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Page added on January 28, 2013
Peak Oil: This Probably Isn’t Good News
Lost in the all the recent news about shale gas, tight oil, technology, ingenuity, etc., etc., have been discussions about production outside of North America.
While it’s hardly an ignored subject, it was easy for media to get caught up in what seems such good news about our own “vast” resources and massive “potential” and “game-changing” technological successes. Energy independence … here we come!
Or not.
I’ve devoted a large number of posts in 2013 [published already and in the queue for posting in the weeks ahead] to discussing and countering the exuberance. As I have stated many times, it’s not because I’m a fan of doom and gloom. I enjoy a very nice lifestyle made possible in no small part by all the products which fossil fuels have enabled my family to acquire and enjoy. The full onset of Peak Oil and its wide-ranging impact will put a big dent in how I and my family live. There’s little in that prospect which I look forward to….
Planning. That’s an important theme of this blog, and the focus hasn’t changed. The other side of the energy abundance/independence stories suggest that we need to keep that strategy in mind.
A couple of recent articles emphasized that need by expanding our focus beyond this continent. Just consider these two headlines:
Russian Oil Production to Peak Soon [Rigzone]
‘Peak Oil’ Impacting Norwegian and Saudi 2013 Production? [OilPrice]
Much like our own production increases in recent months, horizontal drilling and hydraulic fracturing in Siberian fields were prime factors in Soviet production records last year. But all good things must come to an end, and the limits of “fracking”—as I and many others have noted in recent months—are not restricted to only certain political/economic philosophies.
Citing analysis by Fitch Ratings, the Rigzone article stated:
[T]he biggest potential gains from new technology have now been mostly achieved. Existing brownfield sites are depleting rapidly and the Russian oil companies are investing billions of dollars in managing declining rates at these fields….
Meanwhile, new fields are located in inhospitable and remote places, so projects require large amounts of capital….
Fitch reckons they will only compensate for the production lost from mature assets.
Sound familiar? Depletion is likewise not restricted to certain political/economic philosophies. Go figure!
And the OilPrice article by John Daly offered this:
Norway and Saudi Arabia are both facing a murky 2013 as domestic production falls, pushing both nations towards some difficult (and expensive) choices. OPEC’s leading producer Saudi Arabia is facing the twin storms of declining oil production and the rise of global alternatives, threatening its market share.
While duly noting that Saudi decline rates vary depending on who is offering analysis, Mr. Daly cited our own Energy Information Administration’s (EIA) analysis:
One challenge the Saudis face in achieving their strategic vision to add production capacity is that their existing fields experience 6 to 8 percent annual decline rates on average in existing fields, meaning that the country needs around 700,000 bpd in additional capacity each year just to compensate for natural decline.
Depletion occurs there, too? Who would have guessed? (And let’s also keep in mind this annoying fact: Oil exporting nations like Saudi Arabia are increasingly keeping more of their production for domestic purposes. The math thus works out this way: More for them = less for everyone else.)
Worth noting this comment by Mr. Daly from that same piece: “Saudi Arabia seems to be in the process of becoming a victim of ‘peak oil.’”
As for Norway, the EIA was quoted as stating: “Norway’s petroleum production has been gradually declining since 2001 as oil fields have matured.” The OilPrice author then noted: “Norway’s petroleum production peaked in 2004 at 4.54 million bpd, but by 2011 production had fallen to 3.8 million bpd.”
Also worth noting that Norway’s Petroleum Directorate reports that “offshore costs, including pipeline infrastructure in 2013, would hit $36.95 billion.” The Directorate also stated that companies operating in Norwegian waters last year made “14 discoveries totaling 709 million barrels of oil.”
That will supply less than ten (10) days’ worth of demand worldwide.
9 Comments on "Peak Oil: This Probably Isn’t Good News"
Arthur on Mon, 28th Jan 2013 2:18 pm
Peak conventional oil is already behind us, but peak gas not yet (2025-2030) or peak coal (2025-2050). And then there is fracking/shale, yuck. Let’s hope we are not going to waste that carbon capital on driving stupid miles to Walmart or it’s European counterparts. Private electricity can be generated entirely by local initiative. All it takes is a good major and a few men with foresight:
http://tinyurl.com/apgh7ea
BillT on Mon, 28th Jan 2013 2:22 pm
Eventually oil will be too expensive for the consumer to buy. The cost to produce will not allow that price to come down without shutting down all of the alternate oil production methods so popular today. But there can be no economic recovery without affordable oil. I keep saying that we will never run out of oil. We will run out of money first.
