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The peak in world oil production is yet to come

World oil production stagnated between 2005 and 2007, which given rapid growth in demand from emerging economies sent oil prices shooting up. Some observers suggested that production might never rise much above the levels seen in 2005. Among those who raised this possibility, two of the more thoughtful have changed their mind. Euan Mearns last month summarized what he saw as three (or four) nails in the coffin of peak oil. And Stuart Staniford, an early editor and contributor for the Oil Drum, declared a few weeks ago that the data have spoken.

Certainly world oil production did not stop growing in 2005. Last year's total was estimated by the EIA to be 4.8 million barrels higher each day than it had been in 2005.

Annual world production of liquid fuels (in millions of barrels per day), 2000-2012. Blue: production of crude oil including lease condensate; brick: natural gas plant liquids; green: refinery processing gain; orange: other liquids (chiefly biofuels). Data source:EIA.
world_oil_sep_13.png

About a third of the growth between 2005 and 2012 came in the form of natural gas liquids, chief among which are ethane and propane. These are useful hydrocarbons, but you can't use them to power your car. The growth in NGL production has been a big benefit to industrial users of these chemicals; for motorists, not so much. Another important source of gain has been biofuels, which themselves require a significant energy input to produce. Actual field production of crude oil, which accounted for 87% of the total liquids produced in 2005, accounted for only 41% of the growth since 2005.

Change in annual world production of liquid fuels (in millions of barrels per day) between 2005 and 2012. Blue: production of crude oil including lease condensate; brick: natural gas plant liquids; green: refinery processing gain; orange: other liquids (chiefly biofuels). Data source: EIA.
world_oil_change_sep_13.png

It's also interesting to look at where the growth in field production came from. U.S. production grew by 1.3 mb/d and Canada by 770,000 b/d. Between them, these two countries could account for more than 100% of the 2.0 mb/d increase in world crude oil production since 2005, Production from all of the other countries in the world combined actually fell a little between 2005 and 2012. Significant gains in places like Iraq, Russia, and Angola were more than offset by declines in the North Sea, Mexico, and Iran.

Change in annual world production of crude oil and liquid condensate (in millions of barrels per day) between 2005 and 2012 for selected countries. Data source: EIA.
world_oil_change_by_country_sep_13.png

Within the United States, more than all of that 1.3 mb/d increase could be attributed to production of oil from tight formations, which the EIA estimates accounted for 2.0 mb/d of total U.S. oil production in 2012. And within Canada, more than all of that 770,000 mb/d increase could be attributed to production of liquids from oil sands, which the National Energy Board estimates increased by 830,000 b/d between 2005 and 2012. In other words, without oil sands and tight oil, crude oil production in the United States and Canada, and for that matter the world as a whole, would have been lower in 2012 than it was in 2005.
 
The EIA anticipates that U.S. tight oil production can continue to increase another 800,000 b/d above 2012 levels before peaking in 2020.

Source: EIA.
tight_oil_sep_13.jpg

It's interesting to put these numbers in the perspective of the entire history of production from America's bountiful supplies. The surge over the last two years is unprecedented. Even so, the levels for the first half of 2013 remain 2.5 mb/d below the peak of 1970. If the EIA projections above are correct, none of this is going to change the fact that U.S. production peaked 40 years ago. Instead, tight oil will give a dramatic but temporary bump back up in a longer trajectory of decline, similar to that provided by new production from Alaska in the mid 1980s.

U.S. production of crude oil and condensate (in million b/d), 1860-2013. Last entry is estimate based on first 6 months of 2013. Data source: EIA.
US_oil_sep_13.png

The new sources of liquid fuel do not come cheap. Production from oil sands and tight formations could not be sustained if the price of oil were to return to the levels to which we were accustomed before 2005. Euan Mearns concluded his obituary for peak oil with these thoughts:
The new higher oil / energy prices are here to stay but I believe they will stay range-bound in $100 to $150 / bbl bracket, perhaps for decades as we munch our way through the $125±25 slab of resource.
That's a plausible assessment, but Stuart Staniford notes an important qualification:
As I write, Libya, Tunisia, Egypt, Syria, Lebanon, Iraq, and Iran are all subject to varying degrees of economic and political turmoil.... I assume at some point a large oil producer will descend into turmoil and then there will be a large price spike, and that may kick the global oil market out of the current meta-stable state.
To which I would further add, a major economic downturn in China would send the price of oil plunging back down.
 
Those who thought that world oil production would peak in 2005 have been proven to be wrong. But so, too, were those who thought the run-up in oil prices of the last decade would be a temporary disruption until we found a way to return to the world as it had been for a century up until that point.

 

Editorial Notes: It is worth looking at the comments at the original post, especially from Resilience contributor Jeffrey J. Brown.

Jeffrey's first comment to this article:
If the EIA projections above are correct, none of this is going to change the fact that U.S. production peaked 40 years ago. Instead, tight oil will give a dramatic but temporary bump back up in a longer trajectory of decline, similar to that provided by new production from Alaska in the mid 1980s.
One of the little ironies of many “Peak Oil is Dead” is dead stories is that the authors are usually using what is so far a (crude oil) post-peak region, the US, to claim that “Peak Oil is Dead.” As you noted, I think that post-1970 US crude oil production is best characterized as showing an “Undulating Decline.”

Regarding global production, the long term (1930 to 2005) and 2002 to 2005 rates of increase in global Crude + Condensate (C+C)) production were about the same, on the order of about 3%/year. "Gap" Charts for Global C+C and for Global Net Exports (total petroleum liquids + other liquids) follow, showing the gaps between where we would have been at the 2002 to 2005 rates of increase versus actual post-2005 data, by year. Of course, annual Brent crude oil prices approximately doubled from $25 in 2002 to $55 in 2005, and then doubled again, from $55 in 2005 to $112 in 2012 (with one year over year annual decline, in 2009).

C+C Gap Chart:
http://i1095.photobucket.com/albums/i475/westexas/Slide1_zpsddc49796.jpg

GNE Gap Chart:
http://i1095.photobucket.com/albums/i475/westexas/Slide1_zps3161a25b.jpg

Note that I estimate that we have already burned through about one-fifth of post-2005 Global CNE (Cumulative Net Exports). A similar extrapolation for the Six Country Case History* produced a post-1995 CNE estimate that was too optimistic.

*Six major net exporters, excluding China, that hit or approached zero net exports from 1980 to 2010.

Following is a link to my Export Capacity Index (ECI) article and excerpt from same:
http://www.resilience.org/stories/2013-02-18/commentary-the-export-capacity-index

We know what the six year ECI decline meant for the Six Country Case History, and we know that we are seeing similar ECI type declines for Saudi Arabia, Global Net Exports and Available Net Exports.
The key question is why would the outcome for global net exports be materially different from the Six Country outcome?

My basic premise is that the net oil importing OECD countries are maintaining something resembling “Business As Usual” only because of huge and almost totally overlooked rates of depletion in post-2005 Global and Available Cumulative Net Exports of oil.

And a Six Country example of production versus CNE depletion:
(Post-1992 production as a percentage of 1992 production, versus remaining post-1992 CNE, by year)
http://i1095.photobucket.com/albums/i475/westexas/Slide1-27.jpg

What do you think? Leave a comment below.

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