 | Announcement--Boulder Valley Conference And Relocalization Resource Expo | The Oil Drum | The End of Exploration? |  |
Open Thread
Posted by Stuart Staniford on January 10, 2006 - 12:26pm
Topic: Miscellaneous
Tags: hubbert peak, oil prices, peak oil [list all tags]
Enjoy...
I recently realised I'm drinking TOD kool aid way too much and I'd like to rebalance myself a little ;-)
Also, http://news.bbc.co.uk/2/hi/europe/4599096.stm is a story about the Ukraine cabinet being sacked over the recent gas supply problems:
Ukraine's parliament has voted in favour of sacking the government over its recent gas deal with Russia.
A no-confidence vote was backed by 250 of the assembly's 450 deputies - but the president has asked his lawyers to check if the move is constitutional.
SO you're in denial about peak oil??
Any "movement" can attract followers who become too zealous. For instance, I use macs and love them, but I know that I'd rather use a linux box for a server, and I accept my wife prefers windows. I know people who would use the mac for everything, force their wife to use the mac, and vehemently shout down anyone who says anything otherwise.
I'm an atheist. I was raised Christian and find Jesus to be very inspirational. Simply because I don't believe the more supernatural parts of the bible doesn't mean I discard the whole thing.
I'm just trying to point out that we should be truly 'fair and balanced'. Not to be politically correct but to be fair to ourselves.
Personally I'm completely convinced we've passed most of the peaks in various oil regions and we're going to have a very turbulent 20 years. That doesn't stop me seeking out other opinions though.
As an aside, I work in solar cell industry, and I come across numerous pro-solar groups which are very ideologically isolated. They have 'conventional wisdoms' and phrases so often repeated that no one questions them anymore. Some close-minded political ideologies have radicalized solar cells and view solar cells as if they were part of a communist revolution, literally giving power to the people and overthrowing the tyrany and pollution of corporate utilities, ushering in an age of harmonious co-existance with each other and the planet (think Berkeley, CA). They reinforce each other's views through certain web sites and new groups which never challenge their own views and deeply held assumptions. The pseudo-communist view of solar cells is ironic, since I, and other solar businesses, are tapping into venture capital and other capitalist institutions to fund, what we hope will grow into large profitable corporations. We deal with such un-harmonious things like business plans, return on investment, fiance rates, capital depreciation, etc.
About the only thing I think we can really predict is turbulence and lots of it. The problem with predictions is that they are, at best, really crude compared to the complexity of the system we attempt to model. I'm not saying they aren't a worthwhile effort - just that we shouldn't take them for gospel. And I don't think most of us here do.
I think the ultimate irony and a likely outcome would be the discovery and mining of vast new oil reservoirs under the Arctic Ocean due to melting of the ice caused by global warming. We already know its a good candidate given the success at Prudhoe Bay.
If we discover another 1GB of reserves up north then the question will become how fast can that oil be extracted. Perhaps such a discovery coupled with relatively modest extraction rates could be a good thing since it would give us more time to transition to whatever comes next.
I'd be much happier if we called what's happening now the age of "expensive energy" rather than "peak oil." It would resonate with a greater audience because I think almost everyone agrees that the cheap energy has been harvested. The likelihood of finding another oil field like Ghawar with low extraction costs at high volume is essentially zip. We now climb the price curve. China has reduced labor costs for production to zero so the cost of energy has to become the primary factor in the price of finished goods.
So if we just batten down the hatches, put up the storm shutters and hang on tight, the hurricane will pass over and we can start the clean up and everything will be alright again?
No, this is not some incident we have to survive. This will be a fundamental change in the way we live. There is no other side to the problems of peak. The question is what new kind of life, new kind of economy, new kind of society will we create. And this is going to take a bit longer than 20 years.
The big question is the timing, and I know I don't have the answers. I know I could be quite mistaken in the assumptions I have arrived at, regardless of how convinced I am. The specter of the Y2K doomsayers I laughed at always hovers over my head! All I can do is try to stay educated and be ready and willing to change direction. The internet may provide too much positive feedback, but then the "news" provides none. So we're left to search out the truth as best we can. I find that overall, this is the best way, as it forces us to make decisions on our own, while the alternative is blind acceptance of the propaganda. Reading the arguments from the opposing side of the argument is valuable - but it can be hard to wade through to find ones of value.
So a proposal - TOD should post links to articles/discussions of opposing/contrary opinion, but limited to well reasoned and rational ones. It could be a section like the "Peak Oil Primers", or a defined part of the "Blogroll". This would reinforce the reality of TOD as I see it, which is that it is a balanced discussion of people trying to learn and understand, not mindless ideological preaching.
