Peak Oil: Two Approaches, One Answer
There are two distinct ways to think about and present the phenomenon of peak oil. It’s easy to describe what peak oil actually is, it's the global peak in extraction rate of petroleum. It could be specified as the peak rate in million barrels per day or the date on which this peak extraction rate will occur. The difficulty of course is determining the date and associated extraction rate of peak oil. This is where I see the two camps.
Firstly we have the school of Hubbert, including Colin Campbell of ASPO - the geologists. Their methodology dates back to Hubbert’s 1956 paper titled Nuclear Energy and the Fossil Fuels in which he famously and correctly I might add, calculated peak oil for the lower 48 states of the United States as 1970. Even in 1970 he was still ridiculed with people pointing out with glee that the US oil industry had never been more productive. The irony is that whilst they were correct, what the critics didn't realise is that the US would never again be as productive as in 1970.
Today US extraction rates are less than half what they were in 1970. The way Hubbert (and others after him) calculated peak oil is based on two key points, an estimate of ultimate recoverable reserves (URR) and that the profile of the extraction rate curve is the derivative of logistic curve and follows the well known bell-shaped curve, the area under the curve representing the URR. These two points and historic extraction data allows the complete curve to be calculated complete with date and extraction rate at peak.
This theory is sound and has been proven in many provinces who are now most definitely past their peak and in decline, including America, Norway, Venezuela, UK, Indonesia etc. All that remains is to calculate the peak for the world. The only point of contention regarding the Hubbert analysis is what the global URR will turn out to be, make an assessment of global URR and the date of global peak oil is just a quick calculation away. This is the methodology behind Colin Campbell's work from which he is today predicting global peak oil in 2007.
Secondly we have Chris Skrebowski editor of Petroleum Review and his work on oil mega projects - the analyst. Skrebowski also predicts peak oil but doesn't look at global URR, doesn't worry about the vagaries of OPEC reserve reporting or make predictions about likely future discoveries, all points on which Campbell's approach can be challenged. Skrebowski looks at the production profiles of fields today, those in decline, those in ascension and those holding steady. This data is clear. We know the depletion rate of the already peaked provinces mentioned above so we know that if we don't build any new supply capacity global extraction rates will decline, they would have been declining for decades. Fortunately, in the past natural declining production in existing fields has been more than compensated for by new projects, net production has increased. Where Skrebowski sees a problem is looking forward over the next five years.
Looking out to the end of the decade we know how much of today's production we are going to lose each year to natural, already occurring depletion. We also know how much new capacity is coming on line, the new oil projects. These new projects are no secret, the oil companies boast about them, letting the world know how much they are investing, when and how much oil the project will produce. Since it takes more than five years between discovery of an oil field or even the decision to develop and already discovered field and the field going into production we can be sure of all new production coming to market until the end of the decade, the die is cast. If it hasn't started yet it won't deliver this decade.
Here's the problem, adding planned new production to depletion rates of existing fields doesn't add up for long. According to Skrebowski new production isn't adequate to offset the depletion we already know about and projected increases in demand past 2007/08. This prediction is also on the optimistic side, it assumes everything goes to plan, the uncertainty in this calculation is all on the negative side. Projects can slip but never deliver before schedule, project output can disappoint but never exceeds expectation, existing provinces can unexpectedly enter decline but already declining provinces never halt their decline, wars and civil unrest could occur.
2007/08 is a familiar year. These two completely different approaches of Campbell and Skrebowski produce the same prediction for global peak oil. I think they're on to something.
Chris Skrebowski’s analysis can be found in the presentation he delivered at the ODAC/Depletion Scotland Peak Oil conference in Edinburgh.
Colin Campbell’s analysis can be found at the ASPO website.
What do you think? Leave a comment below.
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