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Anticipating the Peak of World Oil Production

Anticipating the Peak of World Oil Production thumbnail

These are indeed good times to be a Peak Oiler. All the  peak oil deniers are dancing with wild exuberance, pointing to that spike of US shale oil production that they believe drives the final nail in the “Peak Oil Theory” coffin. And it is all happening right before reality slaps them in the face.

There is no doubt that world Crude + Condensate production, without that tight oil spike, has been on a ten year bumpy plateau.

World Less USA A

But, you may ask, when the shale bubble burst, won’t that only mean we will still stay on that bumpy plateau? No for several reasons. First the bursting of the shale bubble will likely cause a decline in US production of perhaps half a million barrels per day per year for three to four years. Second Russia, whose production increase of over 1.5 million barrels per day over the past ten years has kept us on this bumpy plateau, is now in decline.

And third, five nations that have shown considerable increase over the past few years now seem to have peaked.

China et al

These five nations, who’s 2 million barrel per day increase since mid 2004, have also kept us on that plateau. Their combined production plateaued a year and a half ago. I don’t expect them to decline very fast but they will not add anything to world production in the next few years.

 

The only nations that are not at or near their peak are Canada, Kazakhstan and Iraq. Kazakhstan hopes to bring the much delayed and way over budget Kashagan field on line in 2016. The once hoped for 1.5 million barrels per day output from Kashagan now appears to be greatly downgraded. Downgraded perhaps to well under .5 million barrels per day.

Iraq, in light of the ongoing conflict there, is unlikely to increase very much if any at all in the next five years or so. In fact Iraq’s production will very likely fall in the near future. Canada will likely continue to increase tar sands production at a slower rate.

But back to Russia!

Russia CDU TEK

Jodi has Russia peaking in November 2013 at 10,127,000 bp/d. The EIA has them also peaking in November at 10,209,000 bp/d. The Russian web site CDU TEK has them peaking at 1,458,000 tons per day. Figuring 7.27 barrels per ton that comes to 10,602,000 barrels per day. I think the EIA figures are the closest but anyway….

Russia CDU TEK

This is a daily chart of 2014 using 7.27 barrels per ton. Both this and the monthly chart are through July 24th. The spikes down in July are an anomaly, most likely caused by pipeline shutdowns due to Siberian wildfires. However I expect the August numbers to be considerably lower than the June production numbers.

Bottom line, there is no doubt that Russia is now in decline and with the political problems there now the problem is likely to get worse, perhaps a lot worse. Here is what Ambrose Evans-Pritchard writing in The Telegraph says, bold mine:

The proposed sanctions will target both the debt and equity of Russia’s major banks, effectively severing access to global capital markets. It also targets the technology for drilling in the Arctic and for opening up the Bazhenov shale basin, both needed to replace Russia’s depleting oil reserves.

Russia has a lot of gas, but gas trades at an oil-equivalent price of $60bn a barrel in Europe. It is not very profitable. Analysts suspect that Gazprom’s pipeline deal with China is at or below the break-even cost of production, assuming it ever happens.

The International Energy Agency says Russia needs $750bn of fresh investment over the next 20 years just to stop oil and gas output declining. This has already become unthinkable. Who is going to wager so much money, for such questionable returns, in the face of so much political risk?

Unthinkable indeed, and then this: Russia Oil Exports by Sea to Reach 6-Year Low

Seaborne crude shipments from the world’s biggest energy exporter via the state-run pipeline system in August will fall 9.2 percent from this month to 2.215 million barrels a day, according to loading programs obtained by Bloomberg News. That’s the lowest since Bloomberg began tracking the data in 2008. Russia’s two biggest crude terminals, Primorsk and Novorossiysk, will both export the least on record.

I don’t understand why these Russian oil production and export problems are not all over the news? They should be headlines but using google news “Russian Oil Production” you get almost nothing.

Okay we have discussed Russia, the USA, Kazakhstan, Canada and Iraq, and the five countries in the second chart up top, China, Colombia, Oman, Kuwait and the UAE, but what about the rest of the world? What can we expect from them?

