Tuesday, February 4, 2014

Oil and Gas: How Little Is Left

"If we're doing things like fracking, it just shows how little is left of all this stuff, and how desperate we are to get at it." -- Anonymous

Global production of conventional oil is past its peak and is now beginning its decline. A mixed bag of unconventional fuels (shale oil, tar-sands oil, natural-gas-liquids, etc.) is keeping the total on a slight rise or a rough plateau.

The hottest discussion in the US over the last few years has involved the fracturing ("fracking") of shale to extract both oil and gas, but production by this method is already slowing or in decline. The costs of fracking are considerable, and so is the environmental damage.

The price of oil is still about $100 a barrel, far above that of the 1990s, in terms of both nominal and real dollars. The failure of the price to go down is an embarrassment to those who think unconventional oil is really solving any problems. But the high price is due not just to increased demand or to geopolitical risk. It is because of trying to squeeze oil out of places where it makes little sense to be squeezing.

The following data are "annual" and "global" and are from BP's 2013 report unless described otherwise.

Laherrère: "The plots of these data start flattening in 2005, followed by a bumpy plateau. The post-2010 increase is mainly caused by the increase of liquids from US shale gas and US shale oil."

Hughes: ". . . Politicians and industry leaders alike now hail 'one hundred years of gas' and anticipate the U.S. regaining its crown as the world's foremost oil producer. . . . The much-heralded reduction of oil imports in the past few years has in fact been just as much a story of reduced consumption, primarily related to the Great Recession, as it has been a story of increased production."


Hughes: "The metric most commonly cited to suggest a new age of fossil fuels is the estimate of in situ unconventional resources and the purported fraction that can be recovered. These estimates are then divided by current consumption rates to produce many decades or centuries of future consumption. In fact, two other metrics are critically important in determining the viability of an energy resource:

"• The rate of energy supply -- that is, the rate at which the resource can be produced. A large in situ resource does society little good if it cannot be produced consistently and in large enough quantities. . . . Tar sands . . . have yielded production of less than two percent of world oil requirements.

"• The net energy yield of the resource. . . . The net energy . . . of unconventional resources is generally much lower than for conventional resources. . . ."


For conventional oil, the peak annual global production was about 27 billion barrels, or about 73 million barrels per day. The peak date of production was about 2010.

BP shows global oil production still increasing in 2012, although much more slowly than before -- an annual increase of about 1 percent between 2002 and 2012, as opposed to about 9 percent annually between 1930 and 2001. Laherrère's Figure 10, on the other hand, shows an actual peak at 2010. The difference is due to the fact that the BP figures include unconventional oil (shale oil, tar-sands oil, natural-gas-liquids, etc.).

According to most studies, the likely average rate of decline of oil production after the peak date is about 3 or 4 percent, resulting in a fall from peak production to half that amount about 20 years after the peak. However, there is also evidence (Höök et al., June 2009; Simmons, 2006) to suggest that the decline rate might be closer to 6 percent, i.e. reaching the halfway point about 10 years after the peak.

Per capita, the peak date of oil production was 1979, when there were 5.5 barrels of oil per person annually, as opposed to 4.4 in 2012.

Laherrère: "The confidential technical data on [mean values of proven + probable reserves] is only available from expensive and very large scout databases. . . .

"There is a huge difference between the political/financial proved reserves [so-called], and the confidential technical [proven + probable] reserves. Most economists do not believe in peak oil. They rely only on the proved reserves coming from [the Oil and Gas Journal, the US Energy Information Administration], BP and OPEC data, which are wrong; they have no access to the confidential technical data. . . .

"The last [International Energy Agency] forecasts report an increase in oil production from 2012 to 2018 of 8% for Non-OPEC (+30% for the US) and of 7% for OPEC, which is doubtful. . . ."

US OIL PRODUCTION peaked in 1970 at 9,637 thousand barrels daily, declined in 2008 to 5,000, and rose in 2013 to 6,488.


GLOBAL GAS PRODUCTION rose from 2,524 billion cubic meters in 2002 to 3,370 billion cubic meters (95 trillion cubic feet) in 2012, an average annual increase of 3%.

Laherrère: ". . . [Global] production will peak around 2020 at more than [100 trillion cubic feet per year]." [emphasis added]

"Outside the US, the potential of shale gas is very uncertain because the 'Not In My Back Yard' effect is much stronger when the gas belongs to the country and not to the landowners. . . . Up to now, there is no example of economical shale gas production outside the US. The hype on shale gas will probably fall like the hype on bio-fuels a few years ago. . . .

