Guest post by Mike Jonas
On Dec 13, Willis Eschenbach posted a convincing (and eloquent as always) argument “The R/P Ratio” against Peak Oil being imminent. I would like to present a different view. In fact I draw the opposite inference from the same statistic.
From the BP data [1], Willis argued that the “R/P ratio” – the ratio of reserves R to production rate P – is higher than ever, and that therefore the world is even more able to continue producing oil at today’s rate than it was yesterday at yesterday’s lower rate.
My argument is that the high R/P ratio shows that it is getting very difficult to increase P in spite of a high R and a high oil price. This argument is based on two factors of which Willis took no account – the reliability of stated reserves and the quality of the oil.
Reliability
The first major hiatus in the oil world occurred in 1973, when OPEC caused the price of oil to quadruple. The second was the Iranian revolution in 1979. Their effects are clearly seen in the historical oil price:
Figure 1 – Historical Oil Price – click image to enlarge
Over the following years, 1980 to 1988, the world’s oil reserve increased by 331.5 billion barrels, of which 329.6 were OPEC.
Figure 2 – Historical Oil Reserve – click image to enlarge
What is thought to have happened is that certain OPEC countries artificially inflated their reserves so that they could sell more oil, because OPEC production quotas were based on official reserve figures [17][22]. It is quite possible that none of this reported increase in reserves actually exists. There has recently been supporting information from Wikileaks [2].
Questions about the reliability of reserve figures are not restricted to the reserves declared between 1980 and 1988. For example, the UAE’s official reserve has been stuck on exactly 97.8bn barrels since 1996 (and was at 98.1bn barrels from 1989 to 1995), in spite of total production of 15bn barrels over that period (21bn barrels 1989-2010) and no major discoveries [21]. That’s mathematically possible, but rather unlikely.
Some other countries have similar patterns – Iran reserve at 92.9bn barrels from 1986 to 1993 (9bn barrels produced), Iraq 100.0 from 1987 to 1995 (5 produced) and 115.0 from 2001 to 2010 (8 produced), Kuwait 96.5 from 1991 to 2002 (8 produced) and 101.5 from 2004 to 2010 (7 produced), Saudi Arabia in a tight range 260.1 to 264.6 from 1989 to 2010 and not falling more than 0.1 in any one year (75 produced).
It does appear likely that a significant proportion of stated reserves do not in fact exist.
Quality
After 1988, the next significant increases in world reserves occurred in 2002 and 2008-9.
Figure 3 – Annual change in reserves – click image to enlarge
In 2002, most of the 60.7 billion barrel increase was in Russia, Iran and Qatar, and I haven’t checked it. I have no reason to suppose that it was anything but a genuine increase in good quality oil. However, of the 123.0 billion barrels increase in 2008-9, 111.8 were in Venezuela. This is an ultra-heavy crude, difficult and expensive to produce at high production rates [3].
This is where the problem lies. Much of the easy oil has gone. We are into the difficult and expensive stuff. It is a major challenge to maintain high production rates. Heavy and unconventional oil are now dominant in world reserves [4] …
Figure 4 – Total World Oil Reserves by Type – click image to enlarge
[http://en.wikipedia.org/wiki/File:Total_World_Oil_Reserves.PNG]
… to the extent that actually being able to increase the total production rate may prove to be out of reach [8].
Global oil production has basically flatlined for the last 5 or 6 years …
Figure 5 – World Oil Production – click image to enlarge
… while the oil price has surged over the same period (Fig.1). I would argue that a high R/P ratio does not necessarily indicate an ability to increase production. Rather, a high R/P together with a high oil price would seem to indicate that it is difficult to increase production. Note that for 5 years now the price of oil has been higher (in 2010 dollar terms) than it was after the 1973 oil shock.
In Venezuela (heavy and very heavy oil), the production rate has declined nearly 30% from 1965 to 2010. In 2006, before the large 2008-9 increases in reserve, its R/P was already high at 85, but was still exactly what it had been in 1985. From 1985 to 1998, production did increase markedly, bringing R/P down to 60, but production has been in decline since.
