Oil Supply: Peak Oil and the Role of Enhanced Oil Recovery

“Peak Oil” is a reality that will continue to play a critical role in the lives of billions of people who live in the 195 countries of the world who depend on oil. Matthew Simmons, one of the leading and most knowledgeable advocates of Peak Oil before his untimely death in 2010, wrote a highly acclaimed book, Twilight in the Desert that discussed the oil industry in depth and also provided substantial proof of dangerously shrinking oil reserves in Saudi Arabia. Mr. Simmons’ bottom line was simply, Peak Oil is real and we must take definitive action.

Most of the economies of the world have been built on the availability of “cheap oil”, but unfortunately cheap oil no longer exists. In the late 1990’s, oil sold for around $10 a barrel, but today oil is selling for around $100 a barrel and is expected to trend much higher in the years ahead.

The world currently consumes approximately 85 million barrels of oil per day or over 31 billion barrels of oil per year – or as author Peter Tertzakian states in his wonderful book on the oil industry, “One Thousand Barrels of Oil Per Second”. The world actually uses about 1,000 barrels of oil per second—a staggering reality. The figures for the United States are about 22.5 million barrels of oil per day, or 7.5 billion barrels of oil per year. By the year 2025, the International Energy Agency (IEA) forecasts that the world demand for oil will grow by 50% – from 31 billion barrels of oil per year to over 47 billion barrels.. The big question is whether this is even possible? However, if this increase is possible where will this additional oil (energy) come from? The answers to those two questions are not exactly clear today—but they may be matters of life and death for millions of people—a sobering thought.

When Peak Oil arrives it doesn’t mean that there is no more oil available. It simply means that there will be less oil available, demand cannot continue to be continuously satisfied, and only the most prosperous and wealthiest countries of the world will be able to afford the high cost of oil. However, someday (perhaps as early as the end of the 21st Century) there will be no more oil to be recovered because we all agree the supply of global oil is finite.

There is disagreement as to the precise amount of oil still available from global oil sources, but 1.0 to 1.5 trillion barrels of oil seems to be reasonably accepted and “in the ballpark”, excluding unconventional oil. This is roughly the same quantity of oil that has already been consumed over the past 150 years. Much of the easy, highest-quality, and most desirable “sweet” oil has likely already been found. The more difficult and less desirable “unconventional oil” (oil sands and oil rich shales for example) is far more difficult to “mine” and more costly to produce while potentially causing additional pollution to the environment in the process. On average world demand for a majority of the United States and most world countries is growing at about 1.0% to 1.5% per year, except for countries like for China and India that are experiencing annual growth rates of approximately 5% and 3.5%, respectively.

There are four major developments that have been in process in the oil world over the past few years that are dramatically affecting the world we live in and the oil we have taken for granted for so long.

1. Approximately 80% of all global oil fields continue to experience severe annual production declines of 5% to 15% (averaging around 8%). A good example of what the world is facing is what is currently happening today to the Cantarell Oil Field in Mexico:

• The Cantarell Oil Field a few years ago was the fourth largest oil field in the world (producing over 2.2 million barrels of oil per day in 2003). Today, severe production decline that has brought production close to one million barrels of oil per day.
• Mexico is currently the second largest supplier of oil to the United States.
• The production decline history of the Cantarell Field is a good example of Peak Oil and what is happening to many other global oil fields.
• The same type of production decline is also happening in the North Sea and other oil producing countries like Venezuela, Russia, and Dubai.

These examples are pre-cursors to the coming global effects of Peak Oil.

2. Approximately 65% of global original-oil-in-place (OOIP) is “trapped” and cannot be recovered using traditional primary and secondary oil recovery methods and processes.

3. Unfortunately, Peak Oil will be widely recognized as reality only “after” it has already happened. Peak Oil should be addressed at least 20 years before reality hits, so that some mitigating steps can be taken. Based on most reliable forecasts as to when Peak Oil will happen (sometime between 2007 and 2025), the world is already too late.

