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Page added on May 6, 2015
The Return Of Peak Oil – Worrying Signs From US And Russia
Since around 2005 many countries have increased their oil production but more have decreased. But the combined production of the United States and Russia have kept the world on a slight uptrend since that time.
World oil production jumped in 2011, hardly moved at all in 2013 but it was up by more than 1.5 million barrels per day in 2014. And after such a huge gain everyone and their brother were singing “peak oil is dead’. But if you scroll down through the 37 major world oil producers it becomes obvious that a majority of nations have peaked and most of them are in steep decline.
The above chart is EIA data; however, the next four charts below are JODI data with the last data point February 2015. The data on all charts is thousand barrels per day.
In the last decade it has been two of the world’s three largest oil producers that have kept us from peak oil, the USA and Russia.
Russia grew like gangbusters in the first six years of this century but has slowed down considerably in the last five years or so while the US, due to the shale revolution, has had four years of dramatic growth.
Using a stacked, zero-based chart, it looks like nothing much has happened since early 2005. And that is correct, the USA and Russia have kept production slightly inching up while the rest of the world slightly declines.
Here we get an amplified view of the World less USA & Russia. The peak was in February 2006 and February 2015 is over 2,600,000 barrels per day below that point.
We have discussed, in several posts, why many of us believe that the USA has peaked, or will peak this year; but what about Russia? Is Russia at her peak also?
I have taken another look at the Global and Russian Energy Outlook to 2040 by two Russian think tanks, The Energy Research Institute of the Russian Academy of Sciences and The Analytical Center for the Government of the Russian Federation that was published last year. I never noticed it before but they actually predict peak oil. On page 35 of this study they say:
Conventional oil (excluding NGL) production will drop to 3.1 billion tons by 2040 from the current 3.4 billion tons, and the long-discussed ‘conventional oil peak’ will occur in the period from 2015 to 2020. The drop in its extraction will be due to the gradual working-out of reserves of the largest existing fields.
3.4 billion tons per year works out to be 68,000,000 barrels per day and world C+C was about 10 million barrels per day above that number so I don’t know what they are counting, perhaps crude only.
They predict that Russian exports of all petroleum products will peak in 2015. Page 111:
Exports of petroleum products will peak in 2015 and will then gradually decrease until they reach 2010 levels by as early as 2040, mainly due to the decrease in exports of fuel oil and non-marketed petroleum products.
Then on pages 132 and 133 they predict the peak C+C for Russia
In Outlook 2014’s Baseline Scenario, production of oil and gas condensate in the Russian Federation reaches a peak and gradually declines, from 523 million tons in 2013 to 522 million tons by 2015, after which it continues to decline, right up to the end of the period, to a level of 468 million tons. This reduction in production is, for the most part, brought about by the working out of already exploited deposits in the key oil producing regions of the country (in Western Siberia).
Here is Russian C+C production through February 2015. It appears now that the peak will be 2014 and 2015 which means that they are at peak right now. The spikes in 2011 were likely caused by the huge Western Siberian wildfires they had that year.
It is interesting to note that both JODI and the EIA reports Russian C+C production at about half a million barrels per day less than what the Russian official web site CDU TEK reports.
Here they have the peak in 2015 but only a slow decline from here on out. Notice that about 60 percent of all Russian oil comes from those very old Western Siberian super giants fields with that percentage declining only very slightly in the future. How can that be? They drilled 8,688 new wells in Russia last year, most of them infill wells in Western Siberia. Do they really expect to poke more holes in those old fields and continue to get oil from them for another 25 years… or more?
Well yes and no. The chart below shows where they expect all that new oil to come from.
As you can see from the shrinking red column they expect those old fields to decline rather dramatically. But at the same time they expect them to grow. By 2040 they expect fully half of their production to come from “reserves growth”. And they are not bashful in admitting such:
One should point out the significant role that will need to be played by geological exploration during the forecast period, since by 2040 more than 50 per cent of production in all scenarios will need to come from growth in reserves, and final reconnaissance of fields resulting in category C2 reserves becoming category C1.
So those tired old Western Siberian fields will shrink but at the same time they will grow. But in all fairness they will not grow quite as fast as they shrink.
Despite the fall in production in the Baseline Scenario, even at the end of the forecast period the key production capacities of the country will continue to be concentrated in the Tyumen region, with its share accounting for 51 per cent of all crude oil and gas condensate production by 2040 (compared with 61 per cent in 2010).
The Tyumen region, and the areas surrounding it, are the areas in Western Siberia where their oil fields are. So the share of Russian oil production from this region will go from 61% today to 51% in 2040. Because those tired old fields are gonna grow!