It is possible that the major factor here was Hugo Chavez being elected president in 1998, so let’s look at all the countries with above average R/P –
| R/P | |
| Venezuela | 233.9 |
| Iraq | 128.0 |
| Kuwait | 110.8 |
| UAE | 94.0 |
| Iran | 88.4 |
| Libya | 76.6 |
| Saudi Arabia | 72.4 |
| Kazakhstan | 62.1 |
| (World average) | 46.1 |
– maybe Venezuela, Iraq, Iran and Libya have political reasons for relatively low production rates. The UAE, whose oil is chiefly in Abu Dhabi, does have difficulty increasing production [10]. Kuwait [11][12] and Saudi Arabia [13] do too.
For comparison, Canada’s Alberta Tar Sands, which began production in 1967, have an R/P of 662. It is hoped that it may in future come down to around 150 (reserve 174bn bbls, prodn 720k bpd, target 3m bpd [6]).
[bbl = barrel, bpd = barrels per day]
There is a clear tendency for high R/P to be associated with heavy and unconventional oil, that is, oil for which high production rates are very difficult.
The Future
The oil industry has been successful in maintaining reporting a world R/P of 40+ since 1988.
Figure 6 – World R/P – click image to enlarge
But in order for the rate of oil production to keep increasing, a lot has to go right. Things like:
· Major new conventional oil discoveries.
· Technological progress in heavy and unconventional oil production.
· Political stability in producing countries.
· Political stability in consuming countries.
· A high oil price.
· Increasing demand in spite of the high oil price.
· Oil remaining competitive with alternatives.
· Non-obstruction by governments (think “carbon” trading and taxes, USA offshore exploration ban)
More optimistic estimates of the Peak Oil date range from 2014 [7] to the IEA’s 2035 or later [5][5a]. But in the IEA presentation, note that although foil #8 “Oil production becomes less crude” …
Figure 7 IEA forecast – click image to enlarge
… shows production increasing to at least 2035 , there is enormous (heroic?) reliance on “fields yet to be developed or found” which are more than half of all oil production by 2035. Note also the relatively low contribution from “unconventional oil”, and the rapid decline of currently producing conventional fields.
There is another figure worth keeping an eye on for the next few years – Saudi Arabia’s production rate. The IEA presentation [5] expects Saudi Arabia to increase production by 50% between 2009 and 2035.
Figure 8 – IEA forecast by country – click image to enlarge
In mid 2008 Saudi Arabia announced that they would increase production by 500k bpd [14], but production fell 8% over the next two years. Perhaps this confirms that the producing Saudi fields are already in decline [15]. In June 2011, Saudi Arabia again stated that they would raise production [16]. It will be interesting to see if they are able to.
Saudi Arabia’s (2010) R/P is 72. They do have some as yet undeveloped fields, but none are anything like as large as the now-declining Ghawar [20].
Conclusion
The increasing world R/P, together with the high oil price, probably means that it is getting ever more difficult to increase production, rather than that Peak Oil is obviously many years away. I suspect that we are already at or close to Peak Oil, but it can only be identified in retrospect [see footnote 4].
It is, admittedly, still mathematically possible that Peak Oil is many years away. I would agree that “Peak Oil & Gas” and “Peak Energy”, as opposed to “Peak Oil”, are many years away – provided sanity returns to western governments.
Footnotes
1. All production and reserve amounts, associated amounts (eg. R/P), and graphs, are from or derived from the BP data [1] unless otherwise indicated. BP’s reserve data includes “gas condensate and natural gas liquids“, but does not include the Canadian oil sands.
2. Oil reserves are relative to economic and operating conditions, so they can increase without new discoveries.
3. Why did I quote the IEA 2010 report instead of the 2011 report? Because in 2011 the IEA lost its marbles and interlaced everything with the need to reduce CO2 emissions [18]. When the world wakes up to the fact that CO2 emissions are not dangerous, much of the 2011 report will be useless. FWIW, in the 2011 report oil production is still expected to increase by a similar amount by 2035, with OPEC increasing its share [19].
4. I understand “Peak Oil” to mean the point in time after which global oil production does not materially increase. The peak in oil production does not signify ‘running out of oil’ [9]. It doesn’t mean that oil production cannot physically be increased, simply that it does not increase. Peak Oil can therefore be influenced by factors such as price, changes in use and efficiency of use, and competition from alternatives. Basically, it is only possible to identify it in retrospect.
Mike Jonas
Jan 2012
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Mike Jonas (MA Maths Oxford UK) retired some years ago after nearly 40 years in I.T.. He worked for BP in the 1960s and 70s, including 3 years in Abu Dhabi.
References
[1] BP Statistical Review of World Energy, Jun 2011.
