Thursday, September 8, 2016

Peak oil by any other name is still peak oil

Guest post by Diego Mantilla

One of the most compelling charts I have ever seen is the “Growing Gap” chart that used to appear in every ASPO Newsletter. This is the one from the last ASPO Newsletter, written by Colin Campbell and published in April 2009.


Since then, more than seven years have passed, and peak oil has disappeared from the mainstream press headlines--almost. On August 29, Bloomberg published a story alerting to the fact that conventional oil discovery has reached a 70-year low. It published a very interesting chart, using data provided by Wood Mackenzie, the oil consulting firm, to show that fact. Unlike the ASPO chart, Bloomberg's chart only goes back to 1947, the year before Ghawar was discovered.


I thought I would reproduce the “Growing Gap” chart using Wood Mackenzie's data.

Neither Wood Mackenzie nor Bloomberg make public the data behind the chart, but I used a digitization program, WebPlotDigitizer, to extract data from the chart. The results are not perfect, of course, but give a good enough estimate. One must keep in mind that discovery data are not precise and may have a significant margin of error.

In order to obtain conventional oil production, I subtracted US tight oil production and Canadian tar sands production from the EIA's global crude plus condensate number. I know I must also subtract the extra-heavy production from the Orinoco Belt, but it is hard to find data for it. In any case, this is a very good estimate. According to data gathered by Jean Laherrère, the Orinoco extra-heavy production is only around 1 Mb/d today.

The following chart shows the digitized Wood Mackenzie conventional discovery data and the production data described above. According to the data, since 1980, when the gap between production and discovery began to appear, humanity has extracted about 47 percent more conventional oil than it has discovered.


And the following chart shows a three-year moving average of discovery, to replicate the ASPO chart. Notice that discovered volumes are generally larger than Campbell's data, but the drop since 2011 is more precipitous than he anticipated.


According to the Bloomberg story, this shortfall in discovery will be felt 10 years from now, when it begins to “hinder production.”

Peak oil by any other name is still peak oil.

23 comments:

  1. 10 years...? sounds optimistic to me. Both China and US are in decline and spare capacity is at al time low. Unless there is a major recension 2017 (which may happen) surplus stocks will soon be a memory.

    Could you make one more version of the last graph that also include the price of Brent on an axis on the right (in $2015)? Or publish the data on annual discoveries?

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    1. A chart with the real price of oil is here. The price comes from BP.

      The discovery data are here. They have been rounded to the nearest billion barrels.

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    2. Thank you!

      The oil industry is cyclical. Interesting to see the price cycles going higher over time while as discoveries going lower. Also interesting that in the last cycle discoveries went down _before_ the price.

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    3. On the spreadsheet, I had made a mistake in the units. It is now fixed.

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  2. Peak conventional oil occurred in 2005. Conventional oil has been on a plateau since then. Every ten years of plateau, is approximately another third of a trillion bbl's produced. The longer the plateau, the steeper the decline. Soon, conventional oil will begin it's steep decline. Non-conventional oil has only contributed to volume and does not have the energy required to sustain current economies.

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    1. Fortunate then that conventional oil is now produced from horizontal well bores from the source rock itself, after a nice dose of sand of water. "Conventional" has always been a time dependent claim, and 2016, ain't 2005. I mean really, in 2005 they were also claiming that bell shaped curves can be used to predict future oil production rates, the US was in terminal decline, that peak oil would cause prices to go up (as opposed to what happened beginning in 2014), and that Simmons the accountant knew more about oil prices than some journalist named Tierney did. More oops. As far as what "unconventional" is capable of, how about we talk about the conclusions of actual professionals and whatnot, rather than rewriting definitions in order for the 4 remaining peak oilers to not have quite so much egg on their face?

      http://fortune.com/2016/07/05/oil-reserves-us/

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    2. sounds like you and the other cornucopeans are the ones rewriting definitions my friend.

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  3. This is logical behavior for a sunset industry. Whether because of looming restrictions to limit GHG emissions or because of depletion of easily-produced light sweet crude and high capital and production costs for many of the alternatives (deepwater offshore, heavy oil/bitumen), oil companies may be increasingly hesitant to commit billions or tens of billions of dollars today on long-term projects that may never pay back their costs.

    The conventional thinking that price will increase to reflect demand/scarcity may not apply due to the increasing availability and decreasing costs of energy sources that can displace petroleum and natural gas in many applications. In this case, a small number of low-cost producers may well dominate a shrinking market.

    From my repeated use of 'may' readers can ascertain that I am not certain about this analysis, but it seems generally reasonable to me.

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  4. A few questions:
    Saudi Arabia is using its own oil at a higher rate, apparently constraining exports. Is that significant?

    USA continues to access large quantities of 'local' N. American unconventional oil albeit at higher production cost - Does that make the USA 'safe'? (The USA is still a large net importer of total crude oil, both conventional & unconventional.)

    Brazil has discovered large quantities of sub-salt oil deep beneath the ocean: will that oil eventually be produced?

    Will the global economy continue to grow if the rate that oil can be produced does not keep pace? (3.5% growth per annum means a doubling of daily economic activity within the next 20 years.)

    If the global economy ceases to grow, will that reduce the amount of new (and replacement) oil production that can be paid for?

