Thursday, April 10, 2008

The Shape of Oil to Come

This is about an article that is about the way in which oil production is going evolve. Will there be a sharp peak, or a long lasting plateau?

It's largely about the peak oil phenomenon and what it says about our future. This phenomenon is an aspect of a general model that for any resource which undergoes continually increasing demand for more, there comes a time when the planet cannot provide more. The model drawn from observing the ability of oil companies to extract oil from oil fields shows that once demand reaches the point where the planet cannot provide more, that what happens is the resource begins to diminish and indeed provide less rather than more. Many oil fields around the planet have gone past this peak production point and it is debatable when the world overall will go past the worldwide peak point. And it is a concern over what happens after that point?

The article draws a distinction between "sharp peak" thinkers, and "plateau peak" thinkers. That is, will the oil production drop off sharply once the peak is reached? ("sharp peak") Or will there be a long period where the production stays the same before it begins to drop off? ("plateau")

What drives oil production is the discovery of new oil fields. The pattern is to use up the oil field, then move on to the next one and the next one and so on. Eventually we will run out of new oil fields. The current statistics shows there seems to be an adequate supply of new fields to maintain a plateau condition for several years into the future.

"In relation to the peak or plateau question, this raises two questions. For how long will the oil industry be able to add such a large amount of new production each year? And the second being, is the decline rate of 4% to 5% stable or will it increase or decrease in the future?...From historical data we know that discoveries peaked in the 1960’s and have been declining ever since. Presently we are discovering on average one barrel for every three consumed....While discoveries can influence the extension of the plateau, unconventional crude oil is not likely to have such an influence. With unconventional in this article I mean oil sands, oil shale, polar oil and heavy and extra heavy oil. Present scenario’s for these sources of unconventional oil estimate a production level between 8 to 12 million barrels per day in 2030 (Campbell, 2006; IEA, 2006). This is too little and too late...."

Article Reference: