Last month, we introduced the Ford Global Challenge, through which Ford sponsored six student teams from around the world to envision and build a 21st century replacement for the Model T Ford, which is celebrating its 100th anniversary. The aim was to keep it cheap and simple while meeting sustainability challenges.

Well the winners have now been announced, and the ‘T²‘ Air Powered Car from Australia’s Deakin University was joint winner with the ’2015 Ford Model T’ from Aachen University in Germany.

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The competition received only limited media coverage. Perhaps they have something else on their minds at the moment?

Paddocktalk.com provides the most detailed coverage:

The Challenge

The four-month competition included teams of undergraduate, graduate and even high school students from schools around the world, who worked to create innovative concepts to address the transportation needs of the future. Participating schools included: Aachen University, Aachen, Germany; Art Center College of Design, Pasadena, Calif.; Deakin University, Melbourne, Australia; Lawrence Technological University, Southfield, Mich.; University of Michigan-Dearborn, Dearborn, Mich.; and West Philadelphia High School, Philadelphia, Pa.

Each student team received $75,000 in funding from Ford Global Technologies to support the creation of a vehicle concept through sketches, models, research papers and potentially even working models that delivered on the brief.

The teams were challenged to create a vehicle that is simple, durable and lightweight. Each vehicle must accommodate at least two people and offer solutions that address assembly, powertrain and sustainability challenges. Perhaps the most challenging criteria was that the concept vehicle was required to have a range of at least 200 kilometers (approximately 125 miles), and come equipped with a base target price of no more than $7,000.

Students worked against a deadline of Sept. 1 to submit their proposals. Five judges from Ford Motor Company, including Coughlin, critiqued each concept to select two concepts that best embodied the Model T spirit, personified the Ford brand and met the challenge criteria.

The team from Deakin university, were excited to be announced as joint winners on 1 October, as reported by The Age in Melbourne:

The Deakin University students created the ‘Model T²‘, a three-wheel vehicle platform with a novel steering system and compressed air rotary hub motors. The Age reported on Deakin’s win:

“To come away with the win has just blown us away,” said Deakin team member Tim de Souza.

Mr de Souza said the team wanted to keep the car as simple and as cheap as possible and believes it could be mass produced and retailed for less than $9000.

The T² has its compressed air motors mounted in the hubs of the front wheels, which are fixed in the straight-ahead position. The rear wheel hangs loose, like a castor wheel on furniture. Steering is achieved by directing more compressed air to one motor than the other.

The T2 would have a range of 60 to 80 kilometres on a 60-litre tank of compressed air.

Deakin University has a thing or two to say about their winning car also:

Dr Bernard Rolfe, the Deakin Project Leader, said that T2’s use of the latest research and technology has re-defined the idea of an inexpensive, innovative and sustainable car. ‘Our design, developed by a cross-disciplinary team effort from across the University, has “plenty of bang for the buck”. As well, T2 is a very green machine,’ Dr Rolfe said. Ford called the design ‘simple, lightweight, practical, compelling and low cost.’

Deakin University’s T2 runs on compressed air (with some compressed natural gas support for longer distance travel). It incorporates safety proven lightweight materials in which Deakin is an acknowledged world leader. With three wheels, it can turn 360° on itself, making inner city parking easy. The simplicity of the design means that it can be assembled at accredited Ford dealers, which was the original business model used by Ford Australia back in the early 1920s when the Model T was first launched in Australia. The key design points include:

• High torque compressed air wheel hub motors to reduce vehicle emissions to zero, depending on the distance option chosen
• Differential wheel speeds to steer the car via hub motors – so the car doesn’t need a conventional gearbox, driveline and steering rack-pinion systems
• Utilising the wheel hub motor concept with only three wheels to increase agility and reduce costs and weight
• Use of Ultra High Strength Steels and novel manufacturing methods to increase strength, while reducing costs and weight
• A flexible, easily adaptable human-machine interface to keep the vehicle competitive for at least a decade of advances in software technology.

Joint award winners from Aachen University in Germany created the “2015 Ford Model T”, using a basic structure with derivatives including a compact pickup, sedan, and mini city car, with a simple steel body that could be built using standard tools.

One thing I take away from this, which Ford should not find surprising, is that it’s pretty darn hard to build a car for $7,000 that can run 200 kms (125 miles) while being more sustainable than current vehicles. The fact that the Deakin Uni air car can run 80kms on its 60L tank of compressed air is impressive, but didn’t meet Fords aim in the challenge, which is presumably why they also chose a simpler and more conventional car as joint winner.

Perhaps Ford with their share of the $25 billion in loans to the Detroit car industry will be able to go further than these university teams but I think they will find the going tough too!

Other Air Car Stories on TOD:

The Ford Global Challenge – A Green Car That Runs On Air?
The Air Car – A Breath Of Fresh Air Or A Waste Of Breath?
Q & A With Louis Arnoux of IT-MDI.

This is an open letter from Stuart McCarthy of ASPO Australia in Brisbane to Professor Ross Garnaut, who is conducting a public review “to examine the impacts, challenges and opportunities of climate change for Australia”.

Dear Professor Garnaut,

Implications of Oil Production Decline Forecasts for Copenhagen 2009

Thank you for providing the opportunity for comment on the Review following the release of your Targets and Trajectories Supplementary Draft Report. ASPO-Australia has followed the Review with interest as oil depletion is very much the ‘other side of the coin’ regarding anthropogenic climate change.

We are deeply concerned that your Draft Report explicitly rejects the notion that oil depletion will constrain economic growth within the next 50 years despite very strong evidence to the contrary. In our view the resulting analysis, conclusions and policy recommendations are flawed and will probably exacerbate the climate change mitigation problem.

_{Figure 1. Colin Campbell/ASPO World Production Profile, Oil and Gas Liquids, 2007 Scenario}

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The purpose of this letter is to draw your attention to growing acceptance of oil depletion in the scientific community and even by the IEA in its revision of the energy forecasts and emissions scenarios in the forthcoming World Energy Outlook 2008, a document intended in large part to inform negotiations in Copenhagen. Our view is that this will substantially improve the prospects for an effective agreement around a target atmospheric CO2 concentration of 450ppm.

The IEA and other agencies such as the US Energy Information Administration and Australia’s ABARE have traditionally produced demand based forecasts of oil production and simply assumed that reserves and production capacity would meet demand. Typically these have forecast world oil production continuing to increase until at least the 2030 timeframe at rates of up to 120 million barrels per day, compared with the current 87 million barrels per day. Notably, there is already a gap of 1.5 million barrels per day between the WEO 2006 forecast and actual production, i.e. production growth has fallen 50 per cent short of forecast growth over the last two years. Price forecasts based on these production forecasts have been similarly discredited in recent years, even over the short term.

