The Oil Drum | GCC: ExxonMobil's Energy Outlook 2005

52 comments on GCC: ExxonMobil's Energy Outlook 2005

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Stuart Staniford on December 21, 2005 - 6:16pm

We didn't call a July top. Several of us noted in November that the then production peak was in April or May depending on time series, and explored what it might take for production to increase or not next year. I certainly made no conclusive claim, though I do think the balance of the evidence has been shifting towards a nearer peak, rather than a further one. Some analysts also think that (eg Henry Groppe).

I agree that lack of refining capacity may constrain peak somewhat - as peak gets closer, no-one will want to build more refineries, and this will have a flattening effect on the peak.

What do you believe is the global decline rate in fields in production, and why?

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Freddy Hutter on December 21, 2005 - 7:15pm

Yes Stuart, it was this implied May date "Happy Peak Oil Day" post that i was thinkin' about. Your valid question about field or country decline rates is better asked of TOD member and TrendLInes scenarioist, Rembrandt Koppelaar. Myself, i just watch the net annual gains in my work and not the two components. And my premise for those annual gains to be prolonged is based on my belief that the Peak will accompany the Hubbert Peak in "all liquids". In that sense, dramatic growth in URR by all analysts over the last five years tell me that we are very far from the 2-Tb URR that would indicate an extraction Peak in 2005-2010.

The avg URR in our Scenarios is presently 3.1-Tb and if i incl OGJ & API, it is 2.95-Tb. This implies that we have 0.5-Tb to consume 'til Peak, or 16 yrs at present demand rates and assuming 1-Tb has been consumed to this point. This points to a peak in 2020 ... if URR does not grow. But it is clearly growing in leaps and bounds. And an avg contract price of $50/barrel should push redefinition of much of present reserves historically not feasible over to the URR category.

We indeed have a paradox in refining. If stakeholders believe "u" and pause on new refining capacity because the top is near, then the extraction peak will become self fulfilling. OTOH, it they see efficiencies of scale and market share wisdom in building new plants, the product will certainly be there regardless, as old plants are shuttered for whatever reason.

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Dave Cohen on December 21, 2005 - 7:37pm

I'm certain Stuart could defend his work here but may prefer not to. So, I'll be a bit presumptious on his behalf here. When you say "Your valid question about field or country decline rates is better asked of TOD member and TrendLInes scenarioist, Rembrandt Koppelaar".

Nonsense. It is the IEA that does not appear to take into account realistic, empirically discoverable decline rates in those cases where good data is available. When such data is available, these rates appear to be larger than those presumed by the IEA (eg. Norway--see clv101's first post in this thread concerning IEA's pie-in-the-sky predictions--made in 2001--about Norway's post-peak production which show them producing in the year 2020 what they actually managed to produce in 2004 after peaking in the 2000/2001 period). Rembrandt is only one modeller here and so is Stuart and the other well known usual suspects (peak oil people or not) you show at trendlines. Decline rates are everything, the sine qua non of predicted world production curves. This is almost the whole peak oil argument.

If you want to just put up curves showing everybody's predictions, that's fine with me. But a deeper analysis is called for to evaluate their accuracy.

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Freddy Hutter on December 21, 2005 - 9:31pm

Dave, i am sure u have alotta passion about the peak, but the truth is that the only one predicting a 85-mbd peak is Colin Campbell. Yet we see at http://trendlines.ca/economic.htm#ASPO that he has continually had to push out and up his predictions. He backed off his 2002-4 projection this year but in the end he will find that it was spot on and both 2002 & 2005 will be revised upwards.

You cast doubt on the IEA ability to predict, and on a country by country basis, perhaps there are a couple of errors, but on the whole, their global extraction record is exemplary. The third graph above the aforementioned link shows a 1991 graph by Lynch that illustrates that back then the IEA and EIA for that matter were looking forward to 79-mbd (actual 84-mbd) in 2005 whilst Campbell foresaw 52-mbd this year. The records speak for themselves regardless of the conspiracy theories of hidden stats and inuendo's that are commonplace here.

In short, Dave, if i was a betting man ...

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Dave Cohen on December 21, 2005 - 10:15pm

Re: "IEA ability to predict, and on a country by country basis, perhaps there are a couple of errors...."

No shit. Like Norway, as I said. And perhaps Saudi Arabia, as Matt Simmons claims.

Nowhere in my remarks did I predict, nor has Stuart, that 85/mbd is the peak. I regret inaccurate predictions by Colin Campbell in 1991 based on insufficient data. But really--

The records speak for themselves regardless of the conspiracy theories of hidden stats and inuendo's that are commonplace here [at TOD].

As the Japanese say, sayonara.

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Stuart Staniford on December 21, 2005 - 9:18pm

Well, obviously, much is going to depend on the definition. The Thanksgiving day post showed data from the Oil and Gas Journal, which does not included NGL, ethanol, GTL, CTL, etc. It is of interest to know when the black stuff peaks, and that is what I was trying to get a grip on in that post, and in the follow up. I did not make any categorical statement that oil had peaked. Instead I noted that there seemed to be something of a plateau, despite the fact that the world economy would obviously like more oil if it could get it (as expressed through the prices it was paying), and looked at who might be able to produce more. It appeared to me then, as it appears to me now, that there is significant uncertainty as to whether production of black crude can go a whole lot higher. I'm not saying it definitely cannot - it largely appears to depend on things in Russia and Saudi Arabia that are rather inscrutable. However, as we explored here, the IOCs have not been able to increase production in the last few years, even though they planned to (Exxon's planned growth of 3% was typical). Obviously, the decline rate of existing production is both hard to estimate (causing IOCs to miss their growth targets), and pretty large. As you can see here, the implied decline rate in Exxon's production if you subtract out their new projects is both large and fluctuating.