Arthur on Mon, 28th Jan 2013 3:06 pm
How do you do that, ‘running out of money’? You can simply print a new currency after a great default, give everybody a little bit and start all over again, slowly. Inject new money as the economy starts going again. The state will keep it’s monopoly over the money anyway. People will not spend their little money on cars, holidays, etc., but on solar panels first. People will be competing for working in a (state run?) solar panel factory for 500$ per month, just to keep feeding the family.
GregT on Mon, 28th Jan 2013 4:15 pm
People will be competing for working in a (state run?) solar panel factory for 500$ per month, just to keep feeding the family.
Should read:
People will be competing for work just to keep feeding the family.
or:
People will be competing just to keep feeding the family.
econ101 on Mon, 28th Jan 2013 10:05 pm
The ability of this author to take short term trends and extrapolate to the end of oil is amazing, and it’s done without the use of facts only generalization and opinion!
I just read an interesting and eye opening article about all the major pipeline projects underway In the USA and the huge positive impact they will have on the various bottlenecks that drive up prices and restrict supply.
These bottlenecks have a negative impact on oil production because you don’t pump if you can’t ship and when shipping is at a premium prices at the wellhead must be reduced as well. These pipelines are going to have very positive impacts on prices and profitability for many companies.
econ101 on Mon, 28th Jan 2013 10:11 pm
It’s all about infrastructure as the industry moves to accommodate the huge new production areas coming on line. Renewed development in the Arctic would help the Alaska pipeline too. North American production would really benefit from access to the huge resources existing up there but until they have it the Russians will be good customers.
Just think how much oil we would have if we could develop all known resources not just the shales that are largely outside of federal control. We are going to become the worlds largest energy producer even though we are not developing some of the worlds largest known reserves.
GregT on Tue, 29th Jan 2013 3:33 am
The USGS estimates a 95% probability of 44 billion barrels of oil in the arctic, a 50% chance of 83 Bbbls, and a 5% chance of 157 Bbbls. That works out to be a 95% chance of a 1.5 year supply, a 50% chance of a 2.5 year supply and a 5% chance of a 5 year supply for the world.
Not huge by any stretch of the imagination, and hardly anything to get excited about.
BillT on Tue, 29th Jan 2013 4:19 am
Arthur, perhaps I should have said, “running out of purchasing power” for those who want to take it literally. When the cost of energy is multiples higher than you can afford, you will not buy. Food is going to be more important then electricity. Solar panels are good for 20 years, but the converters are good for maybe 10 at best. So, renewables have a 10-20 year life at best, and will NOT be available to you when they wear/burn out. End of story.
Yes, and what oil they may get from the Arctic is going to be very very expensive. That is why I doubt much will ever come from there, or any other deep water source. Can you imagine the damage when a category 4 or 5 hurricane comes up the coast several times a year and takes out the rigs and the wind towers? I can. And they will as storms increase due to climate change.
Norm on Tue, 29th Jan 2013 9:08 am
The fact is fossil fuels do have a limit, it is finite, the earth does not sit on 50 trillion barrels of oil. But as these fuels become more expensive to obtain and harder to find, this will be passed on to the consumer. All these so called wind/wave type renewable energy ideas do not work on the scale needed to continue or maintain the existing system. Further to this, many ideas which use renewable energy need oil to exist anyway. Electric cars, how many gallons of oil go into making an electric car for example. China and other so called developing countries are helping to increase the demand for more, and more oil or fossil fuels, without these fuels in some capacity or another the economic engine stops, and capitalism grinds to a halt. The fact is, the future does not look bright at all and collapse is coming, when is the 64000$ question, but I will be surprised if it all doesn’t happen within 2 to 5 years from now. As others have said, yea there will be oil around, but not enough and at a price to anywhere near maintain or continue our normal accepted life we are all so used to.