The Y2K problem was real and a huge amount of IT work was done to update software. But the doomsayers had indeed wrong. The Peak Oil is a real problem, but the "Petrocollapse" people are just phoney doomsayers. IT people could assess the Y2K quite correctly, so can the oil people assess the Peak Oil. There is no way to dismiss the energy problems, but the real challenge is to have a realistic view on them.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Global Petroleum Markets -
With this January Outlook, EIA's assessment of world oil market balances is
extended to 2007. World oil demand growth is expected to increase from 1.2
million barrels per day (bbl/d) in 2005 to 1.6 million bbl/d in 2006, largely
because U.S. demand is projected to recover from a net decline in 2005 to show
growth of 410,000 bbl/d in 2006. Demand growth is projected to increase further
to 1.9 million bbl/d in 2007 as demand picks up because of economic growth in
developing Asian countries (excluding China). Other Asian growth had slowed
because of subsidy cuts in countries such as Indonesia and Thailand. Chinese
demand growth is projected to stay on its overall annual trend of about 500,000
bbl/d. OECD demand growth outside the United States is expected to remain low.
However, despite this strong projected growth in demand, world spare oil
production capacity is projected to increase during 2006 and 2007 as non-OPEC and
OPEC supplies increase. This increase in spare capacity is expected to ease the
current tightness in world oil markets and moderate the world oil price increases
seen during the past year. Non-OPEC supply, which grew by an average of 800,000
bbl/d between 1995-2005, is projected to grow by 900,000 bbl/d in 2006 and by 1.7
million bbl/d in 2007. This non-OPEC supply forecast hinges on the U.S. forecast,
and whether a repeat hurricane scenario next summer takes out production in the
Gulf of Mexico again.
Non-OPEC supplies are projected to show significant gains on a net basis over
2006-2007 despite continued declines in mature fields in the North Sea, Mexico,
and the Middle East, and slower growth in Russia. Outside of the United States,
net production increases for 2006 of 100,000-200,000 bbl/d are expected in the
Caspian, Canada, Angola, Russia, Brazil, and Mexico areas. Large new projects in
2007 are projected to lead to increases of almost 500,000 bbl/d in Angola, almost
400,000 bbl/d in the Caspian, over 200,000 bbl/d in Brazil, and over 200,000
bbl/d in Canada.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
So much for the plateau, eh!
Hope springs eternal at the EIA.
According to the EIA 2004 Annual Energy Review, U.S. domestic petroleum production increased 9 times in the last 30 years -- in 1977, 1978, 1980, 1981, 1982, 1983, 1984, 1985 and 1991.
Got another North Slope you can pop open every 5 years in North America?
But let's look at the US data from the EIA just so we can get a clear picture of what really happened.
When we look at that chart, the North Slope event is obvious and the other few years you mention are nothing but minor blips.
So yes, production managed to increase a few times, by minor amounts aside from the North Slope production. But those variations were irrelevant to the overall trend. I'll even say that I expect production to rarely increase in North America in the coming few decades but each such increase will again be tiny and have no real impact on the general downward trend of North American production.
What is of concern is the general trend. Should Stuart have double checked his facts? Sure. But even with the minor errors, the intent of his statement, that oil production has been on a 30 year downward trend, remains true.
http://www.eia.doe.gov/emeu/steo/pub/contents.html
Here is an interesting graph of predicted world oil production growth, let's see if I can inline it:
http://www.eia.doe.gov/emeu/steo/pub/gifs/Slide9.gif
This shows the actual growth (or decline) in each region in 2005, and the predicted growth in 2006 and 2007. Of note is the U.S. which fell enormously in 2005 due to the hurricanes but is predicted to recover most of that. One odd thing is that I don't see many OPEC countries listed, and you'd think that would be important.
Another interesting datum is that they predict that the North Sea declines in Norway and the U.K. will be LESS (in absolute terms) this year due to new production coming online. Many people have commented here on the supposed collapse in North Sea production so it will be interesting to see if they can at least reduce the decline rate as the EIA predicts. They also predict that Mexico will have an increase in 2006 after coming off a declining year in 2005.
The EIA has kind of a bad name around here for over-optimistic forecasts, but predicting only one year ahead I would think they would try to be accurate. For example they are predicting higher oil and gas prices for 2006 than for 2005. So I am inclined not to write off their predictions as anti-peak oil propaganda. As I said it will be interesting to see how they do.
It would be like if I wanted to predict how the DOW was going to perform this year. What If I disregarded any news about the economy and the stocks and sectors included in the DOW. Instead I just took the average return for the last 10 years and said that was going to be what we get this year. 10 years out, no problem, just multiply by 10. 25 years out? Same thing.
In fact, in some of their anaylsis they simply come up with three lines into the future(scenarios) based on three different prices of oil. we'll just throw a whole handful of darts, we're bound to hit something.
Yes, but you would have thought that about the Exxon predictions of 3 years of production growth that they predicted in 2001 and that Stuart analysed last month. It ended up being essentially flat.
I think the EIA is making the same mistake - underestimating the decline rates.