By contrast, a number of recent and ongoing resource based and project based studies of world oil production have concluded that production is likely to peak in the 2007-2018 timeframe, at rates in the range of around 87-95 million barrels per day, before declining at around two to three per cent per annum or more steeply. These include:

• The Colin Campbell/ASPO Oil and Gas Depletion Model (see Figure 1).
• Werner Zittel and Jörg Schindler, Crude Oil: The Supply Outlook, Energy Watch Group, October 2007.
• Kjell Aleklett, Peak Oil and the Evolving Strategies of Oil Importing and Exporting Countries: Facing the Hard Truth About an Import Decline for the OECD Countries, OECD Joint Transport Research Centre, December 2007.
• Fredrik Robelius, Giant Oil Fields – The Highway to Oil: Giant Oil Fields and their Importance for Future Oil Production, Uppsala University, September 2007.
• Chris Skrebowski, Megaprojects Update: Just How Close to Peak Oil are We?, presentation to the ASPO-USA 2007 World Oil Conference, 18 October 2007.
• The collaborative, open-source Wikipedia Oil Megaprojects Database (see figures 2 and 3).

The project based studies are particularly important as the peak in world oil production makes its transition from theoretical projection to observed phenomenon. Even with observed data from the IEA and EIA showing that world oil production has been essentially flat since 2005, sceptics of the proposition of a near-term oil production peak have tended to resort to a faith-based argument that increasing oil prices would ensure increasing discoveries and production. These have simply failed to materialise despite world oil prices having increased by 30 per cent per annum for the last seven years.

_{Figure 2. Wikipedia Oil Megaprojects Database, Moderate Decline Rate (4.5% per annum) Scenario, world oil supply and megaproject contributions, compared to observed EIA production data}

_{Figure 3. Wikipedia Oil Megaprojects Database, Moderate Decline Rate (4.5% per annum) Scenario, including new discoveries and unconventional oil}

Given the five to seven year start-up time for a typical major oil project, and reasonable estimates of depletion rates in existing oil fields, the project based studies provide a good indication of actual production capacities during the period to about 2018, beyond which time underlying depletion in the ageing supergiant oil fields will be the main determinant in overall production rates. Furthermore, while new oil discoveries continue to be made, the inexorable downwards trend in conventional crude oil discoveries has continued since the annual volumes discovered reached a maximum and started declining four decades ago (see Figure 4). There is little or no evidence that world oil production can continue to grow beyond the next decade, indeed the evidence strongly indicates the opposite – a high probability that world oil production will be declining within several years.

Of particular concern to oil importing countries such as Australia (see Figure 5) and most of the OECD is declining world exports. A recent study by oil industry analysts Jeffrey Brown and Samuel Foucher produced a ‘middle case’ scenario in which exports from the world’s top five oil exporters decline by 6.2% per year from the present rate of approximately 24 million barrels per day to approximately 12.5 million barrels per day by 2015,7 i.e. a decline equivalent to one quarter of the world’s internationally traded oil over the next seven years. This analysis is reinforced by Jeff Rubin from Canadian Imperial Bank of Commerce (CIBC) World Markets, who recently assessed that world exports will decline by 2.5 million barrels per day over the next three years.8

_{Figure 4. World Oil Production vs Discovery, Regular Conventional Oil, 1930-2050}

_{Figure 5. Australian Domestic Oil Production (Geoscience Australia, actual and P50 forecast) vs Total Demand (ABARE), 1970-2030}

A similar approach to combining resource based and projects based methodologies has been taken by the IEA in its review of oil and gas supply prospects for WEO 2008. This assessment has included a detailed field-by-field analysis of trends and prospects for production and decline rates at more than 400 of the world’s largest fields and a comprehensive review of reserves and resources.9 A first draft of WEO 2008 was due to be released for peer review on 1 August. While we are not privy to the contents of the report, IEA Chief Economist Dr Fatih Birol has for some time been openly signalling a major downwards revision from previous reports. In March, for example, Birol wrote in The Independent: “we need to leave oil before it leaves us.”10 IEA reports since WEO 2007 have warned of a “supply crunch” in the 2010-2012 timeframe. Given that many of your key assumptions are based on projections from WEO 2007, we strongly recommend that you obtain the draft WEO 2008 prior to completing your final report.

As an aside, you should bear in mind that the IEA was established by the OECD to counter-balance OPEC and represent the interests of major oil-consuming nations. Unlike the IPCC it is not a broad-based international organisation and in the past there have been serious grounds for doubting the objectivity and reliability of IEA oil forecasts. Although recently the IEA has become more open to oil depletion methodology, Australia should not rely on IEA information alone while neglecting other more independent assessments such as those of Energy Watch Group and ASPO.

The emissions scenarios in WEO 2008 would likely reflect any downwards revision in forecast oil and gas production. You will be aware that the IPCC emissions scenarios discussed in your Draft Report pre-date much of the contemporary literature on oil depletion and therefore take no account of this factor. However a number of published scientific papers now include emissions scenarios based on realistic oil reserve and production estimates. The first of these is Prof. Kjell Aleklett, Reserve Driven Forecasts for Oil, Gas and Coal and Limits in Carbon Dioxide Emissions, OECD Joint Transport Research Centre, December 2007,11 which concludes:

This paper is based on realistic reserve assessments, and CO2 emissions from resources that cannot be turned into reserves are not allowed. … we can conclude that CO2 emissions from burning oil and gas are lower than what all the IPCC scenarios predict.

IPCC emission scenarios for the time period 2020 to 2100 should in the future not be used for climate change predictions. It’s time to use realistic scenarios.

The second paper is Drs. Pushker A. Kharecha and James E. Hansen, “Implications of Peak Oil for Atmospheric CO2 and Climate”, Global Biochemical Cycles, Vol. 22, GB3012, August 2008.12 Kharecha and Hansen present five emissions scenarios, four of which are broadly consistent with the resource based oil production studies cited above. Notably, these four scenarios see peak fuel CO2 levels in the 428-446ppm range. The fifth scenario is a business-as-usual scenario in which fossil fuel emissions are unconstrained.

Even before considering Copenhagen, our view is that this disparity between your emission scenarios and resource limitations discredits much of the analysis in the Draft Report, in particular:

The Review’s ‘Platinum Age’ projections are based on the IEA’s WEO 2007 production forecasts, which have likely undergone significant downwards revision in WEO 2008. The WEO 2007 reference case sees fuel-related CO2 emissions reaching 41 Gt per annum by 2030 (including world oil production at 116 million barrels per day) and continuing to climb, while the high-growth scenario sees emissions reaching 44 Gt per annum in the same timeframe and also continuing to climb. This is completely unrealistic.

Assumptions regarding fossil fuel emissions in the Review’s no-mitigation reference case are not yet published, however the projection (Draft Report, Figure 4.10) appears to be demand based and continues to climb beyond 2100, unconstrained by resource limits, exceeding even the higher IPCC scenarios. This too is completely unrealistic.

