Today's reading assignment
Posted by Yankee on October 11, 2005 - 11:07am
Topic: Supply/Production
Tags: cera, oil, peak oil [list all tags]
"The main risks to our Supply Expansion scenario are above ground, not below ground - changes in the political and operating climate that could delay expansion." In CERA's downside "Delay and Disruption" scenario, capacity increases by only 11.5 million barrels between 2004 and 2010.Whoops.
What is the implication? Will delayed projects and disruptions in the supply chain lead to temporary shortages before "Peak Oil" hits us? Perhaps we should review CERA's implied assumptions. They are, after all, the basis of CERA's optimistic conclusions.
The rest of this article discusses many of the supply issues that HO and Stuart have presented before, but intersperses them with a number of other concerns, such as the stability of the political and labor status in oil producing countries, the threat of terrorism, and resource nationalism.
Assumption # 4. The proven reserves claimed by OPEC actually exist.Even when Cooke feels fairly confident about something—like that unconventional oil sources really could contribute to the total supply—he tempers his enthusiasm:It is unlikely the proven reserves claimed by OPEC actually exist. Many believe they are a fabrication of the quota justifications that occurred in the 1980s. Furthermore, the claim that "Proven" reserves are increasing needs to be examined because in a sense we are merely talking about definitions. Words. As the price of oil increases, it becomes economically feasible to spend more money on production. Make sense? So the reserves that could not be classified as "Proven" at $26.00 per barrel become damn attractive if the price for a barrel goes to $55.00. There isn't any more oil. It's just that "Probable" oil reserves become "Proven" oil reserves as the price of oil increases because we can afford to spend more money on recovery. All we did was reclassify the definition of the oil we already have in the ground. No one found any more oil. Not a drop.
If we add up all of these resources, we probably have up to 1.1 Tbl of unconventional oil to play with over the next 20 years. But our estimate of annual production is much lower. Technical, weather, geography, political, environmental, cost and EROEI factors will limit total production to around 100 Bbl from 2005 to 2020. This estimate – by the way - mirrors the Energy Outlook projections made by ExxonMobile in its "World Liquids Production Outlook" presentation.So, what do you think of Cooke's story?
It's interesting how rising risk makes capital flee. For example why[1] build a lot of fresh refining capacity if your suppliers are highly doubtful? The lack of capital makes the whole chain of energy supply more shaky. Then if you wack it with a bit of mother nature, political insablity, or an economic storm you discover it's not very resilient.
I think all these sources of risk tend to balance out. No one of them gets to lead the parade; because if one gets in front the others get underfunded until they catch up.
How that for meta-pesimism :-)!
[1] Parenthetically the answer to that is: Because the government[2] covered all our risk. That seems to be what is happening in the nuclear power industry.
[2] Which happens at least to some extent because the industry in question goes an talks up how it's far to risky for them to even consider doing what's needed without subsidies.
I think the Defcon rating system is cute, but there is a problem applying it to peak oil issues. When the military declares a particular Defcon, they immediately make the preparations necessary to meet that potential challenge. While we are certainly facing risks of Defon (choose a number)-who's preparing? And an optimistic voice like CERA leads us toward less thought and preparation.
The list of things that have to "go right" for CERA to be accurate is entirely too long, and and a case could be made that several aren't even right today.
Of particular concern is the accuracy of Saudi and other ME reserve numbers. Simply assuming they are right seems inherently wrong to me, yet they are integral to CERA's "don't worry - be happy" outcome.
It's easy to dismiss this issue with a "garbage in, garbage out" joke, as I've heard lots of people do over the years, but the core issue is that if you're constructing any non-trivial model of all or part of the world energy market you're forced to make a buttload of guesses and assumptions.
Spooky is right on the money with the comment: "Of particular concern is the accuracy of Saudi and other ME reserve numbers." The problem is that lacking good data we have to choose between trusting the SA numbers or coming up with our own. The first seems inherently naive, while the second leaves us with a humongous question and no good way to answer it.
I agree that the above-ground issues will be extremely important in coming years. Many PO adherents like to say that in PO we're facing a unique event in human history. I agree with that view, which is precisely why I think that the human element--public policy, war, market psychology--will play a (much?) larger role in the energy markets than they have in the past. Frankly, I don't see how anyone can talk about how serious the arrival of PO is without coming to that conclusion.
And, of course, an increased role for human affairs and reactions makes the process of accurately predicting anything about the energy market all the more difficult.
For X insert the Arabs, or the Jews, or the terrorists, or the Democrats, or the environmental whackos, or Hugo Chavez, or Putin, etc.
