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Peak oil, prices, and supplies - Oct 27

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Oilwatch Monthly October 2009

Rembrandt, Oilwatch Monthly via the Oil Drum: Europe
Latest Developments:

1) Conventional crude production - Latest figures from the Energy Information Administration (EIA) show that crude oil production including lease condensates increased by 715,000 b/d from June to July 2009, resulting in total production of crude oil including lease condensates of 72.42 million b/d. Crude oil production in the EIA International Petroleum Monthly for June 2009 was revised downward from 71.76 to 71.71 million b/d. The all time high production record of crude oil stands at 74.75 million b/d reached in July 2008.

2) Total liquid fuels production - In September 2009, world production of all liquid fuels increased by 320,000 barrels per day from August according to the latest fgures of the International Energy Agency (IEA), resulting in total world liquid fuels production of 84.92 million b/d. Liquids production for August 2009 was revised downwards in the IEA Oil Market Report of October from 84.88 to 84.60 million b/d. Average global liquid fuels production in 2009 up to September was 84.61 versus 86.6 and 85.32 million b/d in 2008 and 2007.

3) OPEC Production - Total liquid fuels production in OPEC countries increased by 120,000 b/d from August to September to a level of 34.28 million b/d. Average liquid fuels production in 2009 through August was 33.66 million b/d, versus 36.09 and 35.02 million b/d in 2008 and 2007 respectively. All time high production of OPEC liquid fuels stands at 36.58 million b/d reached in July 2008. Total crude oil production excluding lease condensates of the OPEC cartel increased by 120,000 b/d to a level of 28.92 million b/d, from August to September 2009, according to the latest available estimate of the IEA. Average crude oil production in 2009 through September was 28.62 million b/d, versus 31.43 and 30.37 million b/d in 2008 and 2007 respectively. OPEC natural gas liquids remained stable from August to September 2009 at a level of 5.36 million b/d. Average OPEC natural gas liquids production in 2009 through September was 5.05 million b/d, versus 4.66 and 4.55 million b/d in 2008 and 2007 respectively.

4) Non-OPEC Production - Total liquid fuels production excluding biofuels in Non-OPEC countries increased by 190,000 b/d from August to September 2009, resulting in a production level of 49.00 million b/d according to the International Energy Agency. Average liquid fuels production in 2009 through September was 49.41 million b/d, versus 49.32 and 49.34 million b/d in 2008 and 2007 respectively. Total Non-OPEC crude oil production excluding lease condensates increased by 418,000 b/d to a level of 41.63 million b/d, from June to July 2009, according to the latest available estimate of the EIA. Crude oil production in the EIA International Petroleum Monthly for June 2009 was revised downward from 41.24 to 41.21 million b/d. Average crude oil production in 2009 up to July was 41.52 million b/d, versus 41.32 and 41.80 million b/d in respectively 2008 and 2007. Non-OPEC natural gas liquids production decreased by 6,000 from June to July to a level of 3.28 million b/d. Average Non-OPEC natural gas liquids production in 2009 through July was 3.39 million b/d, versus 3.65 and 3.79 million b/d in 2008 and 2007 respectively.

5) OECD Oil Consumption - Oil consumption in OECD countries increased by 413,000 b/d from June to July and decreased by 359,000 b/d from July to August, resulting in a consumption level of 43.46 million b/d in August. Average OECD oil consumption in 2009 through August was 43.83 million b/d, versus 46.10 and 47.68 million b/d in 2008 and 2007 respectively.

6) Chinese & Indian liquids demand - Oil consumption in China increased by 205,000 b/d from June to July and decreased by 115,000 b/d from July to August, resulting in a consumption level of 9.28 million b/d in August 2009. Average oil consumption in China in 2009 through August was 7.84 million b/d, versus 6.92 and 7.29 million b/d in respectively 2008 and 2007. Oil consumption in India decreased by 274,000 b/d from June to July and 52,000 b/d from July to August, resulting in a consumption level of 2.64 million b/d in August 2009. Average oil consumption in India in 2009 up to August was 2.86 million b/d, versus 2.60 and 2.43 million b/d in 2008 and 2007 respectively.

8) OPEC spare capacity - According to the International Energy Agency total effective spare capacity (excluding Iraq, Venezuela and Nigeria) increased from August to September 2009 by 190,000 b/d to a level of 6.74 million b/d. Of total August spare capacity, Saudi Arabia can produce an additional 3.45 million b/d within 90 days according to the IEA, the United Arab Emirates 0.57 million b/d, Angola 0.23 million b/d, Iran 0.22 million b/d, Libya 0.22 million b/d, Qatar 0.14 million b/d, and the other remaining countries 0.80 million b/d.

Total OPEC spare production capacity in September 2009 increased by 110,000 b/d to a level of 3.81 million b/d from 3.7 million b/d in August, according to the Energy Information Administration. Of total September spare capacity, 2.70 million b/d is estimated to come from Saudi Arabia by the EIA, 0.21 million b/d from Qatar, 0.20 million b/d from Angola, 0.30 million b/d from Kuwait, 0.30 million b/d from the United Arab Emirates, and 0.10 million b/d from Iran. Other countries contribute no spare capacity.

9) OECD oil stocks - Industrial inventories of crude oil in the OECD in August 2009 decreased to a level of 985 million from 1001 million barrels in July according to the latest IEA statistics. Current OECD crude oil stocks are 26 million barrels higher than the five year average of 959 million barrels. In IEA's August Oil Market Report, a total stock level of 1011 million barrels was tabulated for July; this has been revised downwards to 1001 million barrels in the October edition. Industrial product stocks in the OECD in August 2009 increased to 1471 million from 1452 million barrels in July according to the latest IEA Statistics. Current OECD product stocks are 72 million barrels higher than the five year average of 1399 million barrels. In the August Oil Market Report of the IEA, a total stock level of 1459 million barrels was tabulated for July which has been revised downwards to 1452 million barrels in the October edition...
(Oct 2009)
The October 2009 edition of Oilwatch Monthly can be downloaded at this weblink (PDF, 1.37 MB, 33 pp) The Oilwatch Monthly is a newsletter that is available free of charge with the latest data on oil supply, demand, oil stocks, spare capacity and exports.


