DrumBeat: November 7, 2006
Posted by threadbot on November 7, 2006 - 9:20am
Topic: Miscellaneous
US Energy Dependency: An Old Dream or Existing Project?
Last month, the US Council on Foreign Relations (CFR) in New York put forward proposals based on a study it conducted to address the energy situation in the US and to make recommendations. The study, called the National Security Consequences of US Oil Dependency, was supervised by former Secretary of Defense and Energy, James R. Schlesinger, CIA chief and former Undersecretary of the Department of Energy, John M. Deutch, and former scientific expert, David Victor....The new 'revolutionary' proposal put forth by the CFR lies in setting aside the market factors and freedom of supply and demand, because markets, according to the report, do not automatically provide optimal solutions.
Uranium is the energy investment of choice for a growing number of hedge funds, who say a sixfold gain since 2001 is just the beginning of a rally that will last years."We're in an historic uranium shortage," said James Passin, who manages $580 million at New York-based Firebird Management LLC and began buying shares of uranium producers five years ago. "We're in a global nuclear revival."
Ambassador Threatens Minsk With Gas Price Increase
MINSK -- The government may raise gas prices for Belarus fourfold unless Moscow gets some control of gas pipelines, Russia's ambassador in Minsk said Friday.Such an increase could virtually destroy the Belarussian economy.
55,000 barrels per day of oil cut in new Nigeria unrest
LAGOS (AFP) - Output of 55,000 barrels per day (bpd) of oil was cut in Nigeria when armed protesters forced the closure of a flowstation belonging to Italy's Agip company in the Niger Delta, an Agip official told AFP.The good news is the oil workers kidnapped last week were released.
India says 16 percent of power to come from wind by 2030
NEW DELHI (AFP) - As much as 16 percent of India's electricity needs could be supplied by wind power within the next 25 years, the country's president has told a gathering of renewable energy experts.India produces 6,053 megawatts of wind power, a tiny chunk of the estimated 130,000 megawatts of electricity it needs, but its installed wind power grew by 47 percent in the last fiscal year, the Indian Wind Energy Association says.
Dispute Over NW Passage Revived
TORONTO -- A long-standing legal wrangle between the United States and Canada could complicate future shipping through the Arctic as global warming melts the ice in the Northwest Passage.
China's coal addiction causing environmental disaster
BEIJING - China has seen a massive increase in greenhouse gas emissions over the past decade despite ratifying the Kyoto Protocol -- and the situation will only worsen as coal remains its main energy source.
In Ancient Fossils, Seeds of a New Debate on Warming
It's hard to explain, Tom, why we did so little to stop global warming
Looking back, 40 years on, we were intoxicated with an idea of individual freedom that was little more than greedy egotism
IEA backs nuclear power in climate change battle
The International Energy Agency urged governments on Tuesday to build more nuclear plants to slow climate change and increase energy security, throwing its weight behind the push for nuclear power.
Greenpeace urges climate change reversal, singles out Brazil
NAIROBI (AFP) - Environmental watchdog Greenpeace called on the world's top polluters to act immediately to halt devastation from climate change, singling out Brazil as a leading offender...."Brazil needs to take responsibility as one of the world's biggest CO2 (carbon dioxide) emitters," it said. "The government must combat deforestation, promote clean, renewable energy, and energy efficiency."
Africa's poorest at greatest risk from climate change
NAIROBI - The impoverished inhabitants of Africa's poorest nations are most at risk from the effects of climate change on the continent most threatened by global warming, a study has said.But the most vulnerable are the residents of the east and central African countries of Burundi, Rwanda, Ethiopia, Eritrea, together with Niger and Chad, according to the report by the International Livestock Research Institute (ILRI).
The Ugandan bargain: oil for peace
A huge oil strike in Uganda has persuaded the government to attempt to bring peace to the north of the country, where the infamous Lord's Resistance Army (LRA) has terrorised the local population for 20 years.
Russia and China plan energy deals
INDONESIA plans to produce more than 15,000 tonnes of biofuels from jatropha by the end of 2007, an industry ministry official said.The plan calls for 52 micro-sized plants, and is part of the country's drive to cut a hefty oil subsidy bill inflated by high global prices by encouraging alternative sources of energy.
India's quest for Russian energy
NEW DELHI - India's quest for energy resources has seen the country knocking on Russia's door to propose forming an exploration venture with the country's natural-gas behemoth Gazprom, as well as seeking a stake in the Sakhalin III oil-and-gas project.
