DrumBeat: May 29, 2007
Posted by Stoneleigh on May 29, 2007 - 9:00am
Topic: Miscellaneous
Our blind faith in oil growth could bring the economy crashing down
Motorised transport is a form of time travel. We mine the compressed time of other eras - the infinitesimal rain of plankton on the ocean floor, the settlement of trees in anoxic swamps - and use it to accelerate through our own. Every tank of fuel contains thousands of years of accretions. Our future depends on the expectation that the past will never be exhausted.
The energy white paper the government published last week talks of new taxes, new markets, new research, new incentives. Anyone reading the chapter on transport would be forgiven for believing that the government has the problem under control: as a result of its measures, we are likely to see a great reduction in our use of geological time.
Buried in another chapter, however, and so far missed by all journalists, there is a remarkable admission: "The majority (66%) of UK oil demand is derived from demand for transport fuels which is expected to increase modestly over the medium term." To increase? If the government is implementing all the exciting measures the transport chapter contains, how on earth could our use of fuel increase?
Middle East makes inroads into Alberta oil patch
In a startling reversal of history, a Middle Eastern energy company is pushing into the Canadian oil and gas market looking for secure supplies, and, thanks to a battle with activist shareholders on this continent, it may be getting a good deal in the process.
Abu Dhabi National Energy Co. (TAQA) said Tuesday it has struck a deal to buy North Rock Resources Ltd., a Calgary-based oil and gas exploration firm, for $2-billion (U.S.) from Pogo Producing Co. of Houston.
Northrock president David Pearce said he thinks that, assuming Investment Canada approves the deal, it would make TAQA the first Middle Eastern company to become an owner in the Canadian oil patch. “It is my understanding through preliminary discussions that they have a desire to diversify into relatively secure geographies.”
Ilulissat, a town of 5,000 people in the chilly north of Greenland, is hot. Majestic blue icebergs the size of small islands float outside its harbour; its ice fjord drains 7% of the area of the Greenland ice sheet. It is the place to go to see global warming in action. And getting there has just become much easier. This week Air Greenland began commercial flights between Kangerlussuaq, a former military airstrip to the south, and Baltimore in Maryland. American eco-tourists can now fly straight to the Danish territory without going via Copenhagen.
Anxiously watching a different world
Having agitated about global warming for decades, northerners now find the focus is not on them but on wildlife. So while they welcome celebrities who drop by to publicise climate change—a British businessman, Sir Richard Branson, travelled across Baffin Island by dogsled this spring, while Jake Gyllenhaal, an American actor, visited Iqaluit in 2005—they have little time for those who equate saving the environment with animal rights.
What really worries some northerners is that the concomitants of climate change—more shipping, mining, and oil and gas exploration—may threaten the environment and with it the Inuit's traditional life, based on hunting and fishing. “We're more hardcore than Greenpeace because we know what nature is,” says Nick Illauq, a youth leader from Clyde River in Nunavut.
Others want development—but on their terms. Last year Nunavut's economy grew by 5.8%, second only to that of oil-rich Alberta. Much of the boost came from the opening of the territory's first diamond mine. “There has always been a sense that the northern ice desert of Canada was a treasure trove,” says Peter Gillin of Tahera, the mining company involved. Spending on mineral exploration in the three northern territories has almost tripled in the past five years. Of the 130 companies exploring in Nunavut this year, 32 are looking for uranium. Others are seeking gold, diamonds, silver, zinc, nickel, copper, iron ore and sapphires. Guy d'Argencourt, who supervises mining claims for Nunavut's government, recalls the old joke that a typical Inuit family consisted of father, mother, two children and an anthropologist. Now it is geologists who are ubiquitous, he says.
Turkish minister vows to implement gas project bypassing Russia
The Turkish energy minister said Tuesday the ambitious gas pipeline project linking the energy-rich Caspian Sea to Europe, bypassing Russia, will definitely be implemented.
The $6 billion pipeline project, referred to as Nabucco, is expected to run through Turkey, Bulgaria, Romania, Hungary and Austria. Construction is scheduled to begin in 2008, so that the pipeline could go on stream in 2011.
The European Union expects the project to diversify its supply routes away from Russia and boost European energy security.