A post-oil world gets less sci-fi by the day

Ashley Seager, the Guardian
It is 30 years since the film Mad Max was made, launching the career of Mel Gibson.

The film made a big splash at the time for its terrifying view of a world without oil, where gangs of grisly looking people roam deserts in a post-apocalyptic world, killing each other to get their hands on the few drops of petrol that some have managed to produce in makeshift refineries. Social order has completely broken down.

Great film if you like that sort of thing but complete fiction, of course. Or is it? Three decades later, and I wonder if the film was, in fact, years ahead of its time.

Just think back to summer last year when oil prices spiked to $150 a barrel – 10 times the level of a decade earlier. In petrol stations in some European countries, people started to drive off without paying and drivers had to be banned from filling cars before they had paid up. In Britain, people stole heating oil out of the tanks that sit outside many houses in the country.

Imagine what would happen if prices rose, say, to $300 a barrel. Or higher. Not only would it become too expensive to drive unless absolutely necessary, but food would become prohibitively expensive to transport, goods from China would be too expensive to ship, and plastics, which come from oil, would be unaffordable. The cold turkey after more than a century of cheap oil would be painful indeed. For developing countries it would be fatal – many could not afford energy at those prices.
(26 Oct 2009)


The Truth About Energy

Puru Saxena, The Daily Reckoning
After oscillating within a trading range for several weeks, the price of crude oil has recently broken out to a new recovery high. Now, you will recall that we have been firm believers of ‘Peak Oil’ since 2003 and we were expecting this bullish resolution.

Look. Skeptics can say what they want; it does not change the fact that our world is struggling to maintain daily flow-rates. Whether you agree with us or not, the energy reality is that the supply of conventional crude oil is very close to its peak and no other fuel source can easily fill the supply gap.

Yes, various governments are now promoting alternative sources of energy and over the following years, we expect this drive to intensify. But those sources will provide too little, too late. So there remains, today, an unbelievable degree of denial when it comes to ‘Peak Oil.’ Most people simply dismiss it as a conspiracy. Others gleefully point to alternative sources of energy, whereas some believe that the vast improvements in oil drilling technology will save the day. Do not be seduced by these delusional hopes.

Remember, crude oil is the lifeblood of the global economy and roughly 70% of it is used to power transportation. Moreover, a vast amount of crude oil is also used up by agriculture (production of fertilizers, pesticides and irrigation systems). In fact, modern-day agriculture can be best described as a process of converting hydrocarbons into calories. Without cheap energy, the world would certainly have trouble producing half of the current food supply and the result could be far worse...
(26 Oct 2009)


Global oil supply: Separating fact from fiction

Wayne Kelley, Richard Bishop and Ron Harrell, Houston Chronicle
Steven (Ed. note, actually Michael) Lynch's opinion piece published in the August 25 edition of the New York Times, “Peak Oil Is a Waste of Energy,” contends that there is no danger of near-term decline of production rates because great volumes of oil are believed yet to be discovered. This simplistic view fails to recognize that an aging handful of giant and super-giant fields (only 320 of the world's 16,000 oil fields) provide nearly 60 percent of global oil supply. We provide an alternative view that field size, not just total undiscovered volumes, will determine future production rates and costs.

To illustrate this point, compare an oil field to a glass of water with a straw (our capital cost) as the means of extraction. A single glass of water can be drained by one straw at a very low cost. To drain the glass faster, add multiple straws for a higher extraction rate and higher cost. Consider that same volume of water poured onto a table. There are now many much smaller puddles that require their own straws. Not only is the unit cost of extracting each small puddle much higher than in the case of the glass, the productivity of each straw is much lower. In practice it is not possible to produce from the multiple puddles at the same rate as from the glass. We have “drunk” most of the oil from the giant and super-giant fields. What we have left are a few glasses and many, many puddles. Even though there may be many puddles yet to be discovered, it does not change the fact that they produce at a lower rate and at a higher cost than their larger brethren.

Current giant and super-giant fields are soon destined to be so depleted that no leap in technology or increase in price will prolong their life. Oil is a finite resource. Because the amount of oil has been underestimated in the past doesn't mean it is today or will continue to be.

The estimates of the commercially recoverable oil found in fields discovered decades ago have been, in many cases, adjusted upward over time. This upward assessment is primarily attributed, in addition to increased field knowledge and production histories, to giant leaps in technology used to access and extract the oil. Those who cite this trend as proof that oil shortages are not a near-term threat are only correct in assuming that for much of their history, the giant and super-giant fields were under-utilized. However, they fail to acknowledge the trend's limitations.

Regardless of the claims of the U.S. Geological Survey and others of a trillion barrels of undiscovered oil, let's look at the recent history of finding giant and super-giant fields. The consistency of their contribution is largely the result of increased rates of extraction, not to new discoveries. As time passes, new discoveries are increasingly smaller, of lower quality and located in ever-more difficult operating environments. In the 1960s, 26 giant and super-giant fields were discovered. That number has consistently declined to only two so far in the first decade of the new millennium. The conditions necessary to create giants and super-giants occur infrequently, and where they do occur the real estate has, with few exceptions, been well explored. Trying as hard as they can to discover giant or super-giant fields, the oil companies' results have been disappointing...
(26 Oct 2009)

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