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Peak Oil Down Under

A man either lives life as it happens to him, meets it head-on and licks it, or he turns his back on it and starts to wither away.
     — Gene Roddenberry

Australia serves as a microcosm of a world entering the peak oil era.1 It can be shown beyond a reasonable doubt that Aussie oil production has peaked. As their oil companies struggle to offset production losses as demand grows, Australians must face up to the stark choices these circumstances present. One road, taken by the United States long ago, creates dangerous, ever-growing dependencies on imported oil to fill the supply and demand gap. The other road, leading to energy independence and security, spawns alternatives that allow Australia to move beyond oil. Will the Land Down Under seize the opportunity they now have to make the right choice?

Geoscience's Australian Estimates Official forecasts of Australia's future oil (= crude oil plus condensate) and gas resources and production (OGRA) are made by Geoscience Australia (GA), which is similar in function to the America's USGS. Their latest comprehensive report was issued in 2004. Figure 1 (click the graphic left to enlarge it and keep the page open) shows historical production along with GA's 10%, 50% and 90% probability cases for estimated oil production out to 2025, where "a production estimate at the X% probability (= PX%) level means that there is a X% chance of production being at least as high as the figure shown."

Figure 1 establishes the central fact about Australia's oil production: it has peaked according to the most probable future production scenarios. Only the 10% probability case shows a higher production level, so it necessary to assess how Geoscience Australia's forecast has fared since 2004 and take a look at projects coming on-stream to demonstrate that Australia is definitely past peak — and just in case John Howard's shortsighted government harbors some residual hope (APPEA) that the problem will just magically disappear.

Figure 2 gives the production trend (using EIA supply data) since the beginning of 2001 through March of 2007, along with a rough comparison with the GA's high, middle and low cases. Oil production has mostly followed, but is a little below, the P90% (low production) case. This is not good news for Australia.

The offshore Exmouth sub-basin of the Carnarvon Basin (Figure 3) off the northwest Australian coast is where the action is for new oil projects. Australia's production jumped from a low of 370 thousand b/d in June, 2006, to a highpoint of 510 thousand b/d in October. The increase was mostly due to the Enfield development coming on-stream in July, 2006. Enfield, which is operated by Woodside and Mitsui, was built with a production capacity of 100 thousand b/d using 5 producing wells along with 8 water and gas injection wells, all connected to a floating storage and offloading platform (FPSO). Figure 4 gives Enfield's production profile since then, indicating that production reached 74 thousand b/d in the early fall, a level which supported the October rise.

From November on, including an anomalous jump in February, 2007, Australian production has averaged only 469 thousand b/d. Part of the problem has been at Enfield, where "ENA-03, one of the major production wells, was shut-in due to unexpected sand production and early water breakthrough" in October. Woodside's guidance indicates that 2007 production is expected to average only 45 to 55 thousand b/d. It is doubtful whether Enfield will ever produce at or near capacity.

BHP shores up dwindling oil (The Australian, July 5, 2007) discusses the bigger picture and sets expectations (new projects with planned capacities are highlighted in blue).

Commitment to a $2 billion oil development [operated by BHP Billiton] off Australia's northwest coast  will lift the country's daily production by as much as a sixth in 2010. But there will still be only a short-lived respite from inexorable increases in crude oil and petroleum product imports, which have risen sharply in the past four years and pushed Australia from energy surplus to deficit... The [Pyranees] project, which is expected to be operating by late 2009 or early 2010, is being geared to produce around 96000 barrels of oil a day.

Graeme Bethune, managing director of specialist energy consultant EnergyQuest, said it was likely that when Pyrenees was in full production [in late 2009 or early 2010], Australia's daily oil output would reach more than 600,000 barrels. "That's the good news. Pyrenees is the last major oil project to be committed in Australia. There are no more oil projects in the pipeline," Dr Bethune said.

Woodside and Mitsui are spending more than $US720 million on the Vincent oil project north of Pyrenees and this is scheduled to have peak production of around 100,000 barrels beginning next year. BHP and Woodside are also constructing the Stybarrow oil project to the west of Pyrenees at an estimated cost of $US600 million, capable of producing up to 80,000 barrels a day. And Australian independent AED Oil is planning to produce more than 25,000 barrels of oil a day from an estimated $US100 million development of the Puffin field about 700km west of Darwin in the Timor Sea, with first oil expected by September.

There is reason to doubt the quoted maximum rate for the Pyrenees fields (Crosby, Ravensworth and Stickle). The proved reserves are listed at 80 to 120 million barrels (mmbbl) of recoverable oil, but reservoir volumes this small could never support a production rate of 96 thousand barrels per day. This rate sustained over the course of a year would amount to 35 million barrels of oil! A source on Western Australia’s developing hydrocarbon potential cites "potential" recoverable reserves of 300 mmbbl, which might support the quoted peak rate for a short time. The FPSO at Pyrenees may indeed have a capacity of 96 thousand barrels per day, but it is questionable whether this capacity will ever be fully utilized.

