IEA says ‘peak oil demand’ could hit as early as 2020

Little more that a year after the International Energy Agency added its voice to the chorus chiming that peak oil was dead, a new report from the uconservative adviser to industrialised nations suggests it has changed its tune. Only this time it is not peak supply that is on its radar, but peak demand.

The IEA’s Medium-Term Oil Market Report 2014 has predicted that global growth in oil demand may start to slow down as soon as the end of this decade, due to environmental concerns and cheaper alternatives, and despite boosting its 2014 forecast of global demand by 960,000 barrels per day.

While supply is forecast to remain strong – thanks largely to the unconventional, or “tight” oil revolution currently underway in north America – the IEA says it expects the global market to hit an “inflexion point”, by the end of 2019, “after which demand growth may start to decelerate due to high oil prices, environmental concerns and cheaper fuel alternatives.”

These factors, says the report, will lead to fuel-switching away from oil, as well as overall fuel savings. In short, it says, “while ‘peak demand’ for oil – other than in mature economies – may still be years away, and while there are regional differences, peak oil demand growth for the market as a whole is already in sight.”

It’s worrying news for the over-invested and under-prepared; not least of all oil importing nations, to which, as Samuel Alexander noted in this article last September, the economic costs of peak oil are especially significant.

“When oil gets expensive, everything dependent on oil gets more expensive: transport, mechanised labour, industrial food production, plastics, etc,” he wrote. “This pricing dynamic sucks discretionary expenditure and investment away from the rest of the economy, causing debt defaults, economic stagnation, recessions, or even longer-term depressions. That seems to be what we are seeing around the world today, with the risk of worse things to come.”

This then adds to the peak oil cycle, increasing governments’ motivation to decarbonise their economies – better late than never – “not only because oil has become painfully expensive, but also because the oil we are burning is environmentally unaffordable.”

This view has been echoed in numerous recent reports. US investment banks Sanford Bernstein raised the prospect of “energy price deflation”, caused by the plunging cost of solar and the taking up of market share by that technology as it displaced diesel, gas and oil in various economies. It predicted that could trigger a massive shift in capital.

Analyst Mark Fulton last month also questioned the wisdom of the private-sector investing over $1 trillion to develop new sources of high-cost oil production. While Mark Lewis, of French broking firm, suggested that $US19 trillion in revenuescould be lost from the oil industry if the world takes action to address climate change, cleans up pollution and moves to decarbonise the global energy system.

The IEA report also includes an updated forecast of product supply, which draws out the consequences of the shifts in demand, feedstock supply and refining capacity.

“Given planned refinery construction and the growth in supply that bypasses the refining sector, such as NGLs and biofuels, the refining industry faces a new cycle of weak margins and a glut of light distillates like gasoline and naphtha as a by-product of needed diesel and jet fuel,” it says.

It also predicts that “the unconventional supply revolution that has redrawn the global oil map” will expand beyond North America before the end of the decade, just as OPEC supplies face headwinds, and regional imbalances in gasoline and diesel markets broaden.

The report projects that by 2019, tight oil supply outside the United States could reach 650 000 barrels per day (650 kb/d), including 390 kb/d from Canada, 100 kb/d from Russia and 90 kb/d from Argentina. US LTO output is forecast to roughly double from 2013 levels to 5.0 million barrels per day (mb/d) by 2019.

“We are continuing to see unprecedented production growth from North America, and the United States in particular. By the end of the decade, North America will have the capacity to become a net exporter of oil liquids,” IEA Executive Director Maria van der Hoeven said as she launched the report in Paris. “At the same time, while OPEC remains a vital supplier to the market, it faces significant headwinds in expanding capacity.”

Beyond ageing fields, the major hurdle facing OPEC producers is the escalation in “above-ground woes,” as security concerns become a growing issue in producers like Iraq, and investment risks deter investment and exploration.

The report notes that as much as three-fifths of OPEC’s expected growth in capacity by 2019 is set to come from Iraq. The projected addition of 1.28 mb/d to Iraqi production by 2019, a conservative forecast made before the launch last week of a military campaign by insurgents that subsequently claimed several key cities in northern and central Iraq, faces considerable downside risk. More

 

© 2014

“Climate Change War” Is Not a Metaphor

The U.N. Intergovernmental Panel on Climate Change has just completed a series of landmark reports that chronicle an update to the current state of consensus science on climate change. In a sentence, here’s what they found: On our current path, climate change could pose an irreversible, existential risk to civilization as we know it—but we can still fix it if we decide to work together.

But in addition to the call for cooperation, the reports also shared an alarming new trend: Climate change is already destabilizing nations and leading to wars.

That finding was highlighted in this week’s premiere of Showtime’s new star-studded climate change docu-drama Years of Living Dangerously. In the series’ first episode, New York Times columnist Thomas Friedman traveled to Syria to investigate how a long-running drought has contributed to that conflict. Climate change has also been discussed as a “threat multiplier” for recent conflicts in Darfur, Tunisia, Egypt, and future conflicts, too.

Climate change worsens the divide between haves and have-nots, hitting the poor the hardest. It can also drive up food prices and spawn megadisasters, creating refugees and taxing the resiliency of governments.

When a threat like that comes along, it’s impossible to ignore. Especially if your job is national security.