Rest of the World

We can expect them to keep doing what they have done for since peaking in 2005, they will continue to decline. Combined they have declined 6 million barrels per day in the past nine years. I don’t expect that decline rate to slow.

I will close this post with one of Gail Tverberg’s charts from her latest post:
World Oil Production at 3/31/2014–Where are We Headed?

Gail's Graph

See that little green spike on the very right of the chart? That is what the peak oil deniers are all cheering about. That little spike is responsible for the death of peak oil, or so they think. Boy are they in for a shock.

Peak Oil Barrel by Ron Patterson



26 Comments on "Anticipating the Peak of World Oil Production"

  1. shortonoil on Sat, 26th Jul 2014 7:01 pm 

    “The International Energy Agency says Russia needs $750bn of fresh investment over the next 20 years just to stop oil and gas output declining. This has already become unthinkable. Who is going to wager so much money, for such questionable returns, in the face of so much political risk?”

    It looks like what you are saying is that if Russia can not self finance its not going to happen. Well, maybe Putin will sell his gold to bail out Mother Russia, and risk coming up with nothing! That should happen about the same time he pulls out of the Ukraine.

    PS, glad to see you got that 7 – 7.27 barrel problem sorted out.

  2. paulo1 on Sat, 26th Jul 2014 8:00 pm 

    It is worth going to Ron’s site and keep up with the comments. Many specialists frequent his site that seldom post here.

    Paulo

  3. dashster on Sat, 26th Jul 2014 9:17 pm 

    “These are indeed good times to be a Peak Oiler. ”

    This aligns with what the Cornucopians like to say – “Peak Oilers are upset when production goes up”.

    But personally, I don’t want production to go down, I only expect it to go down. It will be no victory to see the world struggle to adjust to declining oil production.

    Admittedly, there will be some satisfaction in seeing these folks who either fraudulently (lie) or foolishly think that a finite depletable resource has been proven not to peak, by a short term increase in shale oil, shown to be wrong. But it is still an issue in which I would actually be happier to see them smugly right all the way to my grave as it would be better for the world for their wishful thinking to be correct.

    The graph also shows something that makes me wonder about all the pronouncements about shale oil costs. People will talk about high oil prices allowing shale oil to work, and yet you can see here and elsewhere, that shale oil was being developed in 2001, when prices of oil were very low.

  4. Northwest Resident on Sat, 26th Jul 2014 9:37 pm 

    paulo1 — I took your advice and read some of the comments over on Ron’s website. Very interesting and informative, as you say. I bookmarked Ron’s site and I’ll make it a daily stop from now on. Did you read that one poster’s comment on the debris slide that is threatening North Slope oil production? And how about this quote from Ron in the comments section talking about Russia’s oil production problems:

    “Seriously, just guessing, and we are all just guessing, but I believe the decline rate the first year after peak will be around 1%, increasing to 1.5 to 2% the second year and increasing a few tenths of a percentage point after that until it hits 3 to 4%. Then all hell will break loose due to high oil prices, or collapsed economies or political insurrection.”

    There’s a lot of events happening or threatening to happen soon, all of which tend to point one direction. No wonder Ron says “These are indeed good times to be a Peak Oiler”.

  5. Makati1 on Sat, 26th Jul 2014 9:42 pm 

    Interesting that the Russian recovery drop is about 3% over ~8 months. Not even worth mentioning unless it is a long term (10+ years) trend. The US and other oil recovery countries have similar bounces all the time. They are going to get even more pronounced in the years to come.

    As for investment; I think China has their back.

  6. Northwest Resident on Sat, 26th Jul 2014 9:58 pm 

    dashster — I might agree with your statement that it would be better for the world if they could find a way to keep sufficient quantities of oil pumping at a reasonable price — except, wouldn’t that really not be better for the world — more extinctions, more pollution, more consumed resources, more CO2 and other pollutants pumped into the atmosphere. I personally think we’re at a point where the best thing for humanity and definitely the best thing for the world might be to stop our wasteful consumption, and that means using a lot less fossil fuels.

