Peak Oil, Abiotic Oil & EROEI: Real(ish) Things That Don’t Matter, Part One: Peak Oil

Guest Seinfeld routine by David Middleton

The plots of the Seinfeld TV show often revolved around trivializing important things and blowing trivial things out of proportion. While not a Seinfeld fanatic (I’m more of a Frasier fanatic), I thought the comedy routines were generally brilliant and quite effective.

Peak Oil, abiotic oil and EROEI (energy returned on energy invested) are largely academic concepts. They are the subject of books, academic publications and Internet “debates” The “debates” about Peak Oil, abiotic oil and EROEI are a lot like the Seinfeld show. They magnify the trivial and trivialize things that actually matter. The “debates” often divide into two camps:

  1. It’s the end of the world (Peak Oil, EROEI).
  2. It’s our salvation from the end of the world (Abiotic oil).

While all three of these energy-related topics are, at least to some extent, real, none of them have the slightest relevance to energy production… except for Peak Oil… But the relevance is generally missed by both sides in Internet “debates.”

I had originally intended on combining Peak Oil, abiotic oil and EROEI into one post; but realized that it would have been longer than Tolstoy’s War and Peace. So, this post will be limited to Peak Oil. Part Deux will deal briefly with abiotic oil and Part Trois will deal more extensively with EROEI.

Peak Oil: A Real Thing That Doesn’t Matter

What is Peak Oil?

In its simplest form, “Peak Oil” is the point at which petroleum production reaches its maximum rate. It is based on the work of Shell geologist M. King Hubbert (Hubbert, 1956). It’s simply a mathematical approximation of how the production rate of oil, gas or any other depleting resource will change as the resource is recovered. Hubbert’s logistic function yields a maximum production rate at the time half of the resource has been produced. Reality is messier than this; but Hubbert’s logistic function is a decent approximation, particularly for regional analyses. In its most common form, “Peak Oil” is applied to oil producing regions, nations and the world.

This was Hubbert’s 1956 “forecast” for Peak Oil in the US:

Figure 1. Hubbert’s 1956 Peak Oil forecast for the US. (Hubbert 1956).

Peak Oil is highly dependent on the total volume of a resource that will be recovered. Note how the “peak” moves forward in time as the total volume of recoverable oil is increased. Hubbert’s forecast wasn’t looking too bad as recently as recently as 2008. However, the recoverable resource was much larger than 150 or 200 billion bbl.

Figure 2. Hubbert 1956 with US oil production through 2017.

Through 2017, cumulative production totaled over 222 billion bbl and proved reserves stood at just under 40 billion bbl.

Figure 3. Figure 2 with US proved oil reserves.

In order to estimate when US Peak Oil will occur (or has occurred), we would need to know how much of the oil resources, not classified as proved oil reserves, will be recovered. At best, this is a SWAG. The Bureau of Ocean Energy Management (BOEM) estimates that there are about 90 billion bbl of technically recoverable oil remaining on the US Outer Continental Shelf (OCS). Until proved reserves and the estimated undiscovered resource begin to decline, it will be impossible to forecast Peak Oil.

How do we know that Peak Oil is real?

Let’s start out with a simple, generalized depiction of an oil reservoir.

Figure 4. Generalized oil & gas reservoir. (Petropedia)

Every oil well, every reservoir and every oilfield has or will reach a peak oil production rate, followed by a steady decline. The rate of decline and recovery rate are generally functions of the reservoir drive mechanism.

The reservoir drive mechanism supplies the energy that moves the hydrocarbon located in a reservoir container toward the wellbore as fluid is removed near the wellbore. There are five common drive mechanisms:

Water drive

Gas expansion

Solution gas

Rock or compaction drive

Gravity drainage

One type usually dominates, but drive types can occur in combination. Depending on the drive mechanism, characteristic recovery efficiencies can be expected for a given reservoir.

AAPG Wiki

When an oil and/or gas well is completed, the production casing is perforated at the level of the reservoir. The virgin reservoir pressure is considerably higher than the pressure in the wellbore. This causes the oil and/or gas to flow into the wellbore and to the surface. As the oil and/or gas are removed (voided) from the reservoir a combination of two things generally occurs.

  1. The reservoir pressure begins to decline.
  2. Formation water begins to move up-dip.

Water drive and gas expansion (pressure depletion) drives are the most common drive mechanisms.  One feature shared by all drive mechanisms is that the maximum production rate occurs early in a well completion’s life cycle.

Figure 5. Oil reservoir drive mechanisms. (AAPG Wiki)


A water drive reservoir will exhibit increasing water production as oil production declines. The oil is “swept” up-dip as the water table rises to accommodate voidage of the oil. Strong water drives are the best oil reservoirs; but not very good gas reservoirs.

Figure 6. Water drive reservoir. (AAPG Wiki)

Gas solution (pressure depletion) drive reservoirs will exhibit a drop in reservoir pressure and an increase in the gas:oil ratio (GOR) as the oil production rate declines. These are poor-performing oil reservoirs; but the best performing gas reservoirs.

Figure 7. Solution gas drive reservoir. (Schlumberger)

The drive mechanism determines how much of the original oil in place (OOIP) can be recovered:

Drive
Mechanism
Energy SourceRecovery (% OOIP)
Solution gas
drive
Evolved solution gas expansion5–30
Gas cap driveGas cap and evolved solution gas
expansion
20–40
Water driveAquifer expansion35–75
Gravity
drainage
Gravity5–30 (incremental)

Table 1. AAPG Wiki

These percentages can be increased through secondary (water flood) and tertiary (carbon dioxide injection) methods. Future technological advances will probably lead to improved recovery rates. However, 100% recovery rates are highly improbable.

Oifields are groups of well completions in reservoirs. They behave much like the individual reservoirs do. All oifields eventually peak, as will global oil production. When will this happen? I have no idea.

Eugene Island 330 was once the largest field in the US Gulf of Mexico in total oil & gas production (BOE). Although it has been surpassed by Shell’s deepwater Mars field, it is still one of the biggest oilfields in the Gulf and the largest (BOE) field on the shelf (<1,000′ water depth).

Figure 8. Eugene Island 330 Field, oil production rate vs cumulative oil production (David Middleton, data from BOEM).

Eugene Island 330 field has produced almost 500 million bbl of oil and 1.9 TCF (trillion cubic feet) of gas from September 1972 through January 2019. The field averaged 8,200 bbl/d in 2018. Note how the production ramped up quickly, peaked and then tailed off slowly.

When we look at the aggregate oil production from US Gulf of Mexico shelf, we can see a Hubbert-like pattern:

Figure 9. US Gulf of Mexico shelf (water depth <1,000′)
oil production rate vs cumulative oil production (David Middleton, data from BOEM).

The US Gulf of Mexico shelf has passed “Peak Oil.” An opening of the Eastern Gulf of Mexico to E&P operations would probably yield a short resurgence in oil production; but in terms of oil production, the shelf is in permanent decline. There is still a lot of potential for gas on the shelf; but much of this is uneconomic at today’s natural gas prices. Fortunately, the Gulf of Mexico doesn’t stop at a water depth of 1,000′.

Figure 10. US Gulf of Mexico oil production, including deepwater. (David Middleton, data from BOEM)

The thing about “Peak Oil” is that there are many different types of peaks.

Ingenuity/economic peaks

Peak Oil in the Williston Basin of North Dakota appears to have occurred in 1985:

Figure 11. “Total annual oil production in North Dakota” millions of barrels per year. North Dakota Geological Survey.

Then the oil industry, largely led by Continental Resources, figured out how to economically produce oil from one of the basin’s most prolific source rocks, the Bakken formation.

Figure 12. Figure 9. merged with North Dakota crude oil production. EIA

The Bakken was a key factor in the “shale revolution.” Hubbert’s 1956 Peak Oil forecast for the US looked pretty good before the “shale revolution.”

Political peaks

Figure 13. North Slope exploitation scenario if all areas were open to E&P (exploration and production). (Thomas et al., 2009)

Oil production from the North Slope of Alaska peaked in 1990, due to the fact that ANWR Area 1002 and the Beaufort & Chukchi Sea OCS (outer continental shelf) areas have been generally inaccessible for political reasons.


How do we know that Peak Oil doesn’t matter?

Oilfields, like individual reservoirs, generally exhibit exponential decline curves. The decline curve flattens out over time. The average decline rate for mature oilfields is about 5%. Giant oilfields average about 3% decline rates.