[2] Time report “Have Saudis Overstated How Much Oil Is Left?” Feb 2011
http://www.time.com/time/world/article/0,8599,2048242,00.html
[3] Wikipedia “Oil reserves in Venezuela”
http://en.wikipedia.org/wiki/Oil_reserves_in_Venezuela
[4] Wikipedia “Oil Reserves”
http://en.wikipedia.org/wiki/Oil_reserves
[5] IEA “World Energy Outlook 2010” Presentation to the Press Nov 2010
http://www.worldenergyoutlook.org/docs/weo2010/weo2010_london_nov9.pdf
NB. See Footnote 3 above.
[5a] Gail Tverberg, Comment on IEA “World Energy Outlook 2010”, Nov 2010.
http://www.countercurrents.org/tverberg101110.htm
[6] Popular Mechanics “New Tech to Tap North America’s Vast Oil Reserves” Oct 2009
http://www.popularmechanics.com/technology/engineering/4212552
[7] msnbc.com “Peak oil production predicted for 2014” Dec 2010.
http://www.msnbc.msn.com/id/35838273/ns/business-oil_and_energy/ – .TumIeGAch0I
[8] AAAS Member Central “Peak Oil Production May Already Be Here” Mar 2011.
http://www.sciencemag.org/content/331/6024/1510.short
[9] Energy Bulletin “Peak Oil Primer”
http://www.energybulletin.net/primer.php
[10] My comment on JudithCurry.com, re Zakum, Tupi and Peak Oil. Nov 2011.
http://judithcurry.com/2011/11/24/emails/ – comment-144017
[11] H. M. Shalaby “Refining of Kuwait’s Heavy Crude Oil: Material Challenges” Kuwait Institute for Scientific Research. Dec 2005
http://www.arabschool.org/pdf_notes/20_REFINING_OF_KUWAITS_HEAVY_CRUDE_OIL.pdf
[12] Bloomberg “Kuwait Reduces Its 2020 Heavy-Oil Production Target by More Than Half”. Oct 2010.
[13] WSJ “Facing Up to End of ‘Easy Oil’”. May 2011.
http://online.wsj.com/article/SB10001424052748704436004576299421455133398.html
[14] The Independent “Saudi King: “We will pump more Oil”” June 2008
http://www.independent.co.uk/news/world/middle-east/saudi-king-we-will-pump-more-oil-847830.html
[15] Energy Security “New study raises doubts about Saudi oil reserves” March 2004
http://www.iags.org/n0331043.htm
[16] NY Times “Saudi Arabia, Defying OPEC, Will Raise Its Oil Output” June 2011
http://www.nytimes.com/2011/06/11/business/energy-environment/11oil.html
[17] Telegraph article “Oil reserves ‘exaggerated by one third’” Dec 2011.
[18] IEA “World Energy Outlook 2011” Presentation to the press Nov 2011
http://www.worldenergyoutlook.org/docs/weo2011/homepage/WEO2011_Press_Launch_London.pdf
[19] IEA “World Energy Outlook 2011 Fact Sheet” (see “Global oil production”)
http://www.worldenergyoutlook.org/docs/weo2011/factsheets.pdf
[20] NY Times “Forecast of Rising Oil Demand Challenges Tired Saudi Fields” Feb 2004
http://www.nytimes.com/2004/02/24/business/24OIL.html?pagewanted=all
[21] Gerald Butt “Oil and Gas in the UAE”
http://www.geopowers.com/energie/sites/default/files/images/PDF – VAE.pdf
[22] Dr. Jean-Paul Rodrigue, Hofstra University “Changes in Major Crude Oil Reserves, 2001-2006” http://people.hofstra.edu/geotrans/eng/ch5en/appl5en/oilreserves.html
As a number of posters have pointed out, Peak “Anything” can easily be brought about by interference in market processes. Market processes also involve litigation if someone pollutes, or enables sinkholes, or triggers earth tremors causing damage.
The Oil Patch can work to clearly defined requirements, “Precautionary Requirements” needn’t apply.
We’ll have oil and gas for a long time to come, provided we keep level heads.
To Rob Crawford, who said:
“Oil shale is the wave of the future. And always will be.”
And yet it’s producing now…
The shales in North Dakota (Bakken) and west Texas and elsewhere are now producing considerable amounts of oil, just as shales elsewhere are producing unheard of (until a couple of years ago) amounts of natural gas. These shales are widespread.