GM Launches Energy-Saving Plan In Argentina
Argentina has implemented a plan aimed at reducing its energy use, Felipe Rovera, the chairman of GM Argentina, told Dow Jones Newswires Tuesday....His comments come amid mounting fears about an imminent energy crisis in Argentina, despite the government's repeated denial of such a condition.
El Paso posts profit, but warns on gas output: Problems in the Gulf of Mexico hurt production.
More Slimy Stuff and Politics Too: Can BioMass Still Save Us All?
It would seem that some people think that debating and having a say in trying to solve some of the problems of this world, and I am thinking particularly of Peak Oil and Global Climate Change, have nothing to do with ‘survivalists’ or ‘survivalism’. Some say that they ‘have not got the time for survivalists’ while others are ‘not very enthusiastic about survivalism’. So let me give a ‘survivalist’ view.
Naimi: Very low prices not sustainable
Low oil prices discourage producers’ investment in new capacity and, if they sink too far, promote oil market volatility, Saudi Arabian Oil Minister Ali al-Naimi said yesterday.“The reality is very low oil prices are not sustainable. In fact they invariably lead to volatility and subsequently higher prices...” Naimi said in a speech in Islamabad, a copy of which was made available to Reuters in Dubai.
Just in time for the election:
Gasoline prices fall to new low for 2006
Average cost-per-gallon hits $2.20 nationwide, 17.6 cents lower than 2005WASHINGTON - The price of gasoline has fallen to its lowest level in more than 10 months.
The federal Energy Information Administration said Monday that U.S. motorists paid $2.20 a gallon on average for regular grade last week, a decrease of 1.8 cents from the previous week.
Pump prices are now 17.6 cents lower than a year ago and have plummeted by more than 80 cents a gallon since the start of August. The last time prices were below $2.20, on average, was the week ending Dec. 26, 2005.
OPEC President: No price floor to defend
SEOUL, South Korea - The Organization of Petroleum Exporting Countries doesn't have a specific price floor or band that it wants to defend, the group's president said Tuesday."OPEC doesn't have a rigid floor," Edmund Daukoru, who is also Nigeria's petroleum minister, said at an oil industry conference in Seoul.
Setting a target price band "is not really applicable to the fluid, free market," he said.
The era of cheap energy in the UK is over, the energy minister said last night.Malcolm Wicks said the UK was unlikely to see a return to low gas prices because of diminishing reserves of North Sea gas, forcing the country to import supplies from the continent and further afield.
http://plentymag.com/tv/2006/11/the_history_of_oil.php After all, a lot of American readers of this site grew up with these sorts of messages surrounding them in the background of their lives - you silly kids, putting a tiger in your tank, because its greeeaaat (oops, did I get the tigers missed up?)
And there is also a pretty interesting nybooks.com review/article at http://www.nybooks.com/articles/19596 which covers a lot of points of interest to peak oil types, without in any sense having anything to do with peak oil.
Economic, Geological, and Institutional Determinants"" by
Robert K. Kau@ann and Cutler J. Cleveland. In that paper they try to prove that "accuracy of Hubbert's bell shaped curve is fortuitous." Has anyone a link to a rebuttal/discussion or otherwise of this paper? I am finding it hard to follow.
http://www.bu.edu/cees/people/faculty/cutler/articles/Oil_Prod_Lower_48.pdf
Thanks
Max Oakes
Edinburgh
UK
Send me some e-mail so I can tell you how you might respond to the paper in the future -- after I have read it.
I can only agree with the conclusion although I may not agree with how they got to it. We shall see.-- Dave
You might do a Google search "Central Limit Theorem Hubbert" and look through some papers that talk about Hubbert modeling failures or constraints on this kind of modeling. From Roberto --
Click to Enlarge
The "double peak" in the UK disappears
after the big North Sea fields smooth
out and there is a more normal distribution
Generally, people concerned about peak oil production are vulnerable to various critiques of Hubbert modeling unless they have taken the time to study the model in some depth. Having stared at quite a few production curves, it becomes obvious that reality is more complex than a bell curve. Hope this helps.
Basically they showed they could predict or reproduce U.S. oil production levels from the 1930s through 1990s, using just 3 factors: the price of oil; the cost of oil production; and the allowed limits on oil production enforced by the Texas Railroad Commission, a de facto cartel operating up through the early 1970s. The resulting model predicts oil production far more accurately than does the Hubbert bell curve.
