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GCC: ExxonMobil's Energy Outlook 2005
Posted by Prof. Goose on December 21, 2005 - 2:05pm
Each year, ExxonMobil publishes its view of the long-term trends of worldwide economic growth and energy demand: The Outlook for Energy. In the newly-released 2005 version, the energy giant's basic conclusion--that through the year 2030, traditional fossil fuels will continue to supply the vast majority of energy needs--remains the same, although the mix and sources are adjusted slightly.Lots of good stuff from Mike over at GCC...(link)
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Or the UK government aviation white paper from Dec 03 which predicts a doubling in air traffic by 2030... a forecast based on indefinitely stabilised oil prices at $25.
These kind of reports are hopelessly optimistic, come on where is OPEC going to find an additional 17mbpd, pumping an extra 300bn barrels over the next 25 years with rates as high as 47mbpd?
Exxon has not done any analysis on OPEC (how could they the books are closed). They have a demand model; they have some optimistic non-OPEC supply projections and then just use the OPEC fudge factor to make it all add up.
So it's basically a demand prediction model and not a production prediction model! it's a lot easier because demand will always go up and oil is an infinite ressource!
which made everything clear. So, it obviously it looks bad there despite previous IEA predictions. Here's another 2005 report. Finally, the IEA is reduced to begging--
Yesterday we posted our December USA Energy Reserves Report. It's on the same page. Global Crude is shown to be regaining "Spare Capacity" in our EIA graph which bodes well for softer prices in 2006. Global Production has hit a new record of 85-mbd and our new forecast for the trough in working gas is 1050-Bcf.
2005 was another year of merely crying wolf. Any supply/price problems were based on distribution and weather related events and not global supply. 2005Q1 & Q2 saw record excesses going into stock building and reserves as the speculators dropped positions. There is no indication that this did not continue into Q4. If extraction does not grow, it will because of lack of parallel refining capacity and not potential production.
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?
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.
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.
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 ...
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-- As the Japanese say, sayonara.
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...
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.
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.
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.
Complexity rears it's ugly head. And any solution-aside from collapse as economizing- requires more complexity and thus more energy.
Venezuela's energy minister said the government was preparing to take over an oil operation of US-based ExxonMobil and Spain's Repsol on January 1 if the US firm refuses to accept new terms for foreign oil companies.
.
"Of course we will take control of it," Energy Minister Rafael Ramirez, who also serves as president of state-owned Petroleos de Venezuela, told reporter in response to a question on the Quiamare-La Ceiba oil field
http://www.todayonline.com/articles/91537.asp
Bloomberg-122306-Venezuela Confiscates Exxon/Repsol Oil Field
2005 June - 84.1 mbd
2005 July - 84.3 mbd
2005 Aug - 84.7 mbd
2005 Sept - 83.8 mbd (hurricane related)
2005 Oct - 84.4 mbd
2005 Nov - 85.0 mbd
November (full report)
December (highlights only)
IEA Oil Market Reports All 2005
http://omrpublic.iea.org/
but I still have to do it one month at a time. Grrrr. How hard can it be to put an XLS of the data on the site.
On the matter of global unused capacity, imho, the EIA has always been conservative with in their graphs. The IEA was showing 2-mbd spare capacity as of Sept 30th 2005.
2005 Jan 83750
2005 Feb 84260
2005 Mar 84540
2005 Apr 84660
2005 May 84650
2005 Jun 84290
2005 Jul 84065
2005 Aug 84184
2005 Sep 83230
Rather different, go figure. IEA are estimates and will change; Petrologistics just reduced their estimate of Nov OPEC production by 300,000/day. EIA came out with its Nov figures before the countries themselves even announced them (e.g. Mexican numbers came out just two days ago). I am suspicious of IEA numbers both for this reason and that the hurricane recovery was not as fast as they would imply.
As I am not an oil person, I have only recently become exposed to the various estimates of production rates, size of reserves, decline rates, etc. And as a layman, I must say that I am very surprised and a bit appalled that there is still considerable argument over what is down there, how fast we can get it out, and how much is left. Oil easily has got to be the most important resourse in the world, yet the numbers surrounding oil appear to have less firmness than the numbers surrounding the population of the snail darter. Now why is that?
