Oil Depletion – dealing with the issues

 

Energy Institute, London, Tuesday 7th November 2006

                                                                                                                                                                               

 

ODAC Review

 

Introduction

 

The Energy Institute’s Oil Depletion conference is now an annual event. According to Professor Martin Fry, the conference chair, this was the fourth or fifth Energy Institute (EI) oil depletion conference. One of the highlights of this conference was that Chris Skrebowski and Michael Smith both predict global oil demand outstripping supply fairly soon, 2010/2011 for CS, about 2015 for MS. Christopher Smith, an airline pilot, told the conference that there big changes in store for the airline industry irrespective of the outcome of Peak Oil, because the EU will enforce levies on flights to reduce carbon dioxide emissions, by 2011. Duncan Anderson made the interesting observation that oil companies operating in the North Sea UK sector were not in general applying the Enhanced Oil Recovery techniques available to them. Claire Durkin, head of Energy Markets at the DTI, hinted that she is concerned about future UK gas supplies, and how keen she was to communicate and hold talks with the conference delegates.

 

The Energy Institute have supplied a copy of most presentations (all PDF files, click on the talk titles below) but have stated that they will be removed 28th November 2006.

 

The Case for Peak Oil

Dr Roger Bentley, Visiting Research Fellow, Department of Cybernetics, University of Reading

 

Roger discussed the projected ‘Peak’ curve for 10 different sources, and gave an overview of how the different methods for calculating global oil production varied. Much of the work of Roger’s research group at the University of Reading was investigating in detail why differences in Peak Year occur, ranging from about now for Kenneth Deffeyes to sometime beyond 2050 for Odell (Odell’s upward sloping plot went off the edge of the graph. Anything is possible if you are an economist). Roger was especially critical of the International Energy Agency’s global oil production projections, which it was explained are in reality demand scenarios which the IEA assumes will be met (although both the IEA’s Medium-Term Oil Market Report published July 2006 and its World Energy Outlook 2006 published Nov 2006 would strongly suggest that the IEA is changing its tune. In its WEO 2006 report, the IEA even forecasts “non-OPEC conventional crude oil output peaks by the middle of the next decade”).

 

Roger used UK oil production 1975 - 1998 as an example of how oil depletion progresses as an oil producing region ages. Although UK oil production was still rising in 1998 (peaked in 1999), his graph showed that whereas about 25 fields were producing 120 Mt/y in 1984, it took many times this number of oil fields to produce the same amount of oil in 1998. From Roger’s second set of conclusions:

 

The following peak dates look pretty solid:

 

                                                                        Date of Peak

Non-OPEC peak:      Conventional Oil        now-2008

Global peak:              Conventional Oil        2010 – 2015

                                    All oil                           2010 – 2020

                                    Oil + Gas                    2015 – 2020

                                    Gas                             2020 – 2025

 

 

Peak Oil – The Emerging Reality

Chris Skrebowski, Editor, Petroleum Review, Energy Institute

 

Chris gave his excellent ‘The Emerging Reality’ talk, covering Peak Oil / oil depletion from many different angles. The conclusions from Chris’s talk:

 

  • Supply will remain tight and prices high barring a major economic setback

 

  • Oil supply will peak in 2010/2011 at around 92-94 million barrels/day

 

  • Oil supply in international trade may peak earlier than the oil production peak

 

  • Collectively we are still in denial

 

There is very little time to start adjusting

 

 

Prospects for Production from the UKCS to 2035

Professor Alex Kemp, Schlumberger Professor of Petroleum Economics, University of Aberdeen

 

Prof Kemp started with an overview of UK oil production to date: Oil Discovery, UK Oil and Gas Production 1970-2005, UKCS Income and Expenditure 1970-2005, UKCS Drilling Activity 1964-2005, Oil Reserves v Time (see DTI) and Gas Reserves v Time (DTI). Prof Kemp then discussed various assumptions and ran thro scenarios for future oil and gas production.

