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Oil Prices Set to Increase Further
Elliott H. Gue, International Business Times
Earlier this week, I attended the Energy Information Administrations (EIA) annual energy conference in Washington, DC. This years conference was a two-day event marking the 30-year anniversary of the EIAs founding as the statistical and research arm of the US Dept of Energy.
One of the more high-profile debates in the crude oil market today and at the EIA conference is the concept of “peak” oil.
… One of the main reasons peak oil has been so talked about in recent years is because of an outstanding, yet controversial, book by Matt Simmons entitled Twilight in the Desert, which was released in 2005. Simmons was at the conference, on a panel set up to debate peak oil with two EIA analysts and an analyst from Cambridge Energy Research Associates (CERA).
As you might expect, the panelists didnt see eye to eye on this issue.
… The assumption underlying much of the [EIA’s prediction of] growth in OPEC and non-OPEC production is that better technologies will allow recovery factors to rise globally. And producers will squeeze more oil from existing fields.
There is truth to this argument.
… But Simmons and other peak-oil theorists bring up valid points about rising recovery rates. One is that we really cant accurately assess the current state of production or recovery rates from most OPEC fields.
The EIA and other firms rely on third-party data providers for their information and as a basis for projections. That data is often vague and provides little real field-by-field production and reserves detail. In most cases, its also disseminated by the countries themselves, which have an interest in inflating their production capacity.
… But these disagreements are less important from an investment standpoint than the consensus that did emerge. Growing oil production fast enough to meet the worlds rapidly growing demand will be difficult, expensive and subject to a great deal of risk.
Elliott H. Gue is editor of The Energy Letter, a bi-weekly e-letter as well as editor of The Energy Strategist, a premium bi-weekly newsletter on the energy markets.
(14 April 2008)
Comments on Michael Lynch’s Commentary: “Peak Oil, Uncommon Ground”
Tom Standing, ASPO-USA
I would like to offer some of my own thoughts here as a comparison and contrast to Michael Lynch’s commentary Peak Oil, Uncommon Ground published March 17, 2008.
First of all, using his terms, I should categorize myself as a “flow rate pessimist,” but I’m more optimistic than many others in this category. (I like to think of my being “realistic,” rather than “pessimistic.”) Although I see world oil production ultimately reaching no more than 10% above the present level, a decline will not be noticeable until after 2015. I will go so far as to offer that the annual decline rate in the 2020s is apt to be barely 1%, maybe all of 0.5%/year during 2021-2025.
… Personal Thoughts
I approached this analysis with both a sense of humility and a sense of frustration. This is an extremely complex topic that integrates many disciplines, practically beyond the efforts of any one person. Attempting to track down Peak Oil requires constant learning, diligence, re-examination, and yes, obsessiveness. But people try anyway.
In Michael Lynch’s writings of 2005-2007, he fiercely criticizes “peak oil theorists” for their lack of rigor in methodology and for ignoring some publicly-available databases. Accordingly, he would likely dismiss my approach as “ad hoc” or “seat-of-the-pants,” and is, therefore, hardly worthy of comment.
What I have attempted here is to incorporate judgments and interpretations from my tracking of industry activities and specific field projects dating back to the 1940s. Unexpected twists and underestimated difficulties have slowed or stopped many development projects in the past. Tough lessons of the past can be applied to projects in the future.
I acknowledge that the resource base is vast, but its size is indeterminate. What’s more important is the quality of the resource; that is what I am attempting to address here. What really counts in the Peak Oil debate is the rate at which liquid fuels meeting all specifications can be produced from the resource base. The way I see it, these fuels are being processed from resources that are slowly and subtly trending toward lower quality.
My sense of frustration stems from the lack of consideration by mainstream analysts given to long-term decline of the quality of what everyone terms as “reserves,” whether the reserves are “potential,” “possible,” “probable,” or “proved.” Whether today’s reserves are new fields in old basins, additions or revisions to old fields, heavy oil in the San Joaquin Valley or Canada, synthetic crude oil upgraded from bitumen or degraded oil in Canada or Venezuela, the raw material comes out of the ground at slowing rates and with increasing consumption of energy that must be thrust into the subsurface. And increasing volumes of crude are requiring an exorbitant amount of processing for sulfur removal and other contaminants, as discussed in the sections about Tengiz and Kashagan. Such processing is not only rate-limiting, but also energy-intensive.
All of these factors conspire to reduce the rate at which productive capacity is added in the future. Today the industry is operating in a different realm than it operated in during the 1970s. And the 1970s was a different realm from the 1950s.
The bottom line is that global oil production will struggle to keep up with demand, and that the struggle will gradually and steadily intensify over time.
(14 April 2008)
Tom Standing began his career as a chemical engineer in refinery operations and later shifted to work as an engineer for the San Francisco water system. He is self-taught in the sciences of petroleum production, geology and geochemistry.
Rep. Bartlett Delivers 41st Peak Oil Special Order (video)
Representative Roscoe Bartlett, U.S. Congress via Energy Policy TV
Representative Roscoe Bartlett (R-MD) delivers one of his Special Order speeches on peak oil and limited energy supply and relates those issues to rising global food prices.
(14 April 2008)
UPDATE (Apr 15) from Greg Thornwall. The transcript of this speech is online. Also, Greg has transcripts of many other speeches by Bartlett online.
Gail Tverberg’s Talk: Expected Economic Impact of an Energy Downturn (video)
Gail Tverberg, The Oil Drum
A face and voice for “Gail the Actuary”. Gail appeared at the April 10 online environmentl conference put on by Ohio State University.
(13 April 2008)
An early draft for the talk was posted at The Oil Drum and Energy Bulletin.
Rampant Negativity – No Reason to be so Glum
James Hansen, personal site
Predictably, as scientific evidence clarifies that the dangerous level of atmospheric CO2 is at hand, there are cries that it is impractical to avoid climate catastrophe. Such negativity is part of the playbook of those who stand to gain from business-as-usual. A recent report by the Scripps Howard News Service claims that I stated “we must reduce greenhouse gases by 80 percent within 12 years or it will be too late to prevent a climate catastrophe.” What nonsense.
The “Peak Oil” paper by Kharecha and Hansen has been accepted for publication in Global Biogeochemical Cycles. The final form is available at arxiv.org/pdf/0704.2782v3
In this paper we show that if emissions from coal are phased out linearly between 2020 and 2050 atmospheric CO2 will not exceed ~450 ppm, with the exact peak CO2 depending on the true amount of oil and gas reserves, about which there is some dispute. (Long-term coal use is permitted, but only with carbon capture and storage). The ~450 ppm CO2 peak also depends on the assumption that the world does not turn to unconventional fossil fuels (such as tar shale) as fossil fuels are depleted. Emissions from unconventional fossil fuels so far are negligible (mainly a small bit from tar sands), and that will always be the case if an appropriate price is placed on carbon emissions.
In our draft (www.columbia.edu/~jeh1/2008/TargetCO2_20080317.pdf) “Target CO2” paper we show that 450 ppm CO2 is far into the dangerous zone, and we recommend a goal of phasing out coal emissions by 2030 (the practical difficulty of phasing out coal emissions in 20-25 years is acknowledged and discussed at the end of the paper). This keeps peak CO2 close to 400 ppm, again with some variation depending on the magnitude of true undiscovered oil reserves.
(24 March 2008)
Contributor Dave Cohen points out this post includes the news that Hansen’s Peak Oil paper with Kharecha has been accepted for publication.