Figure 14. Average decline rates of giant oilfields. (Höök et al., 2009)

However, this is not the only reason for the slow tail off. Most of the capital expenditures occur early in the life of an oil discovery. Once the field is online, the cash flow from the oil & gas production only needs to cover the costs of operating the field. Furthermore, the cost to plug and abandon (P&A) a field can be quite expensive, particularly for offshore fields. Continuing to operate a cash flow-negative oilfield is economically preferable to incurring the P&A costs.

The North Slope of Alaska is an example of this. Production from the giant Prudhoe Bay oilfield ramped up very quickly, peaked in 1990 and tailed off.

Figure 15. North Slope oil production, historical through 2007, forecast 2008-2050 (Thomas et al., 2009), updated with historical production through 2017.

The Trans-Alaska Pipeline System (TAPS) can’t function below a rate of 200,000 bbl/d. Operators of North Slope oilfields have a very powerful incentive to maintain production rates well-above 200,000 bbl/d.

When global Peak Oil actually occurs, it will probably be driven by demand, rather than supply. The supply is ample and diverse. Note the impact that the decline of the largest oilfield in the world, Saudi Arabia’s Ghawar, and the collapse of Venezuela’s oil production have had on global oil production:

Figure 16. Petroleum liquids production (includes crude, condensate, oil shale, oil sands and NGL). USA in red, Venezuela in yellow.

Dean Wormer would describe the impact as…

Figure 17. “Zero-point-zero!”

Inflation-adjusted oil prices have exhibited no statistically significant trend over the past 50 years.

Figure 18. Annual average imported crude oil price. EIA Short-Term Energy Outlook, April 2019.

The “shale revolution” coincided with the 2006-2014 period of generally high oil prices. It’s often said that $100/bbl oil was a bigger factor than horizontal drilling and frac’ing. This is true to a point. However, the collapse in oil prices since 2014 forced the shale players and the rest of the oil industry to reduce costs… And the industry did this “with a vengeance.”

Figure 19. Shale play breakeven prices. (World Oil)

Continental Resources, the leading Bakken player, has generated positive operating cash flow every year since 2014 and three straight years of positive free cash flow 2016-2018.

EOG Resources, the leading shale player nationwide, has generated positive operating cash flow every year since 2014 and positive free cash flow in 2014 and 2017-2018.

Chevron, the top US oil producer and major Permian Basin player has generated positive operating cash flow every year since 2014 and positive free cash flow 2017-2018.

It was actually more difficult for shale players to generate free cash flow with $100+ oil prices than it has been at $50-60/bbl. $100+ oil made it almost impossible to control spending. The drop from $100-$30/bbl made it worse. However, the drop in prices created leverage to reduce costs, particularly rig rates and service company expenses. Everyone, conventional and unconventional players alike, ratcheted down spending from 2015-2017. Breakeven prices for the shale plays plummeted over this period.

Note: Unconventional oil is often no different than conventional oil. The Bakken shale was the source rock for many conventional migrated oil accumulations trapped in porous and permeable sandstone and carbonate reservoirs in the Williston Basin. The “unconventional” aspect is in the use of horizontal wells and massive frac jobs to enable oil production directly from the low permeability source rock.

When oil prices go up, costs go up. Everything from rig day rates, to frac fluids & sand, to offshore workboats, to motel rooms in the Permian Basin. $100 oil kicked off the “shale revolution”… But wasn’t necessary to sustain it.


Over the last couple of years, E&P companies have become more efficient, forced to create investor returns at $40 – $50/barrel oil. Well productivity has improved as companies drilled longer laterals and used less proppant. After the crash in oil prices, oilfield services companies lowered their prices to compete for limited work. As oil prices recovered, the price of oilfield services was slow to catch up. Additionally, companies have more capital discipline than they ever did at $100/barrel oil prices.

Even as oil prices have started to recover, companies are showing lower breakeven costs than ever before. As shown in the chart below, breakeven prices in the Midland Basin fell by 50% from $87 in January 2014 to $44 in September 2018.

Mercer Capital

The cost-cutting was industry-wide:

Figure 20. Breakeven prices for major oil companies and shale players. (Oil Price)

Breakeven prices have been reduced onshore and offshore, conventional and unconventional.

Figure 21. Breakeven prices have been reduced in a broad range of plays. (FT)

Industry has no control over prices; but can always reduce costs by doing things more efficiently. This is why deepwater Gulf of Mexico E&P is booming at $50-60/bbl oil prices:

Figure 22. US GOM deepwater breakeven costs for greenfield (new discoveries) projects. (Offshore)

Most oil companies make final investment decisions (FID) based on the current price of oil, adjusted for the expected inflation rate over the anticipated project duration. High oil prices drew the industry to shale plays like the Bakken and Eagle Ford and out into deepwater. The industry’s “learning curve” made those plays even more economically viable at $60/bbl than they were at $100+/bbl. Peak Oil, as real as it is, simply doesn’t matter.

As long as oil prices continue to climb at least as fast as the inflation rate, the industry will be able to meet the demand for refinery and petrochemical feedstocks for a long time to come… And North America is well-positioned to dominate the 21st Century.

Figure 23. Global petroleum cumulative production, proved reserves and resource potential. (Jude Clemente).

Bear in mind that I did not factor in natural gas and most of the production data I used did not include natural gas liquids (NGL). Natural gas resources are even more abundant than crude oil and can, to some extent, serve as a replacement… Rendering Peak Oil even more irrelevant.

To Be Continued

Part Deux will address the real(ish) nature of abiotic oil and its irrelevance.

Part Trois will address the real(ish) nature of EROEI and its Seinfeldian position among irrelevant things.

About the Author

I have a B.S. degree in Earth Science (1980) from “that fine oil school,” Southern Connecticut State University. I have been employed in the US oil & gas industry as a geophysicist/geologist since 1981, mostly working the Gulf of Mexico for companies you probably never heard of.

References

AAPG Wiki.  “Drive mechanisms and recovery”.  AAPG Wiki, An Encyclopedia of Subsurface Science. https://wiki.aapg.org/Drive_mechanisms_and_recovery

AAPG Wiki.  “Reservoir Drive Mechanisms”.  AAPG Wiki, An Encyclopedia of Subsurface Science.  https://wiki.aapg.org/Reservoir_drive_mechanisms

Berman, Arthur. “Why Breakeven Prices Are Plunging Across The Oil Industry.” OilPrice.com, 10 Apr. 2017, oilprice.com/Energy/Oil-Prices/Why-Breakeven-Prices-Are-Plunging-Across-The-Oil-Industry.html.

Clemente, Jude. “How Much Oil Does the World Have Left?” Forbes, Forbes Magazine, 25 June 2015, www.forbes.com/sites/judeclemente/2015/06/25/how-much-oil-does-the-world-have-left/#3689cc6a5b1f.

Hargrave, Marshall. “Analyzing a Company’s Liquidity Using the Operating Cash Flow Ratio.” Investopedia, Investopedia, 9 Apr. 2019, www.investopedia.com/terms/o/ocfratio.asp.

Höök, Mikael & Hirsch, Robert & Aleklett, Kjell. (2009). “Giant oil field decline rates and their influence on world oil production”. Energy Policy. 37. 2262-2272. 10.1016/j.enpol.2009.02.020.

“How to Interpret Breakeven Prices.” Mercer Capital, 23 Oct. 2018, mercercapital.com/energyvaluationinsights/how-to-interpret-breakeven-prices/.

Hubbert, M. King. “Nuclear Energy and the Fossil Fuels. Presented before the Spring Meeting of the Southern District, Division of Production, American Petroleum Institute, San Antonio, Texas, March 7-8-9, 1956.” Nuclear Energy and the Fossil Fuels. Presented before the Spring Meeting of the Southern District, Division of Production, American Petroleum Institute, San Antonio, Texas, March 7-8-9, 1956, 1956. https://debunkhouse.files.wordpress.com/2017/03/1956_hubbert.pdf

Kenton, Will. “Free Cash Flow (FCF).” Investopedia, Investopedia, 13 Apr. 2019, www.investopedia.com/terms/f/freecashflow.asp.

“New Concepts, Approaches Help Bring Deepwater Projects to FID.” Offshore, 12 July 2017, www.offshore-mag.com/articles/print/volume-77/issue-7/engineering-construction-installation/new-concepts-approaches-help-bring-deepwater-projects-to-fid.html.

North Dakota Geological Survey. “Overview of the Petroleum Geology of the North Dakota Williston Basin”.

Petro Wiki.  “Solution Gas Drive Reservoirs”.  SPE Petro Wiki.  https://petrowiki.org/Solution_gas_drive_reservoirs

Raval, Anjli. “Oil Majors Return to Deepwater Drilling.” Financial Times, Financial Times, 25 July 2018, www.ft.com/content/caca46c2-8e61-11e8-bb8f-a6a2f7bca546.