At the same time, those arguments are going to blur the advent of Peak Oil since many people will prefer them over accepting the reality of finite resources.
I would think, given the prolific nature of Prudhoe Bay, that both the US and Canadian oil companies have thoroughly looked into the Beaufort area and beyond.
IMHO, THAT might be interesting to look at....
The USGS/EIA was 1.7-Tb in 1984 and is 3.797-Tb today.
Colin Campbell was 1.578-Tb in 1989 and is 2.t-Tb today.
M.K. Hubbert was 2-Tb in 1973.
etc etc
The Avg in our current Depletion series of 11 forcasters is 2.925-Tb of which 1.909-Tb is future production. http://TrendLines.ca
Global warming sounds like a good deal since it's that damned ice that prevents us from drilling there now. The problem is that global warming is shutting down the conveyor belt that makes the Gulf Stream run north and warm up the arctic.
With the conveyor belt shutting down that rapidly thinning ice up in the Arctic may and probably will start growing thicker again, until global warming is strong enough to overpower the effect of not having the gulf stream any more.
So far bigger, more powerfull, and more plentiful hurricaines in the Gulf of Mexico and also thicker sea ice off Alaska.
The good news is the top layer of permafrost that was prematurely melting in the Alaska summers and shutting down the construction period early and opening it late for the last few years will start freezing earlier and melting later again for when we open the ANWR.
One must take care not to confuse the premise of Hollywood movies for reality.
It's just going to go back to the cold part of the cycle called "The Little Ice Age" for a while. No big deal in human terms. More sea ice up north, more hurricaines down south. It doesn't stop so much as just slow down a little. There is still going to be cold air and cold water and hot air and hot water, just not as much as the last few hundred years or so.
Well, we think. A good volcano could kick us into a "Year Without A Summer" event, otherwise known as "Eighteen Hundred And Froze To Death". Mass famine and the death of hundreds of millions of people.
Then we'll be thankfull for all that CO2 to moderate things. The coal and oil corporation people will be heroes.
There isn't anything we can do about it anyway, so we'll see what happens.
Have a look at my post above. Has anybody done this? It would be interesting to see those curves, at least to me...
I'm wondering if the group at any point had commented on the information presented at http://lifeaftertheoilcrash.net?
Are his dire predictions supportable?
In what year will the globe be down to 1 billion?
In what year will we bulldoze the suburbs and use the salvage to rebuild in the city cores?
In what year will North Americans no longer have cars?
Heinberg came to Vancouver last year and told us we should start building massive manufacturing plants in the West for shoes, etc 'cuz soon China and other nations will not be able to find or afford fuel for tankers or freighters. Tell us Richard, in what year will that momentous crossover occur?
In what year will the Antarctic be ice free and similarly, in what year will NYC be under nine metres of water? The Hadley GCM Model says only 26cm (about 10 inches) by 2100!
When "they" start giving time lines, it opens up their rhetoric for challenges. That is the acid test of a good site.
But hasn't the Middle East, particularly Saudi Arabia but maybe less so UAE, failed to find additional appreciable reserves? You say the quota differentail has been "lost". What I am asking is can you leave everything else alone and simply remove the quota-driven "questionable" additions? If there were additional discoveries - fine - leave them in. Additional reserve expansions - fine - use the multiplier on the original data, not the "paper additions". What I am wondering is if the "paper aditions" made during the quota squabble are extrapolated to today, where does that place the curves?
This doesn't mean I think they're playing a straight game but I do believe they can pull additional heavy sour oil from the ground and refine it for a profit at today's prices.
Even Simmons would agree that putting a number to proven reserves is a black art (no pun intended). So much has to do with the geologic formations. One of his main complaints was that there aren't enough actual holes drilled - that too much is done by computer modeling. There is no substitute for actual core samples. I might add that the modern day equivalent of an M. King Hubbert is difficult to find as well. Interpreting samples from thousands of feet down has to be a pretty demanding task that requires lots of previous experience OR apprenticing to a master. How many master oil geologists are left?
The game for the Saudis is complicated by their need to produce a story for both the world and their own burgeoning population. They need both groups to view them as the swing producer. Whatever that takes. They probably see this as a their equivalent of having nuclear weapons. Like the Swiss being the banking country during WWII.
I realize this doesn't speak directly to your post. I'm just saying that subtracting out a reserve increase motivated by a desire to export more product doesn't necessarily produce a more accurate number. We really don't know what they've waiting in the wings since it's obvious they keep two sets of books, one for the world and one for them.
What i did do was to plot some of the series based on their URR claims which in every case is less not more. If u look at my prior BP and Total scenarios for instance in my blog, u can see that even use of their "proven reserves" which discounts alotta fluff shows long periods of extraction ahead... a sort of worst case scenario if u will.