 

Most of Prof Kemp’s oil production graphs showed a significant increase for 2007 (oil production has fallen every year 2000-2005, by over 200,000 bpd 2004 and 2005 and looks like dropping significantly 2006). What makes Prof Kemp so sure that oil production will increase by up to 400,000 bpd (from Kemp’s graphs) is that the Buzzard oil field comes onstream about now (Nov 2006). However, it will only  reach its peak of about 180,000 bpd June 2007. An underlying rate of depletion of about 200,000 bpd to an increase in production of 400,000 bpd implies a net increase of 600,000 bpd. How is this possible ? Quite easy if you are modelling. The International Energy Agency in its latest Oil Monthly Report (November, PDF 498 Kb, p22) forecasts no increase in UK oil production in 2007, subject to revision.

 

Prof Kemp made a statement during his talk about how unexpectedly high the rate of UK oil depletion was and that this was due to infrastructure / platform maintenance problems. A pity that Prof Kemp did not expand on this statement or discuss the implications for future production, if any. It looked like this information was not assimilated into his oil production models. This was one of the points Roger Bentley made during his overview, economists do not assimilate geological and other realities into their models, and geologists tend not to include economics such as oil prices in theirs (with good reason they might argue – see Shaping the peak of world oil production by Robert Hirsch), and neither groups model in geopolitics (not easy).

 

 

EOR – It is Time for Action

Duncan Anderson, Technology Manager – Subsurface, ITF

 

Duncan’s talk was about how Enhanced Oil Recovery (EOR) techniques can increase the amount of oil and gas that can be recovered from fields, and lamented the lack of their application in the UKCS. He showed a slide indicating the potential for enhanced recovery for UK interests as an additional 1.4 Gb of oil and 5+ tcf (tera cubic feet) of natural gas, and also indicated that trials of EOR were planned for the North Sea. He made the point that any meaningful work would have to start before the oil and gas infrastructure is removed by the oil companies, a process which has started already, so not much time remaining.

 

 

Global Oil and Gas Resource Supplies

Ken Chew, Vice-President, Industry Performance and Strategy, IHS Energy

 

Ken gave an overview of global oil and gas consumption and reserves from the IHS perspective. Ken’s take on Peak Oil was that it was a red herring that we should ignore and instead concentrate on Global Warming. Still, a very informative talk. There were some telling slides of the sharp reduction in the quantities of oil and gas discovered despite the continuing high number of individual discoveries, showing how much smaller each discovery is now than in the past - we really have found all the cream, now we are mopping up the drops.  He also had an interesting graph comparing the USGS 2000 figures of yet to find i.e. how much they thought would be found by between 1996 and 2025, by how much has been actually discovered to the end of 2005 (oil – slide 31, gas – slide 32); for oil it is only 17.5% and for gas 12% of the total predicted, when presumably, we could have expected at least 33% additions over the one third of the forecast period involved.

 

Discovered Remaining World Gas Resources

 

                                                Depleted %

North America                       82.7

Latin America                        29.5

Europe                                   58.6

Former Soviet Union            27.8

Africa                                      25.5

Middle East                           7.8

Asia-Pacific                           21.8

 

Worldwide Gas Discovered:           10,100 tcf (tera cubic feet)

Worldwide Cumulative Production: 3,140 tcf

Worldwide Remaining Gas:             6,960 tcf

Worldwide:                                         31.1%

 

 

Modelling The Oil Supply Gap

Dr Michael R. Smith, Chief Executive, Energyfiles

 

Michael gave two projections, one for future oil supply and one for demand. After about 2010 a gap develops (demand outstrips supply). Michael ran thro various scenarios of how the gap might be filled – oil from tar sands and hydrogen for example. However, he concluded that while there may be an oil mini-glut between now and 2010, thereafter a theoretical gap will ensue that cannot be filled by new supply or alternative energy sources. The conclusion – from 2014-2016, supply will meet demand by demand destruction. It was one of the clearest demonstrations of the problem facing us, and how little we can do now that will affect the date when potential demand exceeds supply.