In a recent interview with the blog Responding to Climate Change, retired Army Brig. Gen. Chris King laid out the military’s thinking on climate change:

“This is like getting embroiled in a war that lasts 100 years. That’s the scariest thing for us,” he told RTCC. “There is no exit strategy that is available for many of the problems. You can see in military history, when they don’t have fixed durations, that’s when you’re most likely to not win.”

In a similar vein, last month, retired Navy Rear Adm. David Titley co-wrote an op-edfor Fox News:

The parallels between the political decisions regarding climate change we have made and the decisions that led Europe to World War One are striking – and sobering. The decisions made in 1914 reflected political policies pursued for short-term gains and benefits, coupled with institutional hubris, and a failure to imagine and understand the risks or to learn from recent history.

In short, climate change could be the Archduke Franz Ferdinand of the 21st century.

Earlier this year, while at the American Meteorological Society annual meeting in Atlanta, I had a chance to sit down with Titley, who is also a meteorologist and now serves on the faculty at Penn State University. He’s also probably one of the most fascinating people I’ve ever spoken with. Check out his TEDxPentagon talk, in which he discusses how he went from “a pretty hard-core skeptic about climate change” to labeling it “one of the pre-eminent challenges of our century.” (This interview has been lightly edited and condensed.)

Slate: You’ve been a leader when it comes to talking about climate change as a national security issue. What’s your take on the connection between war and climate?

Titley: Climate change did not cause the Arab spring, but could it have been a contributing factor? I think that seems pretty reasonable. This was a food-importing region, with poor governance. And then the chain of events conspires to have really a bad outcome. You get a spike in food prices, and all of a sudden, nobody’s in control of events.

I see climate change as one of the driving forces in the 21st century. With modern technology and globalization, we are much more connected than ever before. The world’s warehouses are now container ships. Remember the Icelandic volcano with the unpronounceable name? Now, that’s not a climate change issue, but some of the people hit worst were flower growers in Kenya. In 24 hours, their entire business model disappeared. You can’t eat flowers.

Slate: What’s the worst-case scenario, in your view?

Titley: There will be a discrete event or series of events that will change the calculus. I don’t know who, I don’t know how violent. To quote Niels Bohr: Predictions are tough, especially about the future. When it comes, that will be a black swan. The question is then, do we change?

Let me give you a few examples of how that might play out. You could imagine a scenario in which both Russia and China have prolonged droughts. China decides to exert rights on foreign contracts and gets assertive in Africa. If you start getting instability in large powers with nuclear weapons, that’s not a good day.

Here’s another one: We basically do nothing on emissions. Sea level keeps rising, three to six feet by the end of the century. Then, you get a series of super-typhoons into Shanghai and millions of people die. Does the population there lose faith in Chinese government? Does China start to fissure? I’d prefer to deal with a rising, dominant China any day.

Slate: That sounds incredibly daunting. How could we head off a threat like that?

Titley: I like to think of climate action as a three-legged stool. There’s business saying, “This is a risk factor.” Coca-Cola needs to preserve its water rights, Boeing has their supply change management, Exxon has all but priced carbon in. They have influence in the Republican Party. There’s a growing divestment movement. The big question is, does it get into the California retirement fund, the New York retirement fund, those $100 billion funds that will move markets? Politicians also have responsibility to act if the public opinion changes. Flooding, storms, droughts are all getting people talking about climate change. I wonder if someday Atlanta will run out of water?

Think back to the Apollo program. President Kennedy motivated us to land a man on the moon. How that will play out exactly this time around, I don’t know. When we talk about climate, we need to do everything we can to set the stage before the actors come on. And they may only have one chance at success. We should keep thinking: How do we maximize that chance of success?

Climate change isn’t just an environmental issue; it’s a technology, water, food, energy, population issue. None of this happens in a vacuum.

Slate: Despite all the data and debates, the public still isn’t taking that great of an interest in climate change. According to Gallup, the fraction of Americans worrying about climate “a great deal” is still roughly one-third, about the same level as in 1989. Do you think that could ever change?

Titley: A lot of people who doubt climate change got co-opted by a libertarian agenda that tried to convince the public the science was uncertain—you know, theMerchants of Doubt. Unfortunately, there’s a lot of people in high places who understand the science but don’t like where the policy leads them: too much government control.

Where are the free-market, conservative ideas? The science is settled. Instead, we should have a legitimate policy debate between the center-right and the center-left on what to do about climate change. If you’re a conservative—half of America—why would you take yourself out of the debate? C’mon, don’t be stupid. Conservative people want to conserve things. Preserving the climate should be high on that list.

Slate: What could really change in the debate on climate?

Titley: We need to start prioritizing people, not polar bears. We’re probably less adaptable than them, anyway. The farther you are from the Beltway, the more you can have a conversation about climate no matter how people vote. I never try to politicize the issue.

Most people out there are just trying to keep their job and provide for their family. If climate change is now a once-in-a-mortgage problem, and if food prices start to spike, people will pay attention. Factoring in sea-level rise, storms like Hurricane Katrina and Sandy could become not once-in-100-year events, but once-in-a-mortgage events. I lost my house in Waveland, Miss., during Katrina. I’ve experienced what that’s like.

Slate: How quickly could the debate shift? How can we get past the stalemate on climate change and start focusing on what to do about it?