If you want the absolute worst-case scenario, then those claims might be supportable. Most of us feel things will unspool very differently.
His argument that the expanding economy is based primarily on ever-increasing amounts of energy being available, and that economic collapse will result when that pool of energy begins to shrink, was rather disconcerting.
However, as you probably saw in the post here on TOD a couple of days ago, it is very hard to get 2 people to agree on what is going to happen to the financial infrastructure during and after peak.
This uncertainty is the most worrying part of Peak Oil for me. I don't know whether to sell my house and go renting, or fix my mortgage interest rate for 5 years. Will I have a job in 5 years!
I'm hoping for a slightly delayed peak (maybe 2010 as ASPO are now predicting) to allow us to try and prepare a bit more.
It is great that more people like you are discovering these sites, though. The word needs to get spread a lot wider.
Just don't dismiss the whole PO debate as doom-sayers because Matt sounds a bit negative. The best thing is to study the less pessimistic sites, like the ones listed as Defcon 5 thru 2 on the right side of this page.
A person shouldn't wait until they're hungry to plant a garden, nor wait until they're thirsty to dig a well.
I just wish we had stronger leadership on this subject and that people in power would stop feeding us nonsense like the hydrogen-based economy. As if all we had to do was to switch over to a new type of car!
I'll look at those sites and rest a bit easier with the understanding that Matt represents the worst-case-scenario end of the spectrum.
After planting, watering, harvesting, processing and storing only SOME of our own food this summer, I say God Bless Commercial Agriculture, and God help us if anything happens to the oil supply before we've found an adequate replacement! Especially with regard to food production and distribution.
As a recent study done by Cornell Univerisity found (http://www.news.cornell.edu/stories/July05/organic.farm.vs.other.ssl.html), organic farming can yield at least as much as conventional farming when growing corn and soybeans.
In fact, the study found that, despite organic farmers not having to pay for expensive agri-chemicals, they faired better during periods of drought because their soils did not dry out as much as soil that is heavily dependent on fertilizers made from natural gas.
The problem is going to come when oil does start to become a lot more expensive and the conventional farmers cling on to non-organic farming until the last minute, at which time their farms may not survive the three year conversion to being organic (generally, yields are lower during this period as the quality of the soil is 'rebuilt').
Farmers really need to be thinking about converting now, while things are still pretty good, which in itself will help to slow our cumsumption of oil and gas.
If I was a farmer at this time, with a fair amount of land, I would start to think about dividing up the farm and starting to convert parts of it to organic, thus the non-organic remainder can help to offset financial losses during the conversion period.
We did everything organic, which is expensive, and indeed we only fertilized the plants this first season and not the soil. I'm about to put down 30+ bales of mulch hay to begin the process of turning the entire piece of ground into loamy soil.
A friend who is in international development told me about the same three-year requirement for soil development - his experience being in third-world countries.
Anyway I know this isn't a gardening site but I agree with your point that this is not a process that can be rushed. So again the need to get started now. The most optimistic predictions I've seen are those that have community gardens once more as the centerpiece of our food supply, and not the factory farms of ADM.
Happily this is a trend that seems to have its own momentum as people increasingly register their preference for organic produce grown locally by known producers.
This is something that a lot of us can do. It is suprising how little space you need to start growing some of the food that we need. And 'some' is enough to help take some of the pressure of the food production and distribution infrastructure.
If everyone grew a few veggies in their back garden/roof garden/window box, then this would help to lessen the impact of Peak Oil.
It is also very satifying to each fresh, organic veggies grown only a few feet away from where you live!
Good on you!
"The study compared a conventional farm that used recommended fertilizer and pesticide applications with an organic animal-based farm (where manure was applied) and an organic legume-based farm (that used a three-year rotation of hairy vetch/corn and rye/soybeans and wheat). The two organic systems received no chemical fertilizers or pesticides."
and:
"although organic corn yields were about one-third lower during the first four years of the study, over time the organic systems produced higher yields, especially under drought conditions. The reason was that wind and water erosion degraded the soil on the conventional farm while the soil on the organic farms steadily improved in organic matter, moisture, microbial activity and other soil quality indicators."
It was a huge study that dated back to the early '80s, so this is not some quick look at Organic farming.
The study has several of my local organic farmer friends 'buzzing' with renewed enthusiam.
However, the study did note that similar equality in yields did not occur with the so-called 'cash crops' of grapes, apples, etc., but a lot of those crops we can grow in our own back yards.
The move to organics is one of the more positive sides I see to the whole PO scenario.