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Thermodynamic model of oil depletion sparks controversy

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This is a post by François-Xavier Chevallerau, a Brussels-based public policy professional who is in the process of setting up a new international think tank to support the emergence and promotion of biophysical economics in the public debate and the policy conversation. Here, he comments on the “Hill’s Report” that was also discussed in a previous post on “Cassandra’s Legacy.” 

Guest post by François-Xavier Chevallerau

A report on the world’s oil depletion problem published several years ago by an obscure association of anonymous consulting engineers and professional project managers is suddenly coming under fierce criticism. 
In December 2013, an ‘association of consulting engineers and professional project managers’ calling themselves ‘The Hill’s Group‘ published a report titled ‘Depletion: A determination for the world’s petroleum reserve’. Depletion, as is well known, is the inevitable consequence of non-renewable resource extraction, and determining how this depletion will affect petroleum production has been a key focus of energy analysts and researchers for a long time.

Arriving at an estimate for the remaining extractable petroleum reserve is usually attempted by adding together the quantity of petroleum believed to be present in each field, a method which is error-prone and imprecise. The Hill’s Group’s study proposed an alternative model of oil extraction and depletion, rooted in thermodynamics – i.e. the branch of physical science that deals with the relations between all forms of energy. This model, called ‘ETP’ (Total Production Energy), is allegedly derived from the fundamental physical properties of petroleum, the first and second laws of thermodynamics, and the production history of petroleum.

The methodology used by The Hill’s Group is based on ‘exergy analysis’. Exergy in thermodynamics means ‘the maximum amount of work that can be extracted from a system’. The system being considered, in this case, is a unit of petroleum. The Hill’s Group’s study calculates the maximum amount of work that can be extracted from a unit of petroleum, using the physical properties of the crude oil in question, equations derived from studies of the First and Second Laws of thermodynamics, and the cumulative production history of petroleum. It then uses these these values to construct a mathematical model that it claims can predict the status of the world’s petroleum reserve with a much smaller margin of error than can be provided by the quantity measurement approach.

Optimistic estimates place the world’s total petroleum reserve at 4,300 billion barrels. Of that quantity the model proposed by The Hill’s Group predicts that it will only be possible to extract 1,760.5 billion barrels, or 40.9% of the total reserve. Its model suggests that petroleum’s ability to supply the energy needed to sustain its own production process is declining, that petroleum depletion is further advanced than generally assumed and that oil production will decline or even collapse much faster than commonly anticipated.

From its ETP model the Hill’s Group also derives a petroleum cost curve, which it says maps the price of petroleum since 1960 with a correlation coefficient of 0.965, making it the most accurate oil pricing model ever developed. It also says that the price of oil depends, in addition to production costs, on the amount that the end consumer can afford to pay for it, and derives from its ETP model a Maximum Consumer Price curve, representing the maximum price that the end consumer can pay over time for petroleum. It is based on the observation that the price of a unit of petroleum can not exceed the value of the economic activity that the energy it supplies to the end consumer can generate. According to the Hill’s Group, its model shows that 2012 was the energy half way point for petroleum production, i.e. it was the year when one half of the energy content of the petroleum extracted was required to produce the petroleum and its products. From then on, it says, the price of oil can only be pulled down along the descending Maximum Consumer Price curve, which it says is curtailed at $11.76/ barrel in 2020. At this point petroleum will no longer be acting as a significant energy source for the economy, and its only function will be as an energy carrier for other sources. In other words, the oil industry as we know it will disintegrate, with a myriad of negative consequences for the world economy.

The Hill’s Group’s original report was published over three years ago, and a second version was published in March 2015. It gained significant popularity and was favorably commented on many blogs and websites. All this however seems to have change, and the Hill’s Group’s ETP model is now coming under fierce criticism from various sources:

‘SK’, a professor emeritus in the department of Mechanical and Aeronautical Engineering at a Major U.S. University, delivered a strong critique of the ETP oil extraction model at The fact that The Hill’s Group said that a threshold for oil markets was passed in 2012 and that oil prices would tend to go down shortly after seems to give the report a superficial credibility. But according to SK the thermodynamic analysis is incorrect and therefore any calculations and graphs based on this analysis must also be unreliable.