Titley: People working on climate change should prepare for catastrophic success. I mean, look at how quickly the gay rights conversation changed in this country. Ten years ago, it was at best a fringe thing. Nowadays, it’s much, much more accepted. Is that possible with climate change? I don’t know, but 10 years ago, if you brought up the possibility we’d have gay marriages in dozens of states in 2014, a friend might have said “Are you on drugs?” When we get focused, we can do amazing things. Unfortunately, it’s usually at the last minute, usually under duress.

This article is part of Future Tense, a collaboration among Arizona State University, the New America Foundation, and Slate. Future Tense explores the ways emerging technologies affect society, policy, and culture. To read more, visit the Future Tense blog and the Future Tense home page. You can also follow us on Twitter.

The U.N. Intergovernmental Panel on Climate Change has just completed a series of landmark reports that chronicle an update to the current state of consensus science on climate change. In a sentence, here’s what they found: On our current path, climate change could pose an irreversible, existential risk to civilization as we know it—but we can still fix it if we decide to work together.

But in addition to the call for cooperation, the reports also shared an alarming new trend: Climate change is already destabilizing nations and leading to wars.

That finding was highlighted in this week’s premiere of Showtime’s new star-studded climate change docu-drama Years of Living Dangerously. In the series’ first episode, New York Times columnist Thomas Friedman traveled to Syria to investigate how a long-running drought has contributed to that conflict. Climate change has also been discussed as a “threat multiplier” for recent conflicts in Darfur, Tunisia, Egypt, and future conflicts, too.

Climate change worsens the divide between haves and have-nots, hitting the poor the hardest. It can also drive up food prices and spawn megadisasters, creating refugees and taxing the resiliency of governments.

When a threat like that comes along, it’s impossible to ignore. Especially if your job is national security.

In a recent interview with the blog Responding to Climate Change, retired Army Brig. Gen. Chris King laid out the military’s thinking on climate change:

“This is like getting embroiled in a war that lasts 100 years. That’s the scariest thing for us,” he told RTCC. “There is no exit strategy that is available for many of the problems. You can see in military history, when they don’t have fixed durations, that’s when you’re most likely to not win.”

In a similar vein, last month, retired Navy Rear Adm. David Titley co-wrote an op-edfor Fox News:

The parallels between the political decisions regarding climate change we have made and the decisions that led Europe to World War One are striking – and sobering. The decisions made in 1914 reflected political policies pursued for short-term gains and benefits, coupled with institutional hubris, and a failure to imagine and understand the risks or to learn from recent history.

In short, climate change could be the Archduke Franz Ferdinand of the 21st century.

Earlier this year, while at the American Meteorological Society annual meeting in Atlanta, I had a chance to sit down with Titley, who is also a meteorologist and now serves on the faculty at Penn State University. He’s also probably one of the most fascinating people I’ve ever spoken with. Check out his TEDxPentagon talk, in which he discusses how he went from “a pretty hard-core skeptic about climate change” to labeling it “one of the pre-eminent challenges of our century.” (This interview has been lightly edited and condensed.)

Slate: You’ve been a leader when it comes to talking about climate change as a national security issue. What’s your take on the connection between war and climate?

Titley: Climate change did not cause the Arab spring, but could it have been a contributing factor? I think that seems pretty reasonable. This was a food-importing region, with poor governance. And then the chain of events conspires to have really a bad outcome. You get a spike in food prices, and all of a sudden, nobody’s in control of events.

I see climate change as one of the driving forces in the 21st century. With modern technology and globalization, we are much more connected than ever before. The world’s warehouses are now container ships. Remember the Icelandic volcano with the unpronounceable name? Now, that’s not a climate change issue, but some of the people hit worst were flower growers in Kenya. In 24 hours, their entire business model disappeared. You can’t eat flowers.

Slate: What’s the worst-case scenario, in your view?

Titley: There will be a discrete event or series of events that will change the calculus. I don’t know who, I don’t know how violent. To quote Niels Bohr: Predictions are tough, especially about the future. When it comes, that will be a black swan. The question is then, do we change?

Let me give you a few examples of how that might play out. You could imagine a scenario in which both Russia and China have prolonged droughts. China decides to exert rights on foreign contracts and gets assertive in Africa. If you start getting instability in large powers with nuclear weapons, that’s not a good day.

Here’s another one: We basically do nothing on emissions. Sea level keeps rising, three to six feet by the end of the century. Then, you get a series of super-typhoons into Shanghai and millions of people die. Does the population there lose faith in Chinese government? Does China start to fissure? I’d prefer to deal with a rising, dominant China any day. More

 

© 2014

The Peak Oil Crisis: Our Harsh Winter Continues

Two weeks ago we discussed the impact that the polar vortex was having on our natural gas supplies and noted that our stocks of natural gas were already 500 billion cubic feet below where they should be for this time of year.

Two weeks ago the forecasters were optimistic that the record winter of 2013-2014 was over and that things would soon be warming up.

It turned out however that the forecasts were wrong and yet more frigid weather poured down across the U.S., drawing down our stocks of natural gas and heating oil still further and interrupting the drilling and fracking of new shale gas and shale oil wells. New forecasts say that the abnormally cold weather is likely to continue through the rest of March and on into early April.

We won’t have the final figures on how much natural gas was drawn from our stocks this winter for another month, but it is starting to look as if our stocks, which normally range from a high of 3.8 trillion cubic feet to a low of 1.8 trillion, could fall to as low as 750 billion and that the total drawdown this winter will be close to 3 trillion cubic feet as compared to the normal 2 trillion. Since November the U.S. has been consuming an average of 91 billion cubic feet of natural gas each day which is 13 percent higher than the five-year average for this time of year.

