Peak Oil (was "petroleum geologist explains US war policy")

[Falcon]

I've set up a spreadsheet to try to analyse this, and even accounting for the reduced energy content of the liquids as well as the reduced EROEI on new production, a gradually reducing EROEI on existing oil supplies, and assuming your statements about an 8% decline rate for existing oil were correct, we'd still be getting something like a 0.7% increase in net energy content from the sort of annual rise in total liquid volume we've seen in the last couple of years.

You are the fat man eating pies who refuses to accept he's getting fatter until he sees the caloric analysis of his pie. Eating pies makes you fat. Substituting high EROEI fuels with low EROEI fuels reduces your net energy.

But by all means make your spreadsheet. 8% per annum decline (Source: IEA) is a half rate of 9 years. So you are replacing (80/2=) 40 million barrels per day of hydrocarbon of EROIEs of 20-80 (residual stocks of pre-peak light sweet crude discoveries) in the next 9 years (2013+9 = 2022 = your inspection period) with a blend of accelerated remaining conventional stock of EROEI 20, and unconventional stock (liquidised peasant food, synthetic bitumen derivatives, etc.) of EROEIS 1-20. Additional growth will be supplied by a freak show of science projects, the energy requirements of which you will not be able to estimate but, even by their own estimates, will be of lower EROEIs than the fluids they are substituting.

Three scenarios:

(1) substitution takes place entirely with accelerated remaining stock (not physically possible)
(2) substitution takes place entirely with unconventionals
(3) substitution takes place at some intermediate blend which maintains current EROEI

Challenge: derive the mobilisation schedule of conventional stock necessary to offset unconventional stock substitution to maintain constant EROEI. Subtract the IEA depletion base case to derive the incremental volumes necessary to reverse the 2006 peak. State a $/bbl lifting cost to derive the *incremental* capital investment schedule necessary to reverse peak. Estimate the increase in post peak decline rate arising from your acceleration program and state its effect on the hydrocarbon dependent global industrial manufacturing system your solar projects will be depending on in 2022.

You are going to get in a right fankle since scenario (3) becomes scenario (1) if you are preserving EROEI and, even if (a) the physical system could respond to investment (b) the necessary capital could be manufactured (capital formation has ceased) such that you could maintain EROEI until 2020, the resulting accelerated depletion rate will crash the system. But looking forward to your analysis.

 

[Dr Jon]

Ed Davey launches review of North Sea oil and gas industry

Ed Davey, energy minister, has launched an independent review of the North Sea oil and gas industry, warning that declining extraction rates threaten to undermine Britain’s ability to maximise what is left of its energy reserves.
...
“I expect it to say tough things to industry, as well as be supportive, and say tough things to government as well,” said Mr Davey. “Our offshore infrastructure is getting older, and we are seeing a decline in the rate of exploration and in the amount of oil and gas that is being recovered”

preparing for the extinction of 'petroleum man'

When Dr Colin Campbell and I made our predictions, we hypothesised that in 2004, conventional crude oil would reach its peak in production. As it transpired, this peak occurred in 2008.

 

[SpineyNorman]

And your aggression is entirely inappropriate.

When you're acting like an arrogant passive-aggressive arse you really shouldn't be surprised when others respond in a similar, though far more honest, manner.

 

[Falcon]

When you're acting like an arrogant passive-aggressive arse you really shouldn't be surprised when others respond in a similar, though far more honest, manner.

Where did I say I was surprised?

 

[SpineyNorman]

Where did I say I was surprised?

Why bother saying it then? It's just like the snide digs you've been making at him (flatulence etc) but presented more honestly.

I'd much rather see honest abuse than abuse hidden by a veil of politeness.

 

[Falcon]

Why bother saying it then?

I regret lowering my standard to his. Thank you for your arbitration - I'd be delighted to confine the discussion to consideration of the facts.

 

[SpineyNorman]

I regret lowering my standard to his. Thank you for your arbitration - I'd be delighted to confine the discussion to consideration of the facts.

