Register

Peak Oil is You


Donate Bitcoins ;-) or Paypal :-)


Page added on January 25, 2014

Bookmark and Share

Has Petroleum Production Peaked, Ending the Era of Easy Oil?

Geology

A new analysis concludes that easily extracted oil peaked in 2005, suggesting that dirtier fossil fuels will be burned and energy prices will rise

Despite major oil finds off Brazil’s coast, new fields in North Dakota and ongoing increases in the conversion of tar sands to oil in Canada, fresh supplies of petroleum are only just enough to offset the production decline from older fields. At best, the world is now living off an oil plateau—roughly 75 million barrels of oil produced each and every day—since at least 2005, according to a new comment published in Nature on January 26. (Scientific American is part of Nature Publishing Group.) That is a year earlier than estimated by the International Energy Agency—an energy cartel for oil consuming nations.

To support our modern lifestyles—from cars to plastics—the world has used more than one trillion barrels of oil to date. Another trillion lie underground, waiting to be tapped. But given the locations of the remaining oil, getting the next trillion is likely to cost a lot more than the previous trillion. The “supply of cheap oil has plateaued,” argues chemist David King, director of the Smith School of Enterprise and the Environment at the University of Oxford and former chief scientific adviser to the U.K. government. “The global economy is severely knocked by oil prices of $100 per barrel or more, creating economic downturn and preventing economic recovery.”

Nor do King and his co-author, oceanographer James Murray of the University of Washington in Seattle, hold out much hope for future discoveries. “The geologists know where the source rocks are and where the trap structures are,” Murray notes. “If there was a prospect for a new giant oil field, I think it would have been found.”

King and Murray based their conclusion on an analysis of oil data from the U.S. Energy Information Administration. Looking at use and production trends, the two note that since 2005 production has remained essentially unchanged whereas prices (a surrogate for demand) have fluctuated wildly. This suggests to the authors that there is no longer any spare capacity to respond to increases in demand, whether it results from political unrest that cuts supply, as in the case of Libya’s political upheaval last year, or economic boom times in growing countries like China. “We are not running out of oil, but we are running out of oil that can be produced easily and cheaply,” King and Murray wrote.

Other statistics, however, argue against a plateau. Oil company BP found in its most recent analysis that oil production was actually more than 82 million barrels per day in 2010, higher than the proposed plateau of 75 million. That difference may be the result of the increasing use of “unconventionals”—Canadian tar sands or the natural gas liquids co-produced with oil extraction. Rising production in the China, Nigeria, Russia and the U.S. also hints that technological improvements may allow greater production from existing fields than the new research suggests.

Plus, the price of oil may argue against any such plateau. Adjusted for inflation, today’s $100 per barrel is roughly equivalent to prices in 1981, according to environmental scientist Vaclav Smil of the University of Manitoba. Smil also notes that in the last 20 years enough oil has been found to satisfy the demands of two new consumers—China and India—nations that now import more oil than is consumed by Germany and Japan.

Some of that price stability is the result of increased efficiencythe potentially vast reserve of unused oil. The U.S. and other developed countries have maintained economic growth while reducing the amount of oil (and other energy) required for that growth, although some of this apparent efficiency has come from outsourcing energy-intensive economic activity, such as steel production. “We have about halved oil intensity since 1981,” Smil argues. “We could halve it again, so we could do with so much less oil—why should we panic about producing less, even if that were the case?”

If King and Murray are correct about 2005 marking the end of easily extracted oil, however, then Smil’s additional halving of demand, plus conservation and a rapid deployment of alternative energy, would be required to avoid even more economically painful oil price shocks in the future. As it is, the U.S. spent more than $490 billion on gasoline in 2011—$100 billion more than in 2010, even though the number of miles driven was similar, according to data from the New America Foundation.

An easy-oil plateau is not good news for the climate, either. Harder to extract oil means increased burning of dirtier oil like that from the tar sands—or even dirtier coal. In fact, there are trillions more barrels of carbon-intensive fuel out there in the form of huge coal fields, such as the one currently being brought into production in Mongolia. “There will still be enough CO2 produced to result in significant climate warming,” Murray notes.

Even with large supplies of coal and natural gas, the world faces a potential energy shortfall, one reason that the U.S. Department of Energy suggested in a 2005 report (pdf) that a “crash program” to cope with any decline in oil supplies be instituted. The report argued this program should start 20 years before peak global production to avoid “extreme economic hardship.” That’s because it will take decades for any kind of energy transition to occur, as evidenced by past shifts such as from wood to coal or coal to oil.