The key question is whether this can be replaced in time for the next heating season or the ones after that.

You will recall that our shale gas wells, which now supply about 40 percent of our total natural gas consumption, deplete very quickly so that many new wells need to be drilled and fracked each year just to keep production level.

In addition to increasing our consumption, the cold weather has also slowed our domestic production of natural gas. Our natural gas imports from Canada, about 7 billion cubic feet per day, are down about 10 percent from last year. It is even colder in Canada and they need their gas to keep warm before exporting any surplus to the U.S.

You will recall that our shale gas wells, which now supply about 40 percent of our total natural gas consumption, deplete very quickly so that many new wells need to be drilled and fracked each year just to keep production level. There are very few conventional gas wells being drilled these days and production of shale gas other than from the Marcellus shale in the Appalachians is nearly flat. The rapid pace our gas wells are depleting means that the U.S. now needs about 19 billion cubic feet per day of new gas production just to keep up with our annual average consumption of 71 billion cubic feet per day.

As a goodly share of this 19 billion cubic feet per day of new natural gas production must come from the mountains of Pennsylvania and West Virginia, it should be apparent that this location is not conducive to drilling and fracking during the cold and snowy winter months. A recent weekly EIA report shows natural gas production in the eastern U.S down by 30 percent from last year.

Last week the Department of Energy issued a report discussing how we are going to overcome this trillion cubic foot deficit in our natural gas stockpiles before the beginning of next November’s withdrawal season. The Department starts with the assumption that the drawdown is not going to be as bad as it currently seems and then posits that if everything goes right – higher production and lower consumption – we might be able to inject a record 2.5 trillion cubic feet into our storage caverns this summer. Even this will leave us about 500 billion cubic feet below where we would like to be next fall.

Looking ahead for the next few years, questions are starting to arise about the long-term sustainability of our natural gas production.

Natural gas consumption during the next seven months is problematic. If temperatures are unusually high, a lot of natural gas will go into electric power stations to keep us cool. If it is a cool summer, then we might have considerable surpluses that could be injected into our storage caverns. The relatively low price of natural gas, currently about $4.50 per million BTU’s, is another problem.

Some independent analysts say this is well below what it costs to produce shale gas these days and that producers are solvent only because they are making an effort to produce “wet” gas that contains valuable natural gas liquids such as propane which can be sold for enough to offset the loss on the “dry” gas which is what keeps us warm. Gas coming from the Marcellus shale, mostly in Pennsylvania, is generally dry so that there is a good chance that many producers are simply losing money on their natural gas production while waiting for higher prices that will allow profitability.

Looking ahead for the next few years, questions are starting to arise about the long-term sustainability of our natural gas production. This winter will leave us with a major deficit in our stockpiles which unless the weather cooperates is not likely to be made up in the immediate future. Unusually hot summers or cold winters will make rebuilding of inventories difficult or even impossible. More

 

© 2014

Peak oil is not a myth

One might have the impression that hydraulic fracturing (fracking) of shale deposits is the answer to world energy security. Certainly fracking has received much attention and investment, but its prospects must be considered in a broader context.

In the US, where practically all such operations have been conducted to date, fracking now accounts for 40% of domestic gas production and 30% of oil production. The price of natural gas has plummeted, and overall US oil production has increased for the first time since 1970, which had otherwise been falling in accordance with the predictions M King Hubbert made in 1956.

However, this last point is the salient one. Sources of unconventional oil (listed below) such as tight oil (or ‘shale oil’ in popular discourse) are only commercially viable because the need to match the declining rate of conventional oil production has raised oil prices. It is the rate of production of oil that determines its supply, rather than the size of the reserves: ‘The size of the tap, not the tank.’

Oil check

Current data for the decline in oil fields’ production indicates that around 3 million barrels per day of new production must be achieved year on year, simply to sustain supply levels. This is equivalent to finding another Saudi Arabia every 3–4 years. In this context, fracking is at best a stop-gap measure. Conventional oil production is predicted to drop by over 50% in the next two decades and tight oil is unlikely to replace more than 6%.

Once conventional oil’s rate of loss exceeds unconventional oil’s rate of production, world production must peak. Production of sweet, light crude actually peaked in 2005 but this has been masked by the increase in unconventional oil production, and also by lumping together different kinds of material with oil and referring to the collective as ‘liquids’. (More recently, the term ‘liquids’ is often upgraded to ‘oil’, which is highly disinformative since the properties of the other liquids are quite different from crude oil.)

Fracking produces mostly shale gas (rather than oil), and the major growth in global ‘oil’ production has been from natural gas liquids (NGL; in part from shale gas). But the principal components of NGL are ethane and propane, so it is not a simple substitute for petroleum.

Energy in, energy out

The energy return on energy invested (EROEI) is worse for all unconventional oil production methods than for conventional oil.

‘Oil production is predicted to drop by over 50% in two decades’

This means that more energy must be invested to maintain output. As a rough comparison, conventional crude oil production has an EROEI in the range 10–20:1, while tight oil comes in at 4–5:1. Oil recovered from (ultra)deepwater drilling gives 4–7:1, heavy oil 3–5:1, and oil shale (kerogen) somewhere around 1.5–4:1. Tar sands is around 6:1, if it is recovered by surface mining, but this falls to around 3:1 when the bitumen is ‘upgraded’ by conversion to a liquid ‘oil’ substitute.