The no-mitigation scenarios exclude the very serious economic impacts of peak oil on the world economy. The result is that the mitigation scenarios grossly overestimate the cost of mitigation while omitting the severe costs of delaying mitigation until the onset of peak oil. These are described in a 2005 report commissioned by the US Department of Energy (“Hirsch Report”):

How Oil Supply Shortfalls Affect the Global Economy

Oil prices play a key role in the global economy, since the major impact of an oil supply disruption is higher oil prices. Oil price increases transfer income from oil importing to oil exporting countries, and the net impact on world economic growth is negative. For oil importing countries, increased oil prices reduce national income because spending on oil rises, and there is less available to spend on other goods and services. Not surprisingly, the larger the oil price increase and the longer higher prices are sustained, the more severe is the macroeconomic impact.

Higher oil prices result in increased costs for the production of goods and services, as well as inflation, unemployment, reduced demand for products other than oil, and lower capital investment. Tax revenues decline and budget deficits increase, driving up interest rates. These effects will be greater the more abrupt and severe the oil price increase and will be exacerbated by the impact on consumer and business confidence.

Implications for the World Economy

A shortfall of oil supplies caused by world conventional oil production peaking will sharply increase oil prices and oil price volatility. As oil peaking is approached, relatively minor events will likely have more pronounced impacts on oil prices and futures markets.

Oil prices remain a key determinant of global economic performance, and world economic growth over the past 50 years has been negatively impacted in the wake of increased oil prices. The greater the supply shortfall, the higher the price increases; the longer the shortfall, the greater will be the adverse economic affects.

The long-run impact of sustained, significantly increased oil prices associated with oil peaking will be severe. Virtually certain are increases in inflation and unemployment, declines in the output of goods and services, and a degradation of living standards. Without timely mitigation, the long-run impact on the developed economies will almost certainly be extremely damaging, while many developing nations will likely be even worse off.

With the world oil production trend merely on a plateau rather than in decline, i.e. even before there is conclusive evidence of it having peaked, the IEA has already observed “devastating” demand destruction in the US and other OECD countries, contributing substantially to a slowdown in the global economy,15 while Jeff Rubin has calculated that the impact of rising oil prices on global transport costs in recent years has effectively offset all of the trade liberalisation efforts of the past three decades.

The no-mitigation scenarios also exclude the economic impacts of peak oil on the Australian economy, while the mitigation scenarios similarly overestimate the cost of mitigation and omit costs of delaying mitigation. Based on a near-term peak in world oil production, recent modelling for the CSIRO Future Fuels Forum indicated fuel prices as high as $8 per litre by 2018, a reduction in passenger and freight travel of up to 40 per cent and a decline in GDP of at least three per cent,17 which dwarfs the deviation between your reference case and ambitious 450ppm mitigation scenario in Targets and Trajectories. Observed data indicating the impact of rising oil prices includes an increasing petroleum trade deficit that already exceeds $10 billion per annum, the combined impact of rising oil prices and personal debt in the car-dependent outer suburbs of Australia’s cities,18 high inflation and slowing economic growth.

Numerous unsubstantiated assumptions are made regarding energy resource substitution. Constraints imposed by the laws of thermodynamics, time and scale appear to have been ignored. The magnitude and urgency of the “energy transformation” (Draft Report, Chapter 20) is grossly underestimated.

While we accept that the purpose of the Review is to develop a policy response to climate change rather than peak oil, we believe that failing to respond to the latter will preclude an effective response to the former. Placing a price on carbon via the cap and trade system proposed in your Draft Report is important, however this in itself will be grossly inadequate as there is little evidence to support the assumptions regarding timely energy resource and technological substitution. The Hirsch Report examined the specific problem of developing alternative liquid fuels to mitigate a liquid fuel shortfall following peak oil. Three mitigation scenarios were developed, based on different timings for the implementation of comprehensive supply-side and demand-side “crash programs” including enhanced oil recovery (EOR), heavy oil production (such as tar sands), gas-to-liquids (GTL), coal-to-liquids (CTL) and fuel efficiency gains. The conclusions are instructive:

Waiting until world oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades.

Initiating a mitigation crash program 10 years before world oil peaking helps considerably but still leaves a liquid fuels shortfall roughly a decade after the time that oil would have peaked.

Initiating a mitigation crash program 20 years before peaking appears to offer the possibility of avoiding a world liquid fuels shortfall for the forecast period.

The obvious conclusion from this analysis is that with adequate, timely mitigation, the costs of peaking can be minimized. If mitigation were to be too little, too late, world supply/demand balance will be achieved through massive demand destruction (shortages), which would translate to significant economic hardship.

When the combined peak oil and climate change mitigation problem is given even precursory consideration, compounding problems emerge, for example competition for liquid fuels between the transport and stationary energy sectors, or attempts at large-scale substitution of petroleum fuels with emissions-intensive coal-to-liquids or biofuels from food crops. A useful “cost comparison” between climate change mitigation and peak oil mitigation is to be found in the CSIRO Future Fuels Forum modelling, which found that a very high carbon cost of $100 per tonne would increase the cost of petrol by 25c per litre, whereas a near-term peak in world oil production would see the cost of petrol increase as high as $8 per litre.

Without urgent, comprehensive intervention, a purely market based response to climate change will most likely fail to deliver the necessary energy and transport infrastructure before declining oil production precludes such a transition. Even without considering the broader economic consequences, the construction costs alone arising from an increase in fuel prices to anywhere near $8 per litre would be prohibitive. Our dependence on existing, fossil fuel dependent transport and energy infrastructure would likely become more deeply entrenched, thereby exacerbating the already “diabolical” emission reduction challenge.

There is a large overlap in potential policy responses to climate change mitigation and peak oil mitigation. One of the key differences between the two, however, is that there is no “prisoners dilemma” to prevent unilateral peak oil mitigation. Indeed most peak oil mitigation measures would be ‘no regrets’ policies with positive socio-economic outcomes. Several Australian constituencies, including the Queensland Government, have for this reason already begun the process of proactive, unilateral peak oil mitigation.20 Given that Australian domestic oil production peaked in 2000 and we are already almost 50 per cent dependent on petroleum imports, the Commonwealth Government has nothing to lose in following Queensland’s lead.

The Copenhagen negotiations will be occurring at a time of growing awareness of peak oil. Most countries are becoming increasingly aware of the economic and security problems arising from their growing dependence on oil imports, notably the US, the UK, China and India. The imperative for unilateral peak oil mitigation in concert with a cooperative climate change mitigation effort is becoming more widely understood, even within the climate science community. The IEA’s reserve based energy and emissions forecasts are being revised towards realistic scenarios more consistent with a 450ppm emissions target. Prospects for an effective agreement in Copenhagen around this target appear to be improving by the day.

We would be pleased to discuss this matter with you at your convenience and look forward to your final report.

Stuart McCarthy

You can download the full document including references from ASPO Australia.

The challenge set by Ford Global Technologies is to design a Model-T for the 21st Century – an inexpensive, innovative and sustainable car. Deakin University is the only Australian university and one of only five worldwide invited to participate in the Challenge, part of the celebrations for the 100th anniversary of the fabled Model T; the car that changed the 20th Century.

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Deakin University’s ‘under wraps’ design for the Ford Global Challenge left for Detroit on 29th August carried by Deakin’s Tim de Souza (Chief Design Engineer) and Stuart Hanafin (Portfolio Coordinator). Deakin’s project is code-named T2 (‘TSquared’).