But what is termed “oil shale” is different from “ordinary” shales which can produce either oil or natural gas or both, when fractured (“fracked”). Colorado has lots of “oil shale,” which is shale which has a substance called kerogen. This stuff is much harder to extract than fracking a shale and getting oil or gas, if it is present is decent quantities. It has been produced in different parts o the world historically, but it is far more expensive than fracking an ordinary shale which has oil.
“Oil shale” has been known about for well over a century. I actually have a National Geographic from 1917 which talks about running out of oil, but thank goodness Colorado has all this oil shale. However, it is so hard and expensive to get, that going forward we will instead be getting far more oil from ordinary shales which can be fracked to get oil and natural gas.
Here is a link about “shale oil:”
http://en.wikipedia.org/wiki/Shale_oil_extraction
In order for supply to remain adequate new reserves must be developed as old reservoirs are depleted. At present, as many have noted, the oil found in the shales such as the Bakken in North Dakota and Montana are where most gains are found and predicted for the United States. (Alaska has been found to have more natural gas in places where oil was thought to be). But to get the oil from the shale requires hydrofracking (which folk in the Eastern US don’t like). That improved technology puts cracks through rock, where the normal structure is too fine for the oil to flow economically. But the problem is that the cracks give a high initial yield, but, as the flow falls back to depend on the inherent structure over a very short time, production drops off. The production from the Bakken,as a result, is expected to start falling in about four years and is not expected to go up much more than the levels that it has just reached. (And that anticipates that a lot more wells will be drilled).
Much of the increase in global production is expected to come from Iraq, with numbers as high as 10 mbd or more (it is still below 3 mbd). That would require large investments of capital, among other things, which remains unlikely as the turmoil continues. Similarly the Arab Spring will impact exports from the MENA countries, and since it is the export trade on which we depend, life will continue to get more difficult.
And for those who say that technology will get us out of the mess, you might want to suggest where that technology is being developed, and how far along it might be, because predicting oil recovery rates of 70% is generally a foolish dream used to extract investment dollars from those who don’t know better.
In 1960, a gallon of gasoline cost about $.25. To adjust to today’s equivalent $ (inflation) you would have to multiply by 8, = $2.00/gal. But, in 1960, the average car got 10 -12 miles per gallon. Today, the average car gets 20-24 miles per gallon. So, the per mile cost in 1960, adjusted to 2012 for inflation and mpg was $4.00/gal. So, drivers are in about the same position today as they were then as far as price is concerned.
The average well onshore in the U.S. produces 8-10 BBL/day. The average newly frac’d well in shale probably produces 100-600 BBL per day. The average off-shore well produces 8,000-10,000 BBL per day. I think the record producer in the Gulf of Mexico is 23,000 BBL per day. The off shore wells produce hugely in comparison to those on-shore. Perhaps we would have pursued these off-shore fields in any event.
We need a tax on oil equal to whichever is greater: $1/bbl or half the difference of $100 – WTI. So, if the price of WTI falls to $60/bbl, then the tax would be $20 (($100-60)/2) and oil would sell domestically for $80/bbl. Even if Saudi Arabia gave oil to us for free my tax would set the domestic price of oil at $50/bbl. This eliminates the spectre of an oil price collapse.
Create a stable price for oil and you not only benefit domestic production today, but you also foster the development of alternatives going forward. Just as rival nations will be unable to kill our domestic oil production with dirt cheap oil, so cheap oil also won’t be able to throttle natural gas, etc.
Use the revenue however you want, but I think oil ought to pay for its replacement; especially on our highways.
Good article and yes the reserves are as much political as they are geological in nature. I still disagree that peak oil is here or near. Peak easy oil yes (land based, shallow drilling, etc). The industry still continues to innovate and find ways around problems. Pesky bunch those engineers. Glad to see you don’t buy the “peak energy” stuff.
“provided sanity returns to western governments”
Dare to dream my friend, dare to dream.
” Political stability in producing countries, consuming countries, · Non-obstruction by governments .”
Political anything is a toss of the dice given the “for sale” sign attached to most politicians.
” Major new conventional oil discoveries.”
Brazil (possibly Antarctica as mentioned above) but all are offshore. Lots left just harder to get to.
” Technological progress in heavy and unconventional oil production.”