As conventional oil production has fallen, so has oil’s EROEI as we recover it from increasingly inhospitable locations, and with new technologies. The price of a barrel of oil has trebled over the past decade, but output has effectively flatlined. We may be close to the ceiling of global oil production, and the prospect of filling the gap with oil from alternative sources is daunting.

Different rocks

Although fracking has produced sizeable volumes of oil and gas in the US, there is no guarantee that a similar success will be met elsewhere, including the UK, in part because the geology is different. Even in the US, it is the sweet spots that have been drilled, and the shale plays elsewhere across the continent are likely to prove less productive.

The shale gas reserves in Poland have been revised down from 187 trillion cubic feet (tcf) to 12–27 tcf: at best, a mere 14% of the original estimate. And most of the production is likely to be gas. Even if we can exhume large volumes of gas at a generous production rate, converting our transport system to run on it would be a considerable undertaking, particularly given the timescale imposed by conventional oil production’s rate of decline. And there are many uses for oil other than to provide liquid fuels, for which substitutes must also be found.

Renewables do not provide a comparable substitute for crude oil and the liquid fuels that are refined from it, since the potential contribution from biofuels is relatively minor. Replacing the UK’s 34 million oil-powered vehicles with electric versions is an unlikely proposition, given the limitations of time and resources such as rare earth metals. Mass transit is the more likely future for electric transport than personal cars. The end of cheap, personal transport is a real possibility and may seed changes in our behaviour, such as building resilient communities that produce more of their essentials, such as food and materials, at the local level.

There are many uncertainties, but it seems clear that the age of cheap oil is over. We are entering a very new and different phase of human experience. More

 

 

© 2014

The Peak Oil Crisis: A Winter Update

As the years go by, those studying peak oil are beginning to develop a better understanding of what has been happening since the concept of limits to oil production came to widespread attention. First of all, it is important to understand that in one sense, production of what had been thought of as “conventional oil” really did peak back in 2005.While there has been growth in certain sectors of the “oil” industry in the last nine years it has come in what are known as “unconventional liquids” and as we shall see the maintenance of existing conventional oil production has come at a very high price.The recent growth in the “oil” production has been nowhere near what had been normal prior to the “great recession” so that if anyone should wonder why our economy has been stagnant in recent years, one can take the price and availability of oil as a good starting point. US consumption has been falling at 1.5 percent a year since 2005 as opposed to a normal growth rate of 1.8 percent in prior years. In the last decade global oil production grew by only 7.5 percent and not the 23 percent that would have been needed to support the growth the world’s GDP at a rate we would have liked to have seen. Since 2005, total “oil” production has grown by 5.8 million b/d of which 1.7 million consists of natural gas liquids (NGL). While NGL’s are valuable and a useful form of what we now call “oil”, they do not contain the same energy as crude and have a more limited range of uses thereby contributing less to economic growth.US unconventional liquids (shale oil and NGL’s) now are up by 5.1 million b/d since 2005. Along with an additional million b/d from the Canadian tar sands, North American non-conventional liquids constitute nearly all the growth in the world’s oil supply in recent years. Production of conventional crude has remained essentially flat during the period. Moreover, OPEC production has dropped by nearly two million b/d in the last three years largely due to wars, insurgencies, and embargoes and another 1.7 million b/d of its “oil” production has been NGL’s and not crude.The world’s existing fields are depleting at rate of circa 4 million b/d each year so without constant drilling of new wells in new fields global production will quickly wither and prices will climb still more. A good estimate is that the oil which now costs about $110 a barrel will be at $140 or above by the end of the decade unless some major geopolitical upheaval sends it still higher.To keep the oil flowing, the world’s oil companies have invested some $4 trillion in the last nine years to drill for oil. About $2.5 trillion of this was spent on simply replacing production from existing oil fields. Even this gigantic expenditure was not enough since conventional oil production fell by 1 million b/d during the period.About $350 billion went to drill shale oil and gas wells in the US, and increase Canadian oil sands production. This was clearly a bargain as compared to maintaining conventional oil production which now is focused on ultra-expensive deep water wells.Recent announcements by the major oil companies indicate that they reached their limit. Profits and production are falling. Expenditures for finding and developing oil fields have tripled in the last decade and the return from these expenditures has not been enough to justify the costs. Nearly all of the major oil companies have announced major reductions in their exploration and drilling programs and several are selling off assets as they are caught in a trap between steady oil prices and rapidly rising operating costs.Note that the major oil companies do not constitute the whole oil industry as most of the world’s oil production is now in the hands of state-owned companies and small independent producers. These firms are obviously facing the same problems as the large publically traded companies, without as much publicity.What is going to happen in the next few years? First, investments in future production are going down, meaning that in a few years depletion likely will overwhelm new production and output of conventional oil will drop.Then we have the Middle East which, to put it mildly, is coming unglued. Oil exports from several countries have nearly disappeared and the spreading sectarian violence is likely to reduce exports from other countries before the decade is out.Venezuela, from which the US still imports some 800,000 barrels of crude a day, is not transitioning to the post-Chavez era gracefully. The current student riots could easily morph into reduced oil exports.With much of the growth in global oil production coming from US shale producers, a fair question is just how long fracked shale oil production will continue to grow — opinions vary. Some foresee the possibility that growth will slow considerably this year, while others think there are two or three years of large production increases ahead. The three months of extremely cold and snowy weather we have had this winter is already hurting production, but most believe production will rebound in the spring.Even though production of conventional oil peaked nine years ago, massive investment and a five-fold increase in oil prices has allowed the economical production of shale and deepwater oil at a profit since 2005. Further growth shale oil production, however, clearly has a half-life, be it one, three or five years.Recent news concerning deepwater oil production is not encouraging. Brazil’s deepwater oil fields which are thought to contain many billions of barrels of oil are not looking too good at the minute due to the very high costs and risks of production. All in all, the recent news from the oil industry tends to be one of growing pessimism. More

by Tom Whipple, fcnp.com

 