“Rystad Examines What to Expect from U.S. Shale Break-Even Prices in 2017.” Rystad Examines What to Expect from U.S. Shale Break-Even Prices in 2017, www.worldoil.com/news/2017/2/28/rystad-examines-what-to-expect-from-us-shale-break-even-prices-in-2017.

Smithson, Tony.  “Reservoir Drive Mechanisms”.  Schlumberger Oilfield Review, The Defining Series.  https://www.slb.com/resources/oilfield_review/or_en_intro_article.aspx

Staff, Petropedia. “Understanding Reservoir Drive Mechanisms.” Petropedia.com, 15 Feb. 2018, www.petropedia.com/understanding-reservoir-drive-mechanisms/2/9856.

“Statistical Review of World Energy | Energy Economics | Home.” BP Global, www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html.

Thomas, Charles & B. North, Walter & C. Doughty, Tom & M. Hite, David & Sheets, Brent. (2009). “Alaska North Slope Oil and Gas A Promising Future or an Area in Decline?”.

“U.S. Energy Information Administration – EIA – Independent Statistics and Analysis.” U.S. Crude Oil, Natural Gas, and Natural Gas Proved Reserves, Year-End 2017, www.eia.gov/naturalgas/crudeoilreserves/.

“U.S. Energy Information Administration – EIA – Independent Statistics and Analysis.” Short-Term Energy Outlook – U.S. Energy Information Administration (EIA), www.eia.gov/outlooks/steo/realprices/.

Wormer, Vernon. “Zero Point Zero.” YouTube, 14 May 2009, youtu.be/2V3CfD8TPac.

129 thoughts on “Peak Oil, Abiotic Oil & EROEI: Real(ish) Things That Don’t Matter, Part One: Peak Oil

  1. By reflecting 30% of the ISR the presence of an atmosphere/albedo cools the earth compared to its absence.

    Greenhouse theory has it wrong.

    Beyond that nothing else related matters.

      • The moon sees a peak around 400 K on the lit side and a low of about 100 K on the dark per UCLA Diviner data, Nikolov and Kramm. The earth would see similar.
        No way would the earth be a -430 F frozen ice ball per NOAA.
        No GHE, no “extra” GHG energy, no CAGW.

          • Blazing hot on the lit side, bitter cold on the dark.

            Without the atmosphere the earth would get 20% to 40% more kJ/h and that means hotter not colder.

          • How so?

            No atmosphere, no water vapor, no clouds, no ice or snow or vegetation or oceans and no 30% albedo.

            And no 255 K.

          • Ok, are you saying the atmosphere acts more like a reflective shield than like a blanket?
            So the Earth would (on average) be warmer without one?

    • An excellent paper, thank you David.

      I have always thought that King Hubbert was extremely bright, and was correct within the frame-of-reference that he predicted, which was CONVENTIONAL oil production in the USA. What Hubbert did not foresee, and nobody else did either, was the ability to frac tight shales to get major oil production.

      Years ago I attended one of the big Houston petroleum conferences. Shale fracking for natural gas production was proceeding well, and rumors were swirling about the conference that fracking of shales for oil production had been successful. It was little more than a rumor, supported by some early production success, but not enough wells or data to prove the breakthrough that was to unfold. There was considerable skepticism then, but it is now clear that it works and is economic!

      The fact that King Hubbert did not foresee this breakthrough is hardly remarkable – nobody else did either!

      One story of how it all started is here:
      “THE TEXAS WELL THAT STARTED A REVOLUTION & CHANGED THE WORLD FOREVER”
      Russell Gold, The Wall Street Journal, 29 June 2018
      https://www.wsj.com/articles/the-texas-well-that-started-a-revolution-1530270010

  2. Well it’s going to peak today, or tomorrow, or next year…sometime, and this time I really mean it. /s

      • I returned to UBC for a second degree in 1973; on arriving early I got to sit in on Dr. King Hubbert’s lecture on Peak Oil in early September. I remember him giving a convincing presentation, but one I noted at the time was oil-price-dependent. Everyone at the time thought it was relatively constant.

        In a graduate petroleum geology course I took on the Alberta ‘Tar Sands’ for a seminar presentation as the geology appealed to me and I intended to seek further employment there. At the time the only operator was GCOS; Syncrude was just forming up. To present the seminar, I took on the challenge of projecting viability of the Syncrude operation.

        To do this I used absolutely nothing ‘technical’ after the initial overview of the geology–but used the facts of the involvement of both the Canadian federal government and the Alberta provincial government as major investors, plus the interest rates at the time. With these I projected a rise (from the at-the-time price of some $4/bbl) to at least $24/bbl by the time Syncrude came on line.

        At this point Jim Murray, the prof conducting the course. came alive (you know how they fall asleep during grad students’ presentations)–he had just come from a weekend meeting in Calgary with the president of Syncrude, where they had projected that the price of oil would have to rise to….$24/bbl. I aced THAT course.

        But peak oil is indeed price dependent; what new resource will be discovered is related to what profit can be returned from seeking new resources. it is likely that King Hubbert’s graph for US domestic production would have continued just as he predicted had oil remained at $2.50-$4/bbl. It didn’t, and look what’s happened.

        Now I’m waiting for the Green River Shale recovery-technology to emerge; a formation that contains up to a barrel of oil per ton of rock according to the USGS. Won’t that change/amplify who controls the world’s oil!

        • Len Werner: “Now I’m waiting for the Green River Shale recovery-technology to emerge; a formation that contains up to a barrel of oil per ton of rock according to the USGS. Won’t that change/amplify who controls the world’s oil!”

          The carbon bearing rocks of the Green River Formation in Wyoming, Utah, and Colorado don’t contain ‘oil’ per se, they contain kerogen, a precursor to the formation of what we think of as petroleum.

          Thirty-five years ago in the early 1980’s, engineers who worked on the shale oil projects of that era told me that the only practical means of extracting sufficient volumes of kerogen from the Green River Formation involves mining the formation with large mobile equipment using conventional surface and underground mining techniques.

          In-situ extraction by steam injection or by combustion heating won’t work because too much of the liquidized kerogen is lost to the surrounding rock, making it impossible to recover enough precursor oil material to earn a profit.

          As it was explained to me, the economics of the kerogen-to-oil conversion process dictate that the kerogen be separated from the rock as close as possible to where it has been mined, using a series of large and expensive industrial facilities.

          The energy consumption requirements of the mining and processing facilities were and are substantial, and the possibility of using a centrally-located nuclear power station for electric power and possibly even for process heat was briefly studied.

          The process water requirements of the kerogen retorting and separation facilities are exceptionally large and would consume a fairly substantial portion of the fresh water resources available in the vicinity of the shale oil mining operations.

          The engineers who were working these projects at the time also noted that water supplies which might be tapped locally in Wyoming, Utah, and Colorado were already reserved for other uses.

          And so gaining sufficient volumes of process water involved either tapping the Columbia River System or else building a series of nuclear powered desalination plants along the California coast and piping the water inland.

          Good luck with that. Not to say that we in the nuclear construction industry wouldn’t have gladly built as many nuclear plants as was thought necessary to make it all work.

          • I heartily agree with everything you say–but you and I didn’t discover everything there is to discover, and someday a new process will evolve that will make the Green River Shale production ‘child’s play’ compared to what we ‘know’ today to be the only way to get the kerogen out. Darned if I don’t remember exactly the same discussion in the 60’s for the Alberta Tar Sands–and look what’s happened since. Dr. King Hubbert, in the talk I heard him give, had no idea of what fracking could do to the Bakken Shale, or even what fracking was. His Peak Oil curve vanished in the years since.

            I’ve tried to follow development on the GRS, and haven’t invested in anything I’ve seen yet–but with that much contained hydrocarbon, its day will come–when the price justifies the research costs to develop a new technique that I’ve never even imagined.

          • Len Werner: ” …… someday a new process will evolve that will make the Green River Shale production ‘child’s play’ compared to what we ‘know’ today to be the only way to get the kerogen out. Darned if I don’t remember exactly the same discussion in the 60’s for the Alberta Tar Sands–and look what’s happened since. “

            Mining the Green River Formation for many billions of barrels of oil is the carbon fuels equivalent of the nuclear fusion dream of the atomic scientists. It just isn’t going to happen.

            The arguments against mining the Green River Formation go well beyond the enormous scope and complexity of the engineering details. The direct environmental impacts are huge, much more so than those associated with the Alberta tar sands.