Re-entering Libya is critical for a company like BP, which is desperate to boost its reserves and is seeing its Russian plans turn sour. But Libya knows just how much BP needs this deal. Gone are the days when BP could walk into a foreign land and pocket most of the revenue.
One of the reasons Western majors have taken so long to return to the country is the onerous terms Colonel Gaddafi’s ministers have set.
Blair praises 'easy' relationship with Gadaffi
"The fact is we need Libya's help now in combating terrorism and there are fantastic, huge commercial opportunities, but it's also important for the development of Africa," Blair was reported to have told journalists during the flight to Tripoli.
He said relations with Libya have been "transformed" and are now "completely productive".
The cruelties of global warming
Peru's glaciers are melting. High in the Andes, freak hailstorms and cold snaps are freezing llamas to death. In the north of Kenya, unprecedented droughts have driven herdsmen into deadly battles for the few water holes. In the mountains of Tajikistan, near the border with Afghan-istan, flooding and landslides are washing away the crops.
Across the developing world, man-made climate change is an indisputable reality and it is already hitting hardest against the poorest nations.
South Korea to start state-led carbon fund
South Korea, which imports 97 percent of its energy and mineral needs, said Monday that it planned to establish the country's first government-led carbon fund in July.
The fund may be as large as 200 billion won, or $216 million, the Ministry of Commerce, Industry and Energy said. It will invest in carbon-reducing businesses approved by the United Nations and profit from selling the carbon credits these businesses produce.
APEC to Study Impact of State-Owned Oil Companies
Ministers from APEC, which accounts for 60 percent of global oil and gas demand, are meeting in Darwin, Australia, to discuss energy security and minimizing harmful emissions. The group's dependency on oil imports is set to rise at a time when governments led by Russia and Venezuela are seizing oil assets from private companies.
``It's a problem that private, international oil companies find it difficult to develop reserves,'' Claude Mandil, the International Energy Agency's executive director, said in an interview today. ``Partnerships of state-controlled and private oil companies are needed, but the way to cooperate hasn't been invented.''
BP Plc's Russian venture lost a court case yesterday over its license to a Siberian gas deposit with enough fuel to supply Asia for five years, allowing Russia's government to regain control of the field as early as this week.
China opposes new Sudan sanctions, defends oil cooperation
China on Tuesday said it opposed more sanctions against Sudan and defended its cooperation in oil exploitation with the Sudanese government.
'If you only put pressure on Sudan, it is not helpful to resolving the issue [of Darfur]; it can only make the issue more complicated,' said Liu Guijin, a special envoy to Sudan for Chinese President Hu Jintao.
China to regulate natural gas imports from June 10
Competition over gas purchases has helped overseas exporters raise prices, it said.
The situation has been blamed on the lax import system for natural gas. Currently, enterprises do not have to satisfy any conditions to obtain import permits for natural gas. After June 10, each application for an import permit will be examined and approved, Xinhua said.
Apart from the three major companies, enterprises controlled by local governments have joined the competition for gas imports, which is contributing to a further hike in prices, the agency said.
Pakistan says BP to bid for state oil firm - official
A Pakistani government minister minister said that British oil firm BP has not yet won a majority stake in Pakistan State Oil (PSO), but it has been approved to make a bid for it.
Minister of Privatization and Investment Zahid Hamid said bidding for a controlling stake in the country's largest oil supplier would only begin later in June.
Iran hopes to finalise India pipeline deal in June
Iran said on Tuesday it hopes to sign a final deal next month for a $7 billion pipeline that transfers natural gas to India through Pakistan, Iranian media reported.
The three countries agreed over the price formula for the pipeline in January and a new round of negotiations started in Tehran on Sunday.
Gazprom goes after 10pc of UK gas market
Gazprom, Russia's gas monopoly, has drawn up ambitious plans to seize control of 10pc of the UK gas market by 2010.
As part of the plan Gazprom is considering building power stations in the UK in partnership with other energy firms, Vitaly Vasiliev, chief executive of Gazprom Marketing and Trading (GMT) told The Daily Telegraph.
Gasoline message heard clearly
Voters are steamed about the record prices they're seeing at the pump, just as the summer vacation season is getting under way.