US GAS PRODUCTION rose from 536 billion cubic meters in 2002 to 681 in 2012, an average annual increase of 2.5%.

Laherrère: "Natural gas production in the US, which peaked in 1970 like oil, is showing a sharp increase since 2005 because of shale gas. In 2011 unconventional gas production ([coal bed methane], tight gas and shale gas . . . .) was higher than conventional gas production . . . .

"This . . . leads to a peak in 2020 at 22 [trillion cubic feet] and the decline thereafter of all natural gas in the US . . . should be quite sharp. [emphasis added] The goal of exporting US liquefied natural gas seems to be based on very optimistic views. . . .

"The gross monthly natural gas production in the US has been flat since October of 2011, after its sharp increase since 2003, with only shale gas production rising. . . ." [emphasis added]

"Some claim that the US can export its shale gas as [liquid natural gas] even though conventional gas . . . is declining fast and will be quite small in just a few years."

Hughes: "Shale gas production has grown explosively to account for nearly 40 percent of U.S. natural gas production; nevertheless production has been on a plateau since December 2011. . . . The very high decline rates of shale gas wells require continuous inputs of capital -- estimated at $42 billion per year. . . . In comparison, the value of shale gas produced in 2012 was just $32.5 billion."


Laherrère: "Shale oil is now called light tight oil because the production in Bakken is not from a shale reservoir, but a sandy dolomite reservoir between two shale formations. . . . In Montana, production from Bakken is mainly coming from the stratigraphic field called Elm Coulee, which is decline since 2008. In North Dakota, production from Bakken has sharply increased."

Hughes: "Tight oil production has grown impressively and now makes up about 20 percent of U.S. oil production. . . .More than 80 percent of tight oil production is from two unique plays: the Bakken in North Dakota and Montana and the Eagle Ford in southern Texas. . . . Tight oil plays are characterized by high decline rates. . . . Tight oil production is projected to grow substantially from current levels to a peak in 2017. . . . [emphasis added]


Hughes: "Tar sands oil is primarily imported to the U.S. from Canada. . . It is low-net-energy oil, requiring very high levels of capital inputs (with some estimates of over $100 per barrel required for mining with upgrading in Canada). . . . The economics of much of the vast purported remaining extractable resources are increasingly questionable. . . .


Laherrère: "World NGPL production . . . may peak in 2030 at over 11 [million barrels per day]. . . ."


Hughes: "Other unconventional fossil fuel resources, such as oil shale [kerogen], coalbed methane, gas hydrates, and Arctic oil and gas -- as well as technologies like coal- and gas-to-liquids, and in situ coal gasification -- are also sometimes proclaimed to be the next great energy hope. But each of these is likely to be a small player. . . .

"Deepwater oil and gas production . . . would expand access to only relatively minor additional resources."


Laherrère: "Peak oil deniers claim that peak oil is an unscientific theory, ignoring that peak oil has actually happened in several countries like France, UK, Norway. They confuse proved reserves with the [proven + probable] mean reserves. . . . It seems that world oil (all liquids) production will peak before 2020. . . The dream of the US becoming independent seems to be based on resources, but not on reserves."


BP. (2013). Global statistical review of world energy. Retrieved from http://www.bp.com/statisticalreview

Heinberg, R. (2013). Snake oil: How fracking's false promise of plenty imperils our future. Santa Rosa, California: Post Carbon Institute.

Höök, M., Hirsch, R., & Aleklett, K. (2009, June). Giant oil field decline rates and their influence on world oil production. Energy Policy, Volume 37, Issue 6, pp. 2262-72. Retrieved from http://dx.doi.org/10.1016/j.enpol.2009.02.020

Hughes, J. D. (2013, Feb.) Drill, baby, drill; Can unconventional fuels usher in a new era of energy abundance? Executive Summary. Post Carbon Institute. Retrieved from http://www.postcarbon.org/reports/DBD-report-FINAL.pdf

Klare, M.T. (2012).The race for what's left: The scramble for the world's last resources. New York: Picador.

Laherrère, J. H. (2013, July 16). World oil and gas production forecasts up to 2100. The Oil Drum. Retrieved from www.theoildrum.com/node/10009

Simmons, M. R. (2006). Twilight in the desert: The coming Saudi oil shock and the world economy. Hoboken, New Jersey: John Wiley & Sons.

Peter Goodchild

Author of Tumbling Tide: Population, Petroleum, and Systemic Collapse(London, Ontario: Insomniac Press, 2014)

1 comment:

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