            If the citizens of Utah, Colorado, or Wyoming ever came to fully understand what is actually involved in producing useful volumes of petroleum from the kerogen of the GRF, anyone who proposed it would be tarred and feathered and run out of the state on a rail.

      • David M.
        In your evaluation there appears to be an exclusion of methyl calthrates, which according to many sources, Art Robinson for one, would be the fuel going forward if we ever can engineer a way to economically mine and process. I guess if you need the hydrocarbons you’ll pay the going rate.
        Is there a way to estimate the shear volume of this resource? Post #4 ?
        Not looking to start a care onflict here just your reasoning for its exclusion from the discussion.
        As always your articles intellectually stimulating and expand my knowledge base.
        Many thanks.

        • I didn’t consider anything other than oil because the post was about oil and how oil reservoirs function. I only discussed gas to the extent of the role that it plays in oil production.

    • There’s plenty and as cars become more efficient, surely Peak Oil moves on to the future. “With 300,878 million barrels of proven reserves, Venezuela has the largest amount of proven oil reserves in the world. The country’s oil is a relatively new discovery.”

      “The oil sand deposits in Venezuela are similar to those in Canada. Venezuela also boasts plenty of conventional oil deposits. Venezuela’s Orinoco tar sands are significantly less viscous than Canada’s, so the oil sands there can be extracted using conventional oil extraction methods, giving it a considerable advantage over the Northern American rival in terms of capital requirements and extractions costs.”

      That’s why the US wants to regime change.

      https://www.worldatlas.com/articles/the-world-s-largest-oil-reserves-by-country.html

      • It really is fascinating how some people are determined to find bad in the US, no matter what the subject and no matter what the facts.

        Why would the US want Venezuela to ramp up their oil production, they would be competing with us.

      • David Blackall
        Bitumen (Tar) in winter has the consistency of a Canadian hockey puck! It is typically heated to 280 C by high pressure steam to get it to flow. It was politically relabeled “oil” for political purposes. Technically a “hydrocarbon” but hardly “oil”. “Heavy Oil”

  3. Excellent article, David Middleton!
    You greatly improve my understanding of oil/gas wells, fields, and the geologic, environmental, and market forces that drive their productivity. This is worth a 2nd ‘read’ and I’m looking forward to your ‘Part II’ submittal.

  4. I read half of this, and it got too complicated for little me. My takeaway is how great that our economy was not socialist, and approached capitalism. Not my expert area, so it was new to me that expenses for fracking went down with lower prices for oil. Makes perfect sense, but I never heard that on CNBC.

    • The problem with writing these sorts of posts is in recognizing the fact that the oil industry speaks a different “language” than most people. This is further complicated by the fact that geologists and engineers within the oil industry sometimes seem to speak different languages.

      The main point I was trying to convey was that even though petroleum is finite, there’s a whole lot of it remaining to be produced.

      • David Middleton: “The main point I was trying to convey was that even though petroleum is finite, there’s a whole lot of it remaining to be produced.”

        As it affects climate change policies and their related economic impacts, let’s frame the basic question and its possible answers in a different way and reduce the economic analysis to something even more brutally simple.

        Question #1 of 1 (choose one answer):

        If we are to quickly reduce America’s carbon emissions, we must create an artificial petroleum shortage such that all liquid carbon fuels become as scarce and expensive today as they will be in: (a) 50 years time; (b) 100 years time; (c) 150 years time; (d) 200 years time.

        • The Left-Elites don’t have to “create an artificial petroleum shortage”. Hence their various proposals to add carbon taxes of as much as $25,000/metric-tonne of CO2 produced. The elites just want to save the oil for their own use (and their descendants, like the Rockefeller’s are doing).

          Punitive carbon taxes would affect market behavior when the government alters the working of a free-market, such that it is not a free market. They did this with tobacco.

          That is why the Left is so in love with carbon taxes. It alters market behavior without actually reducing the oil reserves (a finite resource) available to those with financial means. As an added benefit (from their perspective) the politicians (politicians the elites own) get tax money to redistribute to keep them in power. It’s win-win-win for the Elites, the politicians, and the rentseeking scientists. The Big Losers are the little people and their freedoms.

          • But I’m guessing if you took a random sample of clan members you’d have a majority of GOP voters. But I could be wrong.

          • Joel,
            The Oil Market is not a free market. One has a Cartel, Opec, operating as swing producer. Prior to Opec being swing producer, the Texas Railroad Commission acted in role to allocate swing production.

          • US shale players are now the “swing producers.”

            OPEC, particularly Saudi Arabia, used to be able to use their excess production capacity to be the swing producer. 2014-2017 demonstrated that the game had changed.

          • 05/07/2001
            Oil minister’s address at NYMEX awards in New York
            Minister of Petroleum and Mineral Resources Ali Al-Naimi, addressed the reception in New York for the NYMEX award for global vision in energy on May 7, 2001
            Snip
            Earlier, I said that the NYMEX and the IPE crude contracts, while increasing market transparency and providing a tool for managing risk, were not perfect. I would like to speak to this point. First, while they are the most liquid and most visible crude markets in the world, movements in the NYMEX and IPE futures prices are often influenced by factors other than the underlying global supply and demand fundamentals. The NYMEX and IPE crude contracts are both based on regional markets – the West Texas Intermediate market in the case of the NYMEX, and the Brent market in the case of the IPE – heavily influenced by “local” economic conditions and industry fundamentals. At any time, regional factors in the U.S. Mid-Continent or Northwest Europe may be more influential in setting prices than global demand, supply and inventory.
            Second, futures prices can be unduly influenced by attempts to “squeeze” or manipulate the underlying physical WTI and Brent markets. Since most of the world’s crudes are priced relative to these two benchmarks, such attempts can distort price relationships in world markets.
            Third, crude futures prices are influenced by large funds that switch between oil and non-oil trading. To these funds, oil is just another asset in a diversified portfolio of assets. Decisions to buy or sell depend on the relative prices of other non-oil assets, not on underlying oil market conditions of demand, supply and inventories. In addition, oil is bought and sold by technical traders who analyze charts and chart patterns and not barrels of oil produced.
            Crude futures prices are subject to “mass psychology” that is moved more by the latest news story than by fundamentals. This characteristic diminishes the usefulness to producers of price signals generated in these markets as they attempt to assess underlying fundamentals and the need to make supply adjustments.
            https://web.archive.org/web/20040909022541/http://www.saudiembassy.net/2001News/Statements/SpeechDetail.asp?cIndex=373

          • If you think the Rockefellers are on the right, that just proves you are so far out in left field that you have to dodge the cars in the parking lot.

        • Hello David
          Tight oil is not swing producer, Opec still is (plus Russia sort of). Swing producers take political decisions to adjust production. The tight oil players are price takers and adjust their production plans according to their outlook

      • David ,
        The Earth itself is “finite”. In a few billion years our Sun will expand and swallow most of our Solar System..(and the eco-terrorist will blame that on CO2 also..) Everything is “finite” EXCEPT liberal idiocy…D’OH..!

        • “When global Peak Oil actually occurs, it will probably be driven by demand, rather than supply. The supply is ample and diverse.”

          So if demand increases, supply will follow (for the foreseeable future)? Are you saying that reducing CO2 emission is a pipe-dream?

          Doesn’t that get us into RCP8.5 territory?

          • I don’t think an RCP8.5 demand scenario is possible. Demand growth will almost certainly slow down, even without massive government intervention.

            CO2 emission reductions aren’t really a pipe dream. Switching from coal to natural gas is the second fastest way to reduce emissions… Switching to nuclear power is the fastest way.

          • Population growth will slow down. As global economies mature they become more energy-efficient. While EV’s won’t be replace ICE vehicles any time soon, over the next 100 years, they will replace a lot of ICE vehicles.

            OPEC’s reference case suggests that demand will peak in the second half of this century…

          • I see your anwer from below
            “However, at some point in the future, as population growth slows, energy efficiency improves and better energy sources are developed, demand for petroleum will eventually level off. This Peak Oil will be the exact opposite of the Malthusian version in which demand inexorably rises while supply collapses.”

            A levelling off of demand might defuse the Malthusian version but doesn’t help much dealing with the RCP8.5 version. How does a levelling off in 20 or 30 years not have us following 8.5?

  5. Let’s say for a moment that I desired to pump water out of a small lake. Before attempting to do this, I want to know what my peak water production (Qmax) would be, and when the water body might go dry.