Lots. Alberta = 1.7 trillion, Venezuela = 2 trillion , USA shale = 1 trillion barrels. Refining capacity, water and cheap energy to run the upgraders is required. Years ago the Alberta government locked in a few trillion feet of natural gas so the oil sands could have it for their processes. Then came shale gas. The technology for both the processing and supporting infrastructure show no signs of innovation slowing. If anything they knock down problems at an impressive rate.
” A high oil price.”
Define “high”. Anything above $60 pb makes Alberta and Venezuela viable. Don’t know about US shale.
· Increasing demand in spite of the high oil price.
Again define “high”. What percentage of the average person’s income needs to go to fuel for their car before they look for alternatives.
· Oil remaining competitive with alternatives.
The old “we didn’t leave the stone age because we ran out of stones” line comes to mind. Are we there yet? No (IMHO) but if any one of a half dozen technologies work out then you will take out a huge amount of demand for oil effectively increasing reserves.
bwanajohn says:
January 4, 2012 at 6:54 am
I am an Engineer for a seismic equipment company so I have a bit of a different perspective on this. In the last 10 years, from my company alone, we have produced new survey, measure and monitor technologies coupled with new exploration techniques are identifying new reserves every day. Additionally, because of the improvements in computing power and this advanced technology, we can re-assess existing reserves and make existing wells more efficient from 1 to 5 percent. In terms of production, that is HUGE.
Based on what I have personally seen over the last 10 years, I expect exploration and extraction develop at an accelerated rate. I think we have really just scratched the surface of what will be available. I think Willis’ analysis is more accurate.
Please answer yes or no.
1) extracting oil from a deposit faster means the depletion rate occurs faster.
2) extracting oil from a deposit faster means you untilimately get less oil from said deposit.
3) explain, with all this technology, why the major oil fields in the world, North Sea, Cantarell, Hybernia, etc are all in terminal decline.
4) new discoveries are small.
5) new production won’t keep up with depletion rates from older fields.
And as for fictitious reserves…if these were stated in the 1980s and the countries are still producing at the same rates 30 years later…well…they probably existed all along.
But they are not. Very few countries have kept their production growing. Norway, the UK, Indonesia, Mexico, The US plus many more are all seeing declining production. Russia is near decline too.
There is an amazing amout of pollyanna being expressed here today. I am just smiling at how this “skeptical” BB so easily accepts the arguement that a wall of oil is out there.. somewhere.. and it will all be extracted cheaply for our benefit!
IE: we are at the end of being able to steal cheap oil from the middle east tribes, and as Matt says, we are short on the discipline needed to dig ourselves out of our oil addiction, without maybe a crisis to get our atttention.
Jeremy says:
January 4, 2012 at 6:23 am
Sorry but these assumptions are garbage. Peak Oil is just another doom monger scare story that simply isn’t true. As the price of oil goes up there is a huge increase in what is economically recoverable and more costly technology/extraction methods become viable – facts that ensure we will never run out.
There will, of course, be a peak one day. That day is when a better and cheaper alternative becomes viable and eventually displaces oil and gas. This day is certainly NOT the day we run out. Battery technology is ever improving and if we can get fusion power to work then it is possible that oil may start to be displaced sometime later in this century but NOT because we run out!
Peak oil has never been about running out. It’s about reaching maximum flow rate, and subsequent decline. Even a small difference between supply and demand will cause major economic hardship. When demand outstrips supply due to what ever reason, then someone does without the oil they need now. The price then increases to the point where the energy component of one’s budget gets too large.
Take the current price of oil. At this price people are driving for about $10 per hour. That’s also miminum wage here in Canada. So people who have to drive, like taxis, are spending $10 per hour to drive. Governments spend $10 per hour per vehicle (police, fire, EMS, garbage), which has to be passed on in higher taxes. Same with food. Food costs more to produce and transport. Thus the average person is hit with not only increases in energy costs, but also increases in everything else that is also dependant on that energy cost. This squeezes people’s ability to pay, which precipitates recessions, which in turn reduces availability of getting credit (due to more defaults). Reduction in available credit makes it difficult for companies to produce new sources of oil. The Energy Trap comes into play. http://www.theoildrum.com/node/8526
Peak oil is not a cliff. It’s about the loss of supply relative to the demand.
Fusion will never happen. There are fundemental walls that cannot be over come. One is getting the waste products out. http://europe.theoildrum.com/node/5929
There is no alternative to oil in its energy density, flow rates, and versitility (electricity can’t make components of oil like plastics).
Mike Jonas has provided a valuable reality check on wishful thinking.
