The Age of Oil Beginning of the End

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The Age of Oil - Beginning of the End?

• by
• Colin Campbell and Jerry Gilbert
• ASPO IRELAND
  BARRELMORE LTD
• www.peakoil.ie

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Do we really appreciate our oil?

• Prices (per pint)
• Gasoline 0.30
• Milk 1.00
• Bottled Water 1.50
• Orange Juice 0.50
• Cappuccino 15.00
• Daily Consumption (per person)
• Food 2,300 k cal
• Oil-based energy gt100,000 k cal

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Why we need to know

• Oil and Gas now dominate our lives
• 40 of traded energy is oil
• gt90 transport fuel is oil
• Trade depends on transport
• Fuels much electricity generation
• Critical for agriculture
• Fuels the tractor, transports the produce
• Basis for synthetic nutrients, pesticides

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Why is there Doubt?

• Most of worlds remaining oil is in the Middle
  East, under Government control
• Strong reserves vital to their economies,
  admitting declines seen as sign of weakness
• Oil companies regard reserves data as
  commercially secret
• Wont give us information which might lead to a
  move away from hydrocarbons dependency
• Archaic Reporting Standards
• US SEC refuses to accept current technology

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Outline

• 1. Geological Reality
• You have to find it first
• 2. Discovery and Production start and end
• Growth is followed by decline
• 3. Dangerous Confusion
• 4. Consequences and - perhaps - solutions

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Petroleum Geology (in two minutes!)
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N.W EuropeOil GeneratingZones-Where oil is
and where it is not
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A Fixed Quantity

• Oil was formed in the geological past
• We cant grow more
• Are we Running Out?
• We started running out with the first barrel!
• but the last barrel is far in the future
• The important fact is
• Production decline begins when half reserves are
  gone

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Depletion is Easy to Understand

• As every beer drinker knows
• the glass starts full, and ends empty
• the quicker you drink it, the sooner its gone
• The same principle applies to oil and gas
• How has this reality been concealed ?
• It is so obvious
• - yet to many it is a devastating realisation

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Bad Information

• Issue would be self-evident with valid data
• Public data are grossly unreliable.
• Governments have been seriously misled.
• Official institutions under political pressure.
• Influence of outdated economic theories
• Supply must meet Demand in an Open Market
• Substitutes naturally arrive as needed
• Skills of a detective needed, but true position
  can be determined.

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Why were we not we told?

• Oil companies reported Reserves to meet strict
  Stock Exchange rules
• Designed to prevent fraudulent exaggeration
• Smiled on conservative reporting
• Discovery under-reported, revised upwards later
• Comforting but misleading image of steady growth
• No conspiracy - just simple commercial prudence
• OPEC over-reported

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OPEC Reserve Reporting Competing for Quota?
Kuwait 1984 Produced 22 Gb Remaining 64 Found
86 ( 90)
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Reality and Illusion
Illusion
Reality
Inflexion due to falling Discovery
Actual
As Reported
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The link between discovery and production . a
few examples

• The same general pattern everywhere
• Discovery episodic, the larger finds first
• Production smooth
• Production naturally mirrors discovery

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US-48
Peak to Peak 40 years
Peak Discovery
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Indonesia
Peak to Peak 32 years
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Russia
Peak to Peak 27 years
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China
Peak to Peak 44 years
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United Kingdom
Peak to Peak 25 years
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Its official
Published by UK Dept. of Trade Industry
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53 countries are past peak

• Pre-1970 - Austria, Germany
• 1970s - Venezuela, Bahrain, Ukraine, Libya, USA,
  Turkmenistan, Canada, Iran, Romania, Indonesia,
  Trinidad, Brunei, Algeria
• 1980s Tunisia, Chile, Albania, Peru, Cameroon,
  Brazil, Hungary, Russia, France, Croatia,
  Netherlands
• 1990s Turkey, Dubai, Pakistan, Papua, Syria,
  Egypt, Gabon, Argentina, Angola, Sharjah,
  Uzbekistan, UK, Colombia, Yemen
• 2000s Mexico, Nigeria, Norway, N. Zone, Oman,
  India, Qatar, Malaysia, Australia, Ecuador,
  Denmark, Congo, Italy

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Real Discovery Trend
Past discovery by ExxonMobil
Past after ExxonMobil
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How much can/will OPEC help?

• Saudi Technical limits politically unstable
• Abu Dhabi Low depletion rate acceptable
• Kuwait Democracy impedes IOC deals
• Iran Internal consumption, technical limits
• Iraq No likely end to chaos

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The problem we face

• Unconstrained demand likely to reach 120 mbd by
  2025
• Non-OPEC supply of 65 mbd or less
• Doubt over OPEC countries willingness and ability
  to increase offtake capability from todays 30
  mbd to nearly 60 mbd

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Impact of New Technology

• Huge advances in exploration, drilling and
  completion techniques
• Production plateau maintained until later in
  field-life (generally improves economics but has
  little effect on reserves)
• Better estimates of EOR reserves benefits (but
  these have been generally disappointing)

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Prudhoe Bay
1977 Internal Estimate 12.5 -15 Gb Reported to
SEC 9 Gb
1989
1977
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ASPO Production Prediction All Oil Gas
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One mans crisis anothers opportunity!

• Soaring energy demand for next decades
• If extra oil not available then what is?
• Nuclear?
• Hydrogen??
• Renewables
• Solar Wind
• Tidal Biomass

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the end
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World Production Capacity
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Price Shocks - the first signs
Five times what it costs to produce
Shocks as production capacity limits breached
But prices crash with recessions,inhibiting turn
to renewables
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Urgent Need for Action

• Taking the Middle East by military force solves
  nothing.
• Defeat likely - but Victory even worse
• higher peak steeper decline
• World must meet Depletion as a Fact with sensible
  reactions
• The Rimini Protocol

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Rimini Protocol

• Cut imports to match World Depletion Rate
• annual production as of remaining (lt3)
• Effects
• World price moderates.
• Profiteering prevented.
• Poor countries can afford minimal needs.
• Destabilizing financial transfers avoided.
• Consumers forced to face reality.

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Population
?
First Oil Well