SOEE3630 Strategic Energy Issues

Will oil production peak in the next 20 years?

Dr James Van Alstine j.vanalstine@leeds.ac.uk Office: 10.104 SEE building
Office hours: 2-4pm Tuesdays and 2.30-4.30pm Thursdays

Structure
Part 1. The limits to growth debate Part 2. Peak oil debate Part 3. The outlook in 2013

Part 1: The limits to growth debate

The Malthusian trap

Thomas Malthus, 1766-1834
An Essay on the Principle of Population, 1798

Population Food Crisis point

Limits to growth?
Space to grow Ecosystem At the limits

Economy

Economy

(Clapp and Dauvergne 2005: 101)

Limits to Growth Report

The 1972 report examined the growth trends in population, industrialization, pollution, food production, and resource depletion using a simple systems model Conclusions:
A decline will happen in not too distant future if we don't reduce our material and energy flows (in 20-30 years global oil reserves will run dry) This decline is not inevitable; need to change policies and increase efficiency A sustainable society is achievable...

Subsequent 20-year and 30year revisions have had similar conclusions

Resource optimists propositions

Substitution with other resources Role of prices in overcoming resource constraints Substitution with man-made capital Technological progress

From source to sink

Pollution and waste is the outcome of resource input A move from source to sink Rise of sustainable development discourse Relationship between economic growth and the environment came under scrutiny

Part 2: Peak oil debate

A convergence of issues almost 40 years later

Peak oil Climate change Water Food Financial instability Arab spring Iranian threats
All symptoms of an unsustainable world

Debating the peak

Peaking driven by:
1. The distribution of field size 2. The geophysical performance of oil reservoirs 3. The timing of large and small discoveries

Yes, it will peak but when? Differences of opinion over:

The timing of the peak The significance of a peak for availability of liquid fuels The role of supply-side restrictions driving peak production
i.e. demand destruction via tech shifts and/or political action on CC

(See: Bridge 2010)

Pessimists vs. Optimists

Pessimists
Forecast an imminent peak and subsequent terminal decline Expected to lead to substantial economic dislocation Alternative and nonconventional sources unable to fill the gap on the timescale required

Optimists
Rising oil prices stimulate exploration and discovery Enhanced recovery of conventional oil Development of nonconventional resources (e.g. oil sands)

Common concern: Will relevant organisations have the incentive and ability to invest? Source: UKERC 2009

IEA WEO 2008 reference scenario: 6 new Saudi Arabias by 2030?

WEO2008: reference scenario

The Pundits
Matt Simmons, author of Twilight in the Desert, on Peak Oil:
http://www.youtube.com/watch?v=F5LOlYEQ1No

Shell: will oil reserves run dry?

http://www.youtube.com/watch?v=3XuggyYVrWQ&feature=related

Dr Hirsch on peak oil:

http://www.youtube.com/watch?v=IWGsnW_NnxE&feature=related

A Crude Awakening trailer:

http://www.youtube.com/watch?v=Or-TyPACK-g&feature=related

Uncertainties
Reserve estimates are uncertain, reporting is restricted, auditing is insufficient, harmonisation is limited, distortions are likely Public domain data has serious limitations and is frequently misinterpreted Industry data is preferred for studying depletion
Source: UKERC 2009

Summary of opinions about "peak oil"

Since June 2006 it can be considered that views about Peak Oil in France have become reasonably similar :
TOTAL : Thierry Desmarest around 2020 / around 100 Mb/d ASPO France : J. Laherrre around 2015 / less than 100 Mb/d P.R. Bauquis around 2020 / around 100 Mb/d IFP : Y. Mathieu undulated plateau 2015/2030 less than 100 Mb/d

This point of view is widely different from those among the "optimists" who believe that Peak Oil is not "reserves related" but a political problem : insufficient investments and restrictive policies about investments by OPEC countries, Russia and Mexico :
Exxon Mobil June 2006 "no sign of peak oil" Aramco June 2006 -"no reserve problem" ENI (Maugeri Early 2006 - "no foreseeable oil peak" BP : John Browne May 2006 - "There is no reserves problem" Mike Lynch (ex MIT) "similar and above 120 Mb/d" CERA 2007 study "Denying peak-oil" USGS, DOE, EIA, IEA