See economist James Hamilton, Oil Prices, Exhaustible Resources, and Economic Growth.
Before moving over to the nuclear industry in the mid-1980s, I spent 12 years in the mining industry, three of which were spent doing feasibility engineering studies and cost analysis studies for development of oil shale mines in the Green River Formation’s kerogen bearing rock of Colorado and Utah.
Contrary to what this government report states, we do not know appreciably more today about how to cost effectively retrieve and process kerogen from the Green River Formation deposits than we knew thirty years ago.
In order to even think about retrieving the Green River formation’s kerogen deposits and converting them into a suitable refinery feedstock, you have to first acknowledge that the kerogen bearing rock must be dug out of the ground by surface mining methods, otherwise you will not get enough volume of kerogen to recover the capital costs of constructing the processing plants, which by necessity must be located directly adjacent to the surface mining operations.
Up front capital cost is one significant issue, but the need for extensive supplies of process water and the prospect of very serious long-term environmental damage to the Colorado / Utah landscape are the fundamental issues that will keep a permanent lid on Colorado and Utah oil shale development.
The prospect of visible and highly acute environmental damage from surface mining operations will go vastly beyond what is now being experienced in other locations across the US with fracking, and the citizens of Colorado and Utah simply will not allow this kind of surface mining to be done. Expanded development of the Green River Formation kerogen deposits will not happen — not now, not a hundred years from now, not ever.
Does the fact that the Green River Formation’s kerogen deposits will remain forever locked up really matter within the context of the Peak Oil debate?
I don’t think so, because so long as the capitalist system is allowed to function to its most efficient potential, prices and production costs for liquid carbon fuels will keep supply and demand in a rough balance while the process of technical innovation, operating through trial and error methods, figures out which future approach to replacing crude oil makes the best economic sense.
There is still a lot of confusion on what oil production is, what flow rate means, and what peak oil means.
A simple analogy may help.
Take two 45gal drums. One contains water only. The other contains a mix of water and sand. The water only drum can produce a flow rate as fast as the pumps can handle. Then when the last drop is extracted, it’s gone. Thus this first drum of water only ends in a cliff.
The second drum is completely different. Flow rates depends on a number of factors, such as the ability of the fluid to flow through the sand. Flow from this barrel will follow a bell curve with the peak of flow some time in the middle of the life of the barrel’s ability to produce.
The second barrel can never get all the water out. Much will be left behind.
Change that second barrel into oil, and being in the ground, and there are even more factors that determine the flow rate and eventual peaking, and eventual recovered once the deposit is spent. Bakken for example will not produce more than 1% of oil in place. The average for any given field is about 40%, though some of 70% have been achieved.
Attempt to extract oil too much and the field is damaged. You eventually get peak earlier and you get less over all oil leaving more inthe ground. This happened in Texas.
It comes down to the same errors people who dismiss peak oil make over and over. They dismiss flow rate and focus on geology. We will never reach geological peak. We will, if not now, reach maximum flow rate. It will affect some countries more than others. Producing countries in decline may decide to keep more of their own resourse for themselves instead of exporting it. Indonesia is a nice example. I’d be willing to bet they wished they never exported a drop. They now have to import.
Scott Brim says:
January 4, 2012 at 9:54 am
I don’t think so, because so long as the capitalist system is allowed to function to its most efficient potential, prices and production costs for liquid carbon fuels will keep supply and demand in a rough balance while the process of technical innovation, operating through trial and error methods, figures out which future approach to replacing crude oil makes the best economic sense.
Scott, nice description on the Green River. Should put an end to those who think we can drop a few wells there and our energy needs are covered for the foreseeable future. It’s not. One report I read suggested detonating nukes in the deposit to cook the kerogen. Like the people there would accept that.
However, your last bit is far off the mark. First, people keep harping about alternatives to oil. Yet no one says what that alternative is. Like some magic bullet will suddenly appear and all our problems solved. There is no alternative to oil for the purposes we use oil for now. Even if there was, it will take decades to switch over, as well as the costs. Note my posts about the economic problems a drop in suppy will produce. Read the article on the Energy Trap. The Energy Trap is very important and highly restrictive of what we will be able to do in a world where exportable oil production is falling.
The Jonas and Eschenbach blog posts are really saying the same thing. Willis Eschenbach chose to focus on how we have always managed to increase oil production (and reserves) as needed to meet the market desires. Mike Jonas chose to emphasize that the easy-to-get oil is declining and we must work ever harder and spend more to extract each barrel.