    Now, for a lake, I can bring in as many pumps and pipes and necessary, therefore my total production would be close to the total volume of the lake. I might estimate my peak production by the size of the pipes and pumps that would get me to my goal in a reasonable time, say, one month of pumping to empty the lake. From that I can get a fairly good estimate of my maximum flow.

    As I added pumps the production would increase. Somewhere along the line, I would reach Qmax. As the lake shrinks I would no longer be able to sustain this production. I would have increasing difficulty in fitting all my pumps into the diminishing body of water. Nor would I need that many pumps to finish the job – why spend the money on them? The last slurp of water would be by just a single pump, with my production trailing off.

    But now let’s say I want to do the same thing to the ocean. Both the lake and the ocean have a finite volume. That is never in doubt. Both could, in theory, be pumped dry. But estimating my peak production and maximum flow from the ocean would not depend on the volume of the ocean at all, since I would hit physical constraints (Pmax) on pumping ocean water long before I would run out of ocean to pump. In other words, the logistics of the project would constrain production long before the supply of ocean water would.

    In such a case, the very big number that is the total ocean resource is irrelevant because I will never be able to produce enough to put much of a dent in it. So my estimate would be a logistical estimate of the maximum I could produce, and my total production would be based on how long I could keep up extraction. To simplify further, the production curve for the lake would be driven by scarcity, while the ocean would be driven by logistics.

    Graphing the results, the lake curve would look like Hubbert’s peak. The ocean curve would be an S curve.

    So are we pumping oil from a lake or an ocean? The total world production curve sure looks like an ocean to me.

    • Your purpose is key. Is your purpose to empty (drain) the lake? Or is it to sell as much water as you can?

    • If we see the down-slope of a Hubbert curve, it will almost certainly be due to declining demand.

      Current trends in demand and production indicate that it will probably look like an S-curve for quite a long time.

      • The demand only goes down because the price moves rapidly upwards to maintain the equilibrium between quantity demanded and quantity supplied. Price determines the behavior of the market.

          • How could supply have gone down with consumption (demand) higher than ever? Price ensures the equilibrium in a free market.

            If by “supply”, you mean total world reserves, then you must be explicit in what definition of reserves you are talking about.

            Of course in the trivial sense, petroleum is a globally finite resource (as is any mineral resource), such that burning one milliliter of oil reduces “supply.”

        • That’s cyclically true. Rising demand causes prices to rise. Rising prices cause oil companies to spend more money on increasing production. Rising prices eventually diminish demand and an over-supply occurs. Prices fall and demand eventually recovers.

          Both supply and demand are rather inelastic over short-term cycles. This is why there is a boom-bust cycle.

          However, at some point in the future, as population growth slows, energy efficiency improves and better energy sources are developed, demand for petroleum will eventually level off. This Peak Oil will be the exact opposite of the Malthusian version in which demand inexorably rises while supply collapses.

          • In Malthus’ dystopian universe, the supply collapse brings famine which corrects the demand problem.

          • The oil boom-bust cycle occurs in part because analyses like yours is a macro-economic viewpoint, which is the historically predominant view within the oil industry. The oil industry is guided by macroeconomics. Probably always will be.

            It serves itself well to make many oil men very very rich, and they pay you well to make those analyses. It serves the need to take risk, where other investors stay away and simply buy the trains and pipelines the industry needs to move its goods (Warren Buffett comes to mind, his investment views are microeconomics driven).

            Because the oil industry views the world via macroeconomics, they will continue to have boom-bust cycles (technology-driven booms/recoveries), and this will continue to flummox the micro-economics driven UNFCCC/Green schemes and dreams.

          • In 1960, many autos got 10 to 12 miles per gallon.
            My car today, a 2016 Subaru Crosstrek, will get about 30.
            New ones are better by about 10%.
            My folks heated a poorly insulated house with coal in the late ’40s.
            Then they switched to gas.
            Today, we heat and cool with an electric (air sourced) heat pump.
            Newer and ground sourced heat pumps are better.
            We need to add insulation in the attic.
            I see energy efficiency all around.
            It saves me money I can spend on wine, women (ok, wife), horses, and birddogs.

            Thanks for all the information.

          • “demand” is a logistical term in this circumstance.

            Pumping the ocean, I might run out of places to put the water. The “demand” for the ocean water I produce is constrained.

            My S curve for ocean production would turn into a very large bell curve with a flat top, once I got tired of this silly project, and found something better to do.

      • Exactly my point – we are logistically limited, not scarcity limited. Just like we would eb with the ocean. And by logistically limited, I mean the market will take all we can produce.

  6. If Barack Obama’s goal of an 80% reduction in America’s carbon emissions by 2050 is to be reached, government mandated energy conservation measures combined with a program of strictly-enforced carbon fuel rationing is the only way to get there.

    If America’s climate activists aren’t pushing hard for taking direct and highly aggressive anti-carbon measures such as a strictly-enforced carbon fuel rationing scheme, then they aren’t truly concerned about fighting climate change. Something else on their policy agenda has first priority.

    • Government dictated fuel rationing is egalitarian. Everyone would get the same number of fuel ration coupons to purchase their gas or diesel or jet fuel.
      Why would Warren Buffet (old Billionaire) or Mark Zuckerberg (new Billionaire) get handed more government-issued fuel coupon booklets than me or any of my equally deplorable friends?
      The government has to treat everyone equally. A free market does not.

      The rich hate that kind of egalitarian system. Letting price determine who can buy gas and jet fuel will ultimately ensure the Elites have it and deplorables don’t.

      • A government dictated fuel rationing scheme that reduced America’s consumption of liquid carbon fuels to one-third of what it is today would prioritize agricultural uses first, cargo transport next, followed by mass transportation, civil protection, and military uses.

        Rather than driving to Walmart or to Publix to buy your groceries or to Home Depot to buy your tools and your plumbing fittings, most everything you purchase would be bought online and delivered to you by a purchased-product transport service using some mix of electric and conventional vehicles.

        Under an aggressive government-imposed fuel rationing scheme, the black market for gasoline and diesel would be huge and become a more influential source of corruption and criminal activity than was alcohol prohibition in the 1920’s and early 1930’s.

        In any case, doubling or tripling the price of all carbon fuels through a government imposed carbon pricing mechanism of some kind can only go so far in forcing a steep reduction in America’s consumption of petroleum based products.

        Ultimately, the only way to achieve the GHG reductions America’s climate activists say are necessary, and to reduce our carbon emissions as fast as they say is necessary, is for the federal government to assume direct control over the supply, availability, and distribution of all carbon fuels.

        • “is for the federal government to assume direct control over the supply, availability, and distribution of all carbon fuels.”
          I thought that was the whole point of all the socialist ecoloonery – total control over us deplorables.

  7. ” Peak Oil, as real as it is, simply doesn’t matter.”
    and
    “[Natural gas reserves] …Rendering Peak Oil even more irrelevant.”

    It is relevant in respect to the Price per bbl. In the 1990’s, everyone was calling for peak oil to hit just after 2000, by 2010 at the latest. The entire IPCC climate scam was built on the enabling assumption that by 2005-2010 oil price shocks were going to:
    1) force a complete realignment of developed Western economies energy uses. The reasons/factors:
    – Airline travel would become very expensive, such as flying the family to a Florida Disney-World summer vacay was going to stop for middle Americans. The Rich would always have the financial resources to fly either commercial or private for the even more affluent. But for average Americans, the use of petroleum-based energy in recreational, discretionary uses would essentially come to halt, becasue they wouldn’t be able to afford it. The rich will always have the financial means to fuel their mega-yachts, private jets, and Buggatti V-12 super cars.
    – Commuter Cars were going to become either all EV, CNG. To own and operate a gas car or truck was going to be reserved for the rich, unless through a business or commerical use the fuel costs could be passed down the consumption chain to the end consumer.
    – Trains in US were to be big again as the dominant mass transit, as they already are in Europe and Japan as those areas have traditionally had high fuel costs due to heavy taxation for political-social uses.

    2) “Stop-dead cold” any Fossil Fuel party from ever really getting started in Third World, developing nations.
    This is the Big One the IPCC expected. While many middle class Americans have the financial leverage and flexible discretionary spending options to keep driving personal cars, trucks, and boats if sacrifices are made elsewhere in budgets, most of the 3rd World such ownership/operators were going to be cut short before much could happen there.
    Oil at > $200/bbl would ensure the 3rd World never develop the financial resources/reserves to operate many tens of millions of cars, or drive thousands upon thousands of big RV rigs to warm winter havens, especially for leisure activities as they are in Western Europe and North America.

    Peak Oil matters in the abstract because of the Price shocks it would bring at the pump to the average consumer, just as it did in 1973. That was to be the unavoidable hook to allow the Socialists to move in with the Big Green Schemes.

