Editore"s Note
Tilting at Windmills

Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

May 31, 2005
By: Kevin Drum

PEAK OIL....PART 3....Our story so far: There may be lots of oil still left in the ground, but oil in the ground doesn't do us any good: what matters is whether it can be pumped to the surface as fast as we use it. The news on that score is discouraging: it turns out that the daily production rate of oil in non-OPEC countries has pretty much reached its peak, and what's more, this peaking is a result of geology, not economics. Every oil field peaks and then declines as it ages.

So if non-OPEC oil fields have reached their peak, but demand keeps rising, where is additional oil going to come from in the future? The only honest answer is to admit that opinions on this differ boy howdy, do they differ and then provide a rundown of the four main growth possibilities. Here they are in sketch form:

  • OPEC. OPEC nations are extremely secretive about their actual capabilities, but they claim they can increase oil production from today's 30 million barrels per day to 50 or even 60 million bpd over the next couple of decades. However, Bush energy advisor Matt Simmons recently published Twilight in the Desert, an exhaustive examination of this claim, and he concludes that Saudi Arabia in particular, and OPEC in general, are probably already close to their peak output.

    My own take is that Simmons is probably a little too pessimistic, but basically more right than wrong. It's true that (a) the Middle East has been pretty thoroughly explored, (b) there have been no new finds of any magnitude for over two decades, and (c) the giant fields currently in production are old and will begin declining before long. On the other hand, there's definitely some amount of new oil there, and new technology will help extend the life of older fields. My guess is that Saudi Arabia can increase its production by 3-4 million bpd, and OPEC as a whole can eventually increase production by around 8-10 million bpd for a little while. But that's about it.

  • Frontier oil. This term generally refers to polar oil and deepwater oil, both of which are substantial sources of oil-bearing formations that are known to exist but haven't been developed yet. This lack of development means it's impossible to do much more than guess here, so here's my guess: both of these sources will produce some new oil, but not as much as everyone hopes. We've already had experience with several similar "hot prospects" during the 90s, and they've mostly been disappointments: Kazakhstan has produced a lot of oil, but the Gulf of Mexico and the Caspian Sea have been busts. Future development is likely to follow the same mixed pattern.

    In addition, environmental concerns will hobble polar oil regardless of how promising it is, and even in the best case it will be a minimum of a decade before any source of frontier oil starts producing in quantity. By then it will be able to do nothing more than make up for accelerating declines in conventional fields.

  • Nonconventional oil. There are three major sources of nonconventional oil. The first is oil sands, found mostly in Canada. There's plenty of oil there, but it takes tons (literally) of natural gas to extract it, a serious problem since natural gas itself is becoming rarer and more expensive to obtain. Canadian production is likely to increase, but even the Canadians themselves only predict an increase of around 2 million bpd over the next decade or two.

    Second is super-heavy oil, mainly from Venezuela. This is expensive, low-quality oil that's difficult to extract. It's unlikely that current production rates can be increased by more than about 1-2 million bpd, if that.

    Third is oil shale, found mostly in Colorado. This has been a disappointment in the past because there's still no efficient way to extract the oil from the shale. Not only does it require lots of energy, but it also requires vast quantities of water, a resource that's already in short supply in the American West.

  • Advanced technology. No question about it: 3-D seismic imaging has revolutionized exploration and sophisticated MRC wells can extract oil more efficiently from aging fields than either old-style vertical wells or more advanced horizontal wells. Other new technologies have made an impact as well.

    However, there are no miracle breakthroughs on the horizon, and we have a pretty good idea of what existing advanced technology can do: it can reduce the decline of old fields, but it can't prevent them from peaking in the first place. There's no magic bullet here.

At this point I'll repeat what I said above: this is all guesswork. Any of these four things could turn out either much better or much worse than I expect. What's more, there's an obvious answer to overly pessimistic assessments: they've been consistently wrong in the past. We've always found more oil when we needed it.

But have we? For devotees of the past, here's something that's not guesswork and it's what convinces me that we should be taking peak oil seriously. The chart on the right shows discovery of new oil sources, and it's been declining like clockwork for four consecutive decades. Will market forces and technology save us in the future? Maybe. But prices skyrocketed during the 70s and the rate of new discoveries fell anyway. Likewise, new technology has been put to ever increasing use during the past two decades, and that didn't stop the decline in new discoveries either. Nothing has stopped the decline, probably because there's just not that much new oil left to be found.

In the end, it's just as naive to expect that everything will turn out well as to expect that everything will turn out badly. Some newly discovered fields will be gushers and some will be dry holes. Ditto for new technologies. The mix of success and failure in the future will probably look a lot like it has in the past, and that mix has produced a steady decrease in the amount of new oil we've discovered. There's no question that the prospect of permanently higher prices will spur both new development and increased use of technology, but when you put everything together, both good and bad, my guess is that new discoveries will continue to decline and oil production will reach its peak in about 10 years. At that point, new discoveries will no longer be big enough to offset declines in older fields.

Of course, I could be wrong. Instead of 2015, oil might peak this year, as Ken Deffeyes thinks, or it might not peak until 2035, as Peter Odell thinks. Market forces and technology breakthroughs really are unpredictable.

But guess what? After all this, it turns out that the precise date of the oil peak probably isn't the most important issue facing us anyway. What matters more is a related problem that's very definitely facing us right away: we've run out of spare pumping capacity.

I'll take that up next.

Continue to Part 4.

Kevin Drum 12:33 AM Permalink | Trackbacks

Bookmark and Share
 
Comments




 

 

Read Jonathan Rowe remembrance and articles
Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for Free News & Updates

Advertise in WM



buy from Amazon and
support the Monthly