The glass is both half full and half empty.
>>Jon says: January 3, 2012 at 9:15 pm
>>All the evidence suggests that the rate at which oil can be pumped
>>will plateau. This is because … adding more wells onto a formation
>>does translate into proportional increases in output.
Not so. Look at the declining production figures for the UK and Norway:
http://ibiblio.org/tcrp/sidebars/art/north_sea_oil.png
This was once a large region of oil fields, which have all peaked and are now in decline, despite all the ‘new technology’ being thrown at them.
If the same happens in the Middle Eastern fields, and it will at some point, then we will have reached Peak Oil. Despite the number of small finds coming on stream, there will be nothing capable of replacing the Middle Eastern fields once they peak.
Look (below) at how the newer but smaller North Sea fields that came on stream did little to make up for the declining Forties field, and are themselves now in decline.
http://www.theoildrum.com/uploads/3246/UKoilfields_to_99.png
Translate the North Sea basin into world terms (and oil is now one big world industry and market), and you can see what world production figures will do in the future. The only difficult bit, is deciding when the peak has been reached. In the UK it was 1984 with a secondary peak in 2000 caused by ‘new technology’, but the new technology only pushed the inevitable into the future by a measly 16 years.
Peak Oil will happen at some time, but as the author here says you will only know it once the crisis is upon us.
And Peak Oil alarmism is not an equivalent to CAGW alarmism.
a. AGW says that a fluctuating climate will always increase in temperature.
b. Peak Oil says that a finite resource will eventually run out.
Point a. is debatable and unlikely. Point b. is an absolute certainty.
.
No magic bullet will suddenly appear. The process of converting from a transportation system which employs mostly oil-based portable energy resources to one that employs a multi-source mix of carbon-based liquid fuel resources will take decades to occur.
As the cost of petroleum-based fuels steadily rises, people will progressively adjust their consumption behavior patterns in those ways which account for the cost differences and which also seem most beneficial — or else the least harmful — to their own particular income situation. In the process, they will also decide what kinds of spending are most important to them in allocating their personal incomes.
In the meantime, as long as the profit-making reward for pursuing technical innovation is maintained at useful levels; and as long as the profit reward is not artificially constrained to suit the whims of some political or social agenda, then the process of transition will be sometimes painful to one degree or another, but will not be catastrophically disruptive as many of the Peak Oilers would have us believe.
They have been predicting peak oil for 100 years.
They keep finding more oil.
It’s about like AGW…it will get warm…tommorrow….always tommorrow.
Re Mike Jonas:
Let’s face it, you are not an expert on this topic. And even some experts can get out of date when an industry begins to shift direction quickly. Focusing just on the Bakken as some kind of unique strata is a mistake that the amateurs are making a lot these days. Watch the industry daily and get some more perspective on what the trends mean and you will begin to understand that the Bakken is not so unique and that money is turning and flowing rapidly to shale oil plays in many directions. It also does not take some leap of imagination to figure this out given the slightly earlier pattern of rush to define, validate, and invest in shale gas resource targets ahead of the USGS, IEA, EIA, Wall Street, blogs, and everyone else behind the curve. Beyond this tech-driven resource shift, there is also the issue of changing risk-reward relationships. There are no oil reserve-production-discovery statistical models that are tailored to the shale oi and shale gas plays at this point and all the outdated discussions are using old models and relationships. Those models were based on completely different risk profiles in mainly onshore basins with conventional drilling and success rates. The new normal is best seen at the forefront of the industry in the mid-sized producers defining the resource and refining the technical approach as they go. There has been nothing in the history of the oil industry that equates to the current pattern of setting up drilling pads onshore and drilling multiple horizons in multiple directions from the same location with high probability of success and doing so across huge basins and also replicating this exploration model across more basins (i.e. not simply in-fill development drilling in a conventional field sense). If the oil industry is going to shift massively then the bloggers need to at least ask why and try to get up to speed. They also need to understand why the resource and reserve models are out of date and likely to fail.
David L. Hagen says:
January 4, 2012 at 9:53 am
“Mike Jonas has provided a valuable reality check on wishful thinking.
See economist James Hamilton, Oil Prices, Exhaustible Resources, and Economic Growth.
This paper explores details behind the phenomenal increase in global crude oil production over the last century and a half and the implications if that trend should be reversed. I document that a key feature of the growth in production has been exploitation of new geographic areas rather than application of better technology to existing sources, and suggest that the end of that era could come soon. ”
This is not the only way.