And lawmakers are scrambling to do something, anything they can to help.
Brushing aside veto threats from the White House, the House last week passed bills authorizing the federal government to sue the Organization of the Petroleum Exporting Countries and to go after price gougers.
The Senate could take up similar provisions in June.
Lawmakers also are taking to the microphones to castigate the oil companies for their refinery mishaps, raise the specter of renewed government intervention into the industry and — this being Washington — take potshots at one another.
Easterners could freeze in the dark
Indeed, Canada's official goal is greater continental co-operation, at the expense of our own security of supply.
For example, in researching how Canada's energy security would be affected by exporting more energy to the United States, I learned that Canada has no plans, or enough pipelines, to get oil to Eastern Canadians in the event of an international supply crisis.
Further, I was surprised that the government was not even studying Canadian energy security.
The National Energy Board wrote me on April 12: "Unfortunately, the NEB has not undertaken any studies on security of supply." Yet the board's mandate is to "promote safety and security ... in the Canadian public interest."
I asked if Canada, as a member of the International Energy Agency, will establish a Strategic Petroleum Reserve. The IEA was created to counter OPEC's boycotting power; its 24 members are supposed to maintain 90 days of emergency oil reserves.
The NEB replied that Canada "was specifically exempted from establishing a reserve, on the grounds that Canada is a net exporting country whereas the other members are net importers."
But that doesn't make sense. Canada may be a net exporter, but it still imports 40 per cent of its oil - 850,000 barrels per day - to meet 90 per cent of Atlantic Canada's and Quebec's needs, and 40 per cent of Ontario's.
In this first year daylight savings time was moved ahead by three weeks, vehicle use in Canada soared. Seems many folks used that extra hour of evening daylight to drive rather than park the car. Or to check tire pressure, a simple way of increasing fuel efficiency.
Sales of SUVs, pick-up trucks and other gas-guzzlers have declined, but remain more brisk than the media suggest. Small-car sales are on the rise.
But often they're a third addition to the family fleet, according to U.S. auto-trend watcher CNW Marketing Research.
That new Prius, Fit or Smart is a balm to the conscience, but seldom a replacement for the Jeep Grand Cherokee and 425-hp Chrysler 300 in the driveway, for hauling and vacations.
Report: Diesels to Outstrip Hybrids in Accelerating U.S. Growth
With U.S. regulators looking to revise fuel economy standards amid concerns for energy security and greenhouse gas (GHG) emissions, new research published by UBS and Ricardo points to combined annual diesel and hybrid gasoline vehicle sales in the United States of 2.7 million by 2012. The Ricardo / UBS research report "Is Diesel set to boom in the US?" sets out the legislative and consumer drivers of engine technology for the North American automotive market over the coming decade, as well as the many candidate technologies available for future vehicle products.
At present, hybrid gasoline technology appears to be the preferred route in the United States, not least due to its attraction as a visible badge of green awareness amongst higher income purchasers. Many original equipment manufacturers plan to launch hybrid products in the next few years, but the report highlights that this technology faces substantial manufacturing cost penalties, which are unlikely to be eroded even in mass production. Diesel has a clear cost advantage over hybrid, even when fitted with the type of complex exhaust after-treatment technologies necessary to meet future, more stringent emissions regulations.
CNOOC to Undertake Deepwater Exploration on its Own
China National Offshore Oil Corp., or CNOOC, Friday said it plans go into deepwater exploration to look for petroleum reserves in offshore China, using its own deepwater drilling rig.
The "experiment" will be carried out in October, Chairman Fu Chengyu told reporters after the annual general meeting of CNOOC's listed unit, CNOOC Ltd. (0883.HK)
This will be CNOOC's first independent foray into deepwater exploration. The third largest Chinese oil firm in terms of assets has so far signed 10 deepwater contracts with foreign companies, such as Canada's Husky Energy Inc., (HSE.T), to use their expertise in drilling in depths where it lacks the necessary technology.
Britain may have missed its chance for clean coal
Britain could be on the verge of missing a huge opportunity to export clean coal technology around the world, energy analysts said yesterday.