Either the people that know are keeping the info secret, or the people that should know really don't. The latter possiblity is the more likely and the more scary of the two. Considering the importance of oil, we should have a good handle on every thimble-full of the stuff and how soon it will be gone, but instead we have funny numbers coming from every direction.
The paranoid side of me gets very suspicious that the powers that be are harboring a deep dark secret.
As for the deep, dark secret: yes, it could be there, and there are certainly reasons that politicians and oil producers don't want to discuss the peak. Talking about problems to come is not a good way to become popular. Prophets are still without honor in their own lands.
But consider Occam's Razor: the idea that given two equally predictive theories, the simpler is preferred. The two theories: 1) oil data is bad because someone is carefully, systematically, and successfully hiding the truth from us or 2) data is bad because it is generated and held in different ways by thousands of uncoordinated people around the globe.
Personally, I'd bet on theory 2. But is is entirely possible that both theories have some truth.
Freddy, there are a couple of issues in your above statements. First 7-11 Tb sounds more like OIP than URR and I assume that you include all forms of oil including oil sands and oil shale. Second, you provide no evidence that indicates that enough capital and technology will be available to extract oil at the rate at which it is demanded.
In my mind, from the supply side, the three variables to be considered are 1)The total volume of oil available or OIP which is an essentially fixed but unknown amount, 2) the amount that will ultimately be recovered (URR) which is a variable amount based on technology and capital available to extract that oil and 3) the rate at which the oil can be extracted in barrels per day (bpd).
It seems to me that optimists tend to focus on OIP and URR whereas the key focus of pessimists about Peak Oil is the maximum rate at which the oil can be extracted. The constraints that will cause a near-term peak are a combination of economics (amount of capital investment available, the price of oil, etc.) and geology ( URR, ease of extraction, etc.).
Since you consider all liquids, let's take the Oil Sands as an example. OIP is estimated at 1.6 Tb, URR at 311 Bb, enough to meet world demand at current rates for over 10 years. Sounds good, until you try to figure out the maximum rate at which you can extract it. So, let's be optimistic and assume we can achieve a maximum production rate of 8 Mbpd and the resource will last for over a century. We do have a problem if we require more than 8 Mbpd from that resource to compensate for a decline in production in existing fields.
The only well documented forecast of a Peak presently occuring is done by Colin Campbell. The 10 other modelers also provide good data. But it is Campbell alone that must continually revise upwards in extraction and outwards in time frame. His credibility sank like a stone when he refused to acknowledge data that refuted his Peak(s). But he has had an epiphany and now revises his model immediately upon discovering new data whether it moves the peak ahead or back. That is admirable and i follow his work closer than anybody because he revises it monthly.
When the Peaksters find another ally that will make his work public so that we can judge it as a road map i will be happy to include it in my Scenarios. I believe that they are there already. Jean Laherrere and Rembrandt Koppolaar both share their excel data with http://TrendLines.ca but few here acknowledge their excellent work ... because it does fit THE AGENDA. Those two gentlemen are known to be concerned about Peak Oil and its ramifications. But they didn't get into a game of data fitting to promote their belief systems. Rather, their data puts them on a better foundation to speak with perspective and revelance.
So the challenge is put forth. Tell me who's data is better than Campbell, Laherrere & Koppelaar and i'll be glad to publish it. But i'm not going to get into the game of playing with monthly or seasonal data. The history of extraction data is one of cycles of rapid and slow and negative growth. That someone feels strongly that there is a problem eighteen months out means nothing if it is not in cntext with what infrastructure is coming on stream in 2008-2010.
Stakeholders and decision makers want to see the decadal trends. Not groundless musings about a Peak that never comes...
http://www.newyorker.com/critics/books/articles/051205crbo_books1
The book is Philip Tetlock's "Expert Political Judgment: How Good Is It? How Can We Know?"
http://www.amazon.com/gp/product/0691123020/qid=1135215537/sr=2-1/ref=pd_bbs_b_2_1/103-1198668-85022 46?s=books&v=glance&n=283155
The book discusses a long-term experiment by Tetlock in judging the accuracy of expert predictions. From the review:
This is a great review and it sounds like a wonderful book. I recommend that people take the time to read the review, which has many examples of the kinds of cognitive errors endemic to the prediction field.