I think you lowered it first actually but I'm not going through the thread to check.

 

[Falcon]

but I'm not going through the thread to check.

A habit of thought that serves reserves optimists well.

 

[SpineyNorman]

A habit of thought that serves reserves optimists well.

That would be one of those snide digs. What's an optimist in this context and why am I one?

 

[Dr Jon]

Good analysis here:
High Oil Prices are Starting to Affect China and India

 

[equationgirl]

I don't 'keep' quoting 'WEO 2010'. I quote the occasion, in 2010, where WEO explicitly documents that conventional oil peaked in 2006. These matters are only ever visible in the rear view mirror. The fact that they don't continue to do so reflects that fact that it keeps being the case that it peaked in 2006.

Believe who you like. I wish you well, but my welfare only marginally depends on you understanding what is going on. But yours does.

WEO 2012 p81 'output of crude oil fluctuates between 65 mb/day & 69 mb/day, never quite reaching the historic peak of 70 mb/day in 2008 and falling by 3 mb/day between 2011 and 2035. Light tight oil production grows above 4 mb/day in the 2020s mainly from the US and Canada'.

Not quite what you claim it says.

Also, when you quote the source as 'IEA' please could you quote the title & year of the IEA source you are using. The IEA published tens if not hundreds of documents and I do not have the time to read them all to verify what you say. A decent researcher quotes the source properly.

 

[ferrelhadley]

Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States

7299tcf of gas.
345 bbls of oil.

1.3 Saudi Arabia's. or about 10 years of consumption. That will require an increase of perhaps 5 to 10 times the current horizontal drill fleet to get that oil flowing at a reasonable rate, let alone the gas. Its there, its real but its expensive and hard to get.

The only replacement for cheap energy. Expensive energy.

 

[Falcon]

Not quite what you claim it says.

Well, the IEA's statements are not quite what you claim them to be, either, and the position is in fact worse than their official statement.

"The IEA in 2005 was predicting oil supplies could rise as high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year," said the IEA source, who was unwilling to be identified for fear of reprisals inside the industry. "The 120m figure always was nonsense but even today's number is much higher than can be justified and the IEA knows this.

"Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further. And the Americans fear the end of oil supremacy because it would threaten their power over access to oil resources," he added.

A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organisation was that it was "imperative not to anger the Americans" but the fact was that there was not as much oil in the world as had been admitted. "We have [already] entered the 'peak oil' zone. I think that the situation is really bad," he added.

Source: Key oil figures were distorted by US pressure, says whistleblower, Guardian

No doubt yet another group of industry professionals that Free Spirit will have to claim are incompetent in order to preserve his view.

 

[Falcon]

That will require an increase of perhaps 5 to 10 times the current horizontal drill fleet to get that oil flowing at a reasonable rate, let alone the gas.

I agree with your post, except this bit. Getting it to flow is the least difficult part, and the basis of the Volumetric Production Payment tax scam ponzi schemes that have funded the current bubble.

After a short period, you have to begin a program of constant refracturing, followed by abandonment and redrilling, which substantially elevates your rig requirement yet further.

Needless to say, the capital for this doesn't exist - it is currently provided in the form of synthetic debt formed from the securitised forward sales of oil and gas projected (deliberately misleadingly) from (conventional) initial decline curves, which tight oil and gas wells don't conform to and therefore don't exist.

 

[free spirit]

The only replacement for cheap energy. Expensive energy.

don't get me wrong, I'm entirely on board with the idea that oil at least is now stuck at at least the current / recent level, as it's only at this sort of level that much of the new sources that have / are coming on stream are economic.

That's a lot different to the oil not being available at all at any price, which I just don't accept is the situation as yet.

I don't particularly think that steadily high oil prices are necessarily completely destructive longer term to the global economy, though they will undoubtedly cause a big rebalancing of that economy. We're seeing it now with money flowing out of the big oil importers into the pockets of the big oil exporters, particularly those like Saudi that are still able to produce oil at costs that were economic at $20 a barrel or lower, so must be making vast amounts of profit from it now.

