions have to be backdated to obtain a valid discovery trend.

Data Sources



Two trade journals

Oil & Gas Journal World Oil

and compile data given to them by governments but do not assess validity



–

reproduces the Oil & Gas Journal But does not reveal its own knowledge



Industry databases

give the best available data but is too expensive for most analysts to access

Conclusion



Most of the confusion and controversy derives from the unreliable reporting of production and reserves.



It is not primarily a technical problem, but a political one.



There are vested interests with good reasons to conceal and confuse

Hyperbolic Creaming Curve

50 40 30 20 10 0 0 500 1000 1500 2000 Cumulative Wildcats 2500 3000 3500

Hyperbolic Model Actual

Size Distribution

10000 100 1 1 10 100 Actual Rank Parabolic 1000

Yet-to-Find in New Areas



All the larger provinces with

Regular

have already been found.

oil



The largest found in 50 years was the North Sea with about 70 Gb. It is inconceivable that anything near as large has been missed.



There may be small new areas. But the discovery trend of a country based on its major productive provinces will not be much affected any small new ones.

WAS IT ALL ABOUT OIL AFTER ALL?

•

Shell along with Chevron, BP and seven other oil giants, have won contracts to buy Iraq's new oil production of Basra Light crude. The contracts cover production from the Mina Al-Bakr port in southern Iraq from August to December of this year.

•

The sales contrast sharply with contracts signed by the previous regime of Saddam Hussein with Russia and France. "Unfortunately, not a single Russian company managed to clinch a contract, as we went for the best price," says acting oil minister Thamer Ghadhban.

EXCERPTS FROM: “To the Victors Go the Spoils of War” CORPWATCH, 2004

WAS IT ALL ABOUT OIL AFTER ALL?

•

“Executive order number 13303 states "any attachment, judgment, decree, lien, execution, garnishment, or other judicial process is prohibited, and shall be deemed null and void", with respect to "all Iraqi petroleum and petroleum products, and interests therein.”

•

"Effectively Bush has unilaterally declared Iraqi oil to be the unassailable province of US oil corporations." Jim Vallette, Sustainable Energy & Economy Network of the Institute for Policy Studies, Washington DC.

FROM: “To the Victors Go the Spoils of War” CORPWATCH, 2004

CRTITQUE OF OFFICIAL RESERVE ESTIMATES “According to BP, reserves increased dramatically in the 1980s and 1990s, from 670 billions barrels at the end of 1960 to 1147 billion barrels at the end of 2003. But most of the increase occurred in OPEC countries, mainly in the Middle East, in the second half of the 1980s. Saudi Arabia and Kuwait revised their reserves upward by 50%, while Venezuelan reserves were boosted 57% by the inclusion of heavy oil in 1988. The United Arab Emirates and Iraq also recorded large upward revisions in that period. Total OPEC reserves jumped from 538 billion barrels in 1985 to 766 billion barrels in 1990. As a result, world oil reserves increased by more that 30%. This hike in OPEC countries’ estimates of their reserves was driven by negotiations at that time over production quotas, and had little to do with the actual discovery of new reserves. In fact, very little exploration activity was carried out in those countries at that time. Total reserves have hardly changed since the end of the 1980s.”

The Outlook, 2004

NEXT BIG THING: PEAK OIL

“The peak-oil debate is getting more polarized and more rancorous—and,

especially noteworthy, more politicized. So here's an immodest prediction: The peak-oil debate will be the Next Big Thing. The story with legs. The overarching theme that will resonate throughout the oil and gas industry for decades to come. It will be propelled forward in the public consciousness not only by serious debate within the industry itself but also on the political hustings and by antioil forces who can't seem to pry Americans out of their sport utility vehicles even as war rages in the Middle East and Chicken Little lies sacrificed on the Kyoto altar. Iraq and Saudi Arabia will figure largely in that debate. So will Russia and the Caspian. And Orinoco oil and Athabasca tar sands. And reserves

accounting and transparency. And alternate energy viability. “ Bob Williams:

Oil and Gas Journal, 2004

NEXT BIG THING: PEAK OIL

CRITIQUE OF USGS RESERVE ESTIMATES

“The

USGS

commenced its study of world oil following the shocks of the 1970s, and for many years issued sound evaluations at successive meetings of the World Petroleum Congress. But a departure came with the study of 2000, under the project’s new director, claiming a Mean estimate of the total discovery to 2025 of

3.3 trillion barrels

. The following Figure illustrates the record of some 65 past estimates by major oil companies, serious institutions and the USGS itself, which average

1.93

trillion barrels, indicating that the latest USGS estimate is far from the consensus.”