Forget petrol, forget electric… how about air?: Hanafin and de Souza believe their model, which has an engine powered by the release of compressed air, fits the bill.

“Fitting the compressed air technologies into cars of today which are quite heavy and large is infeasible,” de Souza told 2GB’s Jason Morrison. “Whereas the concept we’ve come up with is a really small, lightweight vehicle that can make use of this type of technology.”

Although the idea of a compressed air engine suggests it wouldn’t last long without needing a ‘re-fill’, de Souza insists his model would have real staying power.

“One of the conditions [of the competition] is that it had to have a 200 kilometre range. So we’ve engineered it to make sure we have that range,” he said. “It’s a slightly tweaked system where we re-heat the air… which gives it a bit of a boost. If you just used plain compressed air you’d probably get 60 to 70 kilometres.”

There were announcements late last year that IT MDI-Energy was to setup manufacturing facilities for air-powered cars in Australia. You can read more from TOD about that in The Air Car – A Breath Of Fresh Air Or A Waste Of Breath? and Q & A With Louis Arnoux of IT-MDI.

We hope to bring you the results of the Ford Global Challenge soon..

Have you ever stood at the bus stop watching hundreds of cars go by and wondered just how many of those cars are headed to the same place you want to go? Wouldn’t it be great if you could just stick out your thumb and get a quick ride rather than waiting 10 minutes for the old bus?

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Imagining the Future

Imagine if, instead of congested lanes of large cars with one person on board, we had a stream of traffic picking up and setting down passengers to help them get to their destination – a truly ‘rapid transit’ service in action on every street.

Can you picture this future where every car is instead a mini-bus? Or are you turned off instantly by the modern day stigma associated with ‘hitchhiking’?

Hitching a ride used to be quite socially acceptable. Nowadays (at least in the ‘civilised’ west) somebody sticking out their thumb on the side of the road is seen as a much less than desirable passenger. Equally, were you to decide to try your hand for ride, you might not be all that comfortable with the first person who stops for you – after all, what sort of creep would pick up a stranger off the side of the road?!

Hitchhiking into the Future

It doesn’t matter whether it’s hydrogen, batteries or gasoline under the hood – if it’s two tonnes of metal carrying one person then it is grossly inefficient. Clearly, we have the roads and spare seats in the vehicles to get us where we want to be. In our more frugal future, we’re going to need to make better use of those spare seats.

For those of us standing on the side of the road waiting for a ride, what we lack is a means of connecting us to a driver who doesn’t know we need them. But the technological solution to this problem is already close at hand – it is simply a matter of integrating three common functions:

• A mobile (cell) phone to inform the world of our current location and where we want to go.
• GPS units to work out where we are standing and which drivers are coming our way.
• A means of paying the driver a small fee for the ride.

Introducing the ‘iHitch’

Let’s call this new device the ‘iHitch’ – a phone, GPS and payment system all in one – a simple challenge for the likes of Nokia, Apple or Garmin. The next step is equipping a critical mass of passengers and vehicles for it to be a practical option. And finally we will need some software which, when told where the drivers are going and where the passengers want to be, can make the optimum connections between the two. Seems simple really!

Of course, depending on your destination, it might take more than one ‘ride’ to get you from ‘A to B’. With public transport, a journey that requires multiple connections with long waits in between can quickly become tedious and very time-consuming. But if at each change you’re only waiting a minute or two for the next driver in the sequence to keep you moving then much more complex trip patterns suddenly become a lot more viable. This is especially true since the speed of travel in one small vehicle will be faster than in the big old bus which has to stop every few hundred metres to pick up and set down more passengers.

The incentive for the passengers are pretty obvious, and as fuel prices start to bite and the affordability of the next tank of fuel becomes a serious question, the benefit for the driver of being able to share the costs of running their vehicle becomes pretty compelling too. When oil was cheap, it was easy to choose the privacy and comfort of having a vehicle all to oneself. But that equation is shifting quickly, and some old and well ingrained habits may be ready for change.

Breaking down Barriers the eBay Way

Technology is the easy part – the far more challenging problems are those we have created for ourselves. To make our hitchhiking future happen we’re going to need help overcoming the significant social and cultural barriers. But the answers are out there – in this case we need only look at other models of social interaction over the internet.

Consider how the eBay model of ‘rating’ buyers and sellers could be applied:

• If you smell, talk dirty or are otherwise poor company in a confined space, your ‘passenger’ or ‘driver’ rating will quickly plummet.
• If things work smoothly and your rating is high, you won’t have to wait long for a friendly driver to pick you up and get you on your way. High rated drivers may also be able to charge a little more for their services.

On a busy route in the middle of the day, you might be happy to offer a ride to a B-rated passenger but if you’re looking for a ride home at 3am in the morning you might prefer to wait a little longer to get a AAA-rated driver. These personal preferences would be adjusted in your ‘iHitch’ and the software makes the matches according to your criteria. The more stringent you are, the longer you’ll have to wait!

Every Car is a Mini-Bus

In my case, instead of a bus stop it’s actually a tram that I end up waiting for at all hours of the day and night. I hope it won’t be long before I can stand there, plug a destination into my ‘iHitch’ and have a driver pull up moments later, long before the tram would have arrived. Instead of every oil consuming vehicle being the problem, they become part of the solution in the form of a mini-bus.

As the scheme becomes widely adopted, the number of vehicles on the roads will drop as more drivers leave their car at home, choosing the new speed and convenience of riding as an ‘iHitch’ passenger instead. Not everybody can be a passenger (even a real bus needs a driver!) but a substantial reduction in traffic and oil consumption is readily achievable.

In a crunch, one can envisage the same system being pushed to its limits with each vehicle ‘saturated’ with passengers and only the bare minimum number of drivers taking their cars out on any given day. In an ‘oil shock’ scenario, I can see it being possible for a city to keep functioning and successfully moving people around on essential journeys using a small fraction of their previous total oil use. The extra time involved in picking up and setting down passengers may even be won back through less congested roads so the speed of individual travel may not drop.

But the key here is preparation – if the crunch hits first and you don’t have the tools in place then it’s very hard to co-ordinate the drivers and passengers and chaos (and doom) rule instead.

So getting an ‘iHitch’ scheme up and running in your town could be a valuable insurance policy, even aside from the direct benefits. And unlike other major infrastructure responses to peak oil which will take several decades, the ‘iHitch’ solution can be rolled out as fast as you can manufacture mobile phones.

So, will technology cut our future fuel bill in half? Sure, and that high-tech future might be a whole lot closer than you think.

With thanks to the Beyond Zero Emissions discussion group in Melbourne (amongst others) for part of the inspiration behind this story and the impetus to put pen to paper.

How can you double something and still have ten times less than you started with?

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The Handil Oil Field

Handil is a giant oil field in the Mahakam Province of Indonesia, discovered in 1974 and still operated by ‘TOTAL Exploration and Production Indonesia’. The International Society of Petroleum Engineers had a feature article on ‘Reviving the Mature Handil Field’ in the January 2008 addition of their Journal of Petroleum Technology ^[1].