There are scores of documents illustrating that Peak Oil has already arrived whether we like it or not. However, there is hope for emerging technologies that can help to mitigate the overall impact of Peak Oil and the coming global oil shortage problem. Enhanced Oil Recovery (EOR) technologies that can recover a meaningful percentage of the 65% of OOIP that is trapped today. The unknown two key questions are how much oil can be recovered and at what cost? Also, can enough additional oil be recovered to replace the current oil field production depletion rates while the demand for oil continues to increase? The most promising EOR technologies must be pursued as a “bridge to the future” until new renewable sources of energy technology can be found to replace oil. The world is a long way from finding these new technologies but we must take action now.

Some documented proof about Peak Oil

A sampling of articles and reports cover a wide spectrum of authoritative sources addressing the issue of Peak Oil – from the Department of Energy (DOE), to the Corps of Engineers, to an article by Dr. Robert Hirsch, to the testimony of James Schlesinger to the U.S. Senate, and to a study by the Government Accountability Office (GAO). The reader should find credible evidence that Peak Oil is indeed a serious world challenge in these articles.

Number 1 – In February 2005 a definitive report, Peaking of World Oil Production: Impacts, Mitigation & Risk Management was prepared for the Department of Energy by SAIC headed by Robert L. Hirsch.

“The peaking of world oil production presents the United States and the World with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and without timely mitigation the economic, social, and political cost will be unprecedented.”
This report brings to the reader’s attention the chilling reality of what Peak Oil really means; i.e., the world we live in today will dramatically change in a drastic, negative, and potentially catastrophic ways like nothing civilization has experienced in the history of the world.
The inventors and scientists of the world must be given as much time as possible to find and invent alternative sources of renewable energy to replace oil over the next several decades.

Seven important past studies and statements about Peak Oil from knowledgeable and respected sources:

Number 2 – In September 2005 the U.S. Army Corps – Engineer Research and Development Center produced report entitled, “Energy Trends and Their Implication for U.S. Army Installations”.

This report provides a lengthy discussion of the critical role that oil plays in the military world. The report provides specific conclusions about petroleum.
“Oil is the most important form of energy in the world today”
“In the United States, oil accounts for about 38 percent of the total energy supply. “
“The United States now imports about 63 percent of its crude oil supply.”
“In summary, the outlook for petroleum is not good. This especially applies to conventional oil, which has been the lowest cost resource. Production peaks for non-OPEC conventional oil are at hand; many nations have already past their peak, or are not producing at peak capacity. Polar, deep, and non-conventional will contribute to future resources. Most conventional oil production reserves are in OPEC nations in Saudi Arabia and Iraq. Oil demands have not been as high as projected during the last decade due to worldwide recessions and this may stretch out the OPEC peak a bit. Currently, non-OPEC nations have been at maximum production and will most likely peak as predicted (Year 2009)”.

Number 3 – In the October 2005 publication, Atlantic Council of the United States, Dr. Robert Hirsch wrote a follow up article (“The Inevitable Peaking of World Oil Production”) to his February 2005 DOE Report that states:

“The era of plentiful, low-cost petroleum is approaching an end”.
“Without massive mitigation the problem will be pervasive and long lasting”.
“Oil peaking represents a liquid fuels problem, not an ‘energy’ crisis”.
“Governments will have to take the initiative on a timely basis”.
“In every crisis, there are always opportunities for those that act decisively”.

Number 4 – In November 16, 2005, James Schlesinger, former Secretary of Energy and Defense, appeared before the Committee on Foreign Relations of the United States Senate and made the following comments:

“Until such time as new technologies, barely on the horizon, can wean us from our dependence on oil and gas, we shall continue to be plagued by energy insecurity.”
“The underlying problem is that for more than three decades, our production has outrun new discoveries.”
“Moreover, in the longer run, as we face the prospect of a plateau in which we are no longer able worldwide to increase the production of oil against presumably still rising demand, the question is whether the Department of Defense will still be able to obtain the supply of oil products necessary for maintaining our military preponderance”
“Unless we take serious steps to prepare for the day that we can no longer increase production of conventional oil, we are faced with the possibility of a major economic shock – and the political unrest that would ensue.”
“The United States has over four percent of the world’s population and uses roughly twenty-five percent of the world’s oil production.”