They warned that BP's decision to abandon plans for the development of a "green" power plant at Peterhead, Scotland, following this week's Government white paper on energy, could be the start of a slowdown in British efforts to tackle climate change. Stuart Haszeldine, an Edinburgh University geoscientist, said: "The Government says it wants to lead a carbon capture and storage project. Well, it had a lead. Now it has a lead in hot air."
The warning follows comments from Richard Budge, the chief executive officer of Powerfuel, which is now installing clean coal technology at the newly-reopened Hatfield colliery. Mr Budge said energy producers are not likely to follow his company without a much clearer position on financial incentives from the Government.
Australian bet on clean coal risks climate change
The Australian Labor Party (ALP) is counting on clean coal technology (CCT) to achieve long term energy security by exploiting Australia’s huge coal reserves. This is a high risk policy given the enormous challenge of CCT which captures carbon dioxide and buries it in exhausted oil or gas fields. It suggests that the ALP, like the current Howard Government, is in thrall to the fossil fuel lobby.
As governments worldwide look at nuclear power as a possible answer to global warming, China has embarked on a nuclear-plant construction binge that eventually could exceed the one the United States undertook during the technology's heyday in the 1960s.
Under plans already announced, China intends to spend $50 billion to build 32 nuclear plants by 2020. Some analysts say the country will build 300 more by the middle of the century. That's not much less than the generating power of all the nuclear plants in the world today.
Canada sued over greenhouse gases
Environmental group Friends of the Earth Canada launched a lawsuit against the Canadian government on Tuesday for not meeting its commitments under the Kyoto Protocol on reducing greenhouse gas emissions.
The lawsuit, filed in the Federal Court in Ottawa, says the government is failing to meet Canada's commitment under the Kyoto treaty to cut its emissions of greenhouse gases to 6 percent below 1990 levels.
Chevron Forms Biofuels Research Alliance
Chevron Corp. said Tuesday it formed a biofuels-research partnership with Texas A&M University.
Financial terms of the partnership with Texas A&M's Agriculture and Engineering BioEnergy Alliance were not disclosed.
Over four years, Chevron Technology Ventures will support research on developing biofuels from cellulose, such as plants' stems, stalks and leaves. Unlike current ethanol that's produced from corn, cellulosic biofuel could be made from nonfood crops.
China Crash - domino effect on US markets, and collateral effect on resource stocks...
A few days ago Alan Greenspan had a go at bursting the Chinese equity bubble by describing it as just that, but it had little effect as the forces of greed remain in control, although as we shall see, greed could turn to fear at the flick of a switch in this market. We should keep in mind, however, that calling a top even towards the end of a massive bull run is notoriously difficult, but that doesn't mean that when ridiculously overbought conditions prevail, as now, we shouldn't attempt it, because of the serious collateral damage that will ensue in other markets and sectors once the bubble bursts. Note that the bursting of the bubble does not in itself imply that there is anything "wrong" with the Chinese economy per se, rather it is the inevitable consequence of wild speculative excess.
Going Ballistic: The Hard Facts About Parabolic Spikes
In his new book, The Black Swan, Nassim Nicholas Taleb expands on a concept he addressed in his first book, Fooled by Randomness. In the opening, Taleb addresses three attributes of the Black Swan:
“First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.”
And when we understand this concept, we realize why anticipating the rare event is critical, and that any model that does not address this risk is dangerously incomplete. Parabolic rises contain within themselves the warning of a price breakdown. As such, I strongly encourage you to help your clients and friends to stop extrapolating our current conditions into the indefinite future, and to stop repeating the phrase, “Well you have been saying that the markets were going to decline for a long time, and nothing has happened yet.” The real science of price movement and the pragmatic restrictions of debt overhang reveal the fallacy of such a mindset. But, emotions can cloud our judgment and make us rationalize the most reckless of actions.
Well-known Guardian (UK newspaper) writer George Monbiot is at last having some serious thoughts on Peak Oil at:
http://www.guardian.co.uk/commentisfree/story/0,,2089988,00.html
These show that peak oil is well off the UK government radar: “The energy white paper the government published last week … mysteriously forgets to mention that the government intends to build another 2,500 miles of trunk roads and to double the capacity of our airports by 2030. If our economic lives depend on continued growth in the consumption of transport fuels, it must first have determined that such growth is possible. Mustn't it?” In fact it depends on the IEA for assessments and they say “Estimates (of peak oil) range from today to 2050 or beyond.” As Monbiot says “You might have imagined that the government would have shown just a little curiosity about whether or not its transport programme will bring the economy crashing down.” It looks they didn’t and it looks like it will.