Spanish physicist Antonio Turiel published on his website an analysis of the theoretical basis of the ETP model (in Spanish). Applying the principles of thermodynamics to evaluate the limits of the oil’s capacity to deliver net energy to society makes sense, he says, provided it is done in a proper way. The ETP model, however, is according to him based on an incorrect use of thermodynamic theory, erroneous deductions, definitions that do not make sense from a physics point of view, deficient data processing, and ignorance of the interactions between oil production and the economy as well as other energy sources. Given these important shortcomings, he says, the ETP model cannot be used for a serious discussion of oil depletion, at least not until it is fundamentally revised and rebuilt.

Another Spanish physicist, Carlos de Castro from the University of Valladolid, also published a scathing critique of the Hill’s Group’s report (in Spanish). The physical, technological and economic foundations of the report are erroneous, he says. The Hill’s Group in fact focuses on the loss of thermal energy involved in the oil extraction process (oil moving from a high temperature reservoir to ambient temperature outside), which he says has nothing to do with the energy cost of the oil procurement process for human societies. What matters to society, he says, is not oil’s thermal energy but its chemical energy – even if this chemical energy may then be used to generate heat. The ETP model, he concludes, is not an adequate model to assess the net energy derived form petroleum extraction and its evolution.

Prof. Ugo Bardi from the University of Florence is also taking aim with the Hill’s Group’s work in a recent blog post. The Hill’s Group’s report, he says, is badly flawed. While it is true that the oil industry is in trouble, the calculations by the Hill’s group are, at best, irrelevant and probably simply plain wrong. The problem of diminishing energy returns of oil production is real, Bardi says, but the way to study it is based on the ‘life cycle analysis’ (LCA) of the process. This method takes into account entropy indirectly, in terms of heat losses, without attempting the impossible task of calculating it from textbook thermodynamic principles. By means of this method, we can understand that oil production still provides a reasonable energy return on investment (EROI). It is anyway erroneous, says Bardi, to draw conclusions regarding the economy from net energy analysis. The economy is a complex adaptative system that evolves in ways that cannot be understood in terms of mere energy return considerations.

This controversy surrounding the Hill’s Group’s report reveals some inconvenient truths that the ‘peak oil’ community now has to face. The Group’s work was widely embraced and disseminated in this community, with no or limited critical scrutiny. It indeed has an aura of scientific accuracy that comes from its use of basic thermodynamic principles and of the concept of entropy, correctly understood as the force behind the depletion problem. But behind the thermodynamic terminology, it proposes a series of assumptions, not always explicit, and of complex mathematical calculations that nobody until recently had apparently taken the time to review. As pointed out by Antonio Turiel, the Hill’s Group’s work would probably not have passed a proper peer review process in its current form.

Yet the report was widely accepted and commented in the ‘peak oil’ community. According to Ugo Bardi, this episode shows that “a report that claims to be based on thermodynamics and uses resounding words such as ‘entropy’ plays into the human tendency of believing what one wants to believe“. As many in the ‘peak oil’ community want to believe in imminent collapse and disaster, works like the Hill’s Group’s report that are perceived as providing a serious scientific basis to catastrophism are widely embraced. If the scientific basis is revealed to be not as sound as initially thought, as seems to be the case for the Hill’s Group’s work, then its embrace and dissemination can only be detrimental to the peak oil community and undermine its credibility.

Energy researchers and analysts should probably be particularly cautious and vigilant when using the concept of ‘entropy’. As pointed out by Ugo Bardi, “entropy is an important concept, but it must be correctly understood to be useful. It is no good to use it as an excuse to pander unbridled catastrophism.” The problem being, of course, that entropy cannot be correctly understood so easily. As famous scientist John von Neumann (1903-1957) once advised a colleague: “You should call it entropy (…) nobody knows what entropy really is, so in a debate you will always have the advantage.