It would be no exaggeration to say that my philosophy of life is based on the kinds of ideas presented here, ideas which I have been fortunate to be exposed to for a number of years (thanks largely to the work of my friend Robin Hanson). It is the foundation for my skepticism on Peak Oil and the certainty which is so rampant on both sides of this issue (and most others). From my very first posting on this board I have emphasized the uncertainty of the situation and the inappropriateness of the dogmatic attitude held by many Peak Oil true believers.
I believe that the forecasting methodologies explored here, based on attempts to acquire expertise about the details of oil field exploration and development, are doomed. The mere fact that every group applying this method gets a different result is prima facie evidence for this. There is simply too much uncertainty and too many ways to bend the results to satisfy our prejudices and expectations. We would do better, like the experts Tetlock studied, to stand back and throw darts at a chart.
But it makes sense to take a risk analysis approach, considering both probability of occurrence, and consequences of that occurrence.
What is the probability of a peak in oil production? Given a long enough time, it it a certainty (100%). Most of us are arguing not about whether there will be a peak, but when: is it 2005, or 2030, or whatever?
What are the consequences of a peak? Depending on what sort of peak, demand levels, timing, and how good our preparation has been, consequences range from very uncomfortable to devastating.
We often get this horribly wrong, spending vast sums on preparation for improbable events, like stockpiling millions of doses of Cipro for anthrax attacks. Or spending far too little on high probability problems, like the 41 million HIV-positive people in the world who will leave behind orphans, devastated economies, and be a huge reservoir of unpleasant diseases that can infect any of us.
The truly conservative course of action is to hope for the best, but prepare for something closer to the worst. This is what the world is doing for H5N1 avian flu (but not for peak oil, yet). If we invest in becoming more energy efficient, and develop new technologies, it will be good for the world ecosystem and world economy even if the peak is delayed for eons. Conversely, we can simply argue that the data is unclear, so we shouldn't bother with long leadtime preparations. But if we're wrong, we've made a misjudgment that may be irredeemable.
The combination of data uncertainty, but drastic consequences, was memorably summed up by Detective Harry Callaghan:
Regarding theory 2. (above) we are talking about the folks tallying data. So I think this bodes for more of there motives "leaking " in thru assumptions/denial.However there seems to direct maneuvering of reasonable data. Anyway thanks for the laugh. Unfortunatly IMO, and laughter the analogy fits.
When a prediction "works", there's no way to evaluate it, so the whole system is kind of self-validating. If I cause a bank run because I predict the bank will fail, was my prediction "correct"? If William Stanton euthanizes the UK down to population 2 million, does that mean the UK would have died-off if he had not done so? Would there have been a mushroom cloud if the U.S. hadn't invaded Iraq?
If Exxon thought oil would be that plentiful, that far into the future, they would be investing heavily in refineries, pipelines, drill rigs...and so on. They are not. They are investing in stockholder payouts, CEO bonuses and in liquid natural gas.
Follow the money....
The only other possible explanations are an immense act of collusion between all the oil companies to push up prices (which I don't believe would hold together for more than a three-day weekend without someone leaking), or monumental, industry-wide stupidity.
I think President Bush is offering free, unregulated space on military bases.
But nobody seemed to take him up on that ... hmmm ...
Look at what they do or don't do not what they say.
Freddy, I've been to your site and I like your work and numbers, but on this quotation, you can't be serious.
Look at a graph of the price of oil for say 1988 thru 2005. The only anomalies are 90/91 for the first Gulf War and then 1997-1999 for the Asian financial crisis and aftermath. Everything else comes under "normal." Even if you knew what to look for, you couldn't find Katrina on a long-term graph on price.
Supply from 2003-2005 (3 straight years!) has everything to do with the price (again, for 3 straight years!) and it is global, my friend, IT IS GLOBAL. The global part is key. That is what we are saying. The Iraq stuff, Venezuela, Katrina, weather - weather happens all the time, my friend, - this is bigger. When Nigeria and Angola are our only success stories for the year(2005) - we might want to be a tad more concerned.
http://atimes.com/atimes/China/GL21Ad01.html
Best public estimates are that Kazakhstan has 35 billion barrels of discovered oil reserves, twice the amount in the North Sea, and may hold about three times more, according to a Kazakh government report released on November 18 in London. German oil engineers have privately reported that recent drilling by Italy's AGIP, the current oil consortium leader for Kashagan, a huge field offshore Kazakhstan southwest of Tengiz, has confirmed enormous oil deposits there