- Table of Contents
- Special Features
- Coiled Tubing Applications
- Reservoir Simulation and Visualization
- Deepwater Exploration and Production
- Departments
- Archives
Vol. 59 No. 6
June 2007
Discussion
Elmond L. Claridge, Pearland, Texas
I am a retired researcher in the enhanced-oil-recovery field (recognized by SPE as a pioneer in that field) and was Director of the Master’s Degree Program in Petroleum Engineering at the University of Houston during the 1980s. I was stimulated by the Guest Editorial in your February 2007 issue by Peter M. Jackson of Cambridge Energy Research Associates (CERA) to write you concerning both issues that he addressed and those he did not address that are related to the general subject of peak oil.
In Jackson’s article, he points out, as has been long known, that King Hubbert’s curves for discovery and production of petroleum were based on inadequate data. It was apparent, with the discovery of the Prudhoe Bay resources plus research on methods of additional oil recovery, that his assumptions about the total initial oil in place and the fraction of this oil that could be recovered were too low. Instead of a peak in production in about 1970 as Hubbert predicted, Jackson now predicts that the peak can occur no sooner than 2030, and may well be later. Hubbert’s database was too small, but the prediction of eventual exhaustion of the world’s supply of produced crude oil, as he was first to point out, is still correct.
In my Introduction to Petroleum Engineering classes at the University of Houston, I had students calculate a date of the catastrophic exhaustion of petroleum production, using as base data an estimate of 6 trillion bbl of initial oil in place, of which 35% (2.1 trillion) could be recovered by primary and secondary production, plus the known world population and its exponential growth rate, and the historical rate of growth of oil products consumption per person. They calculated exhaustion dates in the 2040s. Of course, as I pointed out to the students, exhaustion would not occur catastrophically; the consumption of petroleum would decrease gradually. First would come a decrease in consumption as fuel, followed by long-term use only as a source for chemicals (plastic articles including clothing, medicines, fertilizers, etc.).
I see that Jackson’s estimate of total possible production is 4.8 trillion bbl yet to be produced, plus 1.1 trillion already produced, for a total of 5.9 trillion, compared to the 2.1 trillion I used in the class exercise.
But this approximately three-fold increase in future-plus-past-production (based on better data than I had available in the 1980s) has in recent years been accompanied by a probable large increase in the per-person consumption rate due to the recent rapid industrialization of China and India with their very large populations. If new estimates of an increase in the growth rate of population and of an increase in consumption per person were included in a new calculation of the catastrophic exhaustion date, it would be very interesting to see how much further in the future this date would be than my students’ calculated value.
This is not simply of academic interest. As and when we arrive at the point when we no longer can use petroleum for fuel purposes, we will have to find alternatives, or the age of transportation by airplane, motor vehicles, and fuel-oil-consuming ships will come to a gradual end. The alternative of converting coal in its various forms into liquid fuel is possible and has been practiced, but the technology is still not well developed to where large yields are realized. However, it recently has become known (even to oil companies) that global warming has accompanied the discharge of much-increased amounts of the so-called greenhouse gases (primarily carbon dioxide) into the air, principally due to consumption of petroleum fuels (including natural gas). The increased rate of use of these fuels is bad enough, but if we have to go to coal-based fuels, we have to deal with a starting material of a much higher carbon-to-hydrogen ratio, that if used as such discharges as the end products of combustion a considerably high ratio of carbon dioxide to water.
It is a matter of experience that our world governments do not ordinarily devise and carry out long-range policies that can avert future disasters. Knowledge of the possible disastrous consequences of global warming is finally beginning to affect government policies. An even greater disaster for persons will result from the nonavailability of liquid hydrocarbon for fuels, and eventually as a source of chemical building blocks, but there is general ignorance on this subject. Unless this situation is changed by the urging of knowledgeable people, including those in the chemical, clothing, and medicinal industries as well as in the petroleum industry, we are likely to find that governmental attention will be too little and too late. A major research effort will be required, one that needs government attention.
I personally do not have to worry about it, for I am 89. But I have a concern for our nation in the future.
