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Energy - July 24

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Is peak oil dead?

Chris Nelder, Alphaville, Financial Times (UK)

This is a guest post from Chris Nelder, an energy expert who has spent a decade studying and writing about energy and related issues. He has written two books (Profit from the Peak and Investing in Renewable Energy) and hundreds of articles on energy and investing. He blogs at GetREALList.com and writes the Energy Futurist column for SmartPlanet.

[Regarding] a new report by Leonardo Maugeri, an executive with the Italian oil company ENI and a senior fellow at a BP-funded center at Harvard University.

... Conclusion

Although Maugeri does not state explicitly what decline rates he is using, researchers Stephen Sorrell and Christophe McGlade derived an annual average decline rate from the data in his report of 1.6 percent, or about one-third the global decline rates estimated by IEA, CERA and others. After analyzing the IEA data, they found an aggregate global production-weighted decline rate of 4.1 percent per year. At that rate, they found that Maugeri’s forecast for 2020 would reach just 95.1 mbpd, not 110.6 mbpd—a gain of just 2 mbpd over today, not 17.6 mbpd.

We cannot independently evaluate Maugeri’s country-by-country forecasts without seeing the assumptions in his data model, but his summary expectations are optimistic in the extreme. For example, he sees production from Iraq expanding in the next eight years at rates that have never before been achieved, despite a great deal of uncertainty about the country’s stability, its ability to maintain security in the future, and its ability to attract Western oil partners with the knowledge and technology needed to exploit its resources. The failure of Iraq’s recent oil lease auctions do little to give one confidence that Maugeri’s extraordinary forecast can be realized.

More generally, his assertion that, of the countries with more than 1 mbpd of production capacity, only four will have reduced capacity by 2020 is impossible to square with the fact that production has been declining in more 50 of those countries since 2000.

Maugeri’s forecast does not mention a price ceiling at all, an obvious deficiency given the extreme volatility of oil prices over the past four years. We know that as prices approach $120 a barrel, demand shrinks, yet triple-digit prices are precisely what is required to bring much of the new supply Maugeri anticipates online.

To his credit, Maugeri acknowledges that his analysis “is subject to a significant margin of error, depending on several circumstances that extend beyond the risks in each project or country,” and he details numerous important caveats. And to the extent that he reveals the assumptions underpinning his forecast, his transparency is laudable. In the final analysis, however, it is insufficient. He fails to provide adequate justification that his assumptions, being widely divergent from most other industry estimates, are remotely realistic.

We must conclude that the key assumptions about reserve growth and its effect on decline rates in Maugeri’s report are muddled, speculative and unverifiable. And sprinkling those assertions with repeated declamations about how peak oil is a non-issue, insisting repeatedly that the only real constraints on his scenario have to do with political decisions and geopolitical risks, suggests that his report is more about grinding a political axe on behalf of the oil industry than offering a serious or transparent analysis. Finally we must note that Maugeri is well known for his hostility to peak oil, as is BP, which funded his report. After taking real-world risks, costs, and restrictions into account, the case for peak oil—which is about production rates, not production capacity or reserves—seems far more realistic.
(24 July 2012)



Oil, politics and resource wars

Lars Schall, Asia Times
At the 10th conference of the Association for the Study of Peak Oil & Gas in Vienna, Austria, Dr Robert Hirsch, Professor Michael T Klare, Dr Karin Kneissl, Dr Daniele Ganser, and Jeremy Gilbert discussed for Asia Times Online and Matterhorn Asset MGMT different important aspects of oil .

Robert Hirsch: Chaos is going to occur just because of the announcement that Peak Oil is real.

Hirsch is a senior energy program advisor at Science Applications International Corporation, a senior energy advisor at MISI, and a consultant in energy, technology, and management. He is a former manager of Petroleum Exploratory Research at Exxon and assistant administrator of the US Energy Research and Development Administration responsible for renewables. (See end for full biographies)

Lars Schall: Mr Hirsch, in 2005 you were given the task to come up with a report related to Peak Oil. How did this came about?

Robert Hirsch: It came about because I did an analysis to look at the big problems that energy research and development should look into in the future, and I came across something called Peak Oil. Even though I have worked in the oil industry for many years, I'd never heard of Peak Oil. I started to dig deeper and deeper into it, and the deeper I got the more difficult and dangerous the concept was.

I knew that oil was a finite resource, I knew that you can only get so much out so fast. I had been in that part of the business, and when I thought about what that could do to economies worldwide it frightened me. What I did was then that I went to a laboratory of the US Department of Energy and said, the problem looks like it's real, when it hits we clearly have to do something about it, please give us some money, me and two colleagues, to be able to look into it and see the best we can do to in way of mitigating the problem. So I proposed the study to the government, the laboratory I was working with provided the funding, and then we did the study that we did. [1]

LS: And what did the government do with the study?