 

©

The Peak Oil Crisis: Cold Fusion Moves East

Many of us believe that life on this planet is in a lot of trouble. The climate is becoming unstable; there are too many people; oceans are dying, sea levels are rising; and water, food, clean air, and minerals are coming into short supply. For many, the economy refuses to grow fast enough to maintain living standards.

Tom Whipple

Although appreciated by only a handful, the evidence continues to build that, unless we have reached some kind of a tipping point, there may be a way out of our mounting problems. A few minutes’ reflection should be enough to convince most that a source of unlimited clean, cheap energy just could reverse global warming, provide unlimited water, food, and a better life for all.

While there may be sources of clean cheap energy that as yet we have no idea exist in this universe, for the present, cold fusion or the preferred term Low Energy Nuclear Reactions (LENR) looks like the only solution currently extant with the potential to save us. It may not be a stretch to say that either we develop and put into widespread use this technology or it is “game over” for life as we know it.

For the last 25 years, the U.S. government, at the urging of its scientific advisors who unfortunately had, and in some cases still have, axes to grind on the LENR issue, has been denying that the “cold fusion;” or LENR phenomenon, actually exists. According to the government, the anomalous heat that so many have been reporting on since 1989 is only experimental errors or scientific fraud or even wishful thinking. When the U.S. government says there is no such thing as “cold fusion” then naturally most other governments and the mainstream media with minor exceptions say the same.

This position may be changing however. While a few scientists at NASA have been saying that the LENR phenomenon is real for some time, the Department of Energy which reigns supreme in these matters remains pretty firm in its denial despite occasional reviews. Recently, however, we may have seen the beginnings of change when a component of DOE which funds exotic energy R&D efforts said it would entertain proposals to fund LENR experiments. Now this may simply be a case of the right hand not knowing what the left hand is doing, but it would be nice to believe that at least somewhere in DOE, a few are coming to their senses,

So where are we on this revolutionary and likely disruptive technology? There are dozens of independent laboratories around the world experimenting with low energy nuclear reactions at the lab bench scale, but only three or four saying, and in some cases demonstrating, that they have devices producing enough energy that commercially useful products should be available soon.

Readers of this column know by now that there is a small but devoted blogosphere out there in cyberspace that not only fervently believes that cold fusion is real and someday will save humanity, but follows and comments on developments daily.

For several years, interest has focused on the Italian inventor Andrea Rossi and his E-Cat nuclear device, which many still consider a scam despite numerous validations. Nearly a year ago, Rossi told his cyber space followers that he had partnered with a well-healed American firm that was helping him develop a commercial product. Until last week Rossi’s American partner was a well-kept secret with speculation focusing on industrial giants such as GE or United Technologies who have much to gain if LENR ever becomes a commercial product replacing combustion of fossil fuels as the principal source of heat in the world.

Last week a hint leaked out when one of Rossi’s associates noted in his biography that he was consulting for an obscure hedge fund called Cherokee Investment Partners LLC, located in Raleigh, North Carolina. The blogosphere jumped on this clue and within days enough information about Cherokee and its new subsidiary, Industrial Heat LLC, was brought to light to conclude that this organization is indeed Rossi’s new American partner in the development of LENR. Cherokee, which has a capitalization of circa $2 billion and has invested $11.5 in the E-Cat project, has a record of investing in cleaning up polluted properties and funding renewable energy projects. More

 

Israel: Gas, Oil and Trouble in the Levant

Israel is set to become a major exporter of gas and some oil, if all goes to plan. The giant Leviathan natural gas field, in the eastern Mediterranean, discovered in December 2010, is widely described as “off the coast of Israel.”

At the time the gas field was: “ … the most prominent field ever found in the sub-explored area of the Levantine Basin, which covers about 83,000 square kilometres of the eastern Mediterranean region.” (i)

Coupled with Tamar field, in the same location, discovered in 2009, the prospects are for an energy bonanza for Israel, for Houston, Texas based Noble Energy and partners Delek Drilling, Avner Oil Exploration and Ratio Oil Exploration.

Also involved is Perth, Australia-based Woodside Petroleum, which has signed a memorandum of understanding for a thirty percent stake in the project, in negotiations which have been described as “up and down.” There is currently speculation that Woodside might pull out of the deal: “ …since the original plans to refrigerate the gas for export were pursued when relations between Israel and Turkey were strained. That has changed, more recently, which has opened the door for gas to be piped to Turkey.”

