Tuesday, February 17, 2015

Fooling peak oil one more time: can we find new sources of liquid hydrocarbons?

The world peak of conventional oil production took place in 2005-2006, but the supply of combustible liquids did not decline, mainly because of the contribution of the newly developed "shale oil" (or "tight" oil) fields. With the impending worldwide peak of "all liquids" it is likely that the industry will try a new, all out effort to squeeze out the last drops of liquid oil from whatever sources are available, no matter how dirty and expensive. It is not certain that the attempt will be successful, but it is likely that some new monstrosity will be created in Sauron's satanic mills. 

Peak oil is something referred to as a "theory," intended in a derogatory sense. But the concept is not just a theory; production peaks are historically observed facts, occurring not just for oil, but for any natural resource which is exploited beyond its capability to reform (e.g. for whale oil).

Not only peaks are a common phenomenon, but often they can also be predicted with good accuracy. That's the case for two of the major events of this kind; the peaking of oil in the US in 1970, and the worldwide peaking of "conventional" oil in 2005-2006. The first was foreseen by Marion King Hubbert in 1956, the second by Campbell and Laherrere in 1998.

Yet, despite the accuracy of these predictions, "peakers" are often taken by surprise when these peaks do not lead to a decline in the fuel supply. The US 1970 peak was offset by an increase of oil imports and by a major shift to coal for the production of electricity. The world peak of 2005-2006 was compensated by the increase in the production of non-conventional oil, in particular by "tight oil" (commonly referred to as "shale oil"). In the end, neither peak was the great turning point for humankind that some had foreseen.

Today, we are facing a new peak. The collapse of oil prices of late 2014 is an indication that the market cannot absorb the abundant - but expensive - unconventional oil that could be theoretically produced. The result is "peak liquids," arriving in a few years at most (according to Arthur Berman). But, just as it has happened in the past, the industry will not stand still. They will be actively seeking for new resources to keep production ongoing. Can peak oil be fooled once more, at least for some time?

As well known, predictions are difficult, especially when they are about the future. But it seems evident that, out there, something is stirring up and new "solutions" are being explored to counter the inpending decline of combustible liquids. The emphasis on nuclear energy in the latest IEA report is a sign of the times. But nuclear does not produce liquid fuels and the costs and the associated complications make it an unlikely savior of the world. The same can be said of biofuels: inefficient and land consuming; they have already reached their practical limits. Rather, the oil industry has always been good at squeezing out flammable liquids out of the dirtiest possible sources. Tar sands remain a potentially large resource, but their exploitation is hugely expensive. Perhaps more likely, the new "miracle" could be found in the "coal to liquids" process. 

Turning coal into liquids is an old idea and, in the 1940s, the Germans powered their whole war machine using synthetic fuels manufactured from coal. It was a tiny production compared to what we need today, but it shows that, in an emergency situation, coal can come to the rescue.

Making fuels from coal was contemplated during the first oil crisis of the 1970s, although it turned out that it was not needed. Then, in his 2005 report, Robert Hirsch suggested that peak oil could be staved off by a crash program involving - among other things - coal liquefaction. The technology is known, some plants are in operation right now; Wikipedia lists 6 plants in operation in the US and 6 more outside the US. Many more are planned. So, if a crash program on coal were to be started now, it could produce a major fraction of the US demand in 10 years, around 5 million barrels per day (image below, from Hirsch's report), an impact similar to that obtained from shale oil over a similar period of time.

Is it really possible? Will we see a rush to coal similar to the rush to shale that we have seen in the past decade or so? It can't be excluded. The world's coal reserves are - theoretically - very large, even though whether they are all extractable is another matter. Before that is ascertained, however, it is not unlikely that the financial system can be convinced to sink great amounts of money into the new, potentially very profitable, coal adventure.

The real problem is, of course, that trying to replace oil with coal would mean wrecking the earth's atmosphere and moving well over the "tipping point" of climate change. It would mean to forsake a whole planet in exchange for riding our SUVs for a few years more. Yet, the thirst for liquid fuels is so strong, and the denial of climate science so widespread and entrenched, that it is hard to think that the rush to coal could be stopped if - Heaven forbid - it were to turn out to be (or just perceived to be) economically profitable. So, before giving up with liquid fuels and admitting that the only way out is to go renewables, it is perfectly possible that some new monstrosity will be created in Sauron's satanic mills.


Note added after publication. Some commenters have correctly raised the question of the net energy of Coal to Liquids. Is it positive? Is it larger than that of Tar sands or tight oil? But it is also a difficult question to answer. The LCA/EROEI analysis is a good tool, but affected by uncertainties, and technologies always change. The point is, I think, not so much what is the actual value of the net energy provided, but the perception of the financial market of whether some money can be made from coal to liquids.

I think we can compare with the housing bubble. What is the net energy of a house? Negative, surely. And yet, the financial system poured in huge amounts of money in something that was known not to have an intrinsic value. So, it is all a question of perception. And people misperceive things badly enough.....


Ugo Bardi is a member of the Club of Rome, faculty member of the University of Florence, and the author of "Extracted" (Chelsea Green 2014), "The Seneca Effect" (Springer 2017), and Before the Collapse (Springer 2019)