Discussion
Seldon B. Graham Jr., Austin, Texas
Peter M. Jackson, Director of Oil Industry Activity, CERA, invites others to join in a considered dialogue on “Peak Oil Theory Could Distort Energy Policy and Debate” in the February 2007 JPT Guest Editorial. I accept the invitation.
Jackson is hopelessly muddled by his lack of US oil history in attempting to seriously analyze an old domestic oil “assumption” in order to apply his analysis to the world. Hubbert’s Peak was embraced by politicians and environmentalists, not geologists and petroleum engineers.
Hubbert’s Peak was an excuse used by the Democratic Party to abandon the US oil industry in 1980. Liberals and environmentalists, supported by the media, have engaged in a “Hate Big Oil” campaign since that time. There is strong evidence that the Republican Party has capitulated.
US energy policy has abandoned US oil. Debate on the issue is, for all practical purposes, nonexistent. Wake up and smell the government-subsidized biofuel.
Discussion
Phil Hart, Melbourne, Australia, Member, Australian Association for the Study of Peak Oil Chris Skrebowski, Member, Association for the Study of Peak Oil
Industry professionals and studious observers have made a remarkable contribution to the peak-oil debate. A growing number of government, corporate, and community stakeholders find the case increasingly robust.
- A reassessment of United State Geological Society (USGS) figures for reserves, discovery, and reserves growth suggests that each has been substantially overestimated.
- Objective reports cast doubt on high-end expectations for unconventional oil production.
- Assessment of depletion underpins predictions of a near-term peak in global oil production.
Oil industry employees face many exciting challenges. Objectively presenting the future of world oil supply is one of them.
Increases to world reserves in the last decade come primarily from the reclassification of Canadian tar sands and a single major revision by Iran. The situation in other non-OPEC countries looks increasingly stark.
Concerns about OPEC reserves are supported by recent data, including in the International Energy Agency’s (IEA) definitive report World Energy Trends 2005—Middle East and North Africa. Remaining proved and probable (2P) reserves in Kuwait are put at 54.9 billion bbl, compared with the publicly stated 101 billion bbl. For the UAE, 2P reserves are put at 55.1 billion bbl, compared with their stated 98 billion bbl. These new lower estimates are sourced from IHS Energy and IEA databases.
It is reasonable to question reserves of the other OPEC members, which all increased their stated figures in the so-called “quota wars” of the 1980s. It is our view that reserves are overstated by approximately 250 billion bbl in total.
The USGS describes a potential 939 billion bbl of oil discovery over the period 1995 to 2025, equivalent to 31 billion bbl per year. But actual discovery continues the steady decline it has exhibited for many decades. Over the last 5 years, discovery has fallen to less than half the rate anticipated by the USGS. Extension of the trend indicates a discovery potential of approximately 200 billion bbl. Peak oil critics now play down the role of discovery and instead emphasize the importance of reserves growth.
Reserves Growth
The USGS studied apparent reserves growth in the US Lower 48 states and extended an estimate of 44% to worldwide reserves. First, this neglects the significant role played by the US reporting environment. Second, the manner in which oil fields are developed now bears no comparison to the early days of the US industry and leaves a lot less to gain. Since the 1970s, new fields generally have been unitized and fully delineated, with secondary recovery in place where appropriate from day one.
The third significant fault in the USGS method was to indiscriminately apply the same figure to all cumulative production and current reserves. Several field categories where this is not appropriate are listed in Table 1 as part of a more appropriate estimate for reserves growth. The USGS estimate of 730 billion bbl over 30 years describes an annual growth in reserves of 2.5%. This is 10 times higher than internal industry estimates and must be called into question.
* Includes fields with strong natural aquifer support.
Conventional Oil Resources
Our assessment of conventional oil resources is presented in Table 2. Cumulative production reaches half of the total conventional resource in just 4 years. It is therefore not surprising that attention is shifting to unconventional oil.
(a) CERA, rounded figure to end of 2005.
(b) Oil and Gas Journal (minus 250 overstated in OPEC).