  7. Plantagenet on Sat, 26th Jul 2014 9:59 pm 

    It’s silly to imagine that tight oil has killed peak oil. It’s also silly to downplay the significance of tight oil in delaying the onset of peak oil for years beyond where most peskers predicted it would occur

  8. dashster on Sat, 26th Jul 2014 10:02 pm 

    @Northwest Resident:
    I think you are talking about issues which are actually addressed by Population Growth, or more precisely, ending it. Which unfortunately is something no one wants to address. Not the right, not the left. Not Peak Oilers, not Cornucopians.

    I am hopeful that as one or more fossil fuels peak, people will develop the nerve to discuss and then later deal with, population growth.

  9. Nony on Sat, 26th Jul 2014 10:31 pm 

    Not seeing some of the arguments. Ron shows blown up graphs with no zero and sometimes short amount of time (Russia). It’s not enough support for his arguments. Also, I get the impression he tends to have some bias. Yes, he does try to go with the data (for that I applaud). But he’s too ready to believe the worst and dismiss the best. He’s been wrong on some other strongly held ideas (like that Texas corrections were insignificant after the first month, like that condensate was an indicator of the EF).

  10. dashster on Sat, 26th Jul 2014 10:32 pm 

    “It’s also silly to downplay the significance of tight oil in delaying the onset of peak oil for years beyond where most peskers predicted it would occur”

    I think it is silly to look at tight oil as anything more than a temporary blessing to allow us to partially make up for our failure to see and prepare for the horrible declines ahead. Instead, we still don’t even see the horrible declines ahead. Cornucopians still rule the day despite a big rise and plateau in oil prices. It is surreal.

  11. Nony on Sat, 26th Jul 2014 10:33 pm 

    I would also remind that we’ve had a lot of previous calls that SA or Russia were in decline. And then they were wrong. Russia is vast and underdeveloped. SA has an essload of oil geologically.

  12. Davy on Sun, 27th Jul 2014 6:18 am 

    Dash/NR, you guys had a good discussion to start the morning off with my coffee. NR, I feel you right to question Dash’s “Corny” (cornucopian) statement, yet, Dash makes the equally pervasive point it is over population that is the issue. We get back to the predicament of population and consumption that we are in today. There are those who argue we have enough for everyone if only we could conserve and be equitable. It is really a question of population at this point in my mind. There was a point in the 60’s (maybe) when the argument of conserving and being equitable could sell as a solution with population control secondary. Today the elephant in the room is population excess and overshoot. ALL, other issues are secondary. When a population exceeds a level especially exceeds levels in the current consumptive patterns with the corresponding ecosystem stresses, we see a global ecological red line. This is why Asia is so dangerous and must stop both its population growth and consumptive growth. Both these trends are out of control in Asia. The west is in decline with both population and growth. The west has started forced de-growth. Dasher makes a good point that if population were less we could conceivably still live as we do in the rich west albeit with sustainable living practices based on an attitude of resilience, energy efficiency, and small populations. Hell Dash, you sold me! But, unfortunately, this is not the case and highly unlikely. There are too many competing ideologies and too little central control to force limits to lifestyles and population growth. This is something only managed properly by nature with humans in small groups. Humans have never demonstrated population and consumptive management at the civilization level. I will also interject Dash that systematically I am not sure at what population level a complexity like we have today can be maintained. I personally think a human population needs to be bellow 1BIL. Can we have a complex global society with less than 1BIL. We have used up much of the affordable energy and resources to support complexity in any case even if we wanted to have this complexity with a low population. I see everything pointing to a much lower population and complexity. I see small agrarian population with a low level of complexity on the horizon. Anyone interested in the dark ages?

  13. marmico on Sun, 27th Jul 2014 8:17 am 

    Cornucopians still rule the day despite a big rise and plateau in oil prices. It is surreal.

    Oil goes to $200 a barrel with assumed global plateau production. At current consumption levels of 8.5 mb/d of gasoline, U.S. households spend $675 instead of $400 billion, with assumed no behavioral change. The $275 billion increase in a $17 trillion economy is not a big deal, let alone surreal.

    Remember U.S. household’s gasoline expenditures of domestically produced net petroleum product are equal to another U.S. household’s income. Of the $275 billion increase, an approximation would be that $90 billion would leak to foreign importers.

