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146 comments on The Net Hubbert Curve: What Does It Mean?
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146 comments on The Net Hubbert Curve: What Does It Mean?
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Whilst I agree with the main premise of this article, I think the calculation is too simplistic and based on far too few data points.
First, defining EROEI is almost impossible, because of where to draw the boundary. Each component of the energy input to the system to some extent IS the economy - if 10% of the population is economically supported in the energy industry, that is 10% of the population that does not need support within the rest of the economy.
Beyond that, my guess is that worldwide, the EROEI is higher than that for US developments, since the US is one of the most highly depleted oil producing regions in the world. Finally, I guess that the figures quoted are for new field developments, not an average figure for oil production as a whole, so that the bulk of oil from existing fields still has relatively high ROI, if you allow for sunk costs already invested.
So I suspect a more realistic graph whould have a slightly less steep energy cliff, but an energy cliff none the less.
And finally, to contradict myself, any complex society faced with such an energy cliff would do very well not to collapse completely, and would probably contract so fast that it will end up leaving most of the oil in the ground anyway, as the economy could not support the massive up-front investment to build the infrastructure needed to exploit such difficult to extract resources.
Actually I doubt that the Hubbert curve does actually peak at 50% URR - Hubbert knew nothing about recently introduced innovations like horizantle drilling. For example, the UK, an area recently developed using these techniques appears to have peaked at around 70% using Government figures for URR.
So, due to technology Hubbert becomes a shark fin, due to EROEI an even sharper descent post peak, due to ELM Net exports .... oh dear!
Xeroid,
I agree. I wanted to keep this post succinct so I did not venture into different Hubbert shapes etc., but the gross vs. net relation still exist as you point out.
I guess you could argue that the US--and other post-peak oil importers--are facing a "squeeze play," between declining domestic production (at a lower EROEI) and a long term decline in net oil exports.
The focus of our upcoming update to the top five net oil exporters paper is annual net export rate versus cumulative remaining net oil exports. For example, using 1996 as a final production peak, Indonesia's net exports in 1998 were only 9% below their 1996 rate, but by the end of 1998 they had shipped 44% of post-1996 cumulative net oil exports.
Xeroid:
"So, due to technology Hubbert becomes a shark fin, due to EROEI an even sharper descent post peak, due to ELM Net exports .... oh dear!"
This is the quintessence of this topic. Scaring.
See my other post its not quite that bad :)
Its not quite additive :)
Not sure the differences are all that important however :)
It would be interesting to see a graph of NET energy available to society given EROI declines even if the Cornucopians are right and we can stay on plataue or even lift Gross Oil output to 2030...
Then toss in declines, ELM, the four horsemen, to get a range of scenarios...
Nick.
Well the shock model by WHT can model this the problem is the data. I think Web has nailed something very fundamental for modeling complex systems.
Briefly when I used to model chaotic systems we worked very hard to make sure initial conditions where random in all directions. In my opinion the beauty of what Web has done is recognize that you can shape the initial conditions such that they are not evenly distributed thus the input effects the output.
This shaped pulse is in a sense a simple model for a complex system !
However this leaves open the problem of how to shock the model. Dispersion is and obvious first order shock but then what ?
And next we simply don't have the data.
It might be possible to take the raw data and guess the shocks something along the lines of a Fourier transform.
I don't know if web has looked at deconvolution i.e run the shock model in reverse.
As and example instead of using discovery data to mean production use it to mean capacity. And although the data is incomplete it does work to constrain the viable solutions. And of course we have hard data from above ground events. How the system rebounds from and above ground event helps to narrow the possible outcomes.
Web of course has known this all along but it just recently hit me that the shock model is fundamentally valid for modeling complex systems.