RH: As we worked through the study we coordinated with people at the laboratory, and we got their ideas, and we told them about the content of the study and so forth - so they were aware of what was happening. When we handed in the final report in they were shocked, and they were shocked because it made sense and because it indicated that to fix that problem it would take a huge amount of money and a significant period of time. This is not a problem that you could fix quickly.

They didn't knew what to do with the study because they were frightened. It turns out that the person who was the director of the laboratory was retiring, and she said: "I'll sign the report." She signed the report, but they tried to bury it. But then people in the Internet found the report and it was then made public.
(21 July 2012)
When this article pops up on my browser, there are ads from the CIA and the US State Department looking for employees.

Related from the Business Insider: Peak Oil Guru Robert Hirsch Gives A Dire Outlook For The Future.

-BA


The Unfinished Story of Iraq's Oil Law: An Interview with Greg Muttitt

Ali Issa, Jadaliyya
“No Blood For Oil” was a slogan featured on many a sign in demonstrations during the run up to the US-led invasion of Iraq, and throughout the early years of the occupation as global opposition to it grew. But as Iraq faded from the headlines in 2009, the struggle over its oil continued. In the following interview, Greg Muttitt, investigative journalist and author of the groundbreaking Fuel on the Fire: Oil and Politics in Occupied Iraq (2012), discusses the attempts by occupying forces, multinational oil giants, and newly minted Iraqi “leaders” to privatize Iraq’s oil. Having worked directly with Iraq’s oil unions, Muttitt also describes the heroic role that Iraqi civil society played in challenging these efforts, how it all shook out and where it might be headed today, at an especially sensitive moment when the Iraqi labor movement is facing a series of fresh attacks. The audio interview was conducted on 13 July 2012, and what follows is an edited transcript.

Ali Issa (AI): Based on the hundreds of US/UK documents you have unearthed, what were your findings about the role of oil in the Iraq War?

Greg Muttitt (GM): Unsurprisingly, the documentary record shows that oil was a central part of the strategic thinking behind the war, and consistently shaped the conduct of the occupation. My book is primarily about what happened during the occupation. The United States, Britain, and the “international community” were keen to see Iraq’s oil developed through foreign investment. It was not so much about helping out their own corporations—that was a secondary concern for them. What they wanted was to see foreign investment in Iraq as a starting point for opening up the other nationalized industries, especially of the region, so as to get oil flowing more quickly. Iraq’s oil sector had been nationalized since the 1970s. The nationalization took place mostly in 1972, and the final phases of it continued until 1975. Essentially, what they wanted to do was to reverse that: put multinational oil companies back in the dominant role in the Iraqi oil sector.

AI: You place the struggle over Iraq’s “oil law” at the center of Iraq’s recent history. What is the oil law, how has it evolved, and what is its present status?

Jadaliyya is an independent ezine produced by ASI (Arab Studies Institute), the umbrella organization that produces Arab Studies Journal (www.ArabStudiesJournal.org) and runs the Documentary Film Collective, Quilting Point.

Jadaliyya provides a unique source of insight and critical analysis that combines local knowledge, scholarship, and advocacy with an eye to audiences in the United States, the Arab world, and beyond. The site currently publishes posts both in Arabic and in English.

Jadaliyya is run and produced on a voluntary basis by an editorial team and expanding pool of contributors committed to discussing the Arab world on its own terms. Where others see only a security threat, conflict, or data on a graph, we see a region inhabited by living communities and dynamic societies.
(24 July 2012)



Will Drought Cause the Next Blackout?

Michael E. Webber, New York Times
WE’RE now in the midst of the nation’s most widespread drought in 60 years, stretching across 29 states and threatening farmers, their crops and livestock. But there is another risk as water becomes more scarce. Power plants may be forced to shut down, and oil and gas production may be threatened.

Our energy system depends on water. About half of the nation’s water withdrawals every day are just for cooling power plants. In addition, the oil and gas industries use tens of millions of gallons a day, injecting water into aging oil fields to improve production, and to free natural gas in shale formations through hydraulic fracturing. Those numbers are not large from a national perspective, but they can be significant locally.

All told, we withdraw more water for the energy sector than for agriculture. Unfortunately, this relationship means that water problems become energy problems that are serious enough to warrant high-level attention.

During the 2008 drought in the Southeast, power plants were within days or weeks of shutting down because of limited water supplies. In Texas today, some cities are forbidding the use of municipal water for hydraulic fracturing. The multiyear drought in the West has lowered the snowpack and water levels behind dams, reducing their power output. The United States Energy Information Administration recently issued an alert that the drought was likely to exacerbate challenges to California’s electric power market this summer, with higher risks of reliability problems and scarcity-driven price increases.

And in the Midwest, power plants are competing for water that farmers want for their devastated corn crops.

Unfortunately, trends suggest that this water vulnerability will become more important with time.

Michael E. Webber is an assistant professor of mechanical engineering and the associate director of the Center for International Energy and Environmental Policy at the University of Texas, Austin.
(23 July 2012)

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