    Americans are doomed. 🙂

  14. Davy on Sun, 27th Jul 2014 9:18 am 

    Come on M, I would equate a fuel cost rise as a tax on an economy already in decline and struggling. An economy with capex compression and hidden inflation. You can’t tell me seriously our economy can easily absorb more. Ok maybe the rats on Wall Street can or any other segment sucking off the Fed’s tits. Please show some compassion for those struggling at the bottom IOW the 70% or so.

  15. JuanP on Sun, 27th Jul 2014 9:25 am 

    Ron rules! I have been reading his blog since TOD shut down. Dash made some good points, but I am less optimistic than he is about how we will deal with the population issue. Davy nailed it in his reply, we will have lower population and complexity; I don’t see how we can avoid it. And population growth is the main cause of most of our predicaments today and our main predicament.

  16. JuanP on Sun, 27th Jul 2014 9:30 am 

    Russia’s peak seems to be happening right now, my intuition has been telling me these past months that the Russian peak is here and is the real McCoy. Several different reports have agreed on this by now. This is a big nail in the coffin of global oil production growth and has enormous geopolitical implications.

  17. Northwest Resident on Sun, 27th Jul 2014 9:40 am 

    Dashster, Davy — As we all know, the reason no politician and in fact nobody wants to talk about population control is because there is no viable solution to this problem except one — and that solution is really, really ugly. The only way that solution will be implemented on a scale large enough to make a difference is to wait for Mother Nature to grab her broom of physical reality and do a major house cleaning. Maybe future humans that survive the house cleaning will have enough sense and social awareness to keep their population levels at sustainable levels — but if not, Mother Nature is always ready to do the job. I’m guessing that a big spring cleaning session is on Mother Nature’s schedule, like any time now.

  18. marmico on Sun, 27th Jul 2014 9:47 am 

    Global per capita GDP has risen every year since The Oil Drum website opened except for a hiccup in 2009 even though the price of a barrel fluxed $30—>$140—>$40—>$100.

    Compassion. I don’t have any issue with increased taxation of gasoline and distributing some of the proceeds to low income Americans. This is the wrong forum to argue about guaranteed annual incomes. The Viagra/Lipitor doomer set is already guaranteed with Social Security and Medicare.

    I see you are as brilliant with numeracy as ‘Hill “missed an order of magnitude” shortonoil’.

  19. Davy on Sun, 27th Jul 2014 10:01 am 

    M, blind belief in reported GDP when so much debt is being created seems to me to be foolish. Yet, you seem so confident that you must be right.

  20. marmico on Sun, 27th Jul 2014 10:57 am 

    Sorry Davy, I laugh at zero hedge conspiracy posts.

    Will you actually stand up and say that Americans are doomed because the barrel (gallon) price of oil (gasoline) rises to $200 ($6.00)? This is measurable stuff, not personal preferences for a global plague.

    Apparently, rockman is a real hot shot oil driller. Either he or the government loads an EBT card for his neighbour in the single wide subdivision next door.

    Maybe I’m confused with your USO African position.

  21. shortonoil on Sun, 27th Jul 2014 2:49 pm 

    “I see you are as brilliant with numeracy as ‘Hill “missed an order of magnitude” shortonoil”.

    Your confusion probably results from the simple fact that you didn’t read the post. You read into the post; believing that what you perceive as true is what everyone else believes. A common mistake made by the ape dominated mind of humans in general (some more than others, some are a little closer to their ancestral roots than others). Go back and re-read it again very carefully. You may do better next time, then again maybe you won’t.

    “Will you actually stand up and say that Americans are doomed because the barrel (gallon) price of oil (gasoline) rises to $200 ($6.00)?”

    Apparently you don’t do much research before stating your opinion. Using the last 60 years of historical crude price to gasoline price ratio gives a price of $6.70/gal for gasoline. Not $6.00. $6.70 per gallon would be sufficient to shut down every suburb in the county that is more than 50 miles from a major metropolitan center. Home prices would fall another 20-35%, and almost every home owner in the country with a mortgage would be underwater. Delinquencies would skyrocket, and the foreclosure rate would be 10 times higher than it is now.

