[seahorse]

As for models, all have problems. As Lynch would say, models can't account for the all the political and economic issues that arise. Further, people/nations are not always rational, and thus defy models that assume some sort of rationality.

I personally don't think we will see "peak oil", simply bc demand destruction will continually push it back. Prices will rise, demand will fall, and the cycle will extend. However, the economic repercussions of demand destruction could be devastating.

Although many economic pundits argue the modern economy is much more tolerant of high oil prices, it seems Katrina has showed us the point of demand destruction, as measured in prices at the pump. Already, there is news that demand in the U.S. may be waning, and the airlines today are asking congress for a break on federal fuel taxes or the airlines are in jeopardy of closing their doors. Further, GM and Ford continue to struggle. The U.S. economy does not appear to be weathering $60+ oil, nor gas prices at or about $2.25 average.

In the end, I find Boone Pickens has been spot on for two years. He was one of the first last year, if not the first, to say oil would reach $50 per barrel. People said he was nuts, but he was right. Many many months ago, he said watch out for the 4th quarter this year, that gas would get to $3 a gallon. Again, he was right. Compare this to Lynch who predicted $35 barrel oil by summer of 2005. Pickens points out that world refinery capacity is maxed out at $84 mbpd, so, doesn't matter how much can be produced beyond that. He's right. We are at peak refinery capacity, actually, we are in refinery depletion with Katrina taking out at least 6 refineries. We have a serious problem on our hands, and it doesn't take a model to show us that. Even if the refineries can be brought on line in 6 months, a lot of economic woe can happen in that 6 months, potentially unravelling woe. Further, even if they are brought on line in six months, that does nothing to keep up with estimated demand growth, bc no refineries are being built, and they take longer than six months to build.

Demand destruction is the only solution to the current peak refinery problem.

[trespam]

Interestingly enough, Simmons presentation largely supports my hypothesis that the current energy crunch is an investment crunch as much as a geological crunch. It's funny how Simmons has slightly changed his story. In this presentation, he argues very strongly that the problem in the oil sector is the lack of return on investment (the oil companies would be better off putting their money into other investments). And the argument that the people with the oil might deserve to make a nice return on it, e.g. the Saudis, is also very convincing.

Peak oil is real. But the question is when. And the lack of investment in the oil sector could easily be motivated by the holders of oil wanting a better return on investment. They could very well be pushing it up to a new price regime, but by bit, and then insuring that it sticks before committing the capital. There will be some demand destruction, dislocation, etc.

Pretty brilliant if you ask me.

Only a perspective, but one that has very good grounding (including support from Mathew Simmons).

[Antimatter]

Rather than quoting snippits from Sadad al Husseini, here is what he actually thinks:

$this->bbcode_second_pass_quote('Husseini', 'O')il capacity today is not production limited but rather processing limited. That is to say, the DOE reports the world's refining capacity has leveled at around 83 mmbd for some time and refinery expansions are slow and costly. We have seen new downstream capacity investments average 300 mbd/year over the last several years. Doubling that rate would still put major changes in refinery expansions well into 2010 and beyond. Therefore the refinery capacities are now the effective ceiling for oil production.

The DOE shows oil demand (presumably after refining) is increasing at something like 1.5 - 2.0 % per year. This was doable in the past because of the excess refinery capacity that prevailed until 2003/2004. From here forward, satisfying oil demand will require 1.2 - 1.6 mmbd of new refinery capacity per year or 4 to 5 new world-scale refineries every year. These normally require 4 - 5 years to execute at a cost of no less than $ 2 B per 100,000 b/d of capacity. With deep conversion and petrochemicals, the investments are even higher.

Because of these massive requirements, I believe the production outlook will be gradual production increases over the next ten years limited by slow refining capacity expansions.

Given the current outlook in terms of global exploration and development, the rate of investments in the oil value chain, energy prices, and the prevailing legal and political investment climate, I believe oil production will level off at around the 90 - 95 mmbd by 2015. This plateau can be sustained beyond 2020 at continuously higher oil prices and with rapid improvements in overall energy efficiencies throughout the world.

Therefore my answer is: under the current circumstances and outlook, oil is likely to peak at a 95 mmbd plateau by 2015 and can then be sustained well beyond 2020 at increasing real oil prices.

[Keith_McClary]

$this->bbcode_second_pass_quote('trespam', 'G')et your white angel flight suit out of the attic.