68 Comments on "Thermodynamic model of oil depletion sparks controversy"

  1. Apneaman on Wed, 8th Mar 2017 12:46 pm 

    Hair clog, yabut that information is provided from studies done by people with PhD’s and according to you all humans with PhD’s are corrupt and just in it for the grant money and can’t be trusted therefore your argument is invalid. You’ll need to come up with a different source for the data. How about semi literate, tattooed, unemployed, neo nazi trumpateer labours who are 100% certain on everything because they “just know” they “feel it” and we all know there is no better way to find facts than going with the humans tribal emotions. Skin colour – there’s another good way to find the truth. All data from brown people is invalid by default because white people are superior and just naturally know more without even having to read more than a couple of Wikipedia entry’s and listen to some conservative talk radio. That 10 years of 14 hr days of post secondary study, just to get in the game, is yet another Jew hoax.

  2. Cloggie on Wed, 8th Mar 2017 12:54 pm 

    You are a good guy, there is nothing wrong with you. It is not your fault.

  3. GregT on Wed, 8th Mar 2017 1:40 pm 

    “EU figure is 18%, 2020 target is 20%. Probably going to be met.”

    That would be for electric power generation though, would it not? What about pharmaceuticals, industrial feedstocks, agriculture, and transport?

    And also Cloggie,

    Worth mentioning from the wiki link that you provided;

    “Underlying many of the EU’s energy policy proposals is the goal to limit global temperature changes to no more than 2 °C above pre-industrial levels, of which 0.8 °C has already taken place and another 0.5–0.7 °C (for total warming of 1.3-1.5 °C) is already committed. 2 °C is usually seen as the upper temperature limit to avoid ‘dangerous global warming’. However some scientists, such as Kevin Anderson, professor of energy and climate change in the School of Mechanical, Aeronautical and Civil Engineering at the University of Manchester and former director of the Tyndall Centre, the UK’s leading academic climate change research organisation, have argued that to be consistent with the science, 1 °C is a more accurate threshold for “dangerous” climate change.”

    This would be consistent with my understanding of our predicament. While I do agree with the effort, we would be about 3 decades too late for a 100% reduction in CO2 emissions. 20% by 2020? Too little, too late. Catastrophic climate change is in all likelihood already baked into the cake.

  4. Cloggie on Wed, 8th Mar 2017 1:44 pm 

    No, 20% of ALL energy, not just electricity.

  5. Cloggie on Wed, 8th Mar 2017 1:52 pm 

    You are picking out the most pessimist scientist.

    But, if we are too late, than we are too late. Too bad.

    Meanwhile the transition must be carried out. The EU doesn’t need to be convinced.

  6. GregT on Wed, 8th Mar 2017 2:12 pm 

    If you pick out the optimistic scenario of 2 degrees C. ( which isn’t really what I would consider to be optimistic at all) Then we would need to completely curb all global CO2 emissions sometime before 2035. 100%, globally. Conservatively speaking, 2ºC is still considered to be dangerous from a human perspective, and the IPCC scenario does not take into consideration positive self reenforcing feedback mechanisms. Which if I remember correctly, there are now some 2 dozen identified.

    We are currently, as of 2016, at .99ºC above pre-industrial global mean temperature levels.

    If we stopped all greenhouse gas emissions today, without positive self reenforcing feedbacks kicking in, ( sadly, already happening ) we could conceivably end up with a GMT rise of around 1.4 – 1.6C.

    Sorry, but no matter how you look at it, we’re in for a great deal of hurt, and the EU cutting GGE by 20% by 2020, is like pissing into the wind. (Hurricane, really.)

  7. Cloggie on Wed, 8th Mar 2017 2:23 pm 

    Here a scientist who claims that for every degree Celsius you need a doubling of CO2 levels:

    And if not, there is one consolation: we are all in this together.

  8. GregT on Wed, 8th Mar 2017 2:25 pm 

    One more thought Cloggie,

    It would appear to me, at least, that the EU goal of weaning itself off of fossil fuels is more in response to the economic fallout from peak conventional oil, which occurred sometime around 2005, rather than catastrophic climate change. (Something that the EU alone can never stop.) That would take a concentrated effort from every nation around the world, as well as a massive undertaking to sequester the CO2 that we have already emitted into the atmosphere, and into the Oceans.