    Now that no one really knows when Peak Oil will occur, if it even will. So the neo-Marxist Greens and their rentseeking, ideologically aligned climate scientists are struggling to figure out how to play their next move. The response so far has to just dial-up the alarmist rhetoric to Level 11. But that is increasingly backfiring as idiots like AO-C/markey’s GND expose the real objective to the masses.

    At this point, probably only thing the Elites can do will be to get Iran and Saudi Arabia into a full-scale regional (nuclear?) war to close off the Persian Gulf. That would do the trick they were expecting with Peak Oil by 2005. But the immensely catastrophic risk potential there would be that no one would know where it would end, especially with the heart of Europe in range of Iranian missiles.

      • David,
        You are confusing my argument of quantity demanded versus quantity supplied with your argument of the structural supply in aggregate to understand a broad phenomenon. This is the classic micro- versus macro- economics analysis conundrum.

        Your entire analysis here (above) is a mostly a Top-Down approach to understanding global petroleum production (your figs 13 and 16 make this point clear) with regional/local examples that will eventually define the entire industry, that is Macro-economics. Macro-economics deals with entire industries and economies.

        The price shock from increasingly limited supplies of oil is a bottom-up analysis, that is Micro-economics. The oil price shocks of 1973 at the pump were quite real. They will come again when quantity demanded rapidly outstrips quantity available for supply, as the price (in a free market) will adjust to maintain the equilibrium.

      • David,

        You have obviously been trained in a macroeconomics style of analysis. Macroeconomics is an analytical tool mainly used to craft economic and fiscal policy. In your case, it is the tool used to help craft economic policies corporations use in deciding where to explore and how much capital to invest (policy level decisions). It serves you well for the purposes you and your craft needs.

        But it is the micro-economics analysis that understands price as a function of quantity supplied versus quantity demanded. The abstract concept of Peak Oil, when viewed through a micro-econ analysis, will be the factor that delivers price shocks to the market that adjusts behavior, both in investors and consumers. This is the concept the UNFCCC/IPCC and elitists were banking on when they started down their Big Green Path in the 1990’s, and making/depending on Peak Oil projections.

        Read more here:
        https://www.investopedia.com/ask/answers/difference-between-microeconomics-and-macroeconomics/

        • Periodic “price shocks” are usually due to supply disruptions, not predictions of Peak Oil.

          The concept of Peak Oil dates back at least to the 1950’s. Periodic price shocks have led to Malthusian predictions of Peak Oil doomsday since at least the 1980’s.

          Peak “Peak Oil” occurred in August 2005. However, the “shale revolution” largely “stuck a fork in it” . The Google Trends of “peak oil” is about as poorly correlated with oil prices as it possibly could be.


          • When I need to fill up my Chevy Silverado, I do not consult Google Trends.

            People were Google searching “peak oil” in 2005 because that is when they were told to expect it and they wanted to figure out why it wasn’t showing up at the pump prices.

            Just before the Lehman collapse and real estate market in the US imploded, oil was above $140, and no one in the general public had heard of shale fracking for tight oil (outside of the circles of those figuring it out). IPCC AR4 had come out in 2007.
            Everything was looking rosy and right on track for the Big Green Socialist Scheme.

            And then the bottom fell out. Fortunately (for them) they had newly elected US Pres who was going to make sure energy got expensive. He tried of course with his maladministration, but the frackers had other plans.
            Obama’s attempts were a big part of why Trump won. Trump’s election was the US version of Mouvement des gilets jaunes and giving the Greens a Big Middle Finger.

            Of course we see everyday now the Democrats and their Socialist buddies are desperately trying to reverse that election.

    • re: “Peak Oil matters in the abstract because of the Price shocks it would bring at the pump to the average consumer“.

      It doesn’t seem to matter how many times people like David Middleton say things like ““Peak Oil” is the point at which petroleum production reaches its maximum rate” and “When global Peak Oil actually occurs, it will probably be driven by demand, rather than supply”. The “Price shock” version keeps resurfacing.

      If a new cheap plentiful energy source becomes available, that can replace all oil usage with something much cheaper, then (a) we immediately have Peak Oil, and (b) the oil price collapses. We will in due course get Peak Oil. For the benefit of all of us, let’s hope that the Peak Oil we get is like this one.

      • The main point of this post was: To the extent that Peak Oil is real, it’s largely irrelevant .

  8. Peak Oil? HaHa, what a hoot! I read this, David, and I have this to say to you: It’s not too late, come on over to the gold exploration side of Geology! That’s right, gold is everywhere, a sharp guy like you can find it, they pay you for it, and, if you get a reputation, they even cut you in on the profit. Peak Gold? Never! Nice report, by the way.

  9. David,

    I enjoy your articles and comments. Thanks for contributing your time on WUWT. This post is informative and well written.

    Having spent 25 years exploring for and developing Alaska’s North Slope oil fields, I wish you would stop using the plot shown in Figure 13. It is very misleading and built on a bunch of implausible scenarios…SWAGs, BHAGs or whatever we want to call them. Even the authors describe it as an “ideal scenario.”

    The plot has peak oil production of 3 mmbd which exceeds the 2 mmbd maximum design capacity for the Trans Alaska Pipeline. It is impossible to fit that much oil into TAPS. Also, today’s max capacity is much less than the original 2 mmbd due to concerns about corrosion with a 40 year old 800 mile long piece of pipe.

    • Normally when I post that image, I mention that TAPS would have to be expanded to accommodate 3 mmbl/d. The authors do state that the ideal scenario is unlikely… It’s kind of a p10 case. And it assumes the areas are opened up simultaneously and aggressively exploited. In reality, the exploitation would probably be drawn out over a longer period of time.

      While I think there’s a fairly high probability that ANWR production could reach 1 mmbbl/d, assuming its successful, success in the Beaufort and Chukchi Sea OCS areas is more “dicey.” Offshore drilling in those areas is still very low on the “learning curve.” It took nearly 20 years of to demonstrate that the deepwater of the Gulf of Mexico was economically viable. You can’t get to the top of the learning curve if you never start climbing.

      Had those areas been open in the 1980’s, TAPS might still be flowing at nearly full capacity. My point was to demonstrate that peaks can be of a political nature.

      • I understand how folks get the impression that ANWR, Chukchi and Beaufort can theoretically produce oil at those volumes. Estimates by USGS and other federal agencies are based on generic play types and not actual prospects. I have interpreted all of ANWR seismic data and more miles of seismic data in Beaufort and Chukchi than I can count.

        You can fix bad politics, regulations or even economics but you can’t fix bad geology. ANWR has undergone 3 deformational episodes that disrupted traps and made large oil accumulations a Vegas style crap shoot. ANWR will never produce 1 mmbd/day…ever. This includes the undeformed area.

        • At this point, “all of ANWR seismic data” consists of relatively dated 2d surveys and until there is some actual drilling in the undeformed area, we won’t know what may or may not be there.
          https://www.alaskapublic.org/2018/07/27/blm-projects-insignificant-impact-from-seismic-work-in-anwr/
          http://www.newsminer.com/alaska_energy_desk/interior-no-d-seismic-exploration-in-anwr-this-winter/article_88739066-2b4c-11e9-b620-b3e6edc1303e.html

          Since these are primarily Mesozoic objectives, it will obviously be somewhat of a “crap shoot.” Direct hydrocarbon indicators aren’t particularly useful here, like they are in Cenozoic “rocks” like the Gulf of Mexico. The OCS areas will also be very challenging.

          • I am very familiar with SAExploration’s plans to conduct 3D seismic in ANWR. They may get approval next year but 3D seismic won’t change the bad geology.

            I’ve spend months in ANWR studying outcrops and integrating that into the seismic. Yes, it is only 2D seismic data but all major North Slope fields were discovered on 2D seismic. There is a good reason you haven’t heard one oil company lobby for opening ANWR.

            But, keep posting your Figure 13 which has less science behind it than Mann’s hockey stick graph. I offered a suggestion that you stop using it because it can’t be defended…just like Mann’s hockey stick.

          • A lot of oil was discovered in the Gulf of Mexico on 2d seismic, particularly the old Tomlinson grid… Prior to 3d, subsalt and the deepwater were nonstarters.

            Mann’s Hockey Stick was a fraudulent depiction of the past. The DOE/NETL potential production plot was of what might happen in the most optimistic case in the future; they were very upfront about it being the most optimistic scenario. Not sure how they’re similar.