If we stay as dependent on oil as we currently are, this is going to lead to a massive concentration of wealth in the remaining oil exporting nations. Unfortunately most of them aren't great beacons of democracy and human rights, and those countries that are are mostly the big net importers.

 

[equationgirl]

Well, the IEA's statements are not quite what you claim them to be, either, and the position is in fact worse than their official statement.

No doubt yet another group of industry professionals that Free Spirit will have to claim are incompetent in order to preserve his view.

The position in 2005 was vastly different. Looking back at the 2005 IEA forecast with the benefit of hindsight after the financial crisis serves no purpose, and I am at a loss to understand why you have jumped from the 2012 forecast (based on a different methodology to the 2005 forecast, by the way) all the way back to 2005. The forecast then was always going to be optimistic, even overly so, given that the global economy was recovery from the dot com bubble and the semiconductor boom-bust wave.

You cannot compare the 2012 forecast with the 2005 forecast, it's like comparing apples and ladders given the different assumptions, economic outlook and forecasting methods.

I quoted exactly from p81 of the IEA WEO 2012 - it IS the IEA statement.

 

[ferrelhadley]

I don't particularly think that steadily high oil prices are necessarily completely destructive longer term to the global economy, though they will undoubtedly cause a big rebalancing of that economy. We're seeing it now with money flowing out of the big oil importers into the pockets of the big oil exporters, particularly those like Saudi that are still able to produce oil at costs that were economic at $20 a barrel or lower,

The problem is now very dynamic. High oil prices have seen significant drops in consumption in the EU and US, the UK has seen something like a 20% drop in forecourt petrol sales in the past 6 years. But the UK and other economies are still borrowing heavily so if they do cut to zero borrowing without finding some magic button to restart their economies they will likely sink, killing demand further and that new supply will disappear of the side of a balance sheet (for a while). Another real threat is simply that long term structural changes in consumption start to outpace increasing demand from the developing world. Things like China getting its electricity distribution into better shape so needing less diesel for gennys, or a surge of new car buying buying low mileage models and a further transformation of the EU\US car fleets suppressing demand etc.

In those cases lots of the new supply becomes untenable. But perhaps the demand will shift in other ways, like less money into finished goods to keep buying the oil or so on.

Dynamic and unpredictable.

And China is opening a giant new refinery in Saudi so perhaps Saudi will have less to export as more of that money it gets from oil gets used to buy oil at home.

I suspect we are on the same page here.

 

[Falcon]

I quoted exactly from p81 of the IEA WEO 2012 - it IS the IEA statement.

Eh? I can't relate your reply to the fact that IEA whistleblowers note that the IEA statements routinely overstate forecasts in order to avoid market panic.

 

[Falcon]

Dynamic and unpredictable.

Dynamic. But not unpredictable.

(1) You refer to economies "borrowing heavily" in an effort to restart their economies. Such debt is repayable only if it leads to sufficient growth to yield a margin with which to repay the debt (yes?).

(2) There is an oil price, above which, economic growth is impossible. In fact, we can define ‘unaffordable’ oil as marginal supply which costs more than the price economies can pay without destroying growth at a given time (yes?).

(3) We can estimate that cost. Jimenez-Rodriguez and Sanchez (2004) summarise the process. Hamilton (2009) notes it to be around $90/bbl. Kopitz (2009) shows that recession occurs whenever crude oil expenditure exceeds 4% of GDP (currently $80 per barrel for the US), or overwhelms oil shedding by rising at more than 0.8% of GDP on an annual basis. Hamilton (2011) shows that 10 out of 11 post-World War II recessions in the United States were preceded by a sharp increase in the price of crude petroleum. Chen & Hsu (2012) note that deglobalisation is now observable following the systemic oil price rise post-2008 peak. In short, we are already above the zero-economic-growth price of oil.