Bottom line, USA peaks in 2015 and Russia peaks in 2015 which means the world peaks in 2015. Also many other nations that have increased production over the last few years are also at peak and will be declining soon. And Russia will be declining just a whole lot faster than those two think tanks believe they will. Those old reserves are not going to grow nearly as much as they think they will.
Of course there is a possibility that the peak could actually be in 2014 or even 2016, but I am firmly convinced that we are at peak oil right now. If you have a counter argument I would love to hear it so please post it in the comments below.
I have published a new page, World Oil Yearly Production Charts with annual data charts for all the world’s major oil producers.
By Ron Patterson
17 Comments on "The Return Of Peak Oil – Worrying Signs From US And Russia"
waltz on Wed, 6th May 2015 9:12 am
So many calling the 2015 peak…..getting tough to ignore.
As U.S. fracking peaks, so does worlproduction, in my opinion and only a doubling of oil appears able to avert the fracking peak (maybe).
Fasten you seat belts folks
Westexasfanclub on Wed, 6th May 2015 10:10 am
Iran, Libia and Irak together could easily produce 3mbpd more under optimal conditions.
Though this could push the peak to 2016 or beyond, it’s not very probable.
But maybe the US hold this scenario as a wildcard and manage to play it wisely. Who knows.
shortonoil on Wed, 6th May 2015 11:54 am
People have been putting up graphs for years to demonstrate the inevitability of this, or that. They have then attempted to read them with the skill of a Tarot deck reader to generate some undeniable, and unquestionable conclusion. The EIA is famous for its many exquisite graphs that have produced zero results over the years. To answer the question as to when the world’s liquid hydrocarbon production will reach its maximum rate requires a little more insight than following lines on a piece of paper; as to date, that method has produced accurate projections that resemble the accuracy of a stopped watch. Try enough times, and eventually someone will be right?
The price of oil is not a cause, its an effect. But, it is an effect that can be used to give a pretty good projection of what is occurring. If the average cost of production is greater than the price, it is inevitable that eventually the production will fall unless that price can be increased. The fall can be delayed if the producers take on debt to compensate. Producers, over the last few years, have been adding to their debt load at a phenomenal rate. It now exceeds $1.5 trillion.
We put up this graph last year to demonstrate what is happening to the production cost/ price spread.
http://www.thehillsgroup.org/depletion2_022.htm
It is now negative, and it will be getting more so as time progresses. Producers can delay the day of reckoning as long as they can increase their debt load, liquidate assets, or convince unsuspecting investors to buy more of their declining value equity. All of these approaches are presently being pursued by the industry with the intensity of a Bull Fighter’s concentration.
What happens from here on out will depend more on human nature than URR, Reserve Production Ratios, or EIA monthly reporting. It will depend on something like the Fibonacci human fight/flight response that is hardwired into us. Oil production has already passed the point were physics tells us that it should be declining. Physics is objective; unfortunately, the same can’t be said of human investor behavior?
http://www.thehillsgroup.org
rockman on Wed, 6th May 2015 12:24 pm
“Producers can delay the day of reckoning…”. I get the sentiment but still surprised to hear expectations that the “bad times” are still in the future. In the last 10 years we’ve seen $TRILLIONS of US tax payer monies (actually huge increases in debt with never ending interest payments since those debts can’t ever be paid off) and thousands of US military lost because of ME conflicts motivated by the oil situations, hundreds of thousands of innocent civilians killed over the same motivation, increased aggressiveness by growing economies such as China and India, to secure as much future energy as possible, increased stress on the environment dues to increasing fossil consumption and, lastly, many $TRILLIONS of additional capital transferred from consumers to oil producers.
Situations may get worse at times in the future but IMHO the “day of reckoning” began many years ago. Despite the current decrease in oil prices and record global oil production this ain’t 1986…and never will be again.
And, as always, the exact date of global peak oil is completely irrelevant IMHO. Our lives are dominated by the POD and not some X marked on a calendar.
shortonoil on Wed, 6th May 2015 1:36 pm
And, as always, the exact date of global peak oil is completely irrelevant IMHO. Our lives are dominated by the POD and not some X marked on a calendar.
A large portion of the world’s GDP is linked directly to petroleum production; extraction, processing and distribution. Millions of jobs, $trillions in tax revenue, the financial system, and entire Sovereign states will disappear when it does. The decline of the oil industry is likely to be followed by the decline of almost everything else. Things can get worse, and will! The first report of declining world production will be a harbinger of things to come. You can be sure that the day will be delayed as long as possible.
waltz on Wed, 6th May 2015 2:38 pm
I argee with Short. The BAU meme is that peak oil is way off or even an outright fallacy. Once that
“x in the calender” starts falling out of the rear view mirror…. its on.