In fact, King and Murray argue that global economic growth itself may be impossible without a concurrent growth in energy supply (that is, more abundant fossil fuels, to date). “We need to decouple economic growth from fossil-fuel dependence,” King adds. “This is not happening due to industrial, infrastructural, political and human behavioral inertia. We are stuck in our ways.”

Scientific American



21 Comments on "Has Petroleum Production Peaked, Ending the Era of Easy Oil?"

  1. Jerry McManus on Sat, 25th Jan 2014 3:28 am 

    Wow, not much that is very “scientific” about this piece of fluff.

    We are indeed “stuck in our ways”, but not in the sense implied by the clueless quote at the end.

    “Decoupling” economic growth is not the problem. Economic growth IS the problem.

  2. Northwest Resident on Sat, 25th Jan 2014 4:37 am 

    “But given the locations of the remaining oil, getting the next trillion is likely to cost a lot more than the previous trillion.”

    I nominate that sentence for understatement of the year.

  3. J-Gav on Sat, 25th Jan 2014 10:00 am 

    Question: How do you decouple fossil fuels and economic growth?
    Answer: You don’t, because fossil fuels ARE economic growth.

  4. Davy, Hermann, MO on Sat, 25th Jan 2014 12:48 pm 

    A nothing new article that is good news because it is another step for the inclusion of peak oil in the mainstream discussion. This is a peer reviewed publication. These type of articles really smack a blow to the peak oil contrarians. The same is true when the military or security organizations release reports supporting peak oil.

    The bought off mainstream media preaching the “Energy Cornucopia” message is very strong now. This message of energy optimism is for economic reasons and ideological reasons. Economically the “Big Energy” from oil to coal is in trouble from “CAPEX compression”. These big energy companies face higher investment cost, lower reserve bookings and declining profits. This is troubling for a publically listed company.

    So you spread the idea of the new horizon where all is good message. This means debunking peak oil articles. They have been lucky with the tight oil and gas revolution hitting when it did as the ralling point. These articles have been coming out fast and furious lately. The ideological side of it is from those who see prosperity around the corner. They see human exceptionalism with technology and human ingenuity prevailing. The lobbying establishment is fine-tuned these days. Their ability to shape messages through mass media and experts of dubious credentials is very effective. Just witness the whole climate change denier movement. It takes money to deliver these messages. These messages comes from those with money who want to keep their money i.e. 1%’s. This includes the political establishment that is now nothing more than a global revolving door of 1%’s, big finance, industry, lawyers, and accountants.

    I feel we will very soon be in a position of crisis for multiple reason. My money is on a financial crisis as the most likely trigger for world crisis. Let’s face it a breakdown of the system that facilitates investment will trigger the end of growth. The economic bandages have been used. We are naked now.

    The oil situation will follow a financial crisis down the slope of collapse. So in my mind Peak Oil is only a backstop much like climate change. These two paradigm changers are the end of industrial man. Yet the slippery chaotic slope down the end of growth curve is a product of systematic risk from a global economic system that is nothing more than a Ponzi scheme. Finance is the top card in the house of cards. When the finance card falls we will see the end of BAU.

    It is my hope at this time that all the plan B ideas expressed here and on other sites will gain traction. Time is a luxury. We have very little time. The time needed is not like Hirsh report calls for but more like the ideas expressed from those like Heinberg. The hirsh report was a revolutionary study stating we need 20 years to adjust to oil depletion to maintain BAU. We now know the full effects of peak oil and it’s corresponding systematic risks. There is only adjustment and mitigation now.

  5. Peter Romersa on Sat, 25th Jan 2014 1:30 pm 

    The world has been mired in a recession for about six years now. The economy has “downshifted” fundamentally, due to the loss of “cheap oil.” The stock market just shed 500 points this week due to weak demand. The shrinking middle class will stay at home if the weather is cold, instead if driving, vacationing, shopping, or dining out. These are the “drivers” of the economy, and $4.00 a gallon for petrol doesn’t help. But as they say, “this is the new normal.” This economic model can not sustain itself. $8.00 a gallon, and a Manhattan Marshland await us in the future!