For instance, I doubt Mexico will be able to increase production, especially if Canterell either a) declines in a similar fashion to the North Sea, or b) is hit by another Hurricane this year.
And I reckon that the UK decline rate will dwarf any new production there. One of my friends has just finished working for a swedish exploration company. He worked on a field on the UK side that was pumping 95% water!
Why would 2006 and 2007 be different from 2004 and 2005? makes no sense, prices have been increasing for at least 3 years. Oh, suddenly a bunch of domestic investment that nobody's heard of is going to come to fruition in the next two years?
ANWR isn't supposed to come online for a minimum of 5 years and more like 10.
So you can forget about 600,000 more barrels from the US and start looking somewhere else.
In other words, they are saying that the US will pump more in 2006 than they did in 2005, which is not too difficult given the huge shut-in figures from the hurricanes. But that is also assuming there are no big huricanes this year to produce similar shut-ins.
The 2007 increase is a little harder to understand, because they are saying that after recovering from last year's hurricanes, the US will then increase production still further! I would love to know where they think that's coming from. Maybe they think that ANWR will be pumping by then!
[http://www.eia.doe.gov/emeu/steo/pub/gifs/Slide10.gif]
I can't find where they are more specific about the "Gulf of Mexico Production Growth".
Maybe they're going to raise some of the sunken platforms and start them drilling again!
[http://www.eia.doe.gov/emeu/steo/pub/gifs/Slide27.gif]
Are they really expecting us to believe this crap?
Anyone know where they're getting these increases from?
and
As far as why they think U.S. production will be up in 2007, I don't know but maybe it is because there is still a certain amount of production shut-in right now in 2006 and they are figuring that that will slightly depress 2006 production from what it could be. They do note that they are assuming no major hurricane damage in 2006. However I don't think that will account for the change, so I guess they have some new GoM production in mind.
Figure 20 above must be proof to you that these guys are smoking some good shit!
Alberta oil sands will be world's largest source of new crude oil by 2010: CIBC
Alberta's oil sands will become the most important source of new oil in the world by 2010 as conventional crude dries up, CIBC World Markets says in its latest monthly report.
Alberta will sit on one of the most valuable energy sources in the world by that time, and one of the few still open to private investment, said Jeff Rubin, chief economist at CIBC World Markets, the bank's wholesale banking arm.
He added that conventional oil production around the world apparently peaked in 2004....
[see link for the rest]
The important part is the last paragraph. All of Canada's tar sands produced 270,000 bpd of liquid in 2005. That is projected to increase to ONLY 500,000 bpd in the next five years. This is at the same time that the cornucopians are adding 180 Billion barrels of this "sand" to worldwide reserves. Insanity. We need a million barrels per year, not 50,000.
Although CIBC doesn't differ much from the EIA for new supplies coming online in 2006 they make a point of saying that most new supply additions are increasingly coming from deep water, tar sands, and other non-conventional deposits, and that the new supplies increasingly will not be able to keep pace with depletion in conventional fields. The EIA is pretty silent on depletion by comparison. Consequently the CIBC price estimates are substantially higher than the EIA's for the next year. If I were out to poke a hole in the EIA predictions I'd concentrate on their depletion estimates rather than their new supply numbers.
I agree with Freddy that we haven't seen peak production yet. If the recent flattening of the global production curve were due to supply constraints we would have seen a much stronger price response. Instead I think the slack production is due to weak demand, not so much in this country, but in less affluent parts of the globe. Gasoline prices here didn't stay high enough long enough to create much of a dent in long term behavior and after a few cold weeks in Dec the winter is turning warmer than average in the US. Rather consider the effects of diesel and cooking fuel price increases where the average wage is substantially below the western world (especially in Indonesia where domestic subsidies were partially eliminated last year) - I would wager that there is a lot more conservation and fuel switching going on in the third world. I haven't seen any statistics to support this, it's just my best guess.
Remember that North America, Europe and Japan account for about half the daily oil consumption.
I remember reading somewhere that the OECD countries account for almost 60% of the daily oil consumption.
And Europe is already coping with petrol ('gas' to the US) prices double that in America, so that shows that the US, at least, can easily survive with $100-150 oil without much demand destruction.
Forecasts even the best ones are best guesses and hopes.
I got one last year from a well regarded bank on oil prices and it was wrong from day 1. It did not get any better for the other 364 days in the year past.
I just can't wait to see all that production coming on line and driving down prices. North Sea and Mexico humming along merrily disregarding decline opportunities.
Maybe we might keep this and compare it with reality in 365 days time.
Can't wait.
Smil, V. 2006. Peak oil: A catastrophist cult and complex realities. World Watch 19: 22-24.
http://home.cc.umanitoba.ca/~vsmil/pdf_pubs/WorldWatch.pdf
I don't know what to think of this guy. He's clearly a cornucopian and don't seem to be very well informed!