(4) The substitution of cheap oil by expensive oil and substitutes at the margin means the oil price trend is irreversibly upward (yes?).

Conclusion: oil is 'unaffordable' in the sense that it costs more than the price economies can pay without destroying growth at a given time, all debt undertaken now is unrepayable, and economies are not going to be restarted. And, of course, this is why our debt based financial system is on the point of failure, as its viability is predicated on the assumption that the debt which finances it is repayable, which it now isn't.

Meanwhile, as to that China refinery in Saudi and the prospect of shifting oil away from finished goods - Saudi will cease oil exports around 2030 and become a net purchaser of oil (competing with us) and contributing to the upward price pressure. The oil is for running desalination plants their by then population of 35 million will depend on and, yes, you might have run those on solar and nuclear - providing you have the necessary supplies of affordable oil to build, operate, maintain their supply chains and procure their fuel with.

Hamilton (2009) ‘Causes and Consequences of the Oil Shock of 2007-08’, Brookings Papers on Economic Activity

Jimenez-Rodriguez, R. & Sanchez, M. (2004), ‘Oil Price Shocks and real GDP Growth: Empirical Evidence for Some OECD Countries’, European Central Bank

Kopitz (2009) 'Oil: What price can America afford?, Technical report.

Hamilton (2011) 'Historical oil shocks, Handbook of Major Events in Economic History, Routledge.

Chen & Hsu (2012) ‘Reverse globalization: Does high oil price volatility discourage international trade?’, Energy Economics

 

[equationgirl]

Eh? I can't relate your reply to the fact that IEA whistleblowers note that the IEA statements routinely overstate forecasts in order to avoid market panic.

Where did this whistleblower stuff come from? Do you have any sources to back that up?

 

[Falcon]

Where did this whistleblower stuff come from? Do you have any sources to back that up?

Apart from the Guardian that I linked to, you mean?

 

[equationgirl]

Apart from the Guardian that I linked to, you mean?

And in which one of your gazillion posts is it, please?

 

[free spirit]

Meanwhile, as to that China refinery in Saudi and the prospect of shifting oil away from finished goods - Saudi will cease oil exports around 2030 and become a net purchaser of oil (competing with us) and contributing to the upward price pressure. The oil is for running desalination plants their by then population of 35 million will depend on and, yes, you might have run those on solar and nuclear - providing you have the necessary supplies of affordable oil to build, operate, maintain their supply chains and procure their fuel with.

yeah, that's one possible future for saudi oil exports.

The Saudis aren't as stupid as you seem to think they are though, and are now embarking on an urgent programme to dramatically reduce domestic oil consumption - eg a target of 41GWp of solar by 2030, and Saudi Arabia plans to build 16 nuclear power reactors by 2030

They know full well that they rely on oil exports for income, and that oil they consume at home is oil they can't sell abroad.

And one of my dad's former students has a lead role in making this happen, and met with my dad to discuss it last year, who in turn discussed it with me... if we're waving our contacts and such around again.

 

[Falcon]

And in which one of your gazillion posts is it, please?

The one you are referring to.

 

[Falcon]

The Saudis aren't as stupid as you seem to think they are though

They are building nuclear reactors because they are, at least, not as stupid as we are. They know that ten years of world production that they fooled us into believing exists, doesn't. These are the reserves we call "paper barrels" in the industry - the ones they added after OPEC changed the quota sharing agreement in 1983 and forced members into a race to inflate their reserves to preserve quota income. OPEC consortium income is is divided on the basis of the reserves each member says it has. Reserves are an unaudited state secret. So to increase income, increase the amount of reserves you state you have. Simples. And they have no faith in the durability of their solar science projects once the supply chains fail, so they are placing their faith in nuclear's supply chains (including fuel provision) and building it instead. Meanwhile, nuclear reactor + conventional missile = nuclear missile. The Saudis are within conventional missile strike of Israel.