Unconventional Oil
Capital and operating costs for unconventional oil continue to rise, and projects have been delayed as a result. Demand for water and gas, as well as environmental concerns, are also constraining further expansion.
The respected energy adviser Wood Mackenzie predicts that Canadian tar sands production will reach 4 million B/D by 2020. The Oxford Institute of Energy Studies forecasts that total unconventional oil production will reach 6.5 million B/D by 2020. CERA’s prediction of 25 million B/D for the same year looks much too high.
The Missing D-Word: Depletion
Naturally enough, the industry focuses on positive news: discoveries, new technology, and unconventional resources. But each year, depletion eats away at the potential of every producing field. When the balance shifts in favor of depletion, peak oil will have passed.
Chris Skrebowski’s report Megaprojects identifies projects that delivered a total capacity of 3.2 million BOPD for 2006 (including unconventional oil). Non-OPEC producers provided 1.6 million BOPD, yet the corresponding production gain recorded by EIA was 300,000 BOPD. This means that non-OPEC producers lost 1.3 million BOPD to depletion last year.
The low level of new discoveries limits the extent to which the industry can continue delivering such a high level of new capacity. Meanwhile, there is a real danger that decline rates in mature regions will continue to increase. The global balance will tip in favor of depletion sooner than expected.
Conclusion
Peak oil presents a profound challenge, one completely at odds with demand-based forecasts of growth in energy consumption. Preparing for peak oil requires 2 decades of intensive, government-coordinated effort. Peak-oil critics propose that we take a large risk by delaying preparation. The analysis presented here signals that making changes now would be far more prudent.
Discussion
Kjell Aleklett, Uppsala University, Sweden, President, The Association for the Study of Peak Oil and Gas
The February 2007 issue of JPT included a Guest Editorial by Peter M. Jackson of CERA. He discussed “peak oil theory” and concluded that “the peak oil lobby”—a group of professionals that forecasts world conventional oil peaking within a decade —“allows fear to replace careful analysis.” Jackson asserts that only CERA has performed a “careful analysis,” and he urges that the world adopt its “market view” forecast. We challenge that position because we believe CERA has failed to explicitly justify its very optimistic conclusions. Too much rides on oil production forecasts to accept an approach of “trust me, not others.”
As a professor in physics at Uppsala University, Sweden, I approach peak oil as a scientist. My interest in energy resources started decades ago and led to the formation of the “Uppsala Hydrocarbon Depletions Study Group” (UHDSG). Recently, we published a peer-reviewed paper titled “Crash Management Program for the Canadian Oil Sands,” and we just released a thesis by Fredrik Robelius based on a 4-year study of giant oil fields and their importance for future oil production. We are also in the process of analyzing other components of the global production of liquid hydrocarbons. Our assumptions, references, and data are explicitly provided, and our work is carefully reviewed before release (i.e., we believe that we produce “careful analysis”).
Peak oil already has occurred in a large number of countries and regions, and the question is when it will happen for the world as a whole. Peak oil for the US Lower 48 states was forecast by M. King Hubbert, using a model that he developed that involved no constraints on extrapolation and future production and assumed oil field production patterns, starting with discovery followed by production rising to a maximum and then a long period of decline. In his original 1956 analysis, Hubbert made two predictions based on 150 and 200 billion bbl of ultimate oil recovery. At the time, few ventured forecasts for ultimate recovery. His 200 billion bbl scenario, which is close to what we believe today, predicted a peak in 1970, which is what occurred. For 2000, Hubbert’s prediction was for production in the Lower 48 states to be 4 million BOPD, which was very close to what it actually was, excluding deep water.
Those who believe that peak oil could occur within a decade use an array of tools, including individual oilfield analyses, current project forecasts, differing estimates for declines in existing oil fields, and adaptations of the Hubbert approach. The results of many of these studies indicate a likelihood of peaking within a decade, but precision is not possible because of the large number of unknowns.