Figure 1: Location of the Handil Oil Field
Source: Wikipedia and LNGplants.com

From the JPT article:

• The Handil field comprises 555 unconnected accumulations (reservoirs) in structurally stacked and compartmentalized deltaic sands.
• The reservoirs are trapped by the Handil anticline, which is cut by major impermeable fault dividing the field into two compartments: north and south.
• The reservoirs are between 200 and 3500 metres subsea and cover an area 10km long by 4km wide.

Table 1: Handil Oil Field Characteristics

API and Sulphur from this Handil Crude Oil Assay

Table 2: Oil Production Summary at end of 2002

Oil Recovery

Before proceeding, it is important to understand the basic mechanisms of recovering oil from a reservoir:

Pressure on the fluids in a reservoir rock causes the fluids to flow through the pores into the well. This energy that produces the oil and gas is called the reservoir drive ^[2].

Primary Recovery is the oil produced by the original reservoir drive energy. The two most important natural reservoir drive mechanisms are Gas Depletion and Water Drive:

• Gas Depletion Drive: In the subsurface, the oil is under high pressure and has a considerable amount of natural gas dissolved in it. When a well is drilled into the reservoir, pressure in the reservoir decreases and gas can bubble out of the oil which can form a gas cap. Dissolved gas drive is very inefficient and will produce relatively little of the original oil in place from the reservoir. While this drive mechanism is commonly used to produce gas fields, rarely would it be relied upon for oil production.
• Water Drive: Water Drive reservoirs are driven by water adjacent to or below the oil reservoir. The produced oil is replaced in the reservoir by water. An active water drive maintains an almost constant reservoir pressure and oil production through the life of the wells. The amount of water produced from a well sharply increases when the water reaches the well. The recovery of oil in place from a water-drive reservoir is relatively high.

It depends highly on the type of reservoir drive, the viscosity of the oil and permeability of the reservoir, but primary recovery produces on average 30-35% of the oil initially in place (OIIP), although it can be as low as 5%. Generally this leaves a considerable amount of oil in the reservoir, so additional recovery techniques may be employed:

Secondary Recovery: This involves injecting water into the field through injection wells. It can be initiated before or after the natural reservoir drive has been fully depleted. The aim is to use the water to sweep some of the remaining oil to producing wells. A waterflood can recover anything from 5-50% of the remaining oil in place that would not have been produced using primary recovery alone. The actual amount achieved depends enormously on the properties of the particular field.

Tertiary Recovery (Enhanced Oil Recovery): In some cases, where Secondary Recovery still leaves a significant amount of oil in place in the reservoir, enhanced oil recovery may be effective. Enhanced Oil Recovery (EOR) includes thermal, chemical and miscible gas processes – injecting substances into the reservoir that are not naturally found there.

Secondary Recovery techniques have been widely used since the early days of the industry. They are already in place in almost all fields where it is necessary or effective.

The history of Tertiary recovery also goes back more than half a century. Tertiary Recovery, however, is only effective for a narrow selection of fields and involves substantially higher costs and effort.

Lifecycle of a Giant Oil Field

In their 1986 assessment of the world’s 500 “Giant Oil and Gas Fields”, Carmalt and St John ^[3] ranked Handil number 303 with an estimated 800 million barrels of ultimately recoverable oil. We can see that this 20 year-old estimate is very close to the mark in terms of the amount of oil produced with primary and secondary recovery (see Table 2). This should give us increased confidence in the Carmalt and St John estimates for other giant fields, including those in Saudi Arabia and other OPEC countries where current data transparency is inadequate.

Figure 2: Handil Oil Production History
Adapted from this Presentation: Mature Kutei Basin of Indonesia

JPT: To maintain production and reservoir pressure, water injection was started in 1978 which maintained the 160,000 BOPD production until 1985.

The production profile here presents a common picture of the lifecycle of a giant oil field. Secondary recovery (water injection) is used to maintain an oil production plateau for as long as possible before more significant decline becomes inevitable. After that, owners of the field have to decide whether intensive efforts to study, develop and apply tertiary (enhanced) recovery will recover enough additional oil to make it economically attractive.

Mature Field Revitalization

JPT: In November 1995 a lean gas injection project was initiated in five reservoirs. The project boosted the production of the five large reservoirs and altered the overall decline rate of the field. Therefore, the project was extended in 2000 to six other large reservoirs, which resulted in more than 25 per cent of the field reserves being under a tertiary-recovery mechanism.

Tom Standing (ASPO USA Newsletter, November 5, 2007):

Oil extraction by miscible gas injection goes beyond conventional pressure maintenance by injecting a gas with specific properties, at pressures sufficient to create a highly mobile gas/oil fluid phase that swells and fills pore space in the reservoir rock. Compression energy from the surface pushes this miscible phase toward wellbores. Injected gas cannot be chemically reactive in the reservoir.

Of the 8 million barrels produced using enhanced recovery mechanisms up to 2002, 6 million was from Phase 1 Lean Gas injection and 2 million from Phase 2 Lean Gas injection. Spurred on by their early success with lean gas injection, TOTAL kicked off a bigger campaign of ‘Mature Field Revitalization’ in 2003, including the following activities:

• Dynamic Modeling and Sweet Spot Mapping: Dynamic computer models combined with well logs and other static historical production data are used to identify the location of bypassed oil and smaller undrained areas of reservoir.
• Light Workovers (LWOs): Well interventions performed without pulling the completion at the bottom of the well. These LWOs are used to isolate water producing zones and target prospective new reservoir sections.
• Infill Wells: Where a Light Workover cannot be used because of the condition of the well, drilling new wells recovers the potential reserves in areas identified by Sweet Spot Mapping.
• Enhanced Oil (Tertiary) Recovery and Optimization: Miscible Gas Injection (described above), in this case using natural gas, is injected into the crest of the reservoir and attempts to sweep oil that has been bypassed toward the producing wells.

JPT: In 2005, 26 LWOs were performed, of which 19 were successful. The project resulted in 1.7 million STBO (stock tank barrels of oil) production during the year and 4 million STBO of incremental reserves. The total cost was approximately USD 2 million.

The stated costs for LWOs yield a figure of $2 per barrel added as reserves – very economical but the potential is of course very limited (production costs are in addition to this). The more expensive infill wells were used for shallow reservoirs with heavy oil, or multi-lateral wells to target multiple small reservoirs which did not justify single wells previously.

The Results

Hopefully it is clear that what is simply described as ‘Mature Field Revitalization’ comprises many years of technically challenging study and modeling followed by intensive application in the field. For the engineers and geologists involved this was no doubt rewarding work. While all of these activities can be considered the application of ‘new technology’, only the final step is considered Enhanced Oil Recovery.

JPT: These key elements increased the production from 12,500 BOPD in 2003 to 23,000 BOPD in 2007.

For a substantial investment of time, money and effort in the giant Handil oil field, we gain just 10,000 barrels per day of oil production. Yet this case study has appeared in the Journal of Production Technology because it is a prime example of what can be achieved (the two other case studies in the same issue showed only very mediocre gains). While there will be isolated fields that perform better, there will be many more that fail to make the pages of the Journal of Petroleum Technology because they provide far less spectacular returns. In many cases, after intensive appraisal and assessment the schemes never get off the drawing board.

Tom Standing (ASPO USA Newsletter, October 1 2007):

An aspect of EOR that is seldom discussed is that recovery processes target oil fields with highly specific properties of reservoir rock and fluids. In brief, EOR processes are not universally applicable. With long years of research and field trials, the industry has developed two categories of EOR success.

• Thermal methods in highly permeable reservoirs containing heavy viscous oil
• Carbon dioxide or nitrogen (or natural gas) injection at miscible pressures in reservoirs with poor permeability

The vast population of oil fields with light oil and good permeability generally have not responded to EOR efforts [because Secondary Recovery alone is already highly effective].

The Impact of Technology

TOTAL would be pleased if their efforts with the Handil oil field can increase the ultimate amount of oil recovered by even 5% (40 million barrels) compared to primary and secondary recovery alone. A 10% increase in this case looks unlikely. The returns look pretty small when averaged across the world’s oil fields, given that only a proportion of them deliver a reward for this kind of effort.

While these aspects of ‘advanced oil field technology’ can increase production from particular oil fields, thereby attractively increasing profits for the owner, they do not significantly alter the picture of global oil resources.

Figure 3: World Oil Discovery and Production

The Law of Diminishing Returns

Economists seem to have trouble understanding geological and technical limits to oil production, but they should understand the law of diminishing returns (Wikipedia):

According to this relationship, in a production system with fixed and variable inputs, beyond some point, each additional unit of variable input yields less and less additional output. Conversely, producing one more unit of output costs more and more in variable inputs.

In our case we have finite, bounded oil fields. Until the mid 1980s, discovery of new oil fields exceeded our consumption rate, so there was little need to increase recovery from existing fields. As the discovery rate declined, companies had greater motivation to extract more from their existing fields. While at first they found easy gains, in the last decade especially the amount of effort required has climbed and yet the returns are falling: is it any surprise that oil industry inflation is rampant?

Oil field reserves may have ‘grown’ 10-20 per cent since the Carmalt and St John assessment in 1986, but we should not expect the next 20 years to deliver the same gain. Discovery of new fields has tapered off to low levels and the easy pickings for increased recovery have already been had. Unconventional oil sources will yield similarly small returns for extraordinary amounts of effort. The numbers simply do not stack up for oil production continuing to expand for another decade against the decline in large mature conventional oil fields.

Summary

How can you double something and still have ten times less than you started with?

In the case of the Handil Oil Field, a concerted campaign to revitalize the field almost doubled production from 12,500 barrels per day in 2003 to 23,000 in 2007. Yet this field had once produced nearly two hundred thousand barrels per day.

This is a representative picture of the role of technology and enhanced oil recovery: merely extending the tail end of production in oil fields that are well past their own peak in production.

So while the Society of Petroleum Engineers and other optimists tell us that technology and enhanced oil recovery will delay peak oil, a more objective look at the data suggests that production declines are relentless and they are stacking up much faster than incremental technological gains.

Contact the Author or download this article as a PDF.

Try these tags for other relevant articles at The Oil Drum:
Enhanced Oil Recovery
Technology
and don’t forget HO’s wonderful Tech Talk series, which has just about every resource production and extraction topic one can think of.

References:

[4] Mature Kutei Basin of Indonesia: http://www.ccop.or.th/PPM/document/SEM2/Indonesia.pdf

It might be too little, too late, but this is some of the hardest hitting journalism we’ve seen on petrol prices. Kerry O’Brien at the ABC 7:30 Report is clearly no peak oil sceptic.

Monday night he put Kevin Rudd in the hot seat on petrol prices, and you got the impression that Kerry was not playing by the rules of engagement anymore. In that interview, he invoked Richard Heinberg, then on Thursday night he interviewed Heinberg himself.

Monday Night: Rudd in the hot seat

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KERRY O’BRIEN, PRESENTER: Kevin Rudd, if we can start with oil. You and Brendan Nelson are both arguing over very small savings at the bowser, although his small savings are bigger than your small savings.

But isn’t it time to look Australians in the eye and tell them the news is only going to get worse on oil?

KEVIN RUDD, PRIME MINISTER: Kerry, on global oil prices, no one that I can speak to, either within the Government, that is the Treasury who are looking at the long range forecasting here, or abroad, can give you any confidence about where global oil prices will be in three, six, nine, 12 months time.

[Maybe he should have asked somebody at The Oil Drum?]

So this is a massive shock to the global economy. It’s happening across all economies at present. What we need to do is frame an intelligent, long term response to this, and Australia as of when we took over Government did not have a long term energy strategy, a fuel strategy.

[We need some really big binoculars.. see the GetUp! FuelWatch ad]

We’re working on that, six months into office, and we hope to have something to produce later in the year on that score. Dealing with the long term channel, as well as being mindful of the impact on people’s hip pocket now.

So, just in case we didn’t get the message from Kerry’s interview with Kevin, he interviewed Richard Heinberg (again). There is no attempt to pull the wool over our eyes here: Thursday Night: The end of the petroleum age

This is a guest post by Cameron Leckie, of ASPO Australia.

The organisation that I work for depends upon air travel for the movement of several thousand trainees around the country each year. I have been working on some peak oil risk management/mitigation strategies and the future of air travel is a key requirement that needs to be explored. This is a start on identifying the prospects for air travel in the post peak oil world. Ironically, this essay was planned whilst flying from Brisbane to Melbourne for one of this organisation’s courses.

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Introduction

Over the last couple of decades, the advent of cheap air travel has provided an unprecedented opportunity for large parts of the population in developed economies to travel. Cheap air travel has allowed both business and leisure travel to become an embedded part of the developed world’s culture, something that is currently taken for granted.

In recent years however, the rapid increase in the rise of oil prices, and in particularly jet fuel prices, has resulted in airlines around the world facing a pinch. At least a dozen airlines globally have filed for bankruptcy in the last six months and US airlines faced a collective first quarter 2008 loss of $11 billion according to the International Air Travel Agency (IATA). Since 2000, QANTAS’ fuel costs have increased from 10% to 24% of operating expenses, overtaking labour as the airlines greatest expense. Virgin Blue is also facing the same pressure, with its fuel costs rising from 15% to 35% of operating costs. As reported in the same article, “No airline business model was built for oil prices to be sustained well above $US100. If it continues we will certainly see airlines continue to fail.”

The main stream media continues to portray recent spikes in oil prices as being a temporary problem and externalising the blame on speculation, a falling US dollar, OPEC or oil companies. However the underlying fundamentals of stagnant production, increased demand and falling exports lead to the conclusion that higher oil prices are here to stay and will most likely only increase in the future.