This is nice work as far as it goes, but at some level it is just statistics, as they don't go deeper to discuss what this means in terms of oil production in other areas and times. And further, this new paper is not necessarily inconsistent with Hubble's basic insight about geology eventually limiting production levels.
Consider for example the Texas RRC limit, which was steadily raised until it finally hit 100% in the early 70s. Yes, you can say this explains why oil production was rising during this time. Statistically the correlation is there - the allowable production levels were increasing, and sure enough, production was increasing too. But from the larger perspective, if we ask why the Commision was raising production limits, that was due to growing demand and supply factors. The Commision did not operate in a vacuum, it made its decisions based on economic and geologic forces. Well, that's implicitly how the Hubbert curve works too (at least how I interpret it) - the upswing is due to economic factors, investment and development and growth; and the peak and downturn is due to geologic limitations. So the operation of the Commission can be seen as part of what makes the Hubbert curve work.
Another similar effect is their use of cost of oil production as a component of the model. Obviously as we get towards the down side of the Hubbert curve, oil production is much more difficult and costly. So yes, if you include oil costs in your model, you again can explain why oil production declines after a while. This is not inconsistent with the Hubbert curve, but rather it is another way of looking at the same effect.
The point is then that just because you can get a good prediction from these three factors, that's not necessarily inconsistent with the basic soundness of the Hubbert curve as a somewhat crude model. Everyone knows that the Hubbert curve is not perfect, but the fact remains that it does pretty well considering what a simple model it is.
The methodology used, the vector error correction model, is a statistical technique that attempts to identify equilibrium relationships and how deviations caused by stochastic fluctuations are transmitted across the system to return it to equilibrium. The identification of the 3 cointegrating relationships is driven, therefore, by statistics but their interpretation is economic (as well as, implicitly, geological through production costs).
You are absolutely right that the paper is not inconsistent with Hubbert; it only seeks to add to his (statistical) insight and to point out that it is, indeed, fortuitous. Fundamentally the difference between the papers is driven by different levels of aggregation where, if you smooth the curve enough, the logistic function could be said to be observed. However, when you consider the economic value of each deviation from the Hubbert curve as demonstrated in the final figure, the justification for this disaggregation can clearly be seen.
This paper clearly refutes those who suggest that changes in technology and price had no effect on oil production in the lower 48 and that the reliance on the Hubbert curve works if you want to take a crude view at oil depletion, but that we really ought to utilise a more full armoury in understanding the future of hydrocarbons.
Julian
Cry Wolf BSc PhD
Go to the Energy Bulletin and search under authors for Jeffrey Brown. There are several artitles there on the HL technique, based on Khebab's technical work. I would recommed the Hubbet's Lower 48 Prediction Revisted.
The HL Method
When we integrate the area under a production rate versus time graph, we get Ultimate Recoverable Reserves, URR, or Qt. So far, the HL method appears to be the most objective way, IMO, of estimating Qt.
As described by Deffeyes, building on work done by Hubbert, the HL method involves plotting annual production (P) divided by cumulative production to date (Q) to get the Qt for a region.
The key point to keep in mind is that the method is better at estimating the reserves, and not as good at estimating precise production rates. Regions tend to peak at about 50% of Qt. Regions that peak later than 50% of Qt tend to have steeper post-peak decline rates, e.g.. Texas, which had a steeper decline rate than the overall Lower 48.
There are probably at least four definitions of "oil."
Crude
Crude + Condensate (Known as C+C)
Crude + Condensate + NGL's
Crude + Condensate + NGL's + Everything Else
(Refinery gains, ethanol, etc., known at "Total Liquids")
In in his most recent book, Deffeyes, apparently using C+C, put Qt at 2,000 Gb and the 50% of Qt mark in late 2005. As has been noted, world C+C production (EIA) has been down since 12/05.
Khebab, in this article: http://www.energybulletin.net/16459.html, put the C+C + NGL's Qt at 2,235 Gb, with the exact 50% of Qt mark probably in very early 2007.
The 50% of Qt mark for Total Liquids will probably be a little bit later than the C +C + NGL's 50% mark.
