[Graeme]

Peak Oil Passnotes: Where Peak Oil Is Wrong

$this->bbcode_second_pass_quote('', 'F')or regular readers of this column, you will know we take a strong middle line on the subject of peak oil. We think it is like death: At some point it is going to arrive, rather unfortunately, and the consequences of it do not appear to be favourable. It is what we do before it arrives that makes the aftermath more bearable.

There are some very important areas in which peak oil advocates are generally correct in their assumptions. Take data transparency as the biggest. No one can call, plan or predict supply and demand with any certainty when the entire industry is guessing how much oil we have.


But in the middle of the peak oil debate - the gray area - lie topics that are interesting and worth discussing but with possibly erroneous conclusions. One is the idea that there are very few major oil and gas projects to be brought on stream after a certain date in the future. It is a valid point to make that few projects are there to be assessed after, say, 2012. They just are not there.


There will be major projects coming on stream after 2012. Currently the IOCs will not budget for them and the NOCs are too cautious to want to bother. To say they will not arrive is a mistake. Those projects will unfold in time. But whether they can replace current supplies affected even by a conservative decline rate is another matter entirely.

[Graeme]

Inside Track: The Oil Crisis of 2012?

$this->bbcode_second_pass_quote('', 'A')t “Oil Prices, Oil Peaks, and the Gulf Crisis”, a roundtable sponsored by The Nixon Center yesterday, three experts discussed the future of global oil markets, their implications for the United States and the current geopolitical situation in the Gulf. The panelists—all of PFC Energy, a leading industry consulting firm—included its Chairman and Founder J. Robinson West, the Manager of Market Intelligence Services David Kirsch and the Senior Director of Markets and Country Strategies Group Raad Alkadiri. Geoffrey Kemp, director of regional strategic programs at The Nixon Center, served as moderator.

While it is en vogue to say that global oil supplies will soon run dry, West maintained that “the world is not running out of oil. . . .The problem is the world is running out of oil production capacity.” He argued that low or stagnant production in places like Mexico, Venezuela and Iran is due to domination by national oil monopolies, which are often “unwilling or unable to develop the resources themselves.”

Yet another factor straining global markets is “enormous” growth in demand. In the United States, West said, “cheap land, cheap credit, cheap roads and cheap energy” have over the past 25 years spurred suburban sprawl. As a result, cars (and thus oil) are now a necessity for many in the country—and demand for gasoline has indeed been highly inelastic, even as prices rise to around three dollars a gallon.

West predicted that as the Chinese economy grows, so too will its demand for cars and gasoline, serving only to exacerbate the problem. Putting current world oil production at about 82 million barrels a day and placing world capacity at about 18 million barrels more, he wondered when demand would exceed this point. West mentioned two dates—five years from now, and 2020—but treated this scenario as inevitable, despairing over “the geopolitical ramifications.”

The other option is to reduce demand, West said, “but that involves pain”—and the United States has failed in this respect as well. The size of cars, for example, has only grown in recent years. This led West to make a sobering prediction: Only the “massive economic dislocation” caused by an oil shortage will induce American leaders to find alternatives to petroleum and make the tough choices necessary to curb demand.

[shortonoil]

$this->bbcode_second_pass_quote('', 'W')hile it is en vogue to say that global oil supplies will soon run dry, West maintained that “the world is not running out of oil. . . .The problem is the world is running out of oil production capacity.” He argued that low or stagnant production in places like Mexico, Venezuela and Iran is due to domination by national oil monopolies, which are often “unwilling or unable to develop the resources themselves.”

[Zardoz]

Yep, we're silly people here at PeakOil.com.

Those undiscovered elephant mega-fields out there will be stumbled upon eventually, and it's just a matter of time before the nationalized oil industries are turned over to ExxonMobil. We just need to be patient. Everything's going to be fine.

We just need to punch a whole lot of holes in the ground, and reason with those banana republic government wonks, and we'll be swimming in the light sweet stuff.

Keep the faith!

[MD]

$this->bbcode_second_pass_quote('shortonoil', '
')
...The historic decline of oil’s ERoEI at the well head, from 100:1 in 1930 to 18:1 at present, and descending by .5 units per year, puts available net energy to the consumer at somewhere between 6 - 4 : 1. This steady, relentless decline is reducing the energy available from oil at 8 - 12 % per year (3.2 to 5.0 % for all energy sources).

[DantesPeak]

Shortonoil - great summary. It's clear to me that light sweet crude peaked out in 2005, and probably all crudes peaked in 2006 (excluding biofuels and natural gas liquids). So from here on out, EROEI can only drop as greater efforts are taken to access and refine generally lower graded to make up losses from depleting fields of light sweet crude.