Those aware of peak oil have oft claimed that airlines would be the first victim of peak oil, as stated by the late Dr Samsam Bakhtiari. The peak oil e-mail group Running on Empty Australia (or ROEOZ) almost daily has posts titled ‘airline deathwatch.’ The recent attention paid in the media to higher oil prices and the actions of airlines in raising surcharges and reducing capacity leads to the question of how sustainable is air travel and airlines in a post peak oil future. This will be the first in a series of posts on the future of air travel and will focus on fuel economy.

Fuel Economy

The fuel economy of an aircraft is dependent upon a number of factors. These include the aircrafts aerodynamic efficiency, weight efficiency, the number of passengers carried and the fuel efficiency of the engines. As oil prices have risen, airlines have attempted to increase the fuel economy of their fleets in a number of ways. These include:

• Under fuelling aircraft to reduce the weight carried and hence reduce fuel consumption.
• Charging customers higher rates on baggage to encourage smaller luggage loads.
• Grounding older and less fuel efficient aircraft.
• Reducing route capacity to increase the Revenue Seat Factor (basically a percentage describing how much of the available seat capacity has been used).

Increasing fuel economy will no doubt be an important part of the airlines responses to higher oil prices. The chart included below is an attempt to compare the raw fuel economy of the current fleet of QANTAS Group (including Jetstar and QANTAS Link) and Virgin Blue, against the economy of these aircraft per passenger.

Chart One: Comparison of fuel economy and fuel economy per passenger of the current QANTAS and Virgin Blue aircraft fleets.

The process used to derive this chart used data sourced from Wikipedia and Virgin Blue’s website on each of the aircraft used by QANTAS and Virgin Blue. The fuel economy was calculated by dividing maximum fuel payload by the range of the aircraft to give a fuel economy figure in litres per kilometre. Whilst this may not be a technically accurate measurement of an aircrafts fuel economy, it provides an approximation against which to compare aircraft. As you can see and would expect, the smaller aircraft, such as the Dash 8, Embraer 170 and Boeing 717, use several times less fuel than the larger aircraft, such as the Boeing 747 and Airbus A380 to travel the same distance.

The next step was to calculate the fuel economy per passenger (this figure has been multiplied by 100 passengers to allow the data to be displayed at the same scale) for each of the aircraft. This was calculated by dividing the fuel economy figure by the maximum number of passengers the aircraft can carry. This provides a useful reference point against which to compare the relative efficiency of each aircraft type in moving passengers. What is clear is that the larger aircraft are more economical on a fuel economy per passenger basis than the smaller aircraft. For example the Airbus A380 was 28% more economical on a per passenger basis than the average figure for all of the aircraft sampled. This economy would be even greater on a seat kilometre basis. This is due to the disproportionate quantity of fuel consumed during take off and whilst gaining cruising altitude. Short haul aircraft are exposed to this requirement more regularly than long haul aircraft, thus increasing the fuel consumption of these aircraft. Unfortunately finding useable data on the seat kilometre fuel consumption of the sampled aircraft was difficult.

Comparing the fleet composition of both QANTAS and Virgin Blue, to the fuel economy per passenger of each aircraft type, results in some interesting findings. Whilst exact aircraft number by type for Virgin were unavailable, its Boeing 737-800 aircraft are the second most economical of those examined, whilst the Embraer 190 and 170 aircraft are amongst the least economical on a per passenger basis. QANTAS has both a far larger number of aircraft and a larger number of different aircraft types in service. Of note is that the Dash 8 fleet and Boeing 767 aircraft make up some 67 of QANTAS’ 213 aircraft, or 31%. These aircraft also happen to be amongst the least economical on a fuel consumption per passenger basis.

Fuel economy of aircraft is only one factor that needs to be considered in the context of future air travel. The next factor is the revenue seat factor.

Revenue Seat Factor

In many instances, an aircraft is not loaded to 100% of its passenger capacity. In an era of ever increasing fuel prices, this is not a good thing for airlines. Airlines regularly report their capacity statistics. Both QANTAS and Virgin Blue report on their Revenue Passenger Kilometres (RPK) and Available Seat Kilometres (ASK) which are used to determine their Revenue Seat Factor. The RPK is the number of paying passengers carried multiplied by the number of kilometres flown whilst the ASK is the number of seats available for sale multiplied by the number of kilometres flown. When the RPK is divided by the ASK, the result is the Revenue Seat Factor.

The latest data available from QANTAS and Virgin Blue is from March 2008. The Revenue Seat Factor for March 2008 and the current financial year to date are detailed in Table 1.

All airlines will obviously try to maximise their Revenue Seat Factor as close as possible to 100%. QANTAS Link, which provides regional air services throughout Australia, has a significantly lower Revenue Seat Factor than the remainder of the QANTAS Group whilst also using aircraft (Dash that are the least economical on a per passenger basis. We can expect to see further capacity reduction as both airlines attempt to increase their Revenue Seat Factor, if oil prices stay high. It is interesting to note that the Revenue Seat Factor for March is less than the year to date figure. There could be a number of reasons for this, such as seasonal variations or the recent rounds of fare increases.

Chart Two: The RPK and ASK for QANTAS Group over the period 1999 – 2007

Chart Two details the ASK and RPK for QANTAS from 1999 -2007. Figures for Virgin Blue were unavailable. As can be seen, the increase in both RPK and ASK has held a close relationship with a slight increase in the Revenue Seat Factor over this time from 73% to 80%. The last data point in this chart was from 30 June 2007 when Singapore Jet fuel was 199c/gal compared to 377c/gal in May 2008. With the recent measures that QANTAS and Virgin Blue have instituted, it will be interesting to see over the coming months whether the Revenue Seat Factor will rise, fall or remain constant.

How this plays out will largely determine the future of these airlines in the post peak oil era. Some indicators could be:

If capacity (ASK) is reduced and the Revenue Seat Factor increases, the airlines maybe OK.
If capacity (ASK) is reduced and the Revenue Seat Factor falls or remains relatively constant, then the airlines are in trouble.

This will be something that I will be watching with some interest over the coming months.

Conclusions

A few key conclusions can be drawn from this analysis. Firstly, the smaller the aircraft, the more economical it is to fly on a fuel economy basis, however the larger (and newer) aircraft are more economical on a per passenger basis.

Secondly, that many of the aircraft in the QANTAS and Virgin Blue fleet are at the lower end of the fuel economy per passenger scale. It is likely that routes using these aircraft would be the first to be reduced, particularly if the Revenue Seat Factor is lower on these routes. No doubt, considerations such as this were key elements in Virgin Blue’s recent decision to cut the Sydney – Proserpine and Melbourne Darwin routes.2

Thirdly, the Revenue Seat Factor is highest in the long distance international travel area and lowest for regional travel. Regional services also have a generally lower fuel economy per passenger than the other services. It can be safely assumed that airlines will do whatever it takes to remain profitable. This implies that those routes that are not as economical to operate on either a fuel economy or capacity basis, will be reduced and if the oil price continues to increase, possibly removed altogether. It is likely that regional Australia, and industries such as tourism that are reliant upon air travel, will be the first to feel the impacts.