Examples of Depletion

Evidence for peak and decline as demonstrated by examples of countries at different stages of depletion

US-48

30 25 20 15 10 5 0 1930 1950 1970 10000 8000 6000 4000 2000 1990 2010 2030 2050 0

Germany

0.45

0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0 1930 1950 1970 1990 2010 2030 2050 80 60 40 20 0 180 160 140 120 100

United Kingdom

5 4 3 2 1 0 1930 1950 1970 1990 2010 2030 3000 2500 2000 1500 1000 500 2050 0

Norway

6 5 4 3 2 1 0 1930 1950 1970 1990 2010 2030 3500 3000 2500 2000 1500 1000 500 2050 0

Algeria

12 10 8 6 4 2 0 1930 1950 1970 1990 2010 2030 1400 1200 1000 800 600 400 200 2050 0

Egypt

1.8

1.6

1.4

1.2

1 0.8

0.6

0.4

0.2

0 1930 1950 1970 1000 800 600 400 200 1990 2010 2030 2050 0

Libya

16 14 12 10 8 6 4 2 0 1930 1950 1970 1990 2010 2030 2050 4000 3500 3000 2500 2000 1500 1000 500 0

Nigeria

4.5

4 3.5

3 2.5

2 1.5

1 0.5

0 1930 1950 1970 2500 2000 1500 1000 500 1990 2010 2030 2050 0

Indonesia

6 5 4 3 2 1 0 1930 1950 1970 1990 2010 2030 2050 1800 1600 1400 1200 1000 800 600 400 200 0

Oman

2.5

2 1.5

1 0.5

0 1930 1950 1970 1990 2010 2030 1200 1000 800 600 400 200 2050 0

Venezuela

45 40 35 30 25 20 15 10 5 0 1930 1950 1970 1990 2010 2030 3500 3000 2500 2000 1500 1000 500 2050 0

Mexico

25 20 15 10 5 0 1930 1950 1970 1990 2010 2030 3500 3000 2500 2000 1500 1000 500 2050 0

Iran

30 25 20 15 10 5 0 1930 1950 1970 1990 2010 2030 7000 6000 5000 4000 3000 2000 1000 2050 0

Saudi Arabia

140 12000 120 10000 100 80 8000 6000 60 4000 40 20 2000 0 1930 1950 1970 1990 2010 2030 2050 0

Russia

35 30 25 20 15 10 5 0 1930 1950 1970 1990 2010 2030 14000 12000 10000 8000 6000 4000 2000 2050 0

World

160 140 120 100 80 60 40 20 0 70000 60000 50000 40000 30000 20000 10000 1930 1950 1970 1990 2010 2030 2050 0

Canada

3000 2000 1000 0 1930195019701990201020302050 Regular Oil Tarsand etc

IRAQ

ASPO

Main Point



The data used in preparing the slides comes from many sources, but shows a general pattern of growth, peak and decline of discovery followed by production

“It has been estimated that, without hydrocarbons to provide energy, fertilizers and pesticides, agriculture could not support a population greater than

two billion

. This reduction would take us back to pre-20th century levels but the disruption to society and its infrastructure would probably mean a reversion to pre industrial revolution.” Paul Thompson Reading, England

August 2004

World Population

Prices and Production over a complete Hubbert Cycle: the Case of the American Whale Fisheries in 19th Century

Bardi : Sept. 2004, ASPO - The Association for the Study of Peak Oil and Gas, and The Dipartimento di Chimica - U. Firenze, Italy

Saudi Arabia's Ghawar Field

Discovered in 1948, Ghawar is the world's biggest oil field, 174 miles in length and 16 miles across and encompasses 1.3 million acres. Current estimates, for cumulative oil production are 55 (??) billion barrels. Average production for the last 10 years is five million barrels per day. Ghawar accounts for more than one half of all oil production in Saudi Arabia. (AAPG EXPLORER JAN. 2005)

Hubbert’s Model: constraints

Hubbert’s modelling technique has been variously applauded and criticised, but the constraints to its application have not been widely appreciated. It works well only:

•

where applied to a natural domain, unaffected by political or significant economic interference;