By the way, if you think there are some barmy and brainless people writing comments on the TOD site, you should take a look at some of those that follow the story on the site above!
I agree about the "quality" of many of the comments in The Guardian relating to Monbiot's article about Peak Oil. What's both irritating and depressing about many of the reactions to the piece, is that the Guardian is a newspaper for the affluent and educated Middle Class, more or less.
The number of people who have an almost religious faith in progress, a tech-fix solution and the magical ability of market forces to conjure alternative sources of energy out of the air, is, candidly, rather frightening.
I've been debating Peak Oil with some highly educated, inteelligent, talented and influential people lately; and they just don't get it! The more I develope my arguments, the less they seem go get it! It's rather odd. It's almost as if I'm presenting an outline for a science fiction novel to a very sceptical publisher, who doesn't think the idea will fly with the public at all.
I think the consequences for our way of life are so enormous and challanging, if Peak Oil is imminent and we've done virtually nothing to mitigate it, that people simply refuse to face it, but prefer to turn away and party on!
Most Grauniad (sp intended)readers are paid out of the public purse.
Never had to meet a payroll or think about ROI's of any description. Completely paid out of taxes, they live in a nirvana of zero thought and the public purse. Good pensions too!
Good place to go if you want a job as :
Lesbian, Gay Outreach Coordinator
Five a Day Fruit Coordinator
Real Nappy Coordinator
These are actual jobs. Really.
Educated but still thick.
All well salaried, perked and index linked pensioned.
One day the ever open public purse may get tight though.
As Al Gore says "It is difficult to get a man to understand something when his salary depends upon his not understanding it".
Even if he does understand it (and I think many people don't, even if you take the trouble to explain it) what can one person do to turn it round? ... so, party on and hope somebody else can fix it!
The Kyoto global warming targets, if achieved, would mean massively less FF use ... but also a massive recession ... so which democratic government is going to propose that? Who would vote for them?
Xeroid.
Or to paraphrase "It is difficult to get a man to understand something when his salary does not depend upon his understanding of it".
Exactly.
Xeroid.
Gore was quoting the very perceptive Upton Sinclair.
The quote is from Upton Sinclair. Lots of people have used it.
"The more I develop my arguments, the less they seem to get it!"
Writerman, recognize that you are presenting information that contradicts decades of societal programming reinforced by everyday experiences. Thoughts do not float around freely in the brain. They represent specific physical pathways. While there are some opportunities for plasticity or malleability to alter the established pattern, the already conditioned responses are so interdependent and elaborately interconnected that, for most people, only a tremendous shock (analogous to ECT) or a great deal of time and effort to recondition will bring about the kind of reprioritization you intend to illicit.
The assumption is often made that we all have the same mental filtering system and all one needs to do is submit the requisite number of inputs to redirect the system. However, there are enough subtle variations in how sensory input is processed to account for differing reactions to the same information.
An extreme example of an atypical filtering process is the autistic savant who blocks the heaps of distracting sensory data the rest of us constantly wade through and intensely focuses his or her mind on one area of interest. It is thought by many that this type of focusing reflecting unusual temporal lobe physiology (part of the filter system) accounts for their heightened perceptions and memory.
I'm guessing the typical TOD reader has a filter that tends to ignore a lot of the noise that most people get caught up in. It seems like the people you are having a difficult time with are increasingly unwilling to attempt to process verbal information that conflicts with their established patterns of thought and the noise that continues to reinforce those patterns.
Don't give up. FWIW, I've had success with several seemingly hopeless cases.
You can see the exact same effect here too when a non-polically correct opinion is delivered.
Try suggesting that a 20% decline in petroleum production in five years -- to early 1990s levels for example -- might NOT cause collapse/depression/mass dieoff.
Heresy!
Admittedly, a 40%+ decline would be pretty interesting.
