Sunday, October 18, 2009

"Global Oil Depletion" a report on Peak Oil by the UK Energy Research Centre

The UK Energy Research Centre handles research into energy issues for all of Britain. On Oct 8, 2009 they released an indepth study of oil production, the ways to measure oil reserves, estimate current and future production, etc. They paint a picture of peak oil and the need to move to other energy resources. It's not that they are whole-hog embracers of peak oil, instead this is a serious and indepth explanation of the issues with eye opening charts, data and discussion. The following is my summarization of the main report, they also published 7 additional reports containing a flood of technical data.

Abundant supplies of cheap liquid fuels form the foundation of modern industrial economies and at present the vast majority of these fuels are obtained from ‘conventional’ oil. Conventional Oil is the high quality stuff that got us hooked the potent energy source that it is.

Many forecast a near-term peak and subsequent terminal decline in the production of conventional oil as a result of the physical depletion of the resource. Others claim rising oil prices will stimulate investment that will increase supply to meet demand. But those who point to stimulated investment tend to reply on use of nonconventional oil such as tar sands conversion. Also as we'll see financial troubles raise the doubt of whether the required production capacity investments can be made, because of doubt over availability of capital.

While there is popular attention on peak oil, official attention is scarce or dismissive. "Most governments exhibit little concern about oil depletion, several oil companies have been publicly dismissive and the majority of energy analysts remain sceptical."

Key conclusions

  1. The mechanisms leading to a ‘peaking’ of conventional oil production are well understood and provide identifiable constraints on its future supply at both the regional and global level.
  2. Despite large uncertainties in the available data, sufficient information is available to allow the status and risk of global oil depletion to be adequately assessed.
  3. There is potential for improving consensus on important and long-standing controversies such as the source and magnitude of ‘reserves growth’.
    • "The oil industry must continually invest to replace the decline in production from existing fields. The average rate of decline from fields that are past their peak of production is at least 6.5%/year globally, while the corresponding rate of decline from all currently-producing fields is at least 4%/year. This implies that approximately 3 mb/d of new capacity must be added each year, simply to maintain production at current levels - equivalent to a new Saudi Arabia coming on stream every three years.
    • Decline rates are on an upward trend as more giant fields enter decline, as production shifts towards smaller, younger and offshore fields and as changing production methods lead to more rapid post-peak decline. As a result, more than two thirds of current crude oil production capacity may need to be replaced by 2030, simply to prevent production from falling. At best, this is likely to prove extremely challenging.
    • Oil reserves cannot be produced at arbitrarily high rates. There are physical, engineering and economic constraints upon both the rate of depletion of a field or region and the pattern of production over time. For example, the annual production from a region has rarely exceeded 5% of the remaining recoverable resources and most regions have reached their peak well before half of their recoverable resources have been produced. Supply forecasts that assume or imply significant departures from this historical experience are likely to require careful justification."
  4. Methods for estimating resource size and forecasting future supply have important limitations that need to be acknowledged.
  5. Large resources of conventional oil may be available, but these are unlikely to be accessed quickly and may make little difference to the timing of the global peak.
  6. The risks presented by global oil depletion deserve much more serious attention by the research and policy communities.

Policy implications

  1. it seems likely that mitigation will prove challenging owing to both the scale of investment required and the associated lead times.
  2. Even with incentives associated with climate change policy, there will be strong incentives to exploit high carbon non-conventional fuels. (the massive amounts of coal just waiting to be liquified)
  3. Investment in large-scale mitigation efforts will be inhibited by oil price uncertainty and volatility and seems unlikely to occur without significant policy support.

total-liquid-fuel-production.jpg

Current economic problems have lead to a major reduction in global oil demand, a major fall in price ($150/bbl in July 2008 to $40/bbl in Jan 2009) and the cancellation or delay of many projects that would act to increase production capacity. Given the long lead time required to get oil production projects underway the cancellation of projects makes likely a supply crunch in a few years e.g. if global oil demand increases again will the demand increase faster than the production projects can get restarted?

oil-peak-us.jpg

oil-peak-britain.jpg

These are examples of a couple oil peaks. Conventional oil production raised to a point and then declined once production levels were unable to be sustained.

oil-classification.jpg

Classifying the different kinds of oil is key to gauging the problem. When conventional enters terminal decline will there be other resources which can pick up the slack? There's nothing magical about fossil oil, it's possible to make oil through other means. Some questions about this are: Is it possible to replace the supply provided by conventional oil by some other fuel source? Are the replacement fuel(s) better or worse for the environment? Do the replacement fuels have as high an energy return on investment as conventional oil does? How quickly can the switchover to other resources be made?

The energy return on investment (EROI) is a measure of the net energy gain from the production of oil and other resources, once the energy used in extraction and processing has been taken into account.

oil-discovery-trends.jpg

This is again focused on conventional oil and shows that the peak of discovery for conventional oil was in the early 1960's. Note well above in the key findings that to make up for production decline that new production sources are required at a rate of another "Saudi Arabia" (3 million bbl/day equivalent) every 3 years. The world society has been coasting on the fumes of old oil discoveries for over 40 years. The lack of new oil major field discoveries represents a major problem looming in front of us.

eia-production-forecast.jpg

The U.S. DOE EIA produced this forecast of future oil production. Note the two wedges in the middle. They are marked "Crude Oil - fields yet to be found" and "Crude oil - fields yet to be developed". These wedges represent the production shortfall that's looming in front of us. The key phrase is "...yet to be..." because that is production capacity which does not currently exist. For it to exist new oil wells, pipelines, refineries, and transport ships have to be built. Often the new oil is far offshore so "oil well" is an expensive oil platform. Then there are the oil fields yet to be discovered. Where are they and why haven't they been found yet?

Much of the paper is devoted to statistical modeling of recoverable reserves, the claimed reserves, the potential for new discoveries, and the decline rates.

There is a big controversy about claimed oil reserves. Some companies appear to be playing tricks with their claimed reserves and that the publicly claimed numbers are widely thought to be bogus. The root cause is the relative power strength of OPEC decision making is based on their reserves figures. Saudi Arabia claims to have the most reserves but their numbers have been suspicious.


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