•

to areas having a large number of fields; and to areas of unfettered activity. Hubbert himself worked primarily on the US-48, which had the necessary characteristics to be well modelled by a single cycle.

from

“

THE HUBBERT CURVE : ITS STRENGTHS AND WEAKNESSES” by J.H. Laherrère, Oil and Gas Journal ms, Feb 18 2000 (http://www.dieoff.com/page191.htm)

PEAK OIL: SOME CONSEQUENCES

The world is not about to run out of oil, but production is about to peak. The sky does not fall in at peak, but the perception of the future changes. It is likely to lead to

•

severe political and economic tensions, including economic recession,

•

a stock-market crash,

•

and, financial instability from the huge flows to the Middle East . There are obvious dangers of misguided military intervention as the United States, Europe and the East vie for access to Middle East oil. The inequality between rich and poor nations will be more severe. Agriculture is at risk because it is now heavily dependent on synthetic nutrients and irrigation, both directly and indirectly dependent on petroleum. The global market may wither from high transport costs.

from the Feasta conferencemoney, energy and growth’ March 2000. the imminent peak of global oil productionCOLIN CAMPBELL

FLAT EARTH PRODUCTION CURVE

Other experts, notably economists, assume that oil production follows this type of curve. As demand increases, the oil fields simply increase production, the two lines rising and falling together. Those who admit that oil is finite (and not all do) expect that the end will come suddenly as the oil fields simply run out. This is often known disparagingly as 'flat-earth economics'

http://wolf.readinglitho.co.uk/index.html

FUEL ENERGY DENSITY

SOURCE: INTERNET ENCYCLOPEDIA

US-48

COLIN CAMPBELL

Oil Production Curve (actual and adjusted)

The symmetrical Hubbert curve is often skewed as shown. For an individual area, it often turns out to be cheaper to buy oil elsewhere rather than extract the difficult remaining oil after the peak, thus reducing the downslope angle. In the case of world production, there will be nowhere else to go and it will be declining prosperity after the peak that will reduce demand.

Oil Production (USA lower-48) 1930-2002

Because the USA has been producing longer than anyone else, largely unaffected by external matters, it shows the Hubbert Curve better than anywhere else. Production has been declining since the 1970s and, despite the efforts of the richest, most technologically advanced society in the world, has not been stopped. Source: ASPO

Oil Discovery minus Consumption (world)

The really important statistic is the difference between discoveries and consumption. Until 1980 (with the exception of 1972), discoveries exceeded production worldwide. Since then, the trend has been negative and we consume more oil than we produce. As discoveries continue to fall and consumption rises, it can only get worse. Source: ASPO

Proved World Oil Reserves - J. Laherrère

Compared to BP's chart of the world's oil reserves, Jean Laherrère's version, produced from creaming curves, seems much more realistic. As consumption outgrew discovery in the early 1980s, reserves fell as one would expect.

Source: Jean Laherrère

OIL PRODUCTION: ASSUMING R/P (FLAT EARTH) MODEL

Many people (including some 'experts') assume that oil produced from a field follows the R/P ratio model: there is a fairly constant flow until near complete depletion when it suddenly drops. Actually, a single well is not unlike this and natural gas flow is somewhat similar. But it is nothing like most actual oil fields or oil provinces.

SINGLE WELL PRODUCTION CURVE

This chart shows how an individual oil well acts differently from the Hubbert Curve, with a long, fairly stable plateau rather than a peak.

HUBBERT 4-WELL CURVE

four individual oil wells when totaled begin to create the Hubbert Curve

Hubbert Curve (8 wells)

eight individual oil wells when totaled begin to resemble the Hubbert Curve. Given enough wells, a smooth curve will result.

PEAK PRODUCTION AND RESERVE GROWTH

The growth of reserves has little impact on peak production, as illustrated by the example of the Prudhoe Bay field in Alaska. The growth in reported reserves normally coincides with the onset of decline, prolonging the field’s life by extending the tail end of production.

Aleklett, Uppsala Hydrocarbon Depletion Study Group, Uppsala University, Sweden Prudhoe Bay

Cumulative Discovery against Production (World)

Discovery and production curves for the World compared. Discovery peaked in 1964 when the discovery curve changed from a concave (growing) to convex (declining) slope. At this time, the production curve is at a similar position. The production curve will mirror the discovery curve with a time lag of about 36 years.

FUTURE VIEWS

“My view of the near future then is pessimistic, a view that the oil crisis will hit us hard with wars, famines and the environment drastically devastating the population. Assuming that we can avoid a nuclear war, I believe that the world would eventually settle down. It has been estimated that, without hydrocarbons to provide energy, fertilizers and pesticides, agriculture could not support a population greater than

two billion

. This reduction would take us back to pre-20th century levels but the disruption to society and its infrastructure would probably mean a reversion to pre industrial revolution.”

Paul Thompson Reading, England

August 2004

Coal fields of the United States.

Oil shale in Green River Formation

WILL TECHNOLOGY SAVE US?

“New “technology”, which in fact is not new being as much as thirty years old for horizontal wells and 3D seismic, is being used already in most producing fields. It allows cheaper and faster production but

does not add to the reserves themselves in

conventional fields.”

Jean Laherrère "Future of oil supplies” Seminar Center of Energy Conversion Zurich May 7 2003

Transport Efficiency

This chart shows the relative efficiencies of different forms of transport taking into account the number of passengers carried and the energy needed to move each kilometer). If we are to deal with the energy crisis to come, we will have to alter our way of life to use more energy efficient forms of transport. Source: "Energy: A Guidebook" by Janet Ramage 1997

The point at which the supply begins to diminish is much more important economically than when the wells run completely dry. M Lawton and Tacildayus Andrews www.almc.army.mil/alog/ issues/JulAug99/MS406.htm The “production peak” is therefore the main event in the future history of oil extraction, a point which will mark the epochal change from cheap oil to expensive oil. Ugo Bardi to appear in

Energy Policy

Dipartimento di Chimica — Università di Firenze, Polo Scientifico di Sesto Fiorentino, 50019 Sesto Fiorentino (FI), Italy

EUGENE ISLAND -

AN “ODD RESERVOIR”

Odd Reservoir Off Louisiana Prods Experts to Seek a Deeper Meaning

By CHRISTOPHER COOPER Staff Reporter of THE WALL STREET JOURNAL HOUSTON -- Something mysterious is going on at Eugene Island 330.

Production at the oil field, deep in the Gulf of Mexico off the coast of Louisiana, was supposed to have declined years ago. And for a while, it behaved like any normal field: Following its 1973 discovery, Eugene Island 330's output peaked at about 15,000 barrels a day. By 1989, production had slowed to about 4,000 barrels a day.

Then suddenly -- some say almost inexplicably -- Eugene Island's fortunes reversed. The field, operated by PennzEnergy Co., is now producing 13,000 barrels a day, and probable reserves have rocketed to more than 400 million barrels from 60 million. Stranger still, scientists studying the field say the crude coming out of the pipe is of a geological age quite different from the oil that gushed 10 years ago.

Peak oil is a turning point for Mankind. The economic prosperity of the 20th Century was driven by cheap, oil based energy. Everyone had the equivalent of several unpaid and unfed slaves to do his work for him, but now these slaves are getting old and won't work much longer. We have an urgent need to find how to live without them. Peak Oil: an Outlook on Crude Oil Depletion Revised February 2002 C.J.Campbell -

DATA SOURCES - GAS & OIL

There are two main sources of public data: the Oil & Gas Journal and World Oil , which are trade journals that compile information given to them by governments and others. They are not in a position to assess the validity of the information supplied to them. Another widely used source is the BP Statistical Review of World Energy . BP is in a position to evaluate the data, but prefers to reproduce the Oil and Gas Journal numbers, understandably not wanting to involve itself with sensitive issues that might affect its relationship with the host governments of the countries where it works. Lastly is the industry database , which is relatively reliable, but too expensive for most analysts to access. All these sources provide

different numbers.

IMPACT OF TECHNOLOGY

“Great advances in seismic technology make it possible to see the smallest and most subtle trap. In general, this better knowledge has

reduced

the perceived potential, because it shows a dearth of large prospects. In other words, we can find a needle in a haystack, but it is still a needle. We did not need the resolution to find the giant fields of the past holding most of the world's oil. It means we have a much better knowledge of the endowment in Nature than we used to have.” (

C.J.Campbell Peak Oil: an Outlook on Crude Oil Depletion - - Revised February 2002)