The serial activity is not: politics—->>explore—->> product. Who can say a mobilized oil field is worthless. In presence abundance of GAS and gas injection where should you let an oil field deserted and look around for new one?
Yes, if nothing is available anymore, as a whole, you should find new reservoirs, this does not need any special IQ.
jrwakefield says:
January 4, 2012 at 9:32 am
….
JR, as long as we do not need to produce oil from coal we have not reached peak oil. When oil will be produced from coal – as did the germans in the 2nd world war – then we may say that there is a certain oil limitation, but with the oil sands and horizontal drilling there are still many options to increase oil production – this is why it is not yet the time to invest in huge oil production industry.
Oil and gas may very well be natural abiotic products – look at Titan, it has 100 times more oil then the Earth:
http://www.space.com/4968-titan-oil-earth.html
There is no peak of coal-oil-gas resources this century, not even a limitation for the next 200-300 years and more – which give us a comfortable time to plan for replacement and develop further our current technologies (Thorium? fusion?) solve the famine this century and get electricity & education in each and every village.
The Fossil Based Fuels (FBF) have been and would remain for many years as a sustainable energy resource. The life time of this source would be extended however by means of efficient fuel consumption technology. Today, energy price and the reality to having efficient power productivity has forced the manufacturers to give a satisfactory declining trend on fuel consumptions per unit of work.
The next problem can be O2. We know that only %16 of the atmosphere is oxygen. Carbon emission is not discussed here. But carbon as an energy source can be maintained much easier than O2. If we are not successful to enrich the atmosphere with adequate CO2 that we have, through photosynthesis with green zones, then O2 is a problem. As long as there is no other option for substitution of (FBF), we should take care of air pollution although CO2 is a vital combination for all the creatures living on the earth. The advantages of (FBF) are the infrastructures and powerful economical relations and ties with our living styles too. That is why other energy sources can never be attractive unless economically can give us the necessary and enough advantages.
I think you have forgotten the economic aspect – as proposed by Julian Simon. There is no shortage of resources as we are continually being more economic in our useage of them because of technological advances.
There is also the point that we haven’t quite worked out how oil is formed – is it the bones of dead trees and dinosaurs or is it formed abiotically? The deep wells would seem to support the abiotic theory.
I am also reminded of the panic in New York in the late 19th Century – If something wasn’t done about the number of horses in the city, Park Avenue would be 1/2 a mile deep in horse manure by 1920. Wha happened – technology advanced with the horse power being produced by oil derivatives……..
Just to put things in perspective for those who think that shale oil is some kind of gimmick. In 2004 you could lease mineral rights for shale for as little as $3/acre. Today the price is over $5000/acre for the lease rights. The change in the price reflects the change in the economics of well production. Some wells in the “Bakken” are producing >1000 bpd, most are over 100 bpd. The expected recovery ratio is now over 30%. Here in Houston there will be a series of dinners celebrating the unconventional oil pioneers, those interested in what’s gone on should consider attending. http://www.hgs.org/. This is the Houston Geological Society.
Lars P. says:
January 4, 2012 at 11:42 am
jrwakefield says:
January 4, 2012 at 9:32 am
….
JR, as long as we do not need to produce oil from coal we have not reached peak oil. When oil will be produced from coal – as did the germans in the 2nd world war – then we may say that there is a certain oil limitation, but with the oil sands and horizontal drilling there are still many options to increase oil production – this is why it is not yet the time to invest in huge oil production industry.
Oil and gas may very well be natural abiotic products – look at Titan, it has 100 times more oil then the Earth:
http://www.space.com/4968-titan-oil-earth.html
There is no peak of coal-oil-gas resources this century, not even a limitation for the next 200-300 years and more – which give us a comfortable time to plan for replacement and develop further our current technologies (Thorium? fusion?) solve the famine this century and get electricity & education in each and every village.
There is no oil on Titan because no life was on Titan. Just because small hydrocarbons, which were accreted early in the formation of the solar system, are on Titan means that large molecule oil components can abiotically form on this planet is grossly misguided.
Coal to oil is negative ERoEI. And it will never have the flow rate required. You people keep missing what peak oil is. It’s about FLOW RATES meeting demand. Soon as demand exceeds flow rate, we have reached peak oil. Soon as demand exceeds supply, someone does without the oil they need.