Exploring Hydrocarbon Depletion
Page added on April 7, 2017
Gone forever are the days when the world stressed over what would happen when humanity began running out of oil—a fear based on M. King Hubbert’s theory of peak oil—or the point in time at which the maximum rate of petroleum extraction occurred.
The North American shale revolution proved that not only are there plenty of hydrocarbons left to fuel humans for centuries, there are plenty of people with substantial grit and ingenuity to find ways to reach these resources. What worries the oil industry today is the idea of peak oil demand—when demand growth for oil and gas resources begins to stagnate and lose ground to other energy sources, such as renewables, due to cost and/or environmental concerns.
“There could be a time, and it could be as early as 2035, when we start to see peak oil; not what is sometimes discussed by geologists where we start to run out oil, but perhaps the time when we start to run out of demand,” said BP America Senior V.P. Cindy Yeilding at AAPG’s 2017 Annual Conference and Exhibition (ACE) on April 4 in Houston. Yeilding participated in a panel discussion at the conference, titled “The Next 100 Years of Global Energy Use: Resources, Impacts and Economics.”
“(Reaching peak demand) would probably mean that we leave some oil in the ground, but that would also mean that there probably is a better offer out there. That point could be reached well into the next century, or it could also start as early as the next half of this century,” said Yeilding, as she referenced a quote from former Saudi Oil Minister Sheikh Ahmed Zaki Yamani, remarking “the Stone Age didn’t end because we ran out of stones.”
Yeilding acknowledged that BP forecasts 33% energy demand growth by the year 2035, driven by non-OECD countries, including those in Africa, as well as China and India. However, she said that OECD demand growth, in developed countries like the U.S. and those in Western Europe, will begin to plateau in the next 20 years, as fuel efficiency improves, meaning virtually all possible demand growth will come from the developing world. BP forecasts oil demand growth to average 0.9% annually until 2035, with OPEC meeting the bulk of demand growth. The cartel is expected to provide 70% of global supply, followed by the U.S. and Russia.
Natural gas demand is expected to grow more rapidly, at 1.6% annually. Shale production is expected to increase 5.2%/year and provide 60% of the total increase in natural gas supply, due in large part to U.S. operations. China should become second, behind the U.S., in shale production by 2035. Both China and Europe are forecast to become increasingly dependent on natural gas, according to BP.
Coal demand is forecast to decrease 0.2% annually, with China and India expected to be the largest consumers. Renewables should grow their share of total power generation, from 7% in 2015 to 20% in 2035, forecasts BP.
Still, “all that is certain is uncertainty,” Yielding said. “Could there be a peak? I think most of us actually think there will be, and there will certainly be technology and policy support for a zero-net carbon future coming very soon.” Yielding noted that advances in technology, like carbon capture, could help adapt oil and gas production to future environmental standards. She also said that she expects growth in petroleum demand could come from some non-combustible sources, such as infrastructure and manufacturing.