 

 

Future Oil and Gas Supplies

Claire Durkin, Head of Energy Markets, DTI

 

Claire arrived on schedule to give her talk, then left immediately after fielding a few questions, so unfortunately missed the other talks. Claire mentioned her concern about UK gas supplies, and that the European free market was not working as well as expected (there effectively isn’t a European free market for gas). Although she did not explicitly say so, the underlying hint seemed to be that the govt was concerned about having enough gas supplies in future.

 

Regarding Peak Oil, Clare said that we should not be concerned about this, more important was how we are going to get the remaining oil out of the ground.

 

One of the questions she was asked was - at last year's EI Oil Depletion meeting she announced a UK Government Peak Oil Enquiry which then never took place.  Her reply was along the lines that she had misunderstood someone else’s plans, but she wished to progress the issue during the coming year. Claire mentioned a few times that she and her department were very keen to get feedback and enter a dialogue with the conference attendees. Unfortunately both Claire and her colleague from the DTI had to leave promptly due to prior commitments, but the DTI have been very positive regarding further dialogue with ODAC.

 

 

Is Peak Oil Reality or Hype

Dr Mamdouh G. Salameh, Director, Oil Expert, World Bank Consultant on Energy Affairs

 

Dr. Salameh presented a lot of data on past and future production and consumption for oil, gas and other primary energy types. Dr. Salameh is himself from the Middle East, and presumably has many contacts there. Dr. Salameh’s conclusions:

 

  • It looks as if an unprecedented crisis is just over the horizon. Global conventional oil production is going to shrink. And while unconventional oil production may not be able to delay the decline in global conventional oil output, it could only ameliorate it.

 

  • Global oil production will probably reach a peak sometime during this decade, probably between 2006 and 2010. The slowdown in oil production may have already started; the current price fluctuations for crude oil and natural gas may be the preamble to what may be the "final energy crisis".

 

  • A peak in oil production would manifest itself by rapidly escalating prices, a slowdown in production, a growing supply deficit, declining discovery rate of new oil and also a declining Energy Return on Investment (EROI) ratio. All these characteristics exist today.

 

  • Peak oil is not only a reality but is already impacting on oil prices, the world economy and the global energy security. The almost quadrupling of oil prices since 2002 is not an anomaly but a picture of the future. Once worldwide oil production peaks, geopolitics and market economics will result in even more significant price increases and security risks. Oil wars are certainly not out of the question. (The war on Iraq was a foretaste what's to come). Moreover, the days of inexpensive, convenient and abundant energy sources are quickly drawing to a close.

 

 

Oil Depletion And Aviation

Captain Christopher Smith, BA Connect

 

Christopher currently works as a full-time pilot for BA Connect. His interest in oil depletion and aviation stems from his Masters project in Air Transport Management. He discussed what are the attributes of an ideal aircraft fuel including high specific energy, safety criteria, low carbon dioxide emissions and low water vapour emissions. In the short term, the only ideal aircraft fuel is the one currently used and therefore the near term solution to lack of fuel supplies would be conservation. In the longer term alternative fuels would have to be found. Most of Christopher’s talk focused on the pros and cons of the various conservation methods and alternative fuels.

 

 

Dealing With The Issues - Some Alternative Transport Energy Solutions

Godfrey Boyle, Director, Energy & Environment Research Unit, Department of Design and Innovation, Faculty of Technology, Open University

 

Godfrey’s talk focused on solutions. Topics included Alternatives to Transport, Improving Vehicle Fuel Efficiency, Alternative Fuels, and Shifting to Less Energy-Intensive Transport Modes. Godfrey’s final slide makes it clear that Sweden has no intention of completely phasing out oil by 2020. For example, two of the 2020 targets he lists, published in June 2006, are:

 

  • Oil in Road Transport cut by 40-50%

 

  • Oil in Industry cut by 25-40%