  6. Stephen on Sat, 25th Jan 2014 1:58 pm 

    I think we are going to have to make some decisions in the future that are going to put economic gain on the back burner, decide what aspects of society we want to keep and what we will change, into a new model that uses far less resource consumption. I think this will inevitability cause a debt default for sure, probably shift wealth, force re-localization, make small town culture a priority again over big-box retail, etc. I think we will even get to a point where wall street controlling everything is no longer desired, and that we will have to hand social policy decisions over to people who are not CEOs of big corporations or wealthy investment bankers. There will then be a quest to protect quality of life as a higher priority than corporate profits. The sooner we make this move, the softer the landing will be. We may be able to avoid a big crash but at this point, it won’t be smooth. If we do nothing, I suspect it will lead to anarchy.

  7. rockman on Sat, 25th Jan 2014 2:31 pm 

    It a shame that such a presumably prestigious mag as Scientific American results to such sloppy characterizations. But there are some good points made in this piece.

    But: “Ending the Era of Easy Oil?” and “…easy-oil plateau…” and “…the end of easily extracted oil…”. If you’ve heard my “easy oil” rant before you can skip the rest of this post.

    Exploration success rates have improved greatly over the last 40 years mostly thanks to huge advances in seismic data quality. There has never been an easy oil era. Those big heritage fields that today look like gold just laying on the ground didn’t look like that BEFORE they were discovered. It many cases the oil patch didn’t have great confidence these trends would amount to much at that time. And in the US there was no plateau when most of those big onshore heritage fields were discovered. Oil production grew at a nice consistently high rate from the 40’s to the late 60’s. That’s not a debatable point: just pull up the curve. A lot of dry holes were drilled finding those fields. But once found there were thousands of low risk development wells drilled because these fields were huge compared to what’s being developed today.

    And no: the Eagle Ford and Bakken are not huge FIELDS…they are prolific TRENDS. Drilling one good well in either play does not lead to a proliferation of low risk developments wells.

    “Easily extracted”? Again, sloppiness or ignorance? Drilling and producing both conventional and unconventional reservoirs has never been easier then it is today. In the 50’s and 60’s there were conventional reservoirs in which wells couldn’t be produced much over 100 bopd. Today, with a horizontal well, I can produce that same well at 500+ bopd.

    The Canadians oil sands are not difficult to produce. In the early days the resource was just laying on the ground waiting to be scooped up by a front loader. Very easy to do but not very cheap. And the horizontal wells and steam being used now? The horizontal drilling is child’s play we developed over 2 decades ago. And steam assisted recovery…a 40+ year old technology that’s how difficult? You boil water and pump the steam down a hole. Also rather easily done. But expensive.

    Deep Water? We began developing DW GOM fields over 30 years ago. When I started in 1975 we were limited to a 600′ water depths with fixed platforms anchored to the sea floor. But we then developed the tech to create floating production platforms and wellheads that could be set on the sea floor. Since then we’ve continually tweaked the engineering to move into deeper water. So again the primary controlling factor wasn’t the technology but the cost.

    We have not left an era of easily produced oil. We have left an era of cheaply produced oil. Little of the current surge in oil production would have happened if prices had not boomed. All this new oil would be just as easy to find and produce if the price was $30/bbl. It just wouldn’t be economical in the vast majority of cases.

  8. Aaron on Sat, 25th Jan 2014 2:52 pm 

    It says this is a new article but it’s two years old. 26 Jan 2012.

  9. rockman on Sat, 25th Jan 2014 4:10 pm 

    Aaron – Thanks…didn’t catch that. So apparently “wrong” is timeless. LOL.

  10. robertinget on Sat, 25th Jan 2014 4:45 pm 

    Thanks rockman for all your posts. In particular, putting the proper perspective on oil and gas drilling.

  11. Northwest Resident on Sat, 25th Jan 2014 4:47 pm 

    But rockman, isn’t there a true distinction between “easy to get oil” and “not easy to get oil”. The “easy to get oil” is the oil that like the dude in Beverly Hill Billies found — he poked a hole in the ground and up came the bubbling crude. There used to be oil like that waiting to be found, but not anymore. Sure, it was never easy to find a lot of those wells, but once found, all you had to do was pretty much drill a hole and the pressure of the well would just force the oil up through the pipe — a “gusher” — easy. The “not easy to get oil”, like you say, is much more expensive to get at, and it is the combination of technical steps and all of the assorted technology that must be deployed that both increases the expense of getting that oil, and also contributes to it being classified as “not easy to get”. I know that “easy” is a relative term, but isn’t it true that the oil reserves we tapped into first were “easier” to bring online than the (shale, etc…) oil reserves you guys are producing these days?

