Friday, December 7, 2018

Peak Oil 20 Years Later: A Comment by Colin Campbell

Colin Campbell is the originator of the concept of "peak oil," the founder of the "Association for the study of peak oil and gas" (ASPO) and, together with Jean Laherrere, the author of the 1998 article on "Scientific American" that started a  wave of interest in oil depletion that re-examined the work that Marion King Hubbert performed in the 1950s. 

The cycle of the peak oil meme has something in common with the concept of "Limits to Growth." Both raised great interest, then were rejected, demonized, and criticized. Today, it seems that the general opinion has consigned  both to the realm of "wrong scientific theories," yet they had a deep resonance in our current view of the world -- the very fact that they were both so vehemently rejected tells us something.

The world peak of oil production was expected for around 2010, but shale oil delayed it of a few years, at least in terms of availability of combustible liquids. Now, it seems that we are approaching the real thing. But don't worry, just as the peak in the US production was not recognized, and not even discussed when it came in 1970s, the world peak will probably be unrecognized and not discussed when it arrives. We'll surely remain more interested in our usual pastimes of warring and quarreling. 

Colin is now 87 and he is a little less active than before in the debate, nevertheless he keeps following it and he wrote to me the note below, related to a recent article of mine. I reproduce it here with his permission (Note that I am not sure I can lead the secession of the Florentine Republic from Italy as "General Bardi" as he proposes!!)

Dear Ugo

Thank you for sending me the reference to your article on Peak oil in Energy Research and Social Science, which was excellent.

I came to realise that one of the main reasons for the difficulties in predicting the course of depletion relates to the reporting of so-called Reserves. Explorers and Engineers have somewhat different approaches. I was in the exploration side of the business and our over-riding mission was to learn the geology of the area we were examining, which especially offshore demanded drilling wells to obtain the geological information needed to build the overall picture and identify the more prospective areas. The Russian explorers under the Communist regime were allowed to drill holes to simply gather geological information, but we in the west had to claim that every wildcat well drilled had a good chance of delivering a profit. That involved estimating its potential “reserves” which we often had to exaggerate to get the management to approve the well. 

Once a successful discovery was made, control passed to engineers who had to determine how many wells had to be drilled to develop the field, the size of pipelines and other facilities. It made sense for them to be very conservative in their initial estimates of the “reserves” as they won medals if they improved over time. Their projects were naturally very influenced both by oil price and forecasts thereof. Naturally, more can be extracted if prices are high.

Then we had OPEC which agreed to share its production based on each country’s reported reserves. This in turn led to political pressures. The classic example is how Kuwait increased its reported reserves from 64 Gb in 1984 to 90 Gb in the following year, although nothing particular had changed in its oilfields. Two years later it announced a further increase to 92 Gb, but that proved too much for several of the other OPEC countries. Abu Dhabi matched Kuwait at 92 Gb (up from 31 Gb), Iran went one better at 93 Gb (up from 49 Gb) and Iraq capped both at 100 Gb (up from 47 Gb). Saudi Arabia and Venezuela also made large increases. My guess is that Kuwait changed from reporting Remaining Reserves to reporting Original Reserves (namely not deducting past production). This is in fact normal industry practice in determining the relative ownership of a field that crosses a lease boundary or frontier.

Another great difficulty is the absence of a system of clear definition for the different categories of oil, each of which has its own endowment and depletion profile. I recognise so-called Regular Conventional Oil (with a density lighter than 17.5 Deg API), distinguishing it from various other categories (including that from Fracking). It dominated past production and I think it peaked in 2005.  
I discuss all this in my last book Campbell’s Atlas of Oil and Gas Depletion (ISBN 978-1-4614-3575-4) which was published by Springer in 2013. It assesses the status of depletion by country and region as of 2010.  

There is accordingly much uncertainty about the date of the peak of all categories of oil, which is imminent, but it misses the point when what matters is the vision of the long decline that follows it. 

I recently received a reference to a very interesting book (Khan Mansoor 2018, The Third Curve - The End of Growth as we know it. which stresses that it is energy not money that drives the modern world. He was a professor but took this issue so seriously that he went back to India and bought 20 acres of land from which to build a sustainable future for himself and family. 

I conclude that easy oil-based energy fuelled the economic expansion of the past century, which allowed the population to expand greatly. The bankers lent more than they had on deposit confident that tomorrow’s economic expansion was collateral for today’s debt. But the oil price surge to almost $150 a barrel in 2008 cut demand and caused an financial crisis with the failure of several banks. Prices then collapsed into the $50s but have since edged up to about $80. I think that the world faces an economic recession comparable to that of the 1930s. We already see many political pressures and massive emigration as people find that their homelands can no longer support them. There are many political consequences which I think will include a return to regionalism as people come to realise that they will have to rely on whatever their particular area can support. Britain is already leaving the European Union (which was little more than a trading empire) and there are comparable moves in several other countries. The Catalonians want to leave Spain, and I would not be surprised if the people of Florence might not want to leave Italy. Perhaps they will turn to General Bardi as their leader. 

It is difficult for politicians in democracies to face up to the situation as they only get elected if they tell people what they want to hear, and that is certainly not the implications of Peak Oil.

It is fascinating to observe all this unfold but I am too old to do serious work on it. 

best regards



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)