UHDSG sees many of the important driving forces very differently from CERA. Recent studies at UHDSG provide additional “careful analysis,” which Jackson has demanded. As the readers of this journal know, a giant oil field contains at least 500 million bbl of recoverable oil. Only 507, or 1% of the total numbers of fields, are giants, but in 2005, these relatively few fields contributed approximately 60% of global production and represented about 65% of global ultimately recoverable reserves. The discovery of giant fields peaked during the 1960s, and many are in decline. Production from these fields was separately studied using four scenarios. The results are shown in Fig. 1.
Fig. 1—Future oil production from giant oil fields in million BOPD.
According to the International Energy Agency and others, the decline in existing oil fields is on the order of 4 to 6%. In the forecast of future world oil production as shown in Fig. 2, we have chosen the Giant Standard Case, High End.
Fig. 2—Global liquids production per liquid stream in million BOPD.
For the time frame considered, we excluded increased production from the arctic and from oil shale, which we consider problematic for quite some time. New discoveries from 2007 on will not affect the time for the peak, but they can make the downward slope less steep. The case shown in Fig. 2 has a peak in the production around 2010 and can handle a demand growth of 1.7%. A decline in demand growth would move the peak forward in time. If somehow global production were to be frozen at today’s level, the world might experience a plateau in production for 10 to 15 years.
Fig. 1 in the Jackson article shows conventional oil production for 2006 at approximately 74 million BOPD, with a forecast increase to a maximum of 96 million BOPD in 2030, plateau production until 2045, and a decline to 68 million BOPD in 2070. Integration under the CERA forecast plot gives total conventional oil production of 205 billion bbl. This is almost twice as much conventional oil reserves as we have today, according to CERA. I hope that CERA will publish a detailed analysis of its prediction, as we are doing.
Misjudging the peak of global conventional oil production likely will have dire consequences. We must openly discuss these matters in order to identify strengths and weaknesses in our various approaches and to provide the most robust forecast possible to policymakers.
Reply
Peter M. Jackson, Senior Director, Oil Industry Activity, Cambridge Energy Research Associates
We are grateful to Aleklett, Hart, and Skrebowski for their comments and wholeheartedly agree with the conclusion that misjudging the timing and scale of any “peak” of global oil supply will have dire consequences. We also agree with the notion that precision in estimating the peak is not possible, in which case we are puzzled by their continuing attempts to estimate a peak. While detailed, bottom-up, objective analysis is a key element of this debate, a broader view is at the same time required because of the complex nature of the problem. While specific numbers are helpful, CERA believes that it is more important to understand the drivers of supply and anticipate the signposts for the onset of the undulating plateau.
In my recent JPT Guest Editorial, I presented a schematic that shows just one of the multitude of eventual outcomes. It showed the start of the undulating plateau at 2030 because that is as far as our own detailed analysis extends; it could be that the plateau starts well after 2030. In addition, Hart and Skebrowski have misunderstood our definition of unconventional liquids, which includes condensates and natural-gas liquids as well as extraheavy oil and certain deepwater sources. Aleklett seems to have missed the point that reserves established from enhanced oil recovery, some deepwater, the arctic, and future exploration also can be considered conventional.
CERA has consistently maintained that it is above-ground factors that will dictate the eventual outcome. However, in common with many other proponents of an imminent peak, Aleklett plucks yet another part of the story from the total picture to support his views—this time we are expected to believe that we are about to experience a “mass extinction” of the world’s giant fields. Hart and Skebrowski again enter the reserves maze and fail to note the huge uncertainties surrounding reserves calculation and also appear to write off unconventional reserves as insignificant. We remain puzzled about their dismissal of the critical importance of reserves upgrades and revisions and what seems to be a rather static attitude toward technology. They also touch on oilfield-depletion issues, suggesting that the global balance will “tip in favor of depletion sooner than expected” without presenting any supporting evidence of why or when or even from whom. CERA’s recent detailed work on depletion for more than 800 fields suggests that global annual depletion averages are cyclical.
In every argument, it is possible to select evidence to support a particular model. But only when all of the components are considered—which, in this case, include above- and below-ground technical, economic, and geopolitical factors—can the fine balance between supply and demand be understood properly. CERA prefers to think holistically about global oil supply. Our spring 2007 liquids productive capacity outlook suggests that the strong growth we have been projecting for many years is intact.