  12. Kenz300 on Sat, 25th Jan 2014 5:55 pm 

    Oil has had a monopoly on transportation fuels. That is ending. Bring on the electric, flex-fuel, hybrid, biofuel, CNG, LNG and hydrogen fueled vehicles. We need to diversify our transportation fuels and reduce our reliance on oil..

    The oil companies love it when oil prices spike….. they make huge windfall profits….. they are doing all they can to reduce competition from any other source.

  13. nemteck on Sat, 25th Jan 2014 6:05 pm 

    “Easily extracted oil” is a matter of definition. In 1858 one needed just a pipe and the cost was very low. Often 3 men were operating the well.

    In the Golf one needs a $2 Billion platform, 200 hundred men, helicopters, ships, pipelines, etc. to “easily” extract oil. What is easy about that? Oil spills demonstrate the difficulties and BP got a bloody noise last year when trying to drill in the Arctic.

  14. rockman on Sat, 25th Jan 2014 9:42 pm 

    Nemteck – I think this is the problem: easy oil vs. cheap oil. You described how expensive it is to develop DW GOM oil reserves…not how difficult it is.
    Expensive yes but not difficult if you have the capex.

    NR – I wish I could take up the space here to explain how difficult it was to SUCCESSFULLY explore for fossil fuels in the early days. Best advice is to search the web. I can’t think of a good analogy so here’s a bad one. How difficult is it for you to get a message to a friend half way around the world today compared to 60 years ago?

    I won’t flesh out the obvious answer but the magnitude of the improvement is on the order of what we’ve seen in the oil patch. First, digging a well long ago was never that easy: lots of collapsed holes, blow outs, deaths and lost fingers. I can easily drill a 12,000′ hole today that no one thought to be ever possible decades ago. But again, back to the easy to find vs. the easy to drill.

    Personal experience: in the mid 80’s I drilled 25 shallow wells in a Texas county that had a historical commercial success rate of around 15%. That was the outcome of using the traditional method using geologic data from existing wells. Using seismic data and “amplitude analysis” I made 23 commercial wells out of those 25. A 90% SR compared to a 15% SR. How fast could I generate a prospect compared to the weeks or months using the old approach? The president of the company brought a new seismic line to me on a well site where I was just finishing up a well. I unrolled the paper print, saw a good “bright spot” and said “Drill here”. Took less than 30 seconds. A bit unusual but it happened.

    I’ll dig for links that may give a better big picture.

  15. FarQ3 on Sat, 25th Jan 2014 9:57 pm 

    Kenz300 “The oil companies love it when oil prices spike….. they make huge windfall profits”

    Not so my friend. Most big oil companies are treading water to stay afloat. ‘Big Oil’ production is decreasing as costs are increasing. This is a generalisation but largely true.

    Airlines are struggling in the same way. If they are not proped up by governments they are financial basket cases. Air travel is very cheap for now, but it won’t be for very long.

  16. Northwest Resident on Sun, 26th Jan 2014 3:50 pm 

    Hey rock — I guess when I think of “easy to get oil” and “not easy to get oil”, it comes down to this:

    Oil well “A” is one that once you put a spigot into the ground and the oil starts gushing out, all you have to do is pump that oil down the pipeline to wherever it is going — you can “milk” that hole for years without having to drill another hole — although you might decide to drill a few more holes just to multiply the amount of oil you get per day. That’s the “easy to get” oil.

    Oil well “B” is not actually a well, but a bunch of concentrations of oil mixed in with shale or sand. You can drill one hole and using additional technologies, get a batch of “oil” out of that hole. But in a relatively short time, that concentration gets sucked dry, so you have to go drill another hole to get the next concentration, deploying the same group of technologies over and over. It requires constant drilling, basically. That is “not easy to get oil”.

    Like you say, due to technological advances, the oil well “B’s” in the world (or, for now, U.S.) may be “easier” to find and exploit than those oil well “A’s” of long ago. But still, once the hole(s) are drilled today even with advanced technology, you still have to do it repeatedly.

    I think the whole point is “easy” and “not easy” boils down to the fact that there are no more oil finds left in the world where all you have to do is drill one good hole and then collect the proceeds for years and years without having to constantly search and drill for more pockets of oil.