[seahorse]

Antimatter,

Those snippits of mine from Husseini were accurate. I didn't quote the entire article bc it was 2 pages. Your quote is from a different article. I don't see, though, that your article is contradictory to what he first wrote. Again, he reiterates that downstream investment is necessary to meet future production requirements, and that downstream investment isn't occuring, or occuring slowly at best. Further, his limitation of 15 mbpd can be taken as alarming, bc it is far less than the optimisti IEA and other projections, which see SA having to produce much more than that. Last, I tend to agree with the "crossover" argument, that the real crisis arises when non-opec production goes into decline. Oil Gas Journal had an article, I believe Feb 2005, which predicted the cross-over point would occur sometime between 2007-2010. At that point, if OPEC can't pick up the slack, then there is a problem. Since SA is the only country with any spare capacity, I would like to see which other OPEC countries are ready to fill the gap.

Further, oil does not equate to the Olduvai Gorge theory. That theory is based on electrical generation. At least in the U.S., we use very little oil for electrical generation. So, I don't think its fair to equate peak oil with the blackout theory of the Olduvai Gorge. Natural Gas is much more important to that theory than oil. And right now, the U.S. is in depletion of natural gas and whether LNG will be able to make up the shortfall is still an open question. Katrina will play a role in all this, at least in the immediate term. As for third world countries, many do still rely on oil for electrical generation, and there are numerous news reports of blackouts ect related to the high cost of oil cutting or curtailing their electrical generation capacity, so, for some people, the Olduvai Gorge has begun, but we don't really care about them (look at Indonesia, Thailand, Iraq, Malaysia). Further, I don't see how LNG or natural gas can save them in the near or middle term, as they are poort countries and probably don't have the finances to start a massive building of electrical generation capacity based on anything other than oil, further, such solutions would take years to get on line even if they started today.

[Ender]

$this->bbcode_second_pass_quote('khebab', 't')he URR is estimated to be 280-300Gb. The objective of 2.6-2.8 mbpd in 2015 is conservative and assumes a $35 a barrel, it 's safe to think that a $50 a barrel is now the norm and will boost investment.

[Ender]

$this->bbcode_second_pass_quote('Taskforce_Unity', 'T')he draft version of my oil production outlook based on coming oil projects and depletion is finished

[Taskforce_Unity]

Thx for your comments, here are my answers:

$this->bbcode_second_pass_quote('', '
')The OPEC figures don't look right to me. Where is Iran getting all that extra production from, when indications are it's at or close to peak?
Has Venezuela not clearly peaked? The BP Report shows it peaking in 1995 at approx 3500kbpd (since declining below 3000) but you show it currently at 3800 and maintaining above its 1998 peak for the next few years: your source?

[Taskforce_Unity]

Due to a fortunate series of events the launch of my report on the peaking of world oil production has been delayed for several weeks.
The launch is now set at the end of October.

The delay has been caused by a reasonable chance to major media exposure which will cause a major peak oil exposure to the Dutch population and the Dutch goverment . Sorry no details yet (nothing confirmed so far)

[Typhoon]

Taskforce_Unity, I looked at your oil production outlook. I haven't had a chance to look at it in detail, but I think you did a good job. I have found a couple of mistakes, which could make a significant difference. For the UAE, you list Upper Zakum as a project that will add 650,000 bpd by 2010. This is what I found about the field:

UPI Energy Watch

$this->bbcode_second_pass_quote('', 'E')xxonMobil has clinched a long-awaited deal to develop the United Arab Emirates' giant offshore Upper Zakum oil field. Upper Zakum produces around 550,000 barrels per day, which ExxonMobil hopes to expand to 750,000 bpd.

[Taskforce_Unity]

Thx for checking Typhoon. I observed a LOT of these mistakes myself in the draft version later on .

I crunched all the numbers again 1.5 - 2 weeks ago and checked all the numbers with eachother. I think the numbers are correct now but i will check again before publication.

Anyway I still have a few problems. For instance the IEA change the production numbers (HISTORICAL!!!) for Kuwait in their last publication!

It went from 2.3 mb/d to to around 2.0 mb/d (300.000 barrels per day less on average).... And the IEA graphs at the world outlook still present the higher numbers.

Im sticking with the latest journal publication by means of continuity but still it doesn't feel right...

[Taskforce_Unity]

Release date scheduled within 2 weeks with an article in the Dutch newspaper Financieel Dagblad. Exacte date unkown, interview will take place on next monday.

More information on media-related exposure will follow.

[GreyZone]

Depletion rate is a key factor and it really impacts timing of peak and consequently what each of us can do to prepare for peak.

Here's what my own model looks like while using a 2% depletion rate and 1.7% annual demand growth rate (as expected by both ExxonMobil and BP).