The spoils of the Leviathan field has already expanded from an estimated 16.7 trillion cubic feet (tcf ) of gas to nineteen trillion – and counting:

”We’ve discovered nearly 40 tcf of gas, and we have roughly 19 tcf of that gas that’s available for export to both regional and extra-regional markets. We see exports reaching 2 billion cubic feet a day in capacity in the next decade. And we continue to explore.”, stated Noble Vice Chairman Keith Elliot (ii) There are also estimated to be possibly six hundred million barrels of oil, according to Michael Economides of energytribune.com (“Eastern Mediterranean Energy – the next Great Game.”)

However, even these estimates may prove modest. In their: “Assessment of Undiscovered Oil and Gas Resources of the Levant Basin Province, Eastern Mediterranean”, the US Department of the Interior’s US Geological Survey, wrote in 2010: “We estimated a mean of 1.7 billion barrels of recoverable oil and a mean of 122 trillion cubic feet of recoverable gas in this province using a geology based assessment methodology.”

Nevertheless, Woodside Petroleum, might also be hesitant to become involved in further disputes, since they are already embroiled, with the Australian government, in a protracted one in East Timor relating to the bonanaza of energy and minerals beneath the Timor Sea, which has even led to East Timor accusing Australia “of bugging East Timorese officials during the negotiations over the agreement.”(iii)

Woodside’s conflict in East Timor however, may well pale against what might well erupt over the Leviathan and Tamar fields. The area is not for nothing called the Levantine Basin. Whilst Israel claims them as her very own treasure trove, only a fraction of the sea’s wealth lies in Israel’s bailiwick as maps (iv, v) clearly show. Much is still unexplored, but currently Palestine’s Gaza and the West Bank between them show the greatest discoveries, with anything found in Lebanon and Syria’s territorial waters sure to involve claims from both countries.

In a pre-emptive move, on Christmas Day, Syria announced a deal with Russia to explore 2,190 kilometres (850 Sq. miles) for oil and gas off its Mediterranean coast, to be: “… financed by Russia, and should oil and gas be discovered in commercial quantities, Moscow will recover the exploration costs.”

Syrian Oil Minister, Ali Abbas said during the signing ceremony that the contract covers “25 years, over several phases.”

Syria, increasingly crippled by international sanctions, has seen oil production plummet by ninety percent since the largely Western fermented unrest began in March 2011. Gas production has nearly halved, from thirty million cubic metres a day, to 16.7 cubic metres daily.

The agreement is reported to have resulted from “months of long negotiations” between the two countries. Russia, as one of the Syrian government’s main backers, looks set to also become a major player in the Levant Basin’s energy wealth. (vi)

Lebanon disputes Israel’s map of the Israeli-Lebanese maritime border, filing their own map and claims with the UN in 2010. Israel claims Lebanon is in the process of granting oil and gas exploration licenses in what Israel claims as its “exclusive economic zone.”

That the US in the guise of Vice President Joe Biden, as honest broker, acting peace negotiator in the maritime border dispute would be laughable, were it not potential for Israel to attack their neighbour again. In a visit to Israel in March 2010, Biden announced: “There is absolutely no space between the United States and Israel when it comes to Israel’s security- none at all”, also announcing on arrival in Israel:”It’s good to be home.” More

 

Posted with Blogsy

Former BP geologist: peak oil is here and it will 'break economies'

Industry expert warns of grim future of 'recession' driven 'resource wars' at University College London lecture

A former British Petroleum (BP) geologist has warned that the age of cheap oil is long gone, bringing with it the danger of "continuous recession" and increased risk of conflict and hunger.

At a lecture on 'Geohazards' earlier this month as part of the postgraduateNatural Hazards for Insurers course at University College London (UCL), Dr. Richard G. Miller, who worked for BP from 1985 before retiring in 2008, said that official data from the International Energy Agency (IEA), US Energy Information Administration (EIA), International Monetary Fund (IMF), among other sources, showed that conventional oil had most likely peaked around 2008.

Dr. Miller critiqued the official industry line that global reserves will last 53 years at current rates of consumption, pointing out that "peaking is the result of declining production rates, not declining reserves." Despite new discoveries and increasing reliance on unconventional oil and gas, 37 countries are already post-peak, and global oil production is declining at about 4.1% per year, or 3.5 million barrels a day (b/d) per year:

"We need new production equal to a new Saudi Arabia every 3 to 4 years to maintain and grow supply... New discoveries have not matched consumption since 1986. We are drawing down on our reserves, even though reserves are apparently climbing every year. Reserves are growing due to better technology in old fields, raising the amount we can recover – but production is still falling at 4.1% p.a. [per annum]."

Dr. Miller, who prepared annual in-house projections of future oil supply for BP from 2000 to 2007, refers to this as the "ATM problem" – "more money, but still limited daily withdrawals." As a consequence: "Production of conventional liquid oil has been flat since 2008. Growth in liquid supply since then has been largely of natural gas liquids [NGL]- ethane, propane, butane, pentane - and oil-sand bitumen."

Dr. Miller is co-editor of a special edition of the prestigious journal,Philosophical Transactions of the Royal Society A, published this month on the future of oil supply. In an introductory paper co-authored with Dr. Steve R. Sorrel, co-director of the Sussex Energy Group at the University of Sussex in Brighton, they argue that among oil industry experts "there is a growing consensus that the era of cheap oil has passed and that we are entering a new and very different phase." They endorse the conservative conclusions of an extensive earlier study by the government-funded UKEnergy Research Centre (UKERC):

"... a sustained decline in global conventional production appears probable before 2030 and there is significant risk of this beginning before 2020... on current evidence the inclusion of tight oil [shale oil] resources appears unlikely to significantly affect this conclusion, partly because the resource base appears relatively modest."