I would prefer to deal with crude or C+C, since I define "oil" as the primary feedstock that oil companies buy to refine into petroleum products and since the HL method does not really work on gas reservoirs, and a large percentage of NGL's (and even condensate ) comes from gas reservoirs.
The UK Model
There are two primary reasons to do HL plots: (1) to estimate the URR for a region and (2) to develop models for the world and key regions like KSA.
The production history of the UK as a model for other regions seems to be a recurring theme, and I have often wondered why. First, it is a sub-basin, a part of the overall North Sea province. Second, it has a very noisy production profile, principally because of the Piper Alpha accident.
I really don't see a case for using the UK as a model for anything. First and foremost this is because of the P/Q intercept, or K, of about 16%, which implies a very steep decline rate, which is exactly what we have seen. Khebab and Deffeyes show a K of 5% for the world. Khebab shows a K of 6.7% for KSA. Second, the UK is a relatively small sub-basin with a noisy production history.
I submit that Texas, the prior swing producer, with a K of 7.7%, makes a much better model for KSA, and the Lower 48, with a K of 6.3%, makes a much better model for the world. Mathematically, KSA in 2005 was where Texas was at when it peaked, and KSA is showing lower production. Mathematically, the world (C+C) in late 2005 was where the Lower 48 was at when it peaked, the world is showing lower C+C production.
Recent Discussions
There have been a lot of very confusing posts done recently by Hothgor. His basic theme has been that HL estimates by Deffeyes and Khebab, et al, are too conservative, and the worst case is that the peak is several years away.
Hothgor showed some fragmentary HL plots with guesstimated cumulative production number in order to bolster his case. I suggested that he simply use the same BP data base that Khebab used (C +C + NGL's). Hothgor initially objected with the somewhat novel response that if he used the same data at Khebab, he would get the "same results." I believe that he posted another fragmentary HL plot using the BP data base that more or less matched Khebab's estimate.
In any case, this all started with Laherrere's HL plot, which shows three Qt estimates. The largest estimate is apparently based on heavily weighting a very small inflection on the last three data points. As I have repeatedly pointed out, we saw much larger inflections in the Texas, Lower 48 and KSA HL plots, right before they started showing lower production. In fact, these small deviations from the overall HL trend are probably indicators of peaking production.
Summary
IMO, we are going to see three liquids peaks: C+C; C+C + NGL's and Total Liquids. I think that we are between the first and second peaks. IMO, this is bolstered by the near certain decline or crash of the four current super giant oil fields.
As Deffeyes and Simmons warned/predicted and as the Lower 48/Texas models suggested, the world and KSA are showing lower (C+C) production.
IMO, unconventional sources of liquids will serve to slow, but not reverse the long term decline in total liquids production.
Finally, I have been frankly astonished the degree of credibility that some, such as Robert and Cry Wolf, have given these posts by Hothgor, who used a series of poorly researched fragmentary HL plots, largely based on guesstimated cumulative production numbers, to bolster his case, which was largely based on extrapolating three data points. The phrase "Grasping at straws" comes to mind.
I can only compare the response given to Hothgor to the level of criticism that I received, especially from Robert, regarding my central three points: (1) world C+C production has peaked (2) KSA has peaked and (3) world oil exports are falling faster than world C+C production.
Ulrich Nehls
Ron Patterson
Mark us down for being in the tiny "Deffeyes" camp. You can begin to imagine the crap that Hubbert got regarding his peak oil speech in 1956--14 years before the Lower 48 production peak.
As I said before, if we were having this argument regarding the Lower 48 peak, it would be in 1971, the first year of the decline. Texas was then in the process of showing something like a 7% increase in production over 1970 production. So I'm sure that everyone in the anti-peak oil crowd was then saying that the C+C downturn had no meaning, and that production would soon resume a growth pattern.
Jeffrey Brown
Make that Three.
The best answer will come in the next year or so.
Or in "1972-74" in your analogy WT.
John
i find your work much better then many here.
Hotgor,
I believe you did a good job crunching the numbers. You have replicated all the HL results that have been published. I don't see major problems in your calculations.
