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Page added on December 25, 2016

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Has tight oil put ‘peak oil’ to rest? Not so fast: Fuel for Thought


Eighteen years ago, the International Energy Agency made an alarming and, by its own admission, controversial prediction. Global conventional oil output would peak well before 2020, it said, based on global oil reserve modeling of the day.

Pondering the potential repercussions of Peak Oil for the first time, the West’s energy watchdog concluded that the world would need to rely increasingly on future supplies of so-called unconventional oil.

The need for more shale oil, tar sands, and coal and gas-to-liquids projects to meet oil demand seemed a given even then. The alarming part was that many of the new resources needed to plug the supply gap were ominously deemed as “unidentified.”

Despite only a passing mention of the potential for US oil shales—which at that time were producing only small volumes—that call in the IEA’s flagship long-term outlook proved largely prophetic.

Global conventional crude output peaked in 2006 at 70 million b/d and within a decade of the 1998 report, the US shale oil boom had started to take root.

Fast forward to 2016 and the IEA’s latest World Energy Outlook again shines a light on the need for more unconventional oil but for different reasons.

Back then, the IEA’s bullish economic forecasts saw global liquids demand exceeding 111 million b/d by 2020, a figure which now stands more than 13 million b/d above current forecasts.

The concern over a supply shortfall today comes from the collapse of industry spending on new oil projects during the price downturn. With the oil price slump pulling the rug from under upstream spending and investment decisions, the IEA foresees a potential oil supply “gap” of 16 million b/d opening up by 2025.

That gap threatens a new spike in oil prices or the requirement for mostly lower cost US tight oil to come to the rescue.

The IEA now sees US tight oil flows remaining higher for longer than in its previous long-term forecasts due to the sector’s efficiency gains and resilience to lower oil prices.

Tight oil production growth

Globally, tight oil production will rise from 4.6 million b/d in 2015 to a peak of 7.5 million b/d in 2035, according to the report, 2.1 million b/d higher than its forecasts just one year ago.

BP is more bullish. It sees US tight oil production plateauing at nearly 8 million b/d soon after 2030, when it will account for almost 40% of total US oil production.

But much depends on the resilience of shale to lower prices. Progress on bringing down shale costs is swift and has outpaced most forecasts. Just 10 months ago the IEA saw tight oil peaking in 2020. It now believes lower drilling and production will see tight oil continue growing through 2035.

Impressive oilfield efficiency gains, however, won’t go on forever and will be stymied as high-yielding shale sweet spots dry up, a scenario likely by the mid-2020, according to the IEA. The scale of the remaining technically recoverable US tight oil resources is also a big unknown and ranges anywhere between 30 and 120 billion barrels.

“Tight oil could, therefore, play a role in ameliorating any sudden price rise, but it should not be relied upon to be able to satisfy within a year’s time any major supply shortfalls that might arise,” it warns.

So how could such supply vulnerabilities for the world’s crucial unconventional oil play out? Barring another US-style shale boom elsewhere, the answer is not obvious. If upstream spending doesn’t bounce back next year, the world faces a “boom-and-bust” oil market cycle and accompanied by extremely volatile price swings.

Natural field declines are also a big issue that often get forgotten in the buzz over large oil finds or even a new oil province such as Brazil’s subsalt bonanza.

Conventional crude fields will see their production decline by 23.7 million b/d over the next decade alone, the IEA forecasts—the equivalent of losing the entire oil output of Iraq every two years.

So was the IEA right to make its unnerving prediction over the arrival of peak oil almost two decades ago? Not quite.

Conventional crude production did peak faster and lower than expected back then. But rising flows of natural gas liquids (NGLs) from surging global gas finds and shale production means conventional oil, which includes liquid gas condensates and NGLs, has yet to reach its apogee. Conventional oil supplies may dip slightly over the coming decade, it now predicts, but will actually rise after 2030 to top 85 million b/d by 2040.


3 Comments on "Has tight oil put ‘peak oil’ to rest? Not so fast: Fuel for Thought"

  1. rockman on Sun, 25th Dec 2016 8:27 am 

    And the Christmas stack of bullshit “presents” grows. LOL. So let’s start off with the first gross misrepresentation: “…many of the new resources needed to plug the supply gap were ominously deemed as “unidentified.” So what constitutes the recent major US oil resources: the Bakken, Eagle Ford and DW GOM. Both shale plays were not only “identified” more then 50 years ago but also well charactertized and produced. But not much production given the lack of technology combined with low oil prices. And even when horizontal drilling and completion of fractured shale formations was developed in the mid 90’s oil prices were still too low to justify using the tech in the B/EFS. And the Deep Water GOM? The Rockman saw the seismic data identifying that potential when he began working for Mobil Oil in 1975. “Unidentifiable”??? The first discovery was made in 1978…22 years before the play was supposedly unidentified before 2000. In fact by 2000 about 1 BILLION BBLS OF OIL had been produced from this “unidentified” potential.

    And predicting unconventional oil drilling thru 2040? This prediction from the experts at the “West’s energy watchdog” that failed just 4 years ago to predict the 70% decline in shale drilling activity we’ve just experienced wants us to have faith in their current 23 year prediction. In the spirit of the season: “All come all ye faithfully…” – I’ve got a bridge in Brooklyn for sale. LOL.

  2. Apneaman on Sun, 25th Dec 2016 12:10 pm 

    Abandoned Texas oil wells seen as “ticking time bombs” of contamination

  3. joe on Mon, 26th Dec 2016 9:12 am 

    Its not acceptable to point out that easy oil and tight oil are different! Stop it. If we accept that easy oil has peaked then somehow somone loses the ‘debate’. As for its return. Maybe, in some other universe. Easy oil will burn for decades but tight oil is here to stay. Hubbert was talking about easy oil btw.

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