            There was no point in lobbying to open ANWR before January 20, 2017. Now, there’s no need to lobby. I don’t think any companies are actively lobbying to open up the Eastern Gulf of Mexico… I’m fairly certain that if it was opened up, there would be a bidding war over acreage in the Smackover and Norphlet plays. We won’t know what the industry interest level is until an actual lease sale is held.

          • I’m not wanting to be contrary because I agree with nearly all of your post about peak oil. It is a great summary of peak oil. I do not agree with Figure 13 as it’s just as bogus as Mann’s hockey stick.

            You are incorrect about lobbying to open ANWR. There was heavy lobbying by politicians and a few oil companies to open ANWR in 1988-89. In fact, the U.S. Senate approved plans for leasing on the ANWR coastal plain in March 1989. Then 10 days later the Exxon Valdez oil spill happened and those plans were cancelled. I know because my employer at the time had tasked me with evaluating ANWRs hydrocarbon potential.

          • Congress voted to open ANWR in the early 1990’s, Bill Clinton vetoed it.

            The response after Exxon Valdez by Bush-41 was to cancel planned lease sales for the Pacific, Atlantic and Eastern Gulf of Mexico and to permanently place some parts of offshore California permanently off limits.

            There was a lot of lobbying back then, particularly by the API. During the Obama years, there wasn’t any point in lobbying to open ANWR. Obama was trying to have it permanently placed off limits. Now there’s no need to lobby to open it; just a need to fight all of the lawsuits that will accompany the first lease sale.

            “Figure 13” was clearly identified in the publication as a maximum case (p01 to p10) and unlikely to occur. I should made this clear in the post. It would only be dishonest if it was presented as a most likely (p50) case. In probabilistic analyses, the p01, p10, p90 and p99 cases are essential constraints.

          • The Senate work in 1989 was to open ANWR primarily based on the potential it may contribute to domestic oil production. Those plans were cancelled. Clinton’s veto was entirely different and based on opening ANWR to help balance the budget which was a poorly conceived approach to open ANWR.

            If you want to use a realistic production forecast that doesn’t rely on ANWRs risky and poor geology check this out. http://www.commonwealthnorth.org/download/action_groups/fiscal_action_coalition/2017/CWN-Pascal-Umekwe-051917.pdf

          • In 1989, the Democrats controlled the House and Senate and there was no congressional action to open ANWR at that time. Reagan tried to open it in the early 1980’s, but Senate Democrats filibustered it. The Republicans pushed ANWR through a budget reconciliation process in 1995 to prevent Democrat filibustering. The 2017 tax bill did the same thing and Trump signed it into law.

            That’s a good production forecast based on existing discoveries, including Smith Bay, Pikka, etc. It’s basically an updated version of this graph from the 2008 DOE/NETL publication.

            The problem is that it doesn’t consider the *possible* impact of ANWR or the OCS areas.

          • It’s not a problem the production forecast “doesn’t consider the *possible* impact of ANWR or the OCS areas.” The Alaska DNR has access to confidential oil company data. ANWR and AK OCS isn’t a realistic source of oil production or they would include it.

            In 1987 Reagan’s Interior Department recommended Congress allow drilling in the coastal plain of the Arctic refuge. It reported that the area represented the nation’s best chance to boost domestic oil production. But it also cautioned that drilling may harm wildlife.

            That report triggered a string of efforts to open the refuge that is still happening 40 years later. In March 1989, a Senate committee approved leasing in the coastal plain. 10 days later, the Exxon Valdez oil spill happened and those plans were cancelled. https://www.upi.com/Archives/1989/03/16/Senate-panel-approves-oil-drilling-in-arctic-refuge/2811606027600/

  10. If David Middleton were to teach a college course he would be the type student would flock to and 70% of the professors would petition to have banned from campus.

      • “flunk too many”

        Likely not — unless it is a 100-level class.
        Many first time students are gone by Christmas.
        Teach 300/400 level classes and you never encounter
        the ones we’ve seen earlier. Your welcome.

        • I take that back. My favorite episode of the great HBO miniseries, From the Earth to the Moon was episode 10, Galileo Was Right.

          Jack Schmitt recruited his old field geology professor, Lee Silver, to teach the Apollo 15 LM crew how to be field geologists and Farouk El-Baz trains CM pilot Al Worden how to do aerial geology… I love this episode and have watched it more often than Animal House.

          https://www.dailymotion.com/video/x4isiyl

          If I could be that sort of professor, I might be tempted to go back to school to get a PhD… But finding oil is way too much fun.

  11. Mr. Middleton: I’m glad you broke this up into three parts, and avoided having to cut anything from this excellent article.

    About a decade ago, I worked for an aerospace company that wanted to get into the oil tools business (a poor fit, as it transpires). My crew took a field trip up to Titusville, Pennsylvania, first visiting the Drake Well Museum (fascinating), and then the Otto Cupler Torpedo Company. Otto Cupler was the first “well shooting” outfit. They manufactured nitroglycerin, which they would drop into the boreholes of dead wells in 10 pint cans (torpedoes). The torpedoes would detonate on impact, and usually bring the well back to life.

    Otto Cupler’s Rick Tallini, Dennis Murray, and Todd Watkins met with us for quite some time, and of all of the fascinating history and lore they relayed, one thing stuck with me. I don’t know who said it, but one of them brought up an activity by an investment group that took place in the recent past. They had gathered enough data to conclude that 90% of the oil that had ever been in Oil Creek Valley was still there, and were looking at novel ways to recover it. The most interesting was tunneling underneath the deposits (which were quite shallow).

    Do you know anything about this? I’ve been unable to find any independent corroboration, but then, this isn’t my field. I just find it interesting.

    Postscript: Fraser rules!

    • Alastair Brickell April 22, 2019 at 3:10 pm
      I thought this blog was about climate?

      Actually No. It can cover anything of current importance. Astronomy, Plate tectonics, and yes politics related to science and civilization. Oh and humor.
      Sit back relax and enjoy the view .

      michael

    • It is. But, if you think oil production has nothing to do with the CAGW meme, then you haven’t been paying attention.

      • SMC, is the running of this article/topic an acknowledgement that oil production is one of the underlying causes of the current global warming?

        • Alastair Brickell April 22, 2019 at 4:16 pm

          Ah No. Warming is caused by a little bit of everything. Ocean cycles a small small bit of solar. The same with cooling.
          Because the system is so chaotic the timing cannot be predicted, just like weather predictions have limits .
          You know you get warm periods followed by cold. Read a good bit of history.
          Once you see the changes in climate in the past, a lot of things that have made historians scratch their heads start to make sense.

          History is full of examples of people who become set in their habits and methods because of climate that they don’t pay attention to the change.
          I our own case one group take advantage of the normal ho hum change .

          As I said read more, especially if you are committed to the other side of the debate.

          michael

        • Nope. It’s the CAGW crowd that’s made oil production, and fossil fuels more generally, a hot topic in the CAGW ‘debate’. So, like it or not, it’s relevant.

    • I thought this blog was about climate?

      The you obviously never read the “about” page to find out what this blog was about:

      About Watts Up With That? News and commentary on puzzling things in life, nature, science, weather, climate change, technology, and recent news

      So what you are really saying is that they run articles here to please the sponsors of this site?

      Again, you show your ignorance that could have been eliminated with a simple perusal of the FAQ page:

      Q. Are you paid to blog?

      A. No. There are some people who have this idea that because I put so much effort into WUWT that I must be on somebody’s payroll and that my stories are “pay for play” or something like that. Nothing could be further from the truth. Being a broadcaster, the surest way to kill a career is to run afoul of the FCC’s payola laws, and because I see blogging as just another style of broadcasting, I’d never consider “pay for play”….
      WUWT doesn’t run articles for hire, it is not nor has it ever been on the payroll of any company or organization…
      That said, I do get some revenue from some Amazon book sales via their referral program, and from the wordpress.com sponsored advertising program which is a revenue sharing arrangement. Advertising is placed on WUWT by wordpress.com and WUWT gets a portion of the ad revenue from wordpress.com just like many other wordpress hosted blogs do. WUWT also gets occasional personal donations via the PayPal button on the right sidebar, and we sometimes sell promotional items such as coffee mugs, t-shirts, and calendars.

  12. “But the relevance is generally missed by both sides in Internet “debates.”
    Perhaps, although it should not be overlooked that may are simply using any chance to make any comment that someone else might read, to add a little more detail to their ongoing and endless Shaggy Dog narrative, whatever it might happen to be.
    You know, like how back in the olden days we used to wear an onion in our belts, which was made out of rope.
    Because of the war. Except on Thursdays, when it was generally frowned on.
    More on this later.

