Comments to the National Petroleum Council
(Note: Commentaries do not necessarily represent ASPO-USA's positions; they are personal statements and observations by informed commentators.)
On October 5, 2005, U.S. Energy Secretary Samuel Bodman requested that the National Petroleum Council conduct a study of global oil and natural gas supply. The motivating concern stated by the Secretary was an investigation into the timing of and responses to peak oil-the plateauing and subsequent decline of world oil production. Hundreds of organizations and individuals have contributed input to the process.
During two multi-hour web-cast teleconference calls on February 23 and March 1, the NPC heard comments from Colin Campbell, Jean Laherrere, Robert L. Hirsch, Steve Andrews, Congressman Roscoe Bartlett, Matt Simmons, Randy Udall, Roger Bentley, Richard Heinberg, and several others.
A draft of the study is due during April, with the final report ready by late June, 2007. For further information, check periodic postings of informational power-point slides on the NPC’s website (www.npc.org).
In response to the NPC’s summary of their March 1 call, Randy Udall wrote back to emphasize and expand on a number of points.
March 12, 2007
I think the phone call summary is generally fair and comprehensive. If I can weigh in on a few points:
The NPC has a wonderful opportunity to reframe the discussion around peak oil. After thoroughly studying the evidence, I hope that you conclude, as many of us have, that peak oil is
near. If that is your conclusion, I urge you to communicate that finding in succinct, sober language. It's time to speak truth to power. Likewise, if you conclude that peak oil is a chimera, and those of us that were on the last call are grievously mistaken, chronic pessimists, nervous Nellies, please say that, loud and clear.
Personally, I would much rather you say, "Heed Not Chicken Little," than have you try to please both sides with the kind of waffling language that is found in so many reports. Whatever your results, an imaginative communication strategy will be necessary to disseminate them.
- A few specific points. You write that "production from several countries has peaked." In this case, "several" means almost 60. Yes, most of these were no-account wonders, petroleum beggars like Germany, Peru, Guatemala, and Romania. Oil production in these countries was clearly constrained by geology.
More importantly, production has also peaked in ten of the twenty nations that today produce 85% of the world's oil. In some of these nations, including the UK, US, Norway, and Indonesia, geological constraints are clearly the primary cause. In other post-peak countries, including Mexico, Iran, Libya, Venezuela, and Iraq, causation is more complicated. To confuse the calculus, production in some post-peak countries could increase; in Iraq and Venezuela it could, some day, in a safer world, perhaps exceed their earlier highs.
Oil production is increasing in places like Brazil and Angola due to deepwater technology, falling in places like Nigeria, restrained in the UAE due to governmental decisions, close to a re-peak in Russia, at the cusp of peak in China and, Stuart Staniford would argue, in Saudi Arabia. The future course of production in these countries is governed by a complex mix of geology, investment, access, politics, manpower, rigs, war, etc. I would like to stress that, in the last five years, a large number of very competent, analytical people, linked together by the Internet, have brought serious intellectual horsepower to bear on the true state of world oil production. Yes, peak oil has attracted its share of conspiracy theorists and Birkenstockers, but some of the work that is being published at the Oil Drum, Energy Bulletin, in books and blogs, and by consulting groups like PFC Energy and John S. Herold Inc., is more seminal than anything found in World Energy Outlook.
- You write that peak is not "about running out." Indeed, it's the opposite. At peak the world will have more oil available than it ever had before. Peak is not the end, it's the zenith.
- You write that the "effect of supply shortfalls" will be significant. It's useful to put a number to this. Losing one Mb/d is losing 2 quads, equivalent to about 80 nuclear power plants worth of energy, or two trillion cubic feet of gas.
- You write that "peaking is about ‘rates’ and ‘risks’ and less about endowment." This is true if we are talking about the "global endowment." It's much less true when we are talking about individual countries.
- You summarized that "the role of natural gas liquids, condensates, and unconventional oils may be overstated." It's critical to explore CERA's contention that NGLs will provide something like 10 Mbd of new capacity due to the expansion of global gas supply, and that the slate will get lighter, not heavier. If true, this has enormous implications. The question of NGLs is, frankly, an area that the peak oil community has not dissected with the same rigor it has crude oil and condensate. What percentage of the growth in NGLs will be a 1:1 replacement for crude oil? How will developments in global gas, including project delays, intersect with global liquid demands?
- As for unconventional oil, these things are hugely misunderstood. Having 150 billion barrels of tar sands in North America is not like having 10 Prudhoe Bays on the shelf. Suggesting that coal liquids will ride to the rescue (hey, the Nazis did it!) is not responsible policy. Spending billions in federal RD to develop the "hydrogen economy" does not reassure. Congress is overwhelmingly staffed by lawyers. I have met some of these notables, and with the exception of Rep Bartlett, most of them are energy illiterates, if not energy cretins.
- Indicators of peak oil. If you read the tea leaves, there are literally dozens of these: major oil companies prospecting for reserves not with the drill bit but with the wallet; a willingness to pay $100 million on a single deepwater wildcat; China buying Africa with recycled Wal-Mart dollars; Exxon spending $1.2 billion a month to preserve production; Chevron's ad campaign; Putin and Chavez having the cojones to go mano a mano with Bush; three carrier battle groups in the Persian Gulf; Statoil scouring for leftovers; Cantarell's gag reflex; a quadrupling of rigs in Saudi Arabia; suggestions that Burghan and Ghawar have peaked, the latter confirmed by CERA; discovery rates falling; Shell's willingness to contemplate oil shale, which has been described as a very-low-quality, high-ash coal; "tar sands fever" as per 60 Minutes; Toyota's development of hybrid drive, and so forth.
- Net energy and, I would add, carbon intensity deserve more understanding since they will be critical screens as we move ahead.
Some final thoughts on the message and the tone: Some oil and gas people have viewed peak oil proponents as dissing the industry. Nothing could be farther from the truth. Most of us find it absolutely astounding that gasoline and other petroleum products can be produced so reliably, in such extravagance, with such remarkable technology, and sold at such bargain rates. We see images of offshore production platforms and are dazzled by their complexity. We read about drilling in 10,000 feet of water and celebrate your ingenuity.
Humans have always sought perpetual motion, and for a moment, the petroleum industry has given it to us. The problem is that you have 300 million Americans who take $2.50 gasoline for granted in a country whose architecture, land use patterns, agriculture, prosperity, and cast of mind have been have been built around cheap oil. These oil tribe people, and their political leaders, don't care about peak oil, they care only about price. Meanwhile, the Chinese are where we were in 1910, with car sales doubling every three years.
Henry Groppe has said, "There is no surplus, there is no shortage, there is only price... We ran out of $2 oil a long time ago, $20 oil in 2001, $30 oil in 2003, $40 oil in 2005."
If oil production is going to peak sometime within the next few thousand days, if we are gradually going to run out of $50 oil and then $60 oil, the NPC would be doing a huge service by giving the nation a heads-up call. It sometimes seems that the peak oil movement has been shouting down a well. Your organization has the status, clout, and respect to be heard.
In any case, thanks for doing this study. We appreciate the outreach efforts and the diligence you have brought to bear.
Randy Udall directs CORE (Carbondale, CO) and is one of the co-founders of ASPO-USA.
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