So, in summary. The Saudis are so desperate for water, so dismissive of their own oil reserves statements, so distrustful of solar's long term prospects, and of their ability to reduce their growing population's demand for air conditioning, and prevent a revolution when energy concessions are removed, that they are pre-installing twelve enemy nuclear missiles on their territory as we enter the era of resource wars.

But building nuclear is, of course, stupid even if you are not an explicit resource war target, and proof of the utter desperation of a country that, only five years ago, was supposed to have decades of unexplored resource left - and of all the idiots who swallowed it and swallow today's version of the same industry's propaganda.

 

[Bernie Gunther]

I'm curious, why would supply chain issues be thought to favour nuclear over solar?

 

[Falcon]

I'm curious, why would supply chain issues favour nuclear?

They don't. But to those who are unaware of the existence and fragility of 90% of the supply chain in both cases, nuclear appears to be a more reliable technology.

 

[free spirit]

I'm curious, why would supply chain issues be thought to favour nuclear over solar?

it's more of a security through diversity of supply thing I'd think. Not much point in asking falcon about that though as I think he views that as just adding more complexity / being even more reliant on the complex global industrial manufacturing process, which is a little erm unconventional.

 

[free spirit]

They are building nuclear reactors because they are, at least, not as stupid as we are. They know that ten years of world production that they fooled us into believing exists, doesn't.

trying to distract from the point being made there Falcon?

Your original graph is based on the assumption that per capita oil consumption will increase along with population levels through to 2030, which by then will result in no net exports even with steady production levels.

This graph takes zero account of the factors I mention, or the specific stated and well funded goal of reducing their per capita oil consumption significantly in order to maintain the export value to the country of their oil production, yet you present it as fact.

Saudi will cease oil exports around 2030 and become a net purchaser of oil (competing with us) and contributing to the upward price pressure

ok so you do mention some potential for replacement of oil with solar / nuclear, but give this caveat

providing you have the necessary supplies of affordable oil to build, operate, maintain their supply chains and procure their fuel with.

Point being that if you've replaced enough of that oil consumption for electricity generation / desalination etc with solar, nuclear etc. then there should be oil available for the other aspects of the economy that need them - certainly more so than in your graph.

 

[Falcon]

it's more of a security through diversity of supply thing I'd think. Not much point in asking falcon about that though as I think he views that as just adding more complexity / being even more reliant on the complex global industrial manufacturing process, which is a little erm unconventional.

It's interesting. The theoretical limit for the grade of ore from which you get a positive energy balance is around 0.02 percent for hard rock, and 0.01 for soft rock. Below that, you expend more energy mining and milling the rock than you recover from any fuel derived from it.

Whistleblower Van Leeuwen estimates there are 60 years of supply left at that ore horizon and current consumption rates (ref) (there will, of course, be an amount of uranium left in the crust at that point, at inaccessible concentrations).

15 years of that supply is required for nuclear's front end requirements (fuel procurement, facility construction and maintenance, etc.). Another 15 years is required for back-end processes (waste cooling, cleanup, container destruction, dismantling and burial). And we haven't processed the 60 years of waste generated so far - another 15 years of fuel.

So we have 15 years of fuel left, at current consumption rates.

Want to argue about estimates of remaining uranium? To be a material substitute for hydrocarbon at current decline rates you'd have to see orders of magnitude increase in nuclear capacity. There aren't orders of magnitude uncertainty in remaining nuclear fuel stocks. A 100% error in the estimate would yield a few years of additional supply at current rates. At current rates, nuclear is an insignificant fraction of demand.

And if the supply were considerably less than 60 years, or demand was considerably more than current, the turning point - the date at which the entire industry would have to direct the whole of its gross energy output to cleaning up its own wastes - would be, well, around now.

Hardly "security through diversity of supply".

I acknowledge, however, that consideration of physical reality is a little erm unconventional in Free Spirit's sphere of interest.