    The 2008 crisis almost collapsed the entire US economy. It took $12 trillion from the FED to prevent a total financial meltdown. That was $100 oil. If you are living under a rock come on out, and take a look at the complete devastation that has occurred to the cities in the US. The FED is a private bank owned by the Warburgs, Rockefellers, Morgans, Rothchilds, Medicis, and others. The super rich, the elite. If you think they are going to risk their fortunes to save some poor shlop on the street, you are as naive as you are clueless. With the massive leverage that has now again re-appeared, the $1000 trillion in derivatives floating in the world’s financial markets, and nothing but ZIRP, and quantitative easing to drive the stock market, $200 oil will be the last nail in the coffin of this dying empire!

  22. dashster on Sun, 27th Jul 2014 6:52 pm 

    “Dashster, Davy — As we all know, the reason no politician and in fact nobody wants to talk about population control is because there is no viable solution to this problem except one — and that solution is really, really ugly.”

    I think there is more than one viable solution, but as long as the people of people keep saying there is no viable solution, then we won’t do anything.

    For the United States, since our population growth comes from immigration, not our birth rate, we have a – from the perspective of a visitor from outer space – seemingly simple solution. But having lived here my whole live I am painfully aware of what a sacred cow the elite have turned immigration into and the masses repeat their mantras on command.

  23. Norm on Sun, 27th Jul 2014 7:03 pm 

    I was wonderin who owns the Fed, cause it ain’t me. Ya this movie is gonna have a big apocalyptic finale soon. use this slow spot to go out to the lobby, and buy more popcorn and soda pop.

  24. Kenz300 on Sun, 27th Jul 2014 7:13 pm 

    Walk, buy a bicycle or take mass transit when you can…….. all these are good options that we all need to use more.

    It is time to take cities back from the automobile and make them people centered. Walking, bicycling or trolleys (mass transit) need to be central to the design of modern cities.

    Safe walking and biking paths need to connect schools, homes and businesses. We need more safe places to store bicycles at businesses and apartments. It is time to get out of the automobile and become part of the city. Your perspective is so much different when you walk or ride a bicycle thru the city.

    Reduce your energy consumption and save some money.

  25. Davy on Sun, 27th Jul 2014 7:46 pm 

    Dashter, there was a time when I was pro-immigration. There was a time when I was pro-globalization. It was the late eighties and early nineties. PO and CC were distant in the future. Development was going to lower the birth rate by educating young women…etc. I no longer believe in immigration at least on the level we see it today. I say this with an Italian girlfriend with a green card. I personally have benefited from immigration. I am anti-immigration more in a theoretical sense. In a practical sense I don’t have answers. How can a country like ours significantly restrict immigration? For that matter how can the global world restrict population? The difficulties are mindboggling. To restrict immigration into the US we have to take a page out of the Democratic Republic of German complete with guard towers, walls and razor wire. The practical problem I have with immigration is related to the carrying capacity of the US which has been breached already. For starters we need to get back to 1960 level population of 170MIL and ideally we need to be bellow 100MIL. If we are in an economic descent we need to be in a population descent. Economist, liberals, and humanitarians will argue otherwise. For them population growth increases economic growth. The key difference is they do not see a paradigm shift in the works from PO and limits of growth with diminishing returns to complexity. It is over folks and as soon as we swallow the pain of “less with less” the better. There is no substitute from here on out for sustainability lifestyle changes and adoption of mitigation attitudes. These steps will be lifesavers not just good ideas. Folks I am telling you again “LIFESAVERS”

  26. JuanP on Sun, 27th Jul 2014 8:29 pm 

    Davy, Great comment on immigration. Today you had a great day. I am an immigrant against immigration, and just like you I used to be pro immigration. Probably more than you, I used to dream of a world with no borders where all people would be able to choose where to live and would move freely all over the world. Imagine there’s no countries, Lennon style.
    Being an immigrant in an overpopulated country was one of the many reasons I had my Vasectomy instead of children. For your children and all others like them. I do have to live somewhere, though, and back home is not a choice for me.
    This country is too crowded as it is already.

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