The Laws of Thermodynamics will be trending on Twitter!!
nony on Wed, 6th May 2015 2:44 pm
Reserve growth is a normal phenomenon that never ceases to baffle peakers to include art Berman. All you have to do is look at last 40 years and how more than preexisting reserves were produced and also replaced.
Agreed with rock. This is not 1986. It’s 1986 lite. But still total shock to the 2005 Era peakers. And 1986 was a shock then too.
Yes we have sent too much money to me and had too many wars. All the more reason to fract the Anwar and open vacapes and kxl etc.
nony on Wed, 6th May 2015 2:47 pm
Oh. And I gave credit to rock for pod when we were at 110. It is about half the pod now at 60. Sure that is twice 30. But it’s also down to half the pod as before. Need to be honest on that.
Plantagenet on Wed, 6th May 2015 2:51 pm
The world is producing record amounts of oil and we’re in an oil glut right now.
If 2015 is going to be the peak, then there isn’t much time left to go from “glut” to shortages.
shortonoil on Wed, 6th May 2015 3:10 pm
“The Laws of Thermodynamics will be trending on Twitter!!”
Speaking of, the first 10 pages of the report are available for download at the site. Go to “order report” in the left box on the front page, and you will see “Download first 10 pages for review”. We figured that would be enough to give at least 90% of the population a headache!
When Peak officially hits we’ll have a zillion questions like, “what happens now”!! Hate to tell them but we are engineers — we left our Wizard Caps at the office!
http://www.thehillsgroup.org
Davy on Wed, 6th May 2015 3:12 pm
Planter, I think the glut came on fairly suddenly why not shortages?
rockman on Wed, 6th May 2015 3:14 pm
“But it’s also down to half the pod as before.” Apparently I haven’t lectured enough about the POD or some folks have trouble understanding the concept. The oil price collapse is a very indicative aspect of the POD. IOW low oil prices resulting from increased production as a result of previously high oil prices confirms the validity of the POD. IOW it’s rather f*cking predictable. LOL.
That’s kinda the meaning of “dynamic” as opposed to “static”. LOL.
Davy on Wed, 6th May 2015 3:20 pm
Short, no wizard cap needed. Tell em to man up and get ready for an ass kicken. What is so complex and wizardly about that?
Captain Marmi and the Wonder Boy NOo got the biggest ass kicken comin. They will not only physically suffer as we all must their whole world view and faith will be shattered. That is sadness at its highest level.
rockman on Wed, 6th May 2015 3:37 pm
“A large portion of the world’s GDP is linked directly to petroleum production”. Actually if one looks at the history of global GDP it has obviously been more a function of the price of oil and not its production rate. A year ago the world was producing oil at nearly record rates when we had very high oil prices. And I don’t think the global GPD benefited from that situation. And today the world is producing a tad more but at a significantly lower price.
So the global economy is transferring about $1.3 TRILLION less to the oil producers today. Thus while we’re a year closer (or 1 year further from) PO the global GDP of the world (excluding the oil producers, of course) is in better condition today.
Thus this data seems to make it clear: the global economies are not as dependent upon the date of PO as the price of oil. Or, in a word, the date of global peak oil isn’t very “relevant”.
Nony on Wed, 6th May 2015 6:54 pm
Rock, if high prices indicate POD (and you rightly describe the issues with consumers paying the cost), then a signigicant drop is mitigation. If you are an honest, shrewd analyst, you note that.
P.s. I’ll take lectures from you on the mudlogger or the carbonate/silicate (although even there, I start to have some doubts on you…the whole equating AC to EF thing), but on economic analysis you don’t impress. It’s not your forte. You’re not a microeconomist or a trader or a buyer.
rockman on Thu, 7th May 2015 6:30 am
“then a signigicant drop is mitigation. If you are an honest, shrewd analyst, you note that.” Sorry…I miss your point. I think you might be overthinking the POD concept. It’s rather all inclusive. Thus just as high oil prices enabled the shale boom, and decreased consumption so the now lower oil prices will decrease drilling, end the production surge and increase consumption.
A worn out analogy but it still fits: the two sides of the same coin. The dynamic is unavoidable…human nature sees to it.
Nony on Thu, 7th May 2015 7:50 am
Total BS, Rock. You are overthinking the concept of supply and demand (because you don’t understand them).
If high prices, show the effect of depletion (even though volume went up slightly), then lower prices show less impact. how would you respond if prices had gone to 150? Or stayed at 100. You are trying to make ANY price consistent with your hypothesis, which is meaningless.
P.s. You still haven’t admitted that you messed up annual/monthly number for the Marcellus. How can we even debate interpretation if you won’t admit a correction on the facts?