Here's what 5% depletion rate looks like.


And here's what the 6.9% depletion rate that the IEA looks like.


In the near term years, I've plotted the initial yields from new fields coming onstream and while they help to offset some of current depletion, the new fields for 2005-2008 don't really kick in til the second or third year of production.

Note that in my model I've also never accepted input from new fields as less than 3 million barrels per day clear out to 2030, even though this may be excessively optimistic. But it really doesn't matter since the depletion curve starts to eat at so many existing fields that we basically need to discover several new Saudi Arabias to continue growing. It's just not going to occur.

This drives us into doing what we can with alternatives as soon as we can. If the 2% depletion expectation is correct, we've still got a few years where the industrialized nations can "save themselves" even if they can't save the poorer nations of the world. But they better get busy right now since turn around time on capital investments of this magnitude is measured in decades

Here's another point to consider, which has been harped on by Saudi Arabia. The world is at refinery capacity peak right now too. Even if those fields come online we need the equivalent of at least 4-5 new "global" sized refineries every year for the next 10 years at least. Since these things take 5 years or so to build even if you cut out the 10 years of red tape, we're just not going to have that refining capacity until 2010 at the best.

Because of that, if we get the 2% depletion scenario, we get to watch the entire world stagnate in a low-growth (constrained by refinery capacity which constrains energy inputs to growth) economic scenario for the next 5 years. This is actually a good thing since it shoves peak out further in the future and gives the world more time to do something constructive about it. But it depends on actual depletion being as low as 2%.

[Taskforce_Unity]

nice model, were did you get your data from regarding the decline rate?

[GreyZone]

The 2% and 5% were just numbers that I plugged in because I've seen them discussed in various locations. The 6.9% number came from the Oil and Gas Journal. The short term oil production numbers are estimates (which I try to update as I can) based on new fields supposed to come online. They are very rough and in fact I want to see about picking apart your data for new production and plugging that in instead. I also currently apply a single average rate of decline across the board. That's not really ideal but expanding it would require expanding the entire model to cover field by field and then applying specific rates of decline to each field. I may do that but since I started on this part-time, it is likely to be a long time til I actually get to it. Like I said, my first new change is trying to get better projected new production numbers for the next 5-10 years. Beyond that I just SWAG'ed it based on the last 5 years of new field data. Of course, I may be entirely too optimistic about the farther out estimates but my main goal was to try to get some sense of the 5-10 year picture.

By the way, thanks for what info you've put up so far. It's been very interesting.


Edit: The CEO of Schlumberger says that 8% decline rate is reasonable. I was not aware of that but given Schlumberger's position in the oil industry, they are certainly very credible. I'm not even sure I want to plug that number in because it will be scary to contemplate.

[Taskforce_Unity]

The final version has now been released. It can be found at

http://www.peakoil.nl/images/ponlreport.pdf

[Dukat_Reloaded]

That looks good and I like your senarios in relation to "Regular Senario", "Technological Senario" and "Disruption and delay Senario". With regular we peak in 2015 at 92.5mbd, Technological we peak in 2016 at 95mbd and in Disruption we peak in 2012 at 90mbd. Looks like we still have quite abit futher to go from 84mbd currently to the minimum of 90mbd in 2012.

Looks like in the worst case senario we will peak in 2012, still 7 years away!.
If your a really hardcore PO person, I would say it's not nessary to begin planning for peakoil until atleast 2010. Some people have already, but prematurly like Killjoy in oct "Just bought 3 tons anthracite coal". clap clap.

Taskforce_Unity, what is different in the old and in this newer version? Did the graphs change much and if they did why and by how much?

[Taskforce_Unity]

Regular has peak in 2012 by the way not 2015.

The graphs didn't change that much in the old and new one. I added new statistical information from the IEA's quarterly statistics (that's why Kuwait has a strange prod. number....... It's in their statistics and im not going to divert from that on my own, would be unscientific).

I only switched the technology variable a little bit, I corrected all the errors (there were a lot). And I added a lot more information ofcourse.

But as it is said in the executive summary the debate is far from over yet.

If decline is running so high as the IEA predicts then we are in deep deep trouble I think. My report is not a "definite" prediction. It could go either way still (although beyond 2020 seems very unlikely to me).

[ashurbanipal]

TU,

Thanks for doing this report. I've downloaded it; it's very well put together from what I've read so far.

[SlipperySlope]

Given the lesser importance of Natural Gas Liquids with regard to a peak in petroleum transportation fuels, I wonder what the effect on the peak oil date would be if NGLs were removed from the model?