I'm not aware of any large fields coming on line after 2012, except Kashagan. Hopefully someone will develop some kind of protection from the toxic suphuric acid fumes there so they can begin production one day. They will develop it regardless, even if it kills people to get Kashagan started, because by then there will be no other large prospects to develop.

[Ferretlover]

I know that I am asking this badly: How does/will EROEI (is this the correct acronym?) relate to this oil field?

In Caspian, Big Oil Fights Ice, Fumes, Kazakhs
We are having a few problems...

[shortonoil]

MD said:

$this->bbcode_second_pass_quote('', 'I')'d like to see some in-depth ERoEI studies with regard to petroleum production, but my searches have come up short. If you have any links to share it would be great.

[DantesPeak]

$this->bbcode_second_pass_quote('Ferretlover', 'I') know that I am asking this badly: How does/will EROEI (is this the correct acronym?) relate to this oil field?

In Caspian, Big Oil Fights Ice, Fumes, Kazakhs
We are having a few problems...

[shortonoil]

Ferretlover said:

$this->bbcode_second_pass_quote('', 'I') know that I am asking this badly: How does/will EROEI (is this the correct acronym?) relate to this oil field?

[Ferretlover]

Yes, very nicely, Short. Thank you for making it simple . I am beginning to understand a bit better the discussions about EROEI.

Dante said, "If the costs of operating it are $136 billion based on $80 oil, it would appear that the EROEI is less than 10 - possibly much less."
Is it complicated to figure out the EROEI? Is it, ie: 136b divided by 80? Is it correct to assume that the EROEI does not remain fixed/unchanging?

[Gazzatrone]

$this->bbcode_second_pass_quote('Ferretlover', 'Y')es, very nicely, Short. Thank you for making it simple . I am beginning to understand a bit better the discussions about EROEI.

Dante said, "If the costs of operating it are $136 billion based on $80 oil, it would appear that the EROEI is less than 10 - possibly much less."
Is it complicated to figure out the EROEI? Is it, ie: 136b divided by 80? Is it correct to assume that the EROEI does not remain fixed/unchanging?

[shortonoil]

Gazzatrone said:
$this->bbcode_second_pass_quote('', '
')Try this post I made nearly a year ago. Many of the replies might help you better understand EROEI.

[shortonoil]

DantesPeak said:

$this->bbcode_second_pass_quote('', 'I')f the costs of operating it are $136 billion based on $80 oil, it would appear that the EROEI is less than 10 - possibly much less. That would make it the worse giant field in terms of EROEI ever. But I think shortonoil could answer that question better than I.

[TheDude]

Ferretlover, you should read Blood and Oil by Michael Klare, who makes a very strong case for there being little chance of increasing oil production simply due to geopolitical instability; he barely mentions peak oil at all. Since the book's publication he's acknowledged its ramifications much more, too. You can get a cheap used copy at Amazon.

A rather ill-thought out riposte: EROEI MISCONCEPTIONS.

[shortonoil]

EROEI MISCONCEPTIONS

I sure am glad that someone finally has the nerve to admit that the Three Laws of Thermodynamic are nothing more than a load of crap. They are utter boulder dash and stupidity, designed to mislead and misinform us.

Great post; what sewer, crack house or bastion of idiocy did you find it in?

[TheDude]

From the desk of JohnDenver.

[kolm]

$this->bbcode_second_pass_quote('shortonoil', '[')b]Gazzatrone said:
$this->bbcode_second_pass_quote('', '
')Try this post I made nearly a year ago. Many of the replies might help you better understand EROEI.

[threadbear]

Given all the info on "peak oil" I've sifted through in the last 7 years, I conclude that cheap oil is on the decline and the more expensive stuff is only worth extracting and refining IF, demand remains strong. This isn't just a geological question, but a political one. There is NOTHING to indicate that a global economic downturn won't reduce demand considerably, nor that more eco-friendly governments won't make research into and development of alternatives a top priority. THAT is what is keeping oil companies from exploiting the more expensive fields, like the Orinoco basin. Watch what they do, ignore what they say. Try to find out if the big oil players are hedging by investing in the nuclear industry.

The political consequences of Chavez type govts threatening to nationalize, are somewhat empty, and the oil corporations know it. He is simply letting them know they have to be prepared for increased licensing fees and royalties. The same dynamics are playing out in Alberta, at the present time. And they are a province of hyper conservative pro- free market red necks, run by right wing idealogues.

It is imperative that resource investors read more moderate opinions or they could ruin themselves financially. The only thing investing in oil might do for Americans is provide a bit of a hedge against their dying dollar, for the short term.

Oil has the feel, to me, of being in "Last Hurrah" mode right now.

[Ferretlover]

Thanks, Dude, Seahorse has also recommended that book, and I have added it to my shopping list when I go to the book store next week. I am nearly done with The Party's Over, and have Crossing the Rubicon and The Story of B to read next..