"only a tremendous shock (analogous to ECT) or a great deal of time and effort to recondition will bring about the kind of reprioritization you intend to illicit."
Apart from a very small percentage of people, I think you are right - a short, sharp shock (God, one of the Thatcher government's phrases!), will be required. Candidates:
* A GOM hurricane to put oil above $100
* Stock market collapse when KSA run out of excuses and admit they have little or no spare capacity
* Recession which sees mortgage foreclosures hit a few % of the population
The last of these may not be sudden will I think will happen anyway over a period of a few years but whether recognition of the cause will come with it, I wouldn't like to say.
Hi,
Hmnn...interesting question, what are the conditions for change.
I offer space, as in "emotional space" or acceptance, as productive. (In a way that shock and/or hard times can never be.) Emotional space, or "unconditional positive regard" - (positive and yet disinterested attention) allows the brain to think. Acceptance and connection, respect for autonomy (seeming contradictions) - are what people crave. Most people have a lot of the negative, going some ways back.
www.cnvc.org, www.newconversations.net, www.gordontraining.com.
I noticed that too --- the completely uninformed comments that is.
Who is the Monbiot for the United States? The U.S. needs one, as I am sure we could come up with much more alarming figures for planned road building and airport expansion here. Add roads to the things like coal we should have a moratorium on. We talk incessantly about better gas mileage, EVs, VMT, etc., but there is little talk about the crux of the problem -- more roads everywhere. When you are in a hole, stop digging. That's what we need to do --- stop digging.
Best hopes for peak roads. Stop the roads, lay the rail.
Just a little strange fact, but every airport across the US has some sort of "Master Plan" (capital letters) usually for 5 to 20 years out, and most of them include some aspect of development and expansion.
First Law of Holes: Stop digging.
Updated World Production Forecasts including UK Oil Production Decline
The UK Govt must believe that peak oil is many decades away! The UK is building more roads while continuing to import more oil. The UK has been a net importer of oil since 2005.
The UK Department of Trade & Industry (DTI) states that UK had proven and probable (2P) reserves of 6,120 million barrels at year ending 2005 (816 million tonnes of crude, condensate & NGLs * 7.5 barrels/tonne).
Ultimate recoverable reserves for the UK is flattening as shown in the chart below. This reflects the lack of recent large UK oil discoveries. No new oil discoveries provides more support to continued decline in UK oil production rates.
Fig 1 - Ultimate recoverable reserves including possible reserves (UK DTI) - Click to enlarge
UK DTI production for 2006 was 535 million barrels. Thus, UK reserves (2P), for year ending 2006, is estimated to be 5,585 million barrels (6,120-535).
The reserves to production (R/P) ratio is only 10.4 years (5,585/535). This means that the UK would have no more oil production after ten years, assuming the UK could produce 535 million barrels per year. In reality, the oil production declines each year so that the UK would still be producing oil after ten years, but at low rates.
The 2006 annual depletion rate of the remaining reserves is a high 8.7% (535/6,120). If the depletion rate is held constant at 8.7% for 2007, then the 2007 UK production will be 486 million barrels (.087*5,585). This represents an annual production decline rate, from 2006 to 2007, of at least 9.2%, which disagrees with this optimistic DTI forecast which shows a production increase from 2006 to 2007. The trend from a peak in 1999, from the DTI forecast, shows a consistent decrease in annual oil production. If depletion rates decrease down to a more reasonable 6%, UK oil production could drop suddenly this year.
Maybe the new high sulphur oil production, starting in 2007, from the Buzzard field is causing the DTI forecast increase. However, Buzzard’s 60 million barrels/year will only be just enough to keep UK production constant from 2006 to 2007. In 2008, the irreversible steep production decline would continue.
The effects of these UK production decline rates have been included in the following updated charts which are derived from a bottom up forecast from over 300 oil regions/megaprojects.
The chart below shows the annual production rate declining at 1%/yr until mid 2009. Afterwards, the production rate declines faster at 3%/yr to the end of 2012.
Fig 2 - Forecast Crude Oil & Lease Condensate Production - Click to enlarge
World total liquids production has been on a peak plateau since the start of 2006. Increased forecast production of natural gas liquids and ethanol should extend the plateau until the end of 2009. After 2009, the world will use less oil.