USGS GAS& OIL ESTIMATES

The US Geological Survey has failed to live up to its scientific reputation . It has assessed the Undiscovered Potential of each basin with a range of subjective probabilities. It has a Low Case for the most sure and a High Case for the least sure. The High Case itself has little meaning, being little more than a wild guess. The Low Case is consistent with the discovery trend, but The Mean value, which is the one publicized is meaningless because it is influenced by the High Case. This has been confirmed by experience in the real world because the Mean estimate is already 100 Gb short, five years into the study period. Its notion of "reserve growth" is also flawed. It is depicted as a technological dynamic when it is simply an artifact of reporting practice, not to be extrapolated into the future. (

C.J.Campbell Peak Oil: an Outlook on Crude Oil Depletion - - Feb 2002)

Over the past few years I have often been amazed by the degree to which the American public remains willingly uninformed, and despite my skepticism, I sometimes wonder about the validity of this statement:

"The CIA owns everyone of any significance in the major media.“

--former CIA Director William Colby Revisited - The Real Reasons for the Upcoming War With Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken Truth by William Clark [email protected] Original Essay January 2003 -Revised March 2003 -Post-war Commentary January 2004

CONSEQUENCES - AN “EXPANDING EARTH”

In May 2004, Simmons explained that in order for demand to be appropriately controlled, the price of oil would have to reach $182 per barrel. With oil prices at $182 per barrel, gas prices would likely rise to $7.00 per gallon.

OIL COMPANY ENLIGHTENMENT



Nobody knows or can know how much oil exists under the earth's surface or how much it will be possible to produce in the future

BP STATISTICAL REVIEW 2004

Proved oil reserves at the end of 2003 are estimated to have been 1147.7 billion barrels. That represented an increase of around 12% over the end 1993 figure of 1023.6 billion barrels, despite estimated cumulative production of almost 264 billion barrels during the intervening ten years, ie reserves replacement amounted to almost 400 billion barrels between end 1993 and end-2003.

BP STATISTICAL REVIEW 2004

THE CRUDE OIL CRISIS MAIN POINTS (CONT.)

•

CRISIS IS POLITICAL AND TECHNICAL

•

GOVERNMENT VERSION DIFFERS CONSIDERABLY FROM PROFESSIONAL OPINION

•

WORLD POPULATION GROWTH IS PART OF PROBLEM

ELECTRICITY AND OIL CONSUMPTION

OIL CONSUMPTION

GLOBAL ENERGY CONSUMPTION

EACH MAN WOMAN AND CHILD IN U.S. USES ABOUT 8 TONS OF ENERGY (boe) / YR This is about 2,352 gallons of gas/oil /yr Enough to drive around the world twice.

The average citizen of Bangladesh uses less than 1/100 that amount in a (good) year.

WORLD OIL CONSUMPTION

The growth in the world's oil consumption doubles in about thirty years. Valleys and plateaus tend to be caused by recessions as in the 1970s and 1980s. The change in the previous year was a 2.1% rise.

Source: BP

40 20 0 160 140 120 100 80 60

WORLD CRUDE OIL: DISCOVERIES & PRODUCTION

WORLD CRUDE OIL DISCOVERED PRODUCED NOTES: 1. Discoveries precede production. Difference is reserves.

2. Trend is for discoveries to taper off.

3. Exponential increase in pre-1970’s production.

4. Area under both curves will be same at depletion. Lights out.

PRODUCTION

“The official forecast from the IEA/USDOE of 120 Mb/d in 2020 or 2030 seems too optimistic in front of the currently indicated poor economic performance, and seems almost impossible in term of supply.” Jean Laherrère "Future of oil supplies” Seminar Center of Energy Conversion Zurich May 7 2003

This is an example of a creaming curve where the actual values (yellow) are compared to a hyperbolic curve (red). Where the curve becomes horizontal will show the total oil in the field.

Source: ASPO

CREAMING CURVE

Shell

Hy perbolic Dis c ov ery Trend

80 60 40 1998 20 1950 0 0 1000 2000 3000 4000 5000 6000 Actu al C u m. wildcats (Sh ell op erated ) H yp er b olic p ro jection

CRITIQUE OF INTERNATIONAL ENERGY AGENCY “We may conclude that the International Energy Agency (IEA) has delivered a forecast designed to fulfill the Agency’s political agenda, but between the lines it clearly sets out enough evidence to show that it is indeed no more than a political statement, far removed from what is attainable in the real world. The critically important message that emerges is that peak oil will come in the near future, and that a peak in 2030 is nothing more than a political posture. “ Kjell Aleklett, professor in Physics Uppsala Hydrocarbon Depletion Study Group Uppsala University, Sweden

OPEC

OPEC (The Organization of Petroleum Exporting Countries), is an international organization of eleven countries that rely heavily on oil revenues as their main source of income. OPEC was formed in 1960, and its current members are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Its stated objective is to ”co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.”