    *Guest mangled “Reference to an Episode of the Simpsons” comment.

  13. This may be the most succinct, brilliant, and meaningful form I have ever seen typical DOOM expressed:

    1) It’s the end of the world (Peak Oil, EROEI).
    2) It’s our salvation from the end of the world (Abiotic oil).

    Just replace a few words and you have:

    1) It’s the end of the world (CO2, Global Warming, Acid Oceans).
    2) It’s our salvation from the end of the world (Green Energy).

    I haven’t made it through much of the article yet, but that introduction really grabbed my attention. Really, nothing has changed since the 1970’s.

    Oh, and about “Peak Oil” – that term really annoys me these days. It is about as meaningless as any term I have ever heard of, but I had to think it through to realize it was meaningless. For example, if you have 100 trillion units of OIL in the ground, and end up needing 50 trillion units of it, far before it runs out you still reach a Peak Oil production. Peak Oil always seemed to imply we were running out and doomed, but it really doesn’t imply that at all. For example, there is LOTS of coal left in the ground, but we likely have passed our Peak Coal here in the U.S. It now seems likely we will reach Peak Oil and not actually not because it is becoming scarce – instead only because we need less of it.

    So I am going to coin a new phrase… We (Western Civilization) have not nor are likely soon to reach our Peak Stupidity. Once reaching Peak Stupidity, we are all going to slowly die of its consequences. There, how is that for a prediction of DOOM?

    Ok, more reading now.

    • I originally planned on including Gorebal Warming and Chicken Little of the Sea… But I was already looking at a Tolstoy-long post. Maybe I’ll add a Part Quatre.

  14. I see your anwer from below
    “However, at some point in the future, as population growth slows, energy efficiency improves and better energy sources are developed, demand for petroleum will eventually level off. This Peak Oil will be the exact opposite of the Malthusian version in which demand inexorably rises while supply collapses.”

    A levelling off of demand might defuse the Malthusian version but doesn’t help much dealing with the RCP8.5 version. How does a levelling off in 20 or 30 years not have us following 8.5?

  15. The shale story is only made possible by the financial sector lending money to companies that HAVE NEVER BEEN ABLE to generate positive free cash flows. Shale makes sense in small core areas that are very productive but these areas are too small to make a difference. Most shale comes from uneconomic areas that are only worked because lenders are willing to finance the projects that will never offer a positive return.

    That simple fact does away with the fake reserve increase claim that has nothing to do with reality. What will matter is the market for shale company debt. It will tell us what the true picture is as will the price of the shares. I expect to see a divergence between the share price of the conventional producers that can produce economically and the failing shale companies that are running out of capital and options.

    • The major shale players have been generating positive operating cash flow since 2014 and positive free cash flow sincwe 2016 or 2017…

      Continental Resources, the leading Bakken player, has generated positive operating cash flow every year since 2014 and three straight years of positive free cash flow 2016-2018.

       

      EOG Resources, the leading shale player nationwide, has generated positive operating cash flow every year since 2014 and positive free cash flow in 2014 and 2017-2018.

       

      Chevron, the top US oil producer and major Permian Basin player has generated positive operating cash flow every year since 2014 and positive free cash flow 2017-2018.

      • Positive free cash flow does not mean that shale is economic. Debt has to be repaid and most is not. Share capital has been destroyed by as much as 95%. Capital used to purchase land has to be written off. Those cheap break evens are for cherry picked sweet spots.

        Shale may not make sense for less than $75 WTI. Shareholders have subsidized consumers for years now.

        • While “shale” is not a panacea, this is unmitigated bullschist. The breakeven prices are the play averages.

          EOG is the biggest “shale player” in the industry.

          Net Income EBITA Op. Cash Flow Free Cash Flow Debt Equit. Debt:

          Equity

          2014 2.92B 8.69B 8.65B 402.35M 5.9B 17.71B              0.33
          2015 (4.52B) 3.2B 3.6B (1.42B) 6.65B 12.94B              0.51
          2016 (1.1B) 2.86B 2.36B (223.73M) 6.98B 13.98B              0.50
          2017 2.58B 4.9B 4.27B 141.09M 6.03B 16.28B              0.37
          2018 3.42B 8.25B 7.77B 1.69B 5.17B 19.36B              0.27

          https://www.marketwatch.com/investing/stock/eog

  16. I remember reading Hubbert’s paper a decade or two ago and if I remember it correctly I think he’s gotten a bad rap.

    What I remember is that he predicted the peak of conventional onshore drilling pretty darn well, and said that possibly offshore drilling and oil sands would become economical by 2000 and take up the slack. Not a bad prediction, unless I’m mis-remembering.

    I want to ask about your Figure 4. My understanding from charts of the Permian is that the gas is generally at greater depths than the oil, but your figure shows the opposite. Is that something specific to west Texas, or did I read the charts wrong, or what’s up with that in general?

    • Figure 4 is a generalized depiction of a single oil reservoir with a gas cap.

      Gas has a lower density than oil, oil has a lower density than water. When all three fluids are present in a single reservoir, the gas is above the oil. Gas reservoirs, particularly dry thermogenic gas reservoirs, tend to be deeper than oil reservoirs because gas can withstand higher temperatures.

      Almost all oil reservoirs have associated natural gas. It’s either in solution (under-saturated reservoirs), kind of like CO2 in beer. Or it’s free gas in a gas cap (saturated reservoirs). When under-saturated reservoirs are put on production, secondary gas caps can form if the reservoir pressure falls below the “bubble point.”

  17. “Inflation-adjusted oil prices have exhibited no statistically significant trend over the past 50 years.”

    please put away OLS until you understand how and when to use it. and please understand there is no such thing as statistically significant, except in tradition.

    you fit a straight line model to data that is nowhere near linear, and the results you get are restricted to that model. what your results show is……

    bad model choice.

    its clear adjusted prices …haha..have gone up.
    and down. its also clear this increase/decrease is not a linear function of time,
    which is what your linear model is proposing as the underlying data generation process.

    arguing “no trend” is a very difficult venture. you dont prove “no trend” by merely assuming and applying a linear trend model. jeez.

    • I should have presented it with an average value, +/- two standard deviations, to demonstrate that the price has generally fluctuated within a range.

    • you fit a straight line model to data that is nowhere near linear, and the results you get are restricted to that model. what your results show is……

      bad model choice.

      Oh the irony.

  18. The concept of “peak oil” is specious, seductive and wrong. The driver is only the spread between the value that people derive from the use of refined hydrocarbon fuels and the cost of the hydrocarbon feedstocks, that is the cost of the hydrocarbons from which those fuels are produced.

    Very few retail customers purchase and use crude oil. I dare say that most people would find it almost impossible to purchase a liter of it. Indeed, it might be illegal to sell it at retail in some jurisdictions. We purchase very carefully produced refined products for use in vehicles, aircraft and for heating. These products are made by breaking down the various hydrocarbon molecules in crude oil and then reassembling them into the desired product. It is the price of this product that matters to us.

    At present, the companies that sell these refined products acquire the raw hydrocarbons from crude oil. There are a number of alternative sources such as coal or biomass. Even sewage sludge contains a surprising amount of hydrocarbons. Coal conversion schemes have been well researched. The instant that any of these other sources are less expensive, they will be used instead of crude oil.

    We do not worry about “peak sperm oil”, but in the 1800’s whale oil was used for burning in lamps in homes. Then other oils became available at lower cost. Today, it is all but impossible to purchase whale oil. And if someone were to sell it, there would be no buyers.

    see:
    http://en.wikipedia.org/wiki/File:US_Sperm_Oil_Imports_1805-1905.jpg

    • You would be correct if Peak Oil actually had anything to do with what you just posted.

  19. In my small region of the world, “peak oil” came a long time ago…back when the price was cents per barrel at the wellhead and pipeline vandalism came from teamsters, not ecoterrorists.

  20. Hubbert’s 1956 forecast for oil was pretty good work, considering 1) it was a prediction for the lower 48 and just shallow offshore waters (300’ IIRC?) 2) he was pretty much a lone voice and endured a lot of pressure to revise his estimates. I like to think he had a good estimate of how much ‘easy’ oil was recoverable at about $20/bbl in today’s dollars.

    Gas, on the other hand, is a whole ‘nother kettle of fish: https://stevemaley.com/2012/01/26/whats-wrong-with-peak-oil-theory-consider-peak-gas/

    Hubbert’s EUR for gas was 800-850 TCF. The curve looked pretty good until we got rid of wellhead price controls. Since about 1984 it’s been nowhere but up. Now we’re exporting. Go figure.

Comments are closed.