Woodside initially specified Vincent's capacity as 100 thousand b/d as quoted above, but has apparently revised their expectations downward to a peak production rate of between 60 and 80 thousand b/d (Woodside link op cit.). Woodside gives their 60% share of proved + probable reserves for Vincent2 as 43.8 mmbbl, which adds up to about 73 mmbbl altogether (see Figure 3 from their partner Mitsui). As with Pyrenees, it is difficult to see how reserves volumes this small could support a peak production rate of 60 to 80 thousand b/d for very long, if at all.

Australian energy expert Graeme Bethune's best estimate for 2010 is 600+ thousand b/d, some 100 thousand barrels below the peak year 2000. This forecast accords with Geoscience Australia's P50 case, but production at this level is now pushed out a few years into the future. The capacities of all the fields mentioned here add up to 321 thousand b/d, counting Vincent as 70 thousand and taking the problems at Enfield into account. Added to the latest March, 2007 figure of 466 thousand b/d, the tally would be 787 thousand b/d, exceeding Australia's year 2000 highpoint. How can this be?

Production uncertainties in the offshore fields of northwestern Australia are accompanied by steady declines in all their other major oil basins, as shown in Figure 5. Only the Exmouth sub-basin production has seen erratic growth since 1985, with the exception of a short-lived production spike from the Timor Sea in the 2000 - 2001 period. Both Timor and Carnarvan production have fallen off recently, but only the latter is capable of picking up the slack out to around 2010. Whether production will actually meet EnerygQuest analyst Graeme Bethune's expectation of 600+ thousand barrels a day at the end of this decade is anybody's guess.

Australia_oil_production Now that it has been established that peak oil Down Under has almost certainly come and gone, and that near term production increases may be disappointing, it is appropriate to ask what Australia is doing about it. Prime Minister John Howard's government is doing next to nothing, according to Bruce Robinson and Phil Hart of ASPO-Australia. The graph (left, click to enlarge) adds a projected oil demand line from Geoscience Australia to their P50 estimate. As consumption increases and production decreases steadily after the 2010 secondary peak, Australia must close the gap by importing more and more oil. Australians tend to speak of their oil self-sufficiency, which is defined here as the ratio of liquids production/consumption. The Australian notes —

According to the Australian Petroleum Production and Exploration Association, the nation's energy deficit - cost of imports less the value of exports - in 2005-06 was $12.8 billion.

Within three years domestic oil production will have increased but industry analysts believe demand will also increase. This means that self-sufficiency, now down to around 54 per cent [in 2007] from 90 per cent early in the decade, will scarcely be improved.

One weak government response was to increase subsidies on liquified petroleum gas (LPG), a mixture of propane and butane. About 77% of Australia's production is called "naturally occurring LPG", which is "sourced directly from underground reservoirs, generally as an associated product of crude oil and natural gas production." The other 23% is produced during oil refining. Conversion of vehicles to run on LPG is becoming more popular, and conversions in Australia have increased following the government incentives. This measure will make only a small dent in overall oil products demand, however.

Australia is rich in natural gas (see Figure 6), which makes possible large-scale initiatives using Compressed Natural Gas (CNG) as a fuel for vehicles. There are large hurdles to overcome, including the fact that CNG is indeed a gas, not a liquid, and also taking into account the huge distance between where the gas is produced (the northwest) and where most of it would be consumed (the southeast).

A tepid demand-side response is offered by TravelSmart, a joint initiative of Australian, State and Territory Governments that promotes alternative forms of transportation. It is discouraging that the peak of oil production in Australia is not among the various reasons offered for considering walking, cycling and using public transport. Although the program is admirable, it would be fair to say that TravelSmart, which is currently implemented as a number of different voluntary initiatives, is merely peak oil window dressing at this point.

Unlike America, which has been traveling down the dangerous foreign oil dependency road for decades, Australia has a chance to fix the problem now. Is Australia's current inaction due to the fact that their oil production will increase a bit in the short term? Do Aussie policy-makers believe that oil imports will always be easily available at reasonable prices? Such myopic visions of the future ignore the global warning signs that peak oil is near. Rather than slip into a perilous import dependency, Australia can take the initiative toward energy independence that would guarantee their economic well-being for a long time to come.

1. Bruce Robinson and Phil Hart of ASPO-Australia kindly gave me some guidance. I would like to thank them both for their assistance with this article.

2. Woodside originally planned to tie in Vincent production with the smaller, neighboring Van Gogh (20 thousand b/d, due in 2009) and Theo discoveries, but these fields are now operated by Apache. Consequently, Woodside decided to go it alone at Vincent using an FPSO moored in 1100 feet of water.

Editorial Notes: To contact the author, see the original article at ASPO-USA. To enlarge figures in the article, left-click on them. To open figures in a new window: SHIFT + left-click. To open figures in a new tab (Firefox), CONTROL + left-click. Alternately, right-lick on a figure and choose the option you want. (Clicking on figures at the original creates a pop-up window.) -BA

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