IEA started changing their views in 2006 and accentuated this change in 2007 :

they now seem to realize that peak oil is not only a political or "above ground" problem but also a geological one.
Source: Total 2009

Source: UKERC 2009

A measured perspective: UK Energy Research Centre (UKERC)

UKERC starting point: Global oil depletion is well understood and well advanced
An increasing number of regions are past their peak in production We have used between 26% and 56% of global recoverable resources Annual production is significant relative to remaining resources A global peak is inevitable the timing is uncertain, but that window of uncertainty is rapidly narrowing

The report assesses the following question: What evidence is there to support the proposition that the global supply of conventional oil will be constrained by physical depletion before 2030?
Source: UKERC 2009

Part 3: The outlook in 2013

How times have changed

July 2012: We were wrong on peak oil. There's enough to fry us all, George Monbiot, Guardian Nov 2012: IEA report reminds us peak oil idea has gone up in flames, Damian Carrington, Guardian Nov 2012: US can become world's biggest oil producer in a decade, says IEA, Fiona Harvey, Guardian Jan 2013, Peak oil theories 'increasingly groundless', says BP chief, Fiona Harvey, Guardian

Changing discourse
IEAs 2008 World Energy Outlook raised concern about the required investment to meet demand by 2030 (e.g. six times current output of Saudi Arabia) Since 2008 WEO, the economic crisis:
major reduction in global oil demand, tumbling oil prices, cancelation/delay of upstream projects, now on the rebound

Governments little concern, oil companies mostly dismissive and majority of energy analysts sceptical Now the 2012 WEO: US could be the Worlds largest oil producer by 2017!

Is running out of oil the issue?

Peak Oil in UK? http://www.youtube.com/watch?v=tN1yF5raDs

Oil prices and Libya protests:

http://www.youtube.com/watch?v=D4DrVAHVNXA&feature=play er_embedded

WikiLeaks cables: Saudi Arabia cannot pump enough oil to keep a lid on prices
http://www.guardian.co.uk/business/2011/feb/08/saudi-oilreserves-overstated-wikileaks?intcmp=239

Iran threats drive oil prices higher:

http://video.cnbc.com/gallery/?video=3000065939

Long term oil prices

Are we in for another oil shock given Iranian crisis?

Four main drivers of oil industry structural change

Geopolitics
Peak oil and Peak gas Carbon emission costs (climate issue) The financial/economic crisis
Source: Total 2009

Production costs are increasing necessitating a relatively high oil price

$/bbl
Oil shales
100

80

60

Deep water

Ultra deep water

Extra Extra Heavy Heavy oil oil Arctic

40

Other Conventional OPEC Middle East

Enhanced Recovery

20

Billions of barrels 1000 2000 3000

Source: Total 2009

Evolving debates
Intensification of oil extraction
Unconventional sources of oil (tar sands, heavy oils) Unconventional places (deepwater, arctic)

Have we reached peak demand for oil?

Improved efficiency Fuel switching Emerging regulation for GHGs

Risks and public acceptability of these modes of extraction under scrutiny (e.g. Deepwater Horizon)

Recession and slackening of demand

Will peak production occur via a demandside mechanism rather than supply?

Complexity
Anticipating a forthcoming peak is complex given the mix of factors that affect conventional oil production: e.g. geological, technical, economic and political factors A qualified consensus: transition from conventional oil to substitute sources of energy likely to have major economic, environmental and security implications

Key areas for further research

Source and magnitude of reserves growth Limitations of methods for estimating resource size and forecasting future supply The risks, policy implications and potential policy responses presented by global oil depletion: supply-side vs. demand-side constraints

Key references
Bridge, Gavin (2010) Geographies of peak oil: the other carbon problem. Geoforum. 41: 523530. Campbell, C.J., Laherrere, J.H. (1998) The End of Cheap Oil, Scientific American, March: 78-84. (on VLE) Ecologist 2005 article (on VLE) Peak Oil primer: http://www.energybulletin.net/node/39308 UKERC report: http://www.ukerc.ac.uk/support/tikiindex.php?page=Global+Oil+Depletion (on VLE) Worldwatch Institute (2006) Peak Oil Forum (on VLE)

Next...
Tutorial for seminar group: Monday, 11 March, 4-6pm, Chemistry West LTF Seminar: Monday 15 April, 16.00-18.00, Chemistry West LTF