INTERNATIONAL ENERGY ORGANIZATION

OECD AUSTRALIA AUSTRIA BELGIUM CANADA CZECH REPUBLIC: DENMARK FINLAND FRANCE GERMANY GREECE HUNGARY ICELAND IRELAND: ITALY: JAPAN: KOREA: LUXEMBOURG: MEXICO NETHERLANDS NEW ZEALAND NORWAY POLAND: PORTUGAL SLOVAK REPUBLICSPAIN SWEDEN SWITZERLAND TURKEY UNITED KINGDOM UNITED STATES

“The

IEA

was established in November 1974 in response to this oil crisis as an autonomous inter-governmental entity within the

Organization for Economic Cooperation and Development (OECD)

to study energy supply and security, and advise the member nations accordingly. In general, OPEC is accepted as a political organization with its statements being coloured accordingly.

What many do not realize is that the IEA is also a political organization

and that its reports are highly coloured by the perceived best interest of its members. “

Kjell Aleklett, professor in Physics Uppsala Hydrocarbon Depletion Study Group Uppsala University, Sweden

COMMENTS FROM ABROAD “The US energy crisis is just beginning, and is very dangerous. It may easily lead to a global disruption of the energy supply system.” ASPO NEWSLETTER #2, FEB. 2001 “ . . . the commercial value of oil and gas discovered by the 10 largest energy groups over the last three years is well below the sums spent to find them. In 2003, the top 10 oil groups spent about $8 billion hunting for oil, but only found about $4 billion worth of the stuff. Development spending on existing oil and gas properties has jumped from about $35 billion in 1998 to a record $50 billion in 2003. During the same time frame, exploration spending has fallen from $11 billion to $8 billion. ASPO NEWSLETTER #48, DEC. 2004

COMMENTS FROM ABROAD “The US energy crisis is just beginning, and is very dangerous. It may easily lead to a global disruption of the energy supply system.” ASPO NEWSLETTER #2, FEB. 2001 Even the U.S. government agrees that the amount of oil that can be pulled from the planet is finite. But it estimates that global oil production will likely peak in 2037, rather than in 2008. "All or nearly all of the largest oil fields have already been discovered and are being produced. Production is indeed clearly past its peak in some of the most prolific basins," the federal Energy Information Administration (EIA) said in a recent report on peak oil. ASPO NEWSLETTER #48, DEC. 2004

CONVERSION FACTORS AND ENERGY EQUIVALENTS

Basic Energy Units 1 joule (J) = 0.2388 cal 1 calorie (cal) = 4.1868 J (1 British thermal unit [Btu] = 1.055 kJ = 0.252 kcal) 1 tonne of oil equivalent (toe) = 42 GJ (net calorific value) = 10 034 Mcal 1 tonne of coal equivalent (tce) = 29.3 GJ (net calorific value) = 7 000 Mcal Volumetric Equivalents 1 barrel = 42 US gallons = approx. 159 litres 1 cubic metre = 35.315 cubic feet = 6.2898 barrels Electricity 1 kWh of electricity output = 3.6 MJ = approx. 860 kcal Representative Average Conversion Factors 1 tonne of crude oil = approx. 7.3 barrels 1 tonne of natural gas liquids = 45 GJ (net calorific value) 1 000 standard cubic metres of natural gas = 36 GJ (net calorific value) 1 tonne of uranium (light-water reactors, open cycle) = 10 000 – 16 000 toe 1 tonne of peat = 0.2275 toe 1 tonne of fuelwood = 0.3215 toe 1 kWh (primary energy equivalent) = 9.36 MJ = approx. 2 236 Mcal

The long-term price of oil in 2003 dollars through 2003 is shown in the attached graph. ... the volatility imposed by the difficult swing role of OPEC is over, and prices are set to rise to reflect the underlying supply constraints. The remarkable stability before the foreign companies were expropriated in the main producing countries stands out, and a future rise into the $40-60 range does not look altogether out-of place, still being below the 1980 spike. -

James Dow, ASPO Economics Correspondent, Sept. 2004