The American Petroleum Institute on peak oil
Rapier's complete text on the conference call is available at The Oil Drum: Energy and the Environment with the API. Below are the excerpts that deal with peak oil. -BA
On April 18th, I participated in a conference call with the American Petroleum Institute. The topic of the call was Energy and the Environment. You can download a transcript here or the audio of the call here.
Here was a list of participants, pulled from the call transcript:
Jeff McIntire-Strasburg is from Treehugger and we just went through, briefly, a blog roll. We have on the call Robert Rapier from The Oil Drum and R-Squared; Hank Green of EcoGeek; Tom Fowler of NewsWatch: Energy which is Houston Chronicle; Marc Gunther, Fortune; Mark Gongloff of The Wall Street Journal Energy Roundup; and Carter Wood of ShopFloor.org.
I think they missed mentioning John Gartner from Wired.
.... In answering a previous question, [Red Cavaney, the president of the American Petroleum Institute] had mentioned "peak oil." So, they called on me and I got to work that question in:
MR. RAPIER: Okay. A very popular question was around peak oil. You mentioned peak oil earlier, and you know, The Oil Drum focuses a lot around peak oil discussions, when peak’s going to happen, and you probably are aware that the General Accounting Office released a report, I don’t know, last month maybe, and it was about the critical need to develop a strategy for addressing a peak and decline in oil production. And it went through and it talked about some of the environmental challenges, and when you look at what is in the pipeline here, it concerns me that we’re probably going to accelerate our greenhouse gas emissions as we do deplete our oil supplies.
I see us likely moving to coal based transportation fuel - coal to liquids. You can count me among those who are not on the cellulosic bandwagon; I don’t think it’s going to deliver in the volumes that are needed to really contribute substantially to our transportation fuel. So I see some real environmental challenges here as oil production peaks, but the question is, what is your position on that? I mean, you guys think we’re not going to peak for 30 or 40 years? I mean, a lot of people want to know that, what exactly you believe as far as oil production peaking and declining.
OK, so I made a speech. And he gave a very long reply, which you aren't going to like:
MR. CAVANEY: Well from our standpoint, if there is to be a peak, the first thing that’s I think not much understood, Robert, by many people, is the idea that peak to them, they think of a sharp-topped mountain, where once you’re off the peak, swoosh, you just slide down very, very quick, and you have to deal with the precipitive thing. Most everybody who understands, at least visits the peak oil issue, understands that once you hit that peak, you end up on sort of an undulating plateau, if you will, with a very slow downward curve, and part of that is it’s a result of the fact that technology keeps kicking in and your yield, you know, from existing fields, keeps increasing.
That’s one of the things that people who are peak oil theorists I don’t feel have sufficiently factored in is, two things – the amount of what we would call current-day technology exploration and production, and I’ll give you a couple data points here in a minute, and then the second is the extent to which we apply some of these enhanced oil recovery efforts to some of these fields. We’ve found some fields that have gone up three and four hundred fold in terms of their output as a result of some of the new technology. So we feel pretty comfortable that the government data talks about, that if you took the median point – median or mean, I can’t remember; whichever it is – that they would say, gee, peak oil might be around 2044, but then factor in things like what happens if the tar sands really do become effective? What happens if shale gets developed out in the Rockies area? It could be extended beyond. But whatever that period of time is, I think hydrocarbons are going to continue to play an important role in many of these, many of these areas, and we think we’re going to be able to get them.
Now, one thing that people have to square with, we think, there’s a concern that the price goes up; well, the price of these products goes up in part because so much of the domestic production areas are off-limits to us. For example, in most of the OCS area, particularly all of the areas outside Gulf of Mexico, we don’t even really have a good read on how much of the resource is out there. The government puts out, you know, its own data, but that’s an estimate, so again, I think the way we look at it is, you see, interestingly enough, a lot of the big majors have come back and are starting to do more operations.