Hence my comment to you that the EIA's projection of an extra 1mbpd next year of space capacity should be taken with a large grain of salt. We don't know what the global decline of existing production will be between this year and next with nearly enough precision to say what next year's spare capacity will be and thus project next year's prices.

Now, if you want to talk about "all-liquids" -- certainly a valid topic but not the one I was addressing -- then we have to talk about coal (which obviously dwarfs everything else in potential and will make the URR enormous) biofuels, etc. But that's a different kind of conversation, I think. The question then becomes about how hard it is to ramp up very large amounts of CTL and what a global economy and climate running on CTL would look like, what lots of biofuels would do to food prices, and so on. I certainly mean to get to those topics over time...

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Freddy Hutter on December 21, 2005 - 9:48pm

Perhaps then it would be helpful to use a somewhat less inflammatory subject line as "Happy Peak Oil Day", eh! For all intents and purposes, oil is "all liquids". When i drew attention to the Conventional Oil Hubbert Peak last year, it was an academic exercise only. Nobody cares. Where it comes from (conv vs non conv) doesn't matter to price or to supply. Oil is oil. Crude or by-products. It is no use struggling over definitions that are lost in the marketplace. That is for purists and idealists. It took a very long time for Campbell to come to terms with that. His disciples should follow suit.

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Stuart Staniford on December 21, 2005 - 10:23pm

The title was a tongue-in-cheek reference to Professor Deffeye's famous prediction. I try to scrupulous about noting whether NGL is included or not in any given set of numbers I graph - that post footnoted the exclusion of NGL (which is the largest non-crude contribution to liquids at present). As to whether it's important in the marketplace, it all depends who you are. If you're a motorist, you only care about whether there's some liquid that will burn in your engine available at the gas pump. If you are considering investing in a CTL plant or a biodiesel company, I think you should be deeply interested in what's going to happen to the conventional crude supply.

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Dan Ur on December 22, 2005 - 2:04am

Tell me would you also add in the EXXON CEO's predictions of a few time frames ago, predicting that the URR is really 14 Trillion Barrels of OIL ( USING your "everything that we get is really oil" statement ). Taking his predictions into account, since you seem to take other folk's of equal standing predictions, you might average out to 5 or 6 Trillion Barrels of URR. Pushing the peak to the 2050 or beyond range.

PLEASE!

From all that I have read of your comments both here at TOD and on the Yahoo Energy Groups, you seem to want to debunk Peak Oil. If so please step forward and show yourself. I don't mind really, but I do dislike folks hiding their true agendas behind their backs.

P.S. My agenda is Learn as much as I can to help me live a better life.

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Luis de Sousa on December 22, 2005 - 5:38am

Hi Fred.

Where it comes from (conv vs non conv) doesn't matter to price or to supply.

That's quite a naive statement. There's a big difference between regular oil with an EROI of 1:10 and corn ethanol witn an EROI of 1:1.3 at the best.

Imagine I tell you this:
"Yesterday a backery store closed, today wheat is more expensive"
You'd probably think I'm not that smart.

The prices rise since mid 2004 can only be explained by an higher dependence on lower EROI liquids (other than con Oil). I hope you can realize the rest.

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creg on December 22, 2005 - 9:05am

Freddy you left out the question mark. Happy Peak Oil Day?

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Dave Cohen on December 21, 2005 - 10:04pm

I would only add that URR world production predictions--say, about 2350 Gb barrels, a number that Stuart has used lately--are completely meaningless when we are looking at production in the next 10 years. That is the peak oil time frame and that's what we need to care about. This is the crisis period in which large economic dislocations may occur. The potential worldwide economic "recession" based on shortfalls in conventional production due to declines in this period may have longer term impacts on what supply is available later.

I can no longer abide talk from IEA, EIA, USGS, IHS Energy/CERA and others that there is plenty of potentially producible hydrocarbon liquids--3 trillion, 4 trillion, hey, sky's the limit! Reserves growth--not based on new discoveries, of course, but based on better "knowledge" of what actually lies under the ground and is recoverable. There may be lots of potentially recoverable hydrocarbons out there (leaving aside the EROEI) but as far as "conventional oil" goes, which we have not weaned ourselves of, these estimates make no difference whatsoever in any timeframe we care about. Tar sands in Canada provide the best example--the best estimates I've seen put production of these at about 4.0/mbd by 2020. But by that time, declines in major producers (Russia, Indonesia, China, Mexico, Norway, the UK, Quatar, Kuwait, Saudi Arabia?) will have swamped the increases. So, let's get real here. Now would be a good time to do that.

We are concerned about available supply year-to-year to meet demand--that's it--in a timeframe that makes sense. Millions of barrels per day, year to year--2006, 2007, 2008 and so on. That's what we should care about, not proven & probable reserve estimates that indicate trillions of barrels of available supply in the longterm.

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jkissing on December 25, 2005 - 2:59am

It seems we do have a refinery bottleneck, preventing climbing crude stocks from being converted to products and thereby reducing product prices. However, quite a few refiners are expanding as fast as possible, not least Valero, which will profit handily on low cost heavy/sour crudes whether we peak or not. We will then see if the world can produce enough to continue the current high rate of refinery utilization.

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