Fig 3 - Forecast Total Liquids Production - Click to enlarge
Ace,
Great work, and thanks for the update.
But, do you EVER post any good news?! :-P
3% decline within 5 years, and less than 80MMBPD by 2010 (eyeballing) not a pretty picture.
ace - thanks for this. You are right that Buzzard was expected to halt - for just one year - the 9-10% annual decline in production. However, I recall someone here saying a few weeks ago that they were not sure this had actually happened. Does anyone have info on this - has Buzzard come fully onstream to offset the declines elsewhere, or have declines of other fields accelerated so much that Buzzard is unable to stop an overall fall in production?
Maybe Chris Vernon, MUDLOGGER or one of the other seniors working in Scotland have some info.
ace - another late comment - I see you have moved the total liquids peak from July 2009 forward to mid-2008 compared to the last version I saw. What new data is this based on?
From your chart a DRASTIC and ever-widening gap between demand and supply will exist in little over two years from now. That will surely see the world economy in massive trouble.
Maybe this should be re-posted at the top of today's drumbeat or be an article in its own right with further explanation.
Hi doctorbob,
The forecast data have changed due mainly to applying appropriate annual depletion rates of remaining reserves to many other countries after applying it first to Saudi Arabia.
For Saudi Arabia, the annual depletion rate for remaining reserves is assumed to stay below 5.5%/yr as shown by the black line. This produced the declining production rate after mid 2009, shown by the blue line.
Saudi Arabia Forecast to Dec 2020 - Click to enlarge
The main reason for peak total liquids moving to mid 2008 is that I decided to apply the constraint of limiting the annual depletion rate of remaining reserves to other countries which have passed peak production. Essentially, this means that the production decline rates are steeper when the peak is passed as shown by the chart below. At the summit of the curve the production decline rate is zero. A year after, the decline rate is small. However, ten years later the decline rate can be steep.
US Oil Production Theoretical Curve - Click to enlarge
Another example: The North Sea peaked in 1999 followed by three years of very low production decline rates of less than 1%/yr. Seven years later, in 2006, the production decline rate is 9-10%. It could increase to 12% in 2008. Past 2008, the decline rate could drop back to 10%.
Before applying this annual depletion rate methodology, the North Sea C&C forecast for mid 2009 was 3.7 mbd; after 3.3 mbd. Russia: before 9.4; after 9.0. Mexico: before 2.8; after 2.6. USA: before 5.5 mbd; after 5.2 mbd. Other countries also changed.
Before the changes, the total liquids peak was 87 mbd on July 2009. Now, it is 86 mbd on July 2008, but it was also 86 mbd on July 2006. Maybe peak total liquids has passed. Nevertheless, I think that specifying a “peak oil plateau” is more helpful than forecasting a peak month. When world total liquids production goes off the plateau at the end of 2009, the production rate could fall quickly. As Colin Campbell says "It's not as important when you peak, it's the vision of the long decline that follows."
I will post an update of the forecasts after the next EIA data release, due next week.
It always seems to surprise me just how many comments are 'clutching at straws' in persuit of endless economic growth - those folks 'just don't get it' but, unlike me they probably don't spend much time on this site! I've just tried to redress the balance a little - comments this morning by ChrisB1.
On May 18 WTI and Brent closed at $64.93 and 69.26 respectively.
On that same day Malaysian Tapis closed at $74.94, $10.01 above WTI crude.
I must use prices of May 18 to show the spread because there seems to be no more recent prices for Tapis on the net. We all know that US crude prices are being depressed because of the bottleneck at Cushing, Oklahoma. Brent more closely reflects the price of crude in Europe while Malaysian Tapis is the benchmark for Australia and most of Asia.
Historically Brent has traded slightly below WTI because WTI light crude is a slightly better grade of oil than Brent. Yet now the market is completely out of kilter when the world price is compared with that of WTI. Looking back through the database at Tapis, it has traded anywhere from slightly below WTI to slightly above it, but this is the first time, historically, that such a wide gap has opened between the two.
The dynamics of crude oil
As you can see from the above Brent is of slightly lower quality than WTI. However as of this moment, WTI is trading at $64.31 and Brent at $70.06, a $5.75 premium to WTI. There is something seriously wrong here.