Ivanhoe on Hubbert 1997
-------------------------------------------------web/20060902171235/hubbert.mines.edu/news/Ivanhoe_97-1.pdf
Hubbert says: “The curve does not keep going up, but passes over a hump and then goes back to zero. This is the one
future point on the curve that you definitely know and it greatly facilitates the mathematics. The area
under the (production) curve is graphically proportional to the amount of development. The area under
the curve cannot exceed your estimate. It is a very simple, but very powerful method of analysis.”1 “This complete cycle has only the following essential properties: The production rate begins at zero, increases
exponentially during the early period of development, and then slows down, passes through one or more
principal maxima, and finally declines negative exponentially to zero. There is no necessity that the
curve P as a function of t, have a single maximum or that it be symmetrical. In fact, the smaller the region,
the more irregular in shape is the curve likely to be. On the other hand, for large areas such as the United
States or the world, the annual production curve results from the superposition of the production from
thousands of separate fields. In such cases, the irregularities of small areas tend to cancel one another and
the composite curve becomes a smooth curve with only a single practical maximum. However, there is no
theoretical necessity that this curve by symmetrical. Whether it is or is not will have to be determined by
the data themselves.”2
------------------------------------------------
Ivanhoe says:" Hubbert wrote virtually nothing about details of the “decline side” of his Hubbert Curve, except to mention that the
ultimate shape of the decline side would depend upon the facts and not on any assumptions or formulae. The decline
side does not have to be symmetrical to the ascending side of the curve - it is just easier to draw it as such, but no rules
apply. The ascending curve depends on the skill/luck of the explorationists while the descending side may fall off more
rapidly due to the public’s acquired taste for petroleum products - or more slowly due to government controls to reduce consumption."
Yep and just like my brief foray into mathematics I busted my ass to discover this only later to find out
that the Gods has already figured it out :(
However the fact that I independently reached the exact same conclusion should be of importance.
I'm sure over the next few years a lot more people are going to understand in painful detail what these paragraphs mean.
When Oilmen state things like "There is enough oil left in the ground to maintain current rates of consumption for X years" there is an implicit assumption that if no new oil is found then at the end of 'X' years there will be a cliff down to zero.
Any new oil found simply extends 'X' a bit, makes up for any drops in current output or raises the 'current rate of consumption' variable when translated into pumped oil...
I guess it is highly unlikely to hear one of them say: "demand for our product will decline over the remainder of the century because its price will repeatedly become so high that fewer and fewer people will be able to afford the benefits it bestows" -It's just not good sales talk is it? :o)
Nick.
The rapid decline in the EROEI is a symptom of the shark fin.
If we where going to have a nice mirror image curve then EROEI would have stayed constant.
They are not exactly additive i.e declining EROEI and asymmetric production curves are almost the same thing.
Not quite but its a chicken and egg problem. Its not a shark fin extraction profile and a shark fin EROEI its both i.e your saying the same thing using different approaches.
My opinion is of course that EROEI is indicative that the shark fin model is correct i.e its a measurement one would expect if you are having a shark fin extraction curve but no one believes you :)
With that said export land is additive on top of the production curve. And in a sense the EROEI does add a bit to export land i.e more oil is being burned internally to extract oil so it makes export land worse. So in a sense export land is also a bit of a double measure i.e you need to subtract the increasing internal use in the oil exporting countries thats a result of declining EROEI.
Of course a country facing falling real production can also claim questionable increases in internal consumption to hide decline. KSA's consumption changes are questionable for example.
This does not detract from the calculation of next exports it does not care what the real reason is for the decline in exports it works even if numbers are being faked.
However I'd argue its underestimating the decline rate since certainly part of the change is rising internal demand thus this will continue even as production falls. In short the real decline in net exports should be accelerating making westexas's current model optimistic. Of course at some point we will see overall net export decline to the point that prices will increase and drive true internal demand while the shark fin model implies real net oil production will be falling rapidly if you add in EROEI concepts.
So you can see how all three concepts have some overlap i.e they are doing a bit of double counting of the same underlying lack of oil but they are also additive. EROEI and Export land mix in the underlying shark fin decline but in doing so they are also symptoms or additional measures on top of the underlying decline so they are not pure double counting.
Whats import is that two reasonably different measures independent of assumptions of the real production profile in my opinion point towards the shark fin profile as being correct.
And net exports is and obvious shark fin.
I agree that the work is simplistic. The main point of this post is to stress the fact that NET and GROSS energy are vastly different, but not necessarily that one is "X" more than the other.
David -- At this point I think simplistic is a good way to go. As other have pointed out the actual calculation of EROEI is complex and, more important IMO, very subject to how you choose to model the set up. I also don’t think such a calculation based upon energy quantities is the key. The economics that determine drilling operations isn’t based upon energy volumes. The process is evaluated strictly on $’s vs. $’s out. Not that there’s a complete disconnect between energy content and $’s. But the actual FF energy used to drill a well is generally a rather small portion of the total operation. An extreme example: Time A prime rate = 16% and Time B prime rate = 6%. Same prospect…same EROEI 5:1... same oil price. But during Time A the well won’t be drilled because the cost of financing drives the return to less then 0. And then there’s Prospect X with an EROEI of 1 but a spike in oil prices pushes the economics to a 20% rate of return so it gets drilled.
