With the recent announcement of closure, this will be the last guest post by Jean Lahérrere at TheOilDrum. By fortune it is an update on Jean’s famous long term petroleum and natural gas forecasts; may it serve also as a long term reference to all the readership.
Based on the creaming curve in Figure 1, the ultimate reserves for the world outside the conventional onshore of the US and Canada are about 2000 Gb for crude less extra-heavy (XH) oil, and 1700 Gboe for natural gas. This plot of backdated reserves versus the cumulative number of fields cannot be extended to the onshore US and Canada because there are too many fields with unavailable data and different definitions. However, if one adds the backdated 2P discoveries for the conventional US onshore (thanks to US-DOE data) and for Canada (thanks to CAPP backdated data) to the previous data, the cumulative world discovery versus time converges to an oil ultimate of 2200 Gb and a gas ultimate of 2000 Gboe. This last figure equals 12 Pcf, but this round estimate from 2012 is now estimated in 2013 at 13 Pcf (see Figure 15).
The three cycles, which can be observed in Figure 2, are well-known in exploration:
- the first one is the surface exploration based on seeps and on surface anticlines, from 1900 to 1945;
- the second one is based on seismic surveys showing buried anticlines, from 1945 to 1990;
- the last one is the exploration of deep-water and sub-salt reservoirs, from 1990 to 2011.
It is frightening to see the large discrepancy between the values of the so called “oil supply” from different sources and also its evolution with time.
One can note that big changes occur at the beginning of the year when definition changes take place.
There is a huge difference between the political/financial proved reserves in brown, which has always increased since 1947, and the confidential technical 2P reserves in green, which has been decreasing since 1980. This graph explains why most economists do not believe in peak oil. They rely only on the proved reserves coming from OGJ, EIA, BP and OPEC data, which are wrong; they have no access to the confidential technical data. Economists ignoring peak oil do not think wrong, they thing on wrong data!
The following graph displays the same data as Figure 5, but now as annual discoveries for 2P and 1P, compared to annual production (crude oil + condensate and crude + NGPL). Annual production has exceeded 2P annual discoveries since 1980, but not 1P annual additions.
The same graph for natural gas annual discoveries and production shows that 2P discoveries are larger than production up to 2000.
Economists rely on the 1P additions by the EIA to believe, even before the shale boom, that there is no problem, because additions to proved oil and gas reserves are twice the production. In reality annual 2P oil discoveries are about half the production!
Crude oil + NGL
OPEC crude less extra-heavy oil production will overpass non-OPEC around 2030.
All liquids from OPEC will overpass Non-OPEC around 2030 in my interpretation, when the 2012 WEO NP puts it around 2050. The last IEA forecasts report an increase in oil production from 2012 to 2018 of 8% for Non-OPEC (+30% for the US) and of 7% for OPEC, which is doubtful in my opinion.
When oil exports cease, somewhere before 2050, OPEC will no longer act as a producer cartel.
The number of rigs in the US peaked in 1980 when the second oil shock coincided with the end of price controls, triggering a drilling frenzy. Even the worst prospects were drilled, resulting in many dry wells and a sharp decline at the 1986 oil counter shock, staying low until the late 1990s.
Drilling activity in the US is cyclical, peaking in 1955, 1980 and probably now. The "drill baby drill" practice is due to the shale oil boom, itself caused by the high oil price and the easy money flows provided by the eased monetary policy. Today US explorers are complaining about the lack of conventional prospects and, moreover, of unconventional gas prospects, since the number of sweet spots in shales seem decreasing.
Some claim that the US can export its shale gas as LNG even though conventional gas (in red) is declining fast and will be quite small in just a few years.
The ratio between oil and natural gas prices in the US has varied widely since 1950. Starting at 7 (meaning that oil was 7 times more expensive per unit of energy at the well head than natural gas) down to 1 between 2000 and 2005 (the normal), up again to a peak at more than 9 in May of 2012 and down again to 4.5 in December of 2012. The ratio varies roughly as the percentage of US gas flared (versus marketed production), and since 1995 as the percentage of gas flared in North Dakota. The lack of gas pipelines creates a glut with low prices and flared gas. This situation with cheap natural gas is unsustainable and has led to lower coal prices and to the expectation of LNG exports.
World, Non-OPEC & OPEC natural gas production forecasts
With the estimate of 7 Pcf for Non-OPEC ultimate reserves, production will peak around 2020 at more than 100 Tcf/y. Unless new reserves become available, only an intensive drilling program could delay this peak, but at the expense of a sharper decline. Gas production from OPEC will peak around 2050 also at about 100 Tcf/y.
World NGPL production (in blue) may peak in 2030 at over 11 Mb/d, whereas Non-OPEC (in red) will peak before 2020 at 5.5 Mb/d; OPEC (in green) should peak around 2040 at 7.5 Mb/d.
Walls on oil price and on crude oil production
Peak Oil Deniers
- 1.4 % in the Arab-Iranian Petroleum System (most of the Middle East);
- 1% in the North Sea
- 0.8 % in the Saharan Triassic
- 0.6% in the Niger Delta
- 0.4 % in Gippsland
- 0.3 % in Kutei & Putamayo
- 0.03 % in the Paris Basin.
The display for the number of hours needed to buy one barrel of oil with the SMIC wage is quite different because of French taxes. In 1960 6 hours were needed, in 1980 11 hours and in 2012 over 9 hours.