In fact, increasing dependence on shale could worsen decline rates in the long run:

"Greater reliance upon tight oil resources produced using hydraulic fracturing will exacerbate any rising trend in global average decline rates, since these wells have no plateau and decline extremely fast - for example, by 90% or more in the first 5 years."

Tar sands will fare similarly, they conclude, noting that "the Canadian oil sands will deliver only 5 mb per day by 2030, which represents less than 6% of the IEA projection of all-liquids production by that date."

Despite the cautious projection of global peak oil "before 2020", they also point out that:

"Crude oil production grew at approximately 1.5% per year between 1995 and 2005, but then plateaued with more recent increases in liquids supply largely deriving from NGLs, oil sands and tight oil. These trends are expected to continue... Crude oil production is heavily concentrated in a small number of countries and a small number of giant fields, with approximately 100 fields producing one half of global supply, 25 producing one quarter and a single field (Ghawar in Saudi Arabia) producing approximately 7%. Most of these giant fields are relatively old, many are well past their peak of production, most of the rest seem likely to enter decline within the next decade or so and few new giant fields are expected to be found."

"The final peak is going to be decided by the price - how much can we afford to pay?", Dr. Miller told me in an interview about his work. "If we can afford to pay $150 per barrel, we could certainly produce more given a few years of lead time for new developments, but it would break economies again."

Miller argues that for all intents and purposes, peak oil has arrived as conditions are such that despite volatility, prices can never return to pre-2004 levels:

"The oil price has risen almost continuously since 2004 to date, starting at $30. There was a great spike to $150 and then a collapse in 2008/2009, but it has since climbed to $110 and held there. The price rise brought a lot of new exploration and development, but these new fields have not actually increased production by very much, due to the decline of older fields. This is compatible with the idea that we are pretty much at peak today. This recession is what peak feels like."

Although he is dismissive of shale oil and gas' capacity to prevent a peak and subsequent long decline in global oil production, Miller recognises that there is still some leeway that could bring significant, if temporary dividends for US economic growth - though only as "a relatively short-lived phenomenon":

"We're like a cage of lab rats that have eaten all the cornflakes and discovered that you can eat the cardboard packets too. Yes, we can, but... Tight oil may reach 5 or even 6 million b/d in the US, which will hugely help the US economy, along with shale gas. Shale resources, though, are inappropriate for more densely populated countries like the UK, because the industrialisation of the countryside affects far more people (with far less access to alternative natural space), and the economic benefits are spread more thinly across more people. Tight oil production in the US is likely to peak before 2020. There absolutely will not be enough tight oil production to replace the US' current 9 million b/d of imports."

In turn, by prolonging global economic recession, high oil prices may reduce demand. Peak demand in turn may maintain a longer undulating oil production plateau:

"We are probably in peak oil today, or at least in the foot-hills. Production could rise a little for a few years yet, but not sufficiently to bring the price down; alternatively, continuous recession in much of the world may keep demand essentially flat for years at the $110/bbl price we have today. But we can't grow the supply at average past rates of about 1.5% per year at today's prices."

The fundamental dependence of global economic growth on cheap oil supplies suggests that as we continue into the age of expensive oil and gas, without appropriate efforts to mitigate the impacts and transition to a new energy system, the world faces a future of economic and geopolitical turbulence:

"In the US, high oil prices correlate with recessions, although not all recessions correlate with high oil prices. It does not prove causation, but it is highly likely that when the US pays more than 4% of its GDP for oil, or more than 10% of GDP for primary energy, the economy declines as money is sucked into buying fuel instead of other goods and services... A shortage of oil will affect everything in the economy. I expect more famine, more drought, more resource wars and a steady inflation in the energy cost of all commodities."

According to another study in the Royal Society journal special edition by professor David J. Murphy of Northern Illinois University, an expert in the role of energy in economic growth, the energy return on investment (EROI) for global oil and gas production - the amount of energy produced compared to the amount of energy invested to get, deliver and use that energy - is roughly 15 and declining. For the US, EROI of oil and gas production is 11 and declining; and for unconventional oil and biofuels is largely less than 10. The problem is that as EROI decreases, energy prices increase. Thus, Murphy concludes:

"... the minimum oil price needed to increase the oil supply in the near term is at levels consistent with levels that have induced past economic recessions. From these points, I conclude that, as the EROI of the average barrel of oil declines, long-term economic growth will become harder to achieve and come at an increasingly higher financial, energetic and environmental cost."

Current EROI in the US, Miller said, is simply "not enough to support the US infrastructure, even if America was self-sufficient, without raising production even further than current consumption."

In their introduction to their collection of papers in the Royal Society journal, Miller and Sorrell point out that "most authors" in the special edition "accept that conventional oil resources are at an advanced stage of depletion and that liquid fuels will become more expensive and increasingly scarce." The shale revolution can provide only "short-term relief", but is otherwise "unlikely to make a significant difference in the longer term."

They call for a "coordinated response" to this challenge to mitigate the impact, including "far-reaching changes in global transport systems." While "climate-friendly solutions to 'peak oil' are available" they caution, these will be neither "easy" nor "quick", and imply a model of economic development that accepts lower levels of consumption and mobility. More