This isn’t an argument against EROEI and its implications. But the oil industry has never based decisions upon EROEI and never will IMO. That adds another reducing/addition factor to your net model. Today many potentially viable NG projects are not being drilled even though their EROEI might be attractive. Current low NG prices won’t allow drilling. In that sense low commodity prices generate what one might call an artificially low “effective” EROEI. Similarly, high oil prices last year almost certainly caused a number of potentially very low EROEI oil projects to be drilled.
Will we ever drill projects with EROEI’s less then 1? Low or even negative EROEI is possible when look at the net process. It’s possible when you factor in the energy component from UNSUCCESSFUL projects. That’s the nature of oil exploration: high prices spur drilling but the success rates falls quickly as the greed factor generates a large percentage of poor prospects. The price spike of the late 70’s led to 4600 rigs drilling…twice the number drilling when oil prices peaked last summer. I can promise you half those rigs were drilling crap and generated no reserve gains. But they burned up a lot of $’s and energy in the process.
I wouldn’t try to model the economic effect on the Hubbert Curve. Too many Y’s in the road. But it would probably be good to keep in mind that the tail of the curve will be determined by more then just the physical presence of a certain volume of oil. Your curve does an good job of that IMO. As you imply it’s not meant to be a quantitative prediction but does offer a qualification to Hubbert’s original projection.
And for the comment regarding Hubbert’s blindness to future new oil trends bear in mind that he had no clue to the huge potential we developed in the US offshore shallow water plays let alone the Deep Water plays currently being developed. But his very old curve for the US still works fairly well.
All economic activity is about $s and making a profit and consumers affording the required price, oil is no exception.
It's the inability to afford the price that will eventually deter consumers from using the oil for energy use, as we have already seen in the last few months - the price is all they need to make their decision.
The expected shape of Hubberts peak due to geology, EROEI and ELM just allows us to predict that the price has to become completely unaffordable for energy use much more quickly than most people suppose.
From reading his paper I think Hubbert was correct about the peaking phenomenon, got lucky about the timimg of the US peak and was completely wrong about the volume at peak because, as you say, his knowlege of actual reserves, their flow rates and their affordability was unknown to him, just as they are to us.
I am inclined to at least partly agree with this. Part of the reason the US peaked is because there was easier (cheaper) to extract oil elsewhere (ME). Had there been no alternative I don't see why they could not have kept production increasing for several more years. I say this because almost 40 years after peak there is still significant production. There is no reason production could not have been kept increasing, albeit at the expense of a later and steeper decline.
BTW I think this is in general true. I.e. later fields are experiencing accelerated production (i.e. above what Hubbert's symmetrical curve would predict) because later fields are increasing capital intensive to produce. Therefore accelerated production is required to get the needed IRR, i.e. recapture investment and profit quickly enough to attain the IRR. Another reason Hubbert's bell is skewed (and us too, with an 'r').
Also, on the theme of declining EROEI, it is important to remember that not all the E(in) will be from oil. Much of it will be from gas, coal, nuclear etc. Of course each of these are also facing declining EROEI values in the same time frame, but not all. The EROEI for hydro is probably fairly constant, for renewables it is probably rising with improving technology, and even with nuclear, it might not be falling.
However, coal, oil and gas represent over 80% of primary energy supply worldwide, and their EROEI are (probably) all falling. Certainly coal is.
It should not be too difficult to combine crude figures (sorry for the pun) from each energy source to give a better estimate of what I call 'peak net energy' from all main energy sources. I suspect it will not be more tha a decade or two in the future.
Also he couldn't anticipate the Yom Kippur War and the Iranian revolution...I would say that it was rather a pretty nice shot.
Many times a good way.
The rata of EROEI decline cannot be a simple interpolation IMO, see my post below. I think a better approach is to take a look at the increase of E(in) over the decades to get the samo amount of E(out).
EROEI is not 'real'. It is a direct result of the proportion between E(out) and E(in). So while I titally agree with your basic idea, I'd use E(in) instead of EROEI. In other words: I do agree with you that E(net) declines a lot faster than E(out), but I don't think it wil be as steep as your graph shows.
More details below.
According to the EIA we've drilled 3164170 dry holes in the US since 1949, if you want another data point.
Quite the energy sink.