    I see it as nothing more than a feeble attempt to maintain some semblance of eCONomic BAU. Unfortunately, the Earth’s environment is a tad bit more important to our survival, than air-conditioning in the summer, and space heating in the winter. Non-essential, human creature comforts.

  9. GregT on Wed, 8th Mar 2017 2:30 pm 

    Again, from your link:

    “Ridley does acknowledge that real environmental problems do exist: over-fishing, ocean acidification, hunting, deforestation.”

    Ocean acidification, in my understanding, is the biggest threat facing mankind’s existence, from catastrophic climate change.

  10. Cloggie on Wed, 8th Mar 2017 2:31 pm 

    As I understand it there is no reference to peak oil in the EU energy policy motivation. Just climate change.

    And don’t forget the Paris Accords. That’s a global agreement. And Trump has Ivanka and her moderating

  11. GregT on Wed, 8th Mar 2017 2:36 pm 

    Just started to snow here, yet again, we’re expecting another 15 to 20 cm by tonight.

    Absolutely insane. Last year at this time I had my greenhouse already planted, with daytime temperatures of 16ºC.

  12. GregT on Wed, 8th Mar 2017 2:44 pm 

    Sorry Cloggie, but the Paris agreement was much to do about nothing. It was even argued that 1.5ºC should not be passed. At the beginning of 2016 the world was already experiencing temperatures of 1.3ºC above the 1880s baseline. And also, the industrial revolution began a century before that.

  13. Apneaman on Wed, 8th Mar 2017 2:50 pm 

    hair clog, I have pointed out to you on more than one occasion about Ridlys lack of credentials – A degree in zoology makes him as qualified to speak on climate science as me or my dog. Oh and there’s that little conflict of interest deal.

    Matt Ridley aka Viscount Ridley is a coal baron, science writer and AGW denier (lukewarmer variety) on the Academic Advisory Council of the denialist Global Warming Policy Foundation. Ridley is a landed aristocrat who earns an estimated £4.1 million each year from opencast coal mines on his Blagdon Estate with income guaranteed until 2020. He is also a Conservative member of the House of Lords. Ridley was chairman of the UK bank Northern Rock from 2004 to 2007, during which period Northern Rock experienced the first run on a British bank in 150 years. Ridley chose to resign, and the bank was bailed out by the UK government leading to the nationalisation of Northern Rock.

    Coal Baron

    The White-Ridley family has owned the stunning Blagdon Estate in Northumbria since 1700, and for centuries mined coal and fireclay to amass a considerable fortune while fuelling the Industrial Revolution and British Empire. It has been estimated that open cast coal mining on this estate earns Ridley £4.1 million annually.[15]

    In spite of the fact that I have repeatedly shown he is the least qualified person to be making any professional opinion on the climate, you continue to haul him out. This is the typical tactic of a low down cock sucking liar. You are a dirty fucking liar hair clog – it’s all you have and you use the same lame assed kindergarten level rhetoric and lying all the time.

    BTW, to be a real scientist one needs to do original research, not just get a degree write books and articles to protect ones coal interests.

  14. Apneaman on Wed, 8th Mar 2017 2:54 pm 

    ‘One morning we came in and everything was dead’: Climate change and Oregon oysters

    ““By burning fossil fuels, we’ve increased the concentration of CO2 in the atmosphere by 30 percent,” he says. “That’s lowered the pH of the ocean — or the acidity of the ocean — by about 30 percent, which shifts the saturation state and makes it harder for organisms to make shells.”

  15. Cloggie on Wed, 8th Mar 2017 3:15 pm 

    If you read my blog post you will verify that he admits that he has coal interests, just like you, stinking convicted thug and miserable cancer monkey from the Alberta oil patch. Sorry about that. He makes a positive statement about the logarithmic relationship between CO2 levels and temperature increase, as well the CO2 buffer effect due to glabel luke warming. Got that, bampot?

  16. makati1 on Wed, 8th Mar 2017 5:12 pm 

    Cloggie, he is still a coal supporter, and that makes ANYTHING he says or writes as false advertising. Sorry. You are supporting a liar.

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