Ron Patterson
In terms of UK petrol (gas) prices which generally reflect those in W Europe, the current prices are only about 2-3% below the peak seen post-Katrina. At that time, a typical non-superstore filling station price was 99.9p (~ $1.94!) per litre, while now 96.9 to 97.9 is average. The lowest I've seen in the last few days for 95 octane, the standard Uk fuel, is 94.9p. So it's clear that the Brent prices are a better guide than WTI for Europe at present.
Maybe the graphic in the right-hand column ought to be changed to Brent, or the Brent shown in tandem with WTI. At least for the short term, the WTI price is misleading in terms of global oil prices.
hi Ron,
You can get almost live TAPIS prices here:
http://www.upstreamonline.com/market_data/?id=markets_crude
and some kind of daily average on a graph here (seems to consistently be a bit lower than the above link?):
http://www.aip.com.au/pricing/marketwatch.htm
cheers
Phil
www.aspo-australia.org.au
Phil, thanks a million for this link. I have been searching for such a link for some time but neither Google nor News.Google seemed to bring it up.
Right now things are worse than I thought, Tapis is trading at a $12.51 premium to WTI. Why do we see no reference to this anywhere in the media????
Ron Patterson
I issued a Media Release today through ASPO Australia to all Australian print media and most of the other major media outlets discussing exactly this.
As a result I'm going to be on ABC Radio in South Australia (one of the less populous states) at 2:45pm SA time tomorrow afternoon (3:15pm AEST, 0515 GMT). Not sure if any papers are going to run with it..
In the Media Release, I refuted the claims that our high petrol prices are due to refining shortage in the US which is what our economists are blaming it on. I acknowledged that was part of the problem but said that high TAPIS oil price accounted for most of it.
If only we could prove that Asian refineries are not quite maxed out and are in fact struggling to get all the crude they need. That Saudi Arabia continues to cut their deliveries suggests that is the case.
You can make a strong case that the cost of gasoline in the US is driven by the marginal price of importing a tanker of gasoline from Asia which has to be refined from a $78 barrel of crude.
cheers
Phil.
Thanks Phil for this:
Makes all the above understandable. Nice to have the odd bit of the jigsaw filled in from time to time. Makes me feel just a little less brainless.
Hi Ron,
I find these differences a good indicator of where we see demand destruction (or demand reallocation, at this point).
Look at ASIA, Tapis benchmark - KSA reducing ASIAN deliveries for the last 6 months. They have to fill those gaps, so they are driving up their local price(benchmark) to reallocate demand away from those who can't afford it. And with China and India (as well as others) blockbuster economies in this region they are ABLE and WILLING to pay more USD$ for the OIL.
Look at Brent, Europe, AFRICA, etc. - Benchmark not as high as Asia, economies growing as much smaller rates, and not many with huge surpluses. I see the Brent benchmark the price level that keeps many African countries from consuming, and reallocating that demand to Europe. Clearly, a large portion of Africa is already priced out, and probably why the price is holding in a small range (so far).
In the near future, say this fall (Ace's graph), I suspect we will see the first of real demand destruction(downturn), coupled with recession in the US (others?), and a corresponding increase in all the benchmarks, with the largest being the TAPIS. (TAPIS will increase to the point to destroy demand in poorer Asian countries).
Yes, oil is fungible, but regional pricing is a reality and this difference will become more apparent as long as it is priced in USD and the US can still print money.
I could be wrong, but I have been considering this for the last while and I believe it is playing out already (as you indicate with the TAPIS spread widening already).
Don't have such high expectations for the media. You are not their audience.
Hope you continue to find info and share it here.
Thanks for the new price quotes on crude. Been looking hogh and low for this!
Apologies in advance if this is a no-brainer, but why isn't there a benchmark price for the crude produced in Saudi, or Russia for that matter, since they are the heavyweights in global production right now?
Saudi, and the rest of the Middle East, uses several benchmarks for their basket price. They use the Oman-Dubai price, the WTI price, the Brent price and in the end get the best price they possibly can for their oil.
If you check out This Week in Petroleum you will see that the "Crude Oil Estimated Contract Prices" for OPEC averages betwee