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NPC report is hand grenade in bubble wrap

The working draft of the National Petroleum Council's forecast of global oil and gas trends runs to nearly 500 pages. Weighing as much as the chunk of foam that brought down the Space Shuttle Columbia, this curious document reads like a hand grenade encased in Bubble Wrap.

Since its release, the report (and a more digestible 40-page executive summary) has received 750,000 hits at www.npc.org.

Facing the Hard Truths About Energy is perplexing, even schizophrenic. In maddening fashion, it blends numerous cautions about the "accumulating risks" to global oil and gas production with repeated, rosy reassurances that we "aren't running out," as if anyone said we were.

A call for maximum sustained improvements in automobile efficiency—a welcome first for Big Oil—is paired with a cheery statement about our "vast" global endowment of petroleum and natural gas. Peak oil may be near—but then again we might have 10 times more oil left than we have already used. Carbon emissions are a concern—but coal-to-liquids seems promising.

News coverage reflects the report's confusing duality. Some headlines called it "alarming." Other reporters found it a snooze.

One prominent chart suggests that the world will be lavished with an additional 16 million barrels/day of Mideast oil by 2030, which seems a fantasia. Another chart says the world will enjoy 20 million b/d from enhanced oil recovery by 2030, although today's production is about 1.8 million b/d. (Despite $70 oil, U.S. EOR is 650,000 b/day and falling.) This same image promises another 20 million b/d from oil we haven't found yet—even as it shows depletion robbing 60 million b/d from the existing production base.

What's a reader to believe?

Early in their research, the NPC solicited the views of ASPO-USA and other peak oil concernists here and in Europe. In a pair of conference calls last week with ASPO-USA's Steve Andrews and Randy Udall and others, the NPC's authors communicated their own concern about the resource nationalism, access limits, manpower constraints, guerrilla insurgencies, the machinations of Putin and Chavez, and all the other accumulating risks that plague an orderly expansion of global oil and gas.

In this discussion, it soon became clear to us that the report's rosy patina is largely due to a reliance on forecasts from the U.S. Energy Information Administration. (The NPC deliberately did not develop any forecasts of its own.) Unfortunately, the EIA relies on an outdated computer model that simply forecasts how big the economy will be, then supplies the necessary energy, without consulting the Saudis. The EIA's influence is most noticeable in the study's Supply Chapter, which reads as if it were co-authored by the Wizard of Oz.

After the conference call, Udall sent the NPC's authors an email, excerpted below:

"Steve and I appreciate all the time and effort that has gone into your study. A consensus document will inevitably muffle some of the main points and, indeed, some of the ‘hard truths.'

"The oil and gas industry delivers miracles each day and at rock-bottom prices. You are currently indulging 300 million mostly clueless Americans, enabling them to live like Gods. The tacit promise is that this will continue.

"But can it? What I find most remarkable (about the peak oil discussion) is how widespread the range of views is. How can so many bright people have reached such distinctly different conclusions?

"Somebody has to be wrong, and the truth may not lie in the middle.

"Energy forecasting is damnably difficult. That said, energy historians may look back on much of this study's supply chapter as a classic case of wishful thinking, an intelligence failure, similar to that of the FBI before 9/11, the CIA on Iraqi WMD, and NASA on the dangers of a 2-pound chunk of flying foam.

"The NPC report repeatedly discusses ‘global' resources and ‘global' endowments. If only there were such things.

"That paradigm—the world is an American buffet—blinds us to the troubling news that fills the daily newspaper. On Enhanced Oil Recovery, your report suggests it can add 90 billion barrels to the U.S. ultimate production. Good luck with that: at today's rates it will take 400 years to fulfill this promise. Our domestic history of EOR—free carbon dioxide from McElmo and Bravo domes for the Permian Basin and essentially free natural gas from the San Juan Basin for California steam floods--blinds too many analysts to what the future might hold.

"On unconventional oil, 80% is in the Western Hemisphere. Chavez has driven Venezuela into a ditch; their production is falling. Oil shale has the energy density of shaving cream, one-third that of phone books, and has never provided more than 1/10,000th of global energy. Yes, the Canadians will get tar sands to 3 Mb/d, which will help. But U.S. tar sands are not water soluble, occur in thin crusts and have never been produced commercially. A 50,000 b/d coal-to-liquids plant would cost $6 billion, take 3 years to build, and aggravate climate change.

"The report also seems somewhat cavalier about North American gas constraints: do you mean to suggest that 3 tanker loads of LNG will glide into American shores each day by 2020? From where, exactly? Half of US domestic gas is from wells less than 3 years old, which means we have to replace with new drilling 25 billion cubic ft/d in the next 1000 days.

"That's one of the hard truths I find missing here.

"My biggest regret is that the NPC report fails to communicate the essential nature of the competition between depletion of existing wells and investment in new ones. Depletion is tireless, quick, inevitable, relentless, and automatic. Investment is costly, slow, uncertain, sporadic, and optional. This is a horse race, with one winner.

"Although Energy Secretary Bodman asked the NPC to address whether peak oil is imminent, the study dodges the question. Your discussion of peak oil hijacks the North Sea as a case study for the upside of technology. Sweet baby jesus, have you guys not seen recent decline curves for the UK and Norway?

"In any case, good luck with your outreach efforts. Anything this report does to educate Americans, and their leaders, on energy realities can only be a step in the right direction."

Randy Udall directs CORE in Carbondale (CO) and is a co-founder of ASPO-USA.

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