Number 5 – United States Government Accountability Office – Report to Congressional Requesters dated February 2007 – “Uncertainly about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production”.

“Most studies estimate that oil production will peak sometime between now and 2040. This range of estimates is wide because the timing of the peak depends on multiple, uncertain factors that will help determine how quickly the oil remaining in the ground is used, including the amount of oil still in the ground; how much of that can ultimately be produced given technological, cost, and environmental challenges as well as potentially unfavorable political and investment conditions in some countries where oil is located.”
“World oil production has been running at near capacity in recent years to meet rising consumption, putting upward pressure on oil prices.”
“Historically, U.S. oil production peaked around 1970 at close to 10 million barrels per day and has been generally declining ever since, to about 5 million barrels per day in 2005.”
“The United States imported about 63 percent of its oil and petroleum products in 2005.”

Number 6 – According to a 2005 report prepared for DOE: Without timely preparation, a reduction in world oil production could cause transportation fuel shortages that would translate into significant economic hardship

“More than 60 percent of world oil reserves, on the basis of Oil and Gas Journal estimates, are in countries where relatively unstable political conditions could constrain oil exploration and production.”
“While the consequences of a peak would be felt globally, the United States, as the largest consumer of oil and one of the nations most heavily dependent on oil for transportation, may be particularly vulnerable.”
“According to the IEA, most countries outside the Middle East have reached their peak in conventional oil production, or will do so in the near future.”
“Even though the United States is currently the third-largest, oil-producing nation, U.S. oil production peaked around 1970 and has been on a declining trend ever since.”

Number 7 – “Peaking of World Oil Production: Recent Forecasts” by Dr. Robert L. Hirsch, Senior Energy Program Advisor – SAIC for DOE/NETI – 2007/1263 – February 5, 2007

“Because oil is a depleting, finite natural resource, world conventional oil production will reach a maximum, called ‘the peak,” after which production will decline. Prudent risk minimization requires the implementation of mitigation requires roughly 20 years before peaking to avoid a very damaging world liquid fuels shortfall”

Number 8 – Baker Institute Study – November 2000 – Running on Empty?

“Ironically, just two years after a historic crash in oil prices, the world has entered an oil-supply situation more precarious than at any other time since the 1973 oil shock. Commercial oil company inventories hover around historic lows, and the Organization of Petroleum Exporting Countries (OPEC) has less immediate spare capacity than it has had for three decades.”

Peak Oil and Emerging EOR Technologies

Over the past 10 years, Titan Oil Recovery, Inc. has developed a revolutionary, proprietary, field proven, and affordable oil recovery technology called The TITAN Process® that uses an organic oil recovery process to successfully recover a significant percentage (1% to 10% of OOIP) of the 65% of OOIP “trapped” in global oil fields at an incremental cost of less than $10 per incremental barrel recovered. Titan’s oil recovery technology has already been proven successful in over 16 oil fields with over 100 field treatments in United States and Canada.

Today, there are estimated to be more than six trillion barrels of oil trapped in global oil fields. If 10% of this oil could be recovered this would result in about 600 billion barrels of oil – enough oil for another 20 years of oil at today’s usage rate of 31 billion barrels of oil per year. The 600 billion barrels represents approximately $6.0 trillion of potential revenue for oil field owners at $100 per barrel.

Titan is pleased to be one of the current EOR companies trying to recover trapped oil safely and at an affordable cost for oil field owners.

A good way to describe Titan and what it does is:

“Titan produces new oil where old oil has already been produced”

It is time that statements like, “There is no oil supply problem”, “Peak Oil is a myth”, or “The oil supply problem is above the ground, not below the ground” are addressed in a factual and honest way.

Oil Edge