    I guess all I’m saying is that to me, there IS a clear distinction between easy and not easy to get oil — although based on what you’ve pointed out, “easy” and “not easy” may not be the best descriptors.

  17. rockman on Sun, 26th Jan 2014 4:12 pm 

    Far – Yep…not a simple dynamic. Oil producing from a well I justified drilling in 2000 when it was $30/bbl now sells for much more then I used in my economics. But it cuts both way. $billions were spent drilling NG wells when prices boomed 6 years ago. And then companies were slaughtered when prices eventually fell more then 70%. That price collapsed turned my $400 million NG drilling program into a $zero drilling program. And that means less drilling which will eventually mean high NG prices.

    Folks who bitch about high oil/NG prices don’t shed a tear for the oil patch when prices collapsed. But they don’t understand what low prices lead to…high prices. The oil patch is not monolithic. The pubcos love high prices for a simple reason: it provides more wells to drill and thus more reserves to book. Even if the profit margin is low like we see in the shale plays. Privcos, like mine, can only take advantage of high prices if the rate of return is sufficient. But the pubcos’ high utilization of the drilling infrastructure increases the cost for privco drilling. And that reduces our drilling incentive. The big advantage for my privco is that while the pubcos are chasing the shales they aren’t competing with us for the limited number of the more profitable conventional wells. If it weren’t for the shales at least half the oil companies wouldn’t exist today. And fewer companies drilling = less oil/NG = higher prices.

    So high oil prices lead to more shale drilling. More shale revenue, even at a low ROR, adds to US oil production because the pubcos recycle much of that revenue into more drilling. More drilling = more oil = more price stability.

    Unfortunately there are other factors, such as economic activity and geopolitics, that impacts the dynamic. BTW the best rate of return I’ve ever made for a company was when NG was selling for $0.90/mcf years ago. Thanks to a very high success rate AND low drilling cost (as a result of little drilling activity due to low prices) my finding cost was $0.12/mcf. A company’s profit margin ISN’T dependent on what price they sell oil/NG for but what it cost to find it. True today and always has been. I’ve seen far more companies go under as a result of high price periods of exuberance then from low price periods. And 99% of the public is incapable of understanding that.

  18. rockman on Sun, 26th Jan 2014 4:31 pm 

    NR – Yep…the terminology makes it confusing. For instance there is no prospect easier to produce oil from then the Eagle Ford Shale. The drilling and frac’ng is butt simple. And the geologic analysis? What analysis? Just look at the map: they just pick an azimuth for the well path, scrape a location and drill.

    A little secret…don’t tell anyone: in the oil patch when we call someone a “great shale geologist” it is not considered a compliment. It’s a tad bit of mockery.

    It is easier today the ever before to find the conventional reservoirs left it the world. And there are fewer conventional reservoirs left to find today then ever before. So is the oil left to find easy or difficult. You say tomato and I say potato.

  19. Northwest Resident on Sun, 26th Jan 2014 5:11 pm 

    Dang, leave it to “the rock” to dynamite an easy-to-grasp concept with nitroglycerine-filled facts.

  20. Jerry McManus on Sun, 26th Jan 2014 8:07 pm 

    Not to mention the subtleties of Proved vs. Probable and Reserves vs. Resources.

    The “one trillion” number is superficial, at best. I’ve seen credible estimates that there are 6 trillion barrels of hydrocarbons in the Earth’s crust. That is total resource, or original oil in place.

    How much of that can technically be recovered and thus booked as a reserve? Average global recovery rates are abut 30%, which gives us the two trillion number. Note that is global average, different fields may have vastly different results. It all depends on price and technology as the cheerleaders are fond of reminding us.

    How much of that is proven and not just probable? Again, it depends, and to make it even more complicated there are different degrees of proven and probable. As Rockman pointed out, it is a moving goal post. Oil that is proven at one price may not be economical at another price.

    Throw in the recent fondness for redefining oil as “anything that is liquid and can be burned” and you have quite a mess to sort out.

    Details which this fluff piece completely glosses over.

  21. rockman on Sun, 26th Jan 2014 10:13 pm 

    Jerry – Great points. I’ll also add that “proven” reserves don’t always get produced. I’ve gotten more than one third party reserve auditor to accept my “proven” numbers. It can be done without lying. You just have to be very good at it. I got pretty good at baffling them with my bullish*t if I do say so myself. LOL.

Leave a Reply

Your email address will not be published. Required fields are marked *