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    1. Saudi domestic oil consumption has been growing exponentially for decades, and this has constrained their exports a little. In another 15 years this trend would wipe out their exports. However, nothing grows exponentially for ever, and they are trying to offset oil use for electricity with gas (imports) etc. The recent low oil prices have dented their plans but they are an unstable absolute monarchy involved in several wars and an unbelievable level of corruption and intolerance. Normal rules of society or economy do not apply (much).

      US shale oil was only marginally economic at $100/barrel and only cheap credit from QE enabled the massive expansion of production, which is now declining rapidly again. Shale production was only ever going to be a flash in the pan in the history of oil. Brazil deep water is also in trouble, and further growth is very unlikely. Brazil remains a net oil importer.

      The global economy is hard to measure, as numbers are easy to fudge, as is the official definition of oil in oil production figures. The peaking of Chinese growth will cause a generation long stagnation at least, and I suspect growth will depend more on political factors. To a good approximation energy consumption is proportional to economic activity, and renewables and efficiency gains will be hard pressed to offset declining net energy from fossils.

      A bigger impact is probably going to be climate chaos, over population and local poverty leading to widespread hunger, war and migration, as we are
      seeing already. We are already deep into ecological overshoot.

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    2. US shale oil (and gas) was being produced in substantial quantities before 1900. Anyone not familiar with the formation that the original Hart well produced from should be if they wish to talk about shales, and the shale oil from the devonian aged formations of Ohio and West virginia came from some of the largest oil fields of their day. Not knowing these facts leads people to pretend that shale development is something that has happened recently. The superficiality of their claim being matched by the same level of understanding of oil ad gas development.

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    3. The authority on these matters is Jean Laherrère. I'd recommend reading his latest paper. He thinks US crude oil extraction, including light tight oil, is about to peak. He believes, based on his creaming curve (page 17), that US ultimate recoverable resources (URR) will be about 300 Gb. If one uses another estimate of URR, by Rystad Energy, then perhaps US extraction will peak around 2040. Even in the latter case, total US extraction will not go above 11 Mb/d (page 20), according to Laherrère, and that is well below US consumption today.

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    4. ReserveGrowthRuiz: it is useless that you come here and pretend to be an expert. Real experts don't write comments under a pseudonym in a blog. You are just a lowly troll; no more comments from you will be accepted. And I am sure that the oil industry will take in due consideration your expertise. :-)

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    5. Thanks Diego for the Laherrere link - heavy going, but I always appreciate his scientific approach to uncertainty. I guess most of the answers to my qustions could begin somewhere in his review. One guesses, however, that some of the answers will only be known in the 'rearview mirror'.

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  5. There is no graph that summarizes Peak Oil better than this one from Colin. Anyone should be able to look at it, even the original was clear enough, and at the very least it should set off alarm bells, if not, as it did for me when I first saw it, make me feel nauseous, for the implications for 'civilisation' are clear enough. This graph above all else indicates that we as a society have not got off out backsides to prepare for peak oil, not due to lack of info, but because we don't want to face reality and we would much rather shove our heads in the sand. I am inclined to believe that the down slope of peak oil will be rapid and painful, to put it mildly.

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    1. it sure will be. but you assume industrial civilization has some kind of legitimate future, if only we took 'certain steps'. but something so rapaciously greedy for energy could only ever exist or continue to exist by burning very rapidly through an appropriately collosal and freely available supply of high density energy. the like of which we could never replicate artificially. try substitution of this store with a meager flow of energy from alternatives and you have another type of civilization. unfortunately not one industrialized enough to create the infrastructure for the flow. its a classic catch 22 situation.

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  6. So what is the total amount of oil discovered according to Wood Mackenzie?

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  7. Ugo:

    Thanks very much for doing this. At the risk of sounding ungrateful, would it be possible to put up the raw numbers in a file for some of us to noodle around with?

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  8. I am amazed by what I see here and that is the Peak Oil crowd mangling their own story.

    Peak Oil is not a problem because production will then decrease ultimately to insignificance.

    Peak Oil is a problem because oil drives the economy and when oil production peaks the economy peaks. For an economy that must grow to survive peaking is the beginning of the death cycle.

    Decreasing oil supplies or cessation of oil supplies is not the issue. Death by lack of growth is very much a problem and the global economy has been dying for at least a decade. I would go so far as to propose that even Peak Oil is an optimistic metric. I would offer that the REAL issue is Peak Work which I would suggest occurred sometime during the 1970's.

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  9. It is indeed interesting, whether the capitalistic economy will be able to cope with high energy cost. Generally, the work productivity in the oecd countries is becoming more and more constant - the respective growth rate is decreasing since about 35 years or more from about 4 % p.a. to now about 1 % p.a., ( https://anmerkungen.wordpress.com/2015/12/31/auf-dem-weg-in-die-gesaettigte-wirtschaft/ ).
    That means, that investors have to get used to less and less profits, in the mean, with the risks more or less staying the same.
    Economically, rising energy costs mean decreasing work productivity, and a steep rise in energy cost (which mean in Marxist interpretation a rise in the amount of human work to get the energy) means that mean work productivity may well decrease inspite of technological progress.
    But this does IMO not nessecarily mean a collapse of the whole system. Capitalism is very adaptable, if the people doiong it adapt their expectations. A crisis - yes, a prolonged adaption crisis is probable. But a collapse? I'm optimistic.

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  10. Bla,bla
    https://www.youtube.com/watch?v=vBk0EARky9c

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Who

Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014)