Here in the U.S., each of them would have their own reason why they’re doing that, and I think the American public is going to pretty soon, if they continue to be serious about this idea of relying less on imported oil, we’ve got plenty of oil and gas opportunities out there, and we’ve certainly got the technology, as we proved in the Gulf of Mexico, to do it in an environmentally sound way, so that will add another piece to this, is when we start to find out, I think the Chevron and Devon finding last September out in the ultra deep water and what they’ve seen out there was a real eye opener.
And the other thing I would point to is to the surprise of virtually everyone in Washington and many people in the industry, last fall, right before Congress adjourned, there was a bill put forth by a very unusual coalition that ended up opening some more OCS acreage to exploration production, and it was done principally by, not the producers; it was done by the users, and I think increasingly the user community and people are going to see some value, so I think peak oil is an interesting thing to discuss, I think people who raise it, they do it in all earnestness; I just don’t know that there’s a really crisp answer.
I think one little phrase I use, sort of half jokingly, but man left the Stone Age not because he ran out of stones, and someday we will leave the Age of Oil, but it won’t be because we ran out of oil; it will be because some other technologies have come in that have proven to be more cost-effective, more reliable and in various applications they will. So we plan to be around, think we’ll be active, and technology has always ended up, from 1854 I think when the first peak oil theories were propounded, but having this technology has been the tool that’s brought it in.
The other point I would say is if you look at most of the rest of the world where oil is forecast to be, they are so underexplored that it’s not even (laughable–?). For example, only three percent of the exploration that’s taken place in the Middle East, even though they’ve got, you know 70 percent of the proven reserves, in Saudi Arabia alone, which most people would argue has probably got a fair amount of oil there, they had fewer than 300 new exploratory wells that have drilled, and less than 30 of them were drilled since 1995. And so you think of the technology that was around in ’95 and what’s available now, so I think there’s more to come in this area rather than less to come here in the immediate term, in near term.
I don't even know where to start. I guess I could start with the first sentence: "if there is to be a peak". If there is to be a peak? I don't even understand that phrase. It does not parse.
I will let others discuss the specifics of his answer. But I will give you my thoughts as he was giving the answer. I was thinking "How on earth can we be so far apart on this issue?" It seemed that he was suggesting that peak might be "as soon as" 2044, while I am thinking 90% probability within 10 years. There are a number of people who have analyzed this issue and believe we are right at or near peak. So the question in my mind became "Why is there such a divide, and how do we address it?" Because I don't believe we can just afford to write off people who think peak is a long way off. We have to look at our position and their position and figure out what the problem is. If they believe they have credible information that we don't have, they should share it. And where we have challenges to this data, or other criticisms (I meant to mention Cantarell, and the fact that the North Sea peaked prior to expectations) then they should be addressed and incorporated.
I also spent some time thinking "Is it possible that I could be so wrong on this issue?" This is probably something we all wonder from time to time. I personally question and challenge my own positions on a frequent basis. One thing that has influenced my thinking on this issue is Chris Skrebowski's mega-projects list. Skrebowski knows a great deal about world-wide projects that are planned and underway, and he thinks peak inside of 10 years is likely. But is the very nature of it such that peak will always be implied to be 3-5 years away, even if it is 20 years away? After all, there are probably many projects that will come online in more than 5 years that haven't been announced yet. But then I think 1). There aren't many truly big projects that are coming online; and 2). I still think demand is growing fast enough that we simply will not see any excess capacity in any case.
Like the rest of you, I want to know what the heck is going on. I try not to jump to conclusions, but I also don't want to be standing around in a house as it burns down. Peak still looks to me like it is 90% probable within 10 years. But it is deeply troublesome to me that such a great divide exists on this issue. I am trying to get my head around a way to close it.
Anyway, the answer to that question eliminated the need to ask several other questions. Yes, the API considers "Peak Oil theory" to be bunk. Yes, they believe that Yergin is more credible than Simmons. As far as dealing with potential supply shortfalls? They don't believe that we are facing any potential supply shortfalls.
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