I don't have much time to give a detail answer. Here is my problem:
1. you are putting too much confidence in the estimated URR derived from the HL technique. The error interval is fairly significant. You can find an error analysis performed by Stuart here and myself here. If you do a boostrapping analysis on the HL fit for CC+NGL, you get the following URR estimate distribution:
you can see that the 90% confidence interval is 1500-3500Gb! Consequently, fluctuations in the URR estimates of several 100's of Gb are not surprising. Conclusion: the HL technique is a very imprecise estimator
2. You said: I will state yet again that I believe it is time for the PO community to seriously use the total liquids HL in their own discussions. As gr1nn3r said yesterday, I quote: "we have some corn ethanol here so we can just assume that there is 800 more Gb in SA.". By mixing sources, your URR estimate will get higher but it will be impossible to form any conclusions on the oil depletion. Why not including the barrels of oil equivalent of the electricity used by eclectric vehicles? For sure, you will probably never observe any Peak Oil.
3. The logistic modeling is not appropriate for all the fuel sources. For instance if you use the HL on the Canadian Tar sands production assuming prior knowledge of the URR at 179 Gb, it gives me an unrealistic production profile peaking in 2050 at more than 9.7 mbpd! (The most optimistic forecast is giving 4.0 mbpd in 2020)
But a couple of points.
I think that you agree that we are at, or within the margin of error, of the 50% of Qt mark for C+C and C+C+NGL's and probably for total liquids too. Given this, it is interesting that world C+C production is trending down and total liquids production is basicaly flat. (BTW, do you have a current C+C+NGL number versus 2005?)
Also, the two largest discrete producing regions in the world, to date, have been the Lower 48 and Russia. The post-1970 cumulative Lower 48 production and the post-1984 cumulative Russian production were basically exactly what your HL model predicted they would be, using only Lower 48 data through 1970 and only Russian data through 1984 to generate the predicted cumulative production.
So, given all of the foregoing, the question is,what is the most likely scenario?
IMO, the most likely scenario is that we are past peak C+C production and just before peak C+C+NGL production--especially given the near certain decline of the four current super giants.
Your arguments become more convincing with each passing day.
You guys had it rough when oil production was rising. But you still didn't hesitate to make the call on the coming peak.
What I never would have imagined is that once oil production started to fall, you would come under even heavier fire.
Keep up the good work.
SAT
And the Gold is where? In the cupboard? The dumbwaiter?
Aw, man, you are the best thing that ever happened to this site.
I'm 75% convinced that is due to demand falling - and with OPEC cutting production we once again have growing spare capacity - hence softening prices.
If you look at the demand curve for the last 25 years (some people call this the production curve)you see that while the overall trend is up, and well-correlated with world population growth, that the line wiggles around - sharp rises followed by periods of settling back to trend.
I am 100% convinced that a sure fire sign of being past peak will be falling production (a production led as opposed to a demand led fall) correlating with escalating prices.
It is always possible that demand is falling ahead of the production curve at present, and the two lines cross on the way down. But I don't think so. The consensus view in London yesterday is 2010 - 2012 - apart from a couple of Corn folks who belive that the Earth is flat - trouble is one of them is a highly respected Prof of Economics whose views still carry more weight than mine.
CW,
The previous (nominal) peak in oil prices was pretty close to Yergin's predicted long term index price of $38 per barrel. As you know, Yergin's point was that rising production would force prices down.
IMO, the opposite has happened, with falling oil production forcing oil prices up to ration remaining supplies via price, resulting in oil prices trading in record high (nominal) range this year--50% to 100% higher than Yergin's long term index price and 50% to 100% higher than the previous (nominal) peak.
I think that we are starting a new round of bidding for declining oil supplies, especially for declining exports.
I believe that we are entering a production plateau or a least a slower growth period for C+C and probably C+C+NGL (the NGPL production is losing steam and has peaked so far in 2005/02).
You can check on my last PO Update. I'm currently working on the next one for mid-November.
From last month EIA numbers:
C+C:
2005: 73.49 mbpd
2006 (7 months): 73.38 mbpd
Monthly Peak Prod.:
2005-12 at 74.05 mbpd
C+C+NGL:
2005: 81.23 mbpd
2006 (7 months): 81.15 mbpd
Monthly Peak Prod.:
2005-05 at 81.77 mbpd
Note the EAI is almost always revising down its early estimates for C+C.
And this is the crux of EVERYTHING. Even with the error variance of the analysis, if we have not hit the plateau, we are VERY stinking close to it. So close, that if we don't make some changes soon, it will be very difficult to recover from with any sense of civility.
we used it as a kid rock climbing for the hardest part of a climb.
of words to randomly use it is better than machiavellian.
google matt savinar machiavellian