Fourthly, as the airlines struggle with the impact of higher fuel prices, we have a couple of indicators, particularly the relationship between Available Seat Kilometres and the Revenue Seat Factor, that will provide some guidance on the future prosperity or otherwise of our airlines.

Admittedly this post has only covered one element of the airlines operating considerations, however it poses an interesting dilemma for the airlines and industries reliant on air travel such as tourism. I would be interested in hearing from airline industry insiders and their comments on this post. One area that I have not explored is the maintenance costs by aircraft type and how this may sway the balance in total operating cost of an aircraft type.

I will follow this post up over the next few weeks with another perspective on the future of air travel. I can be contacted at Cameron.Leckie@aspo-australia.org.au. You can also download this post as a PDF.

Since returning to Melbourne two years ago after working in the North Sea oil and gas industry, I’ve given a peak oil presentation to varied audiences on average once a month. They have all been positive experiences (some more so than others) and at least help me feel that I am doing something constructive. Generally though, I’ve had audiences who have invited me to come and speak about this topic, so I’ve usually had a polite if not completely convinced audience.

TOD reader Ralph started first time with a tougher audience:

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Recently a client of mine (in Adelaide) asked me if I would like to give a talk to the local Rotary Club on a subject of my choice. Now there are lots of fascinating, amusing and uplifting subjects I could have chosen, but instead, inspired by some of the great TOD publicists, and having been a resource Cassandra for 35 years since reading Paul Ehrlich, I decided to throw away my chances of winning friends and being the life of the party- and talked about Peak Oil.

This was my first talk on the subject so I used a prepared script. They only gave me 20 minutes talk time plus 10 minutes question time to cover this huge subject. So I decided to start with the current rising price of petrol etc to establish a personal link , then moved onto the underlying cause from there. ( A purist would probably have gone to the geology fundamentals first). Unfortunately, this left no time to talk about positive solutions.

I think if I had my time again, I would make it shorter and simpler and try to shoot down the objections in question time rather than pre-empt them in the body of the text.

Only 3 questions could be coaxed from an audience of 30. One was “If I drill for oil in my backyard will I find any?” I wasn’t sure whether this lack of response indicated that everyone was stunned, or indifferent, defended by rationalizations, or just thought that I was a crazy millenialist who should be politely ignored. The president indicated to the audience that he disagreed with my conclusions based around a vague “they will come up with something” argument.

I always expected Rotary to be a difficult nut to crack as they are more likely to be relaxed and comfortable with the joys and accumulated treasures of the post-war oil bonanza than most. So I intend to improve my speech and take another tilt at the windmill if the opportunity arises.

I welcome feedback, suggestions and criticisms from the TOD audience.

I think the whole issue of how best to strategically present the PO story for maximum persuasive impact is worth discussing on TOD- though the fundamental rules of public speaking – “Know your audience” and “KISS” should still determine the shape of any presentation.

thanks
Ralph (Adelaide)

You can download and read Ralph’s presentation and provide comments below.

Also available are Gail Tverberg’s presentation and overview–which has a whole packet of materials, and a set of slides that I used recently – there are very few words but most TOD readers will be able to see the story that goes with each slide.

You can also watch ASPO’s Stuart McCarthy recent presentation to Engineers Australia in Brisbane earlier in May
(choose the presentation title from the May list):
Peak Oil: The broader sustainability and engineering implications in South East Queensland.

Over to you now.. Whether you’ve been in the audience or running the show, what makes a good peak oil presentation?

In May 2007, the work of Stuart Staniford and Euan Mearns culminated in a new and unprecedented assessment of oil reserves in Ghawar, the world’s largest oil field. This article (also written in May 2007 and well overdue for TOD posting) combines their assessment with additional information sources, to produce a revised estimate of reserves in Saudi Arabia and the other OPEC countries.

Oil Reserves in Saudi Arabia

In their 1986 study “Giant Oil and Gas Fields”, Carmalt and St John (American Association of Petroleum Geologists²) published a list of the largest five hundred oil and gas fields known at the time. This included field size estimates for 24 major fields in Saudi Arabia (crude oil and condensate).

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_{Unless otherwise stated, reserves here refer to P50 estimates, ie. proven plus probable (2P)
Gb = Billion Barrels}

In SPE Paper 255803, Saudi Aramco reference this Carmalt and St John paper when they claimed that the Berri field “ranks as the 22nd largest in the world”. While this does not specifically endorse any of the reported field sizes, that Saudi Aramco have seen fit to reference this paper provides it with a significant level of credibility.

It is also important to note that Carmalt and St John, using a variety of sources including industry databases, performed their study before the widespread revision of OPEC reserves in the ‘quota wars’ of the mid/late 1980′s. This suggests that the data they were using would have been free from any of the ‘political pollution in technical databases’ which Jean Laherrere has roundly criticised more recently.

Stuart’s analysis¹ revises the field size estimate for Ghawar up to 96 billion barrels (Gb). Some of this increase may have occurred in the southern sections of Ghawar, especially Haradh which has only been extensively drilled and developed since 1986. It is significant that, despite this additional development, the total field size estimate has only increased by 17% in two decades. Euan’s base case analysis⁴ revises Abqaiq reserves to 14.8 Gb, which represents a 16% increase on the 1986 estimate.

That the Carmalt and St John estimates are only modestly lower than these two new estimates, is encouraging, but not all that surprising given that most of the listed fields were already 20-40 years old and extensively developed by the time of their study.

While some fields may come in below the 1986 expectations, which is to be expected among a mix of P50 estimates, others may yield yet larger percentage increases. At this stage it is reasonable to extend the observed average increase to the other 22 fields in the list. While this is based on results from only two fields, the sample covers 43% of the resource so it is quite significant. The result is in an additional increase of 21 Gb in the size of the other listed fields (in addition to 14 in Ghawar and 2 in Abqaiq), bringing the revised sub-total to 259 Gb.

The cumulative additional resource in very much smaller fields and those discovered since 1986, of which the Hawtah trend fields are the only known significant oil find, are estimated to amount to 6 billion barrels.

This yields a total initial reserves estimate for Saudi Arabia of 265 billion barrels.

Cumulative production of crude oil and condensate to end of 2006 is 113 Gb. Therefore, 43% of initial oil reserves have been produced, with end 2005 reserves of 152 Gb (2P). This is more than 110 billion barrels short of the 264 stated by OPEC and widely reported as Saudi Arabian ‘proven’ reserves (although 264 includes an amount of NGLs also).

Coincidentally, there is a close match between Saudi claimed reserves and the initial reserves in this analysis. This tends to support a claim made previously by Colin Campbell that in the OPEC ‘quota wars’ in the 1980′s, some members started reporting initial rather than current reserves. This makes some sense in the context of allocating quotas, rather than haggling over production revisions each year. But there is no official confirmation of that interpretation, so we can only conclude that OPEC reserves are substantially overstated. It’s only a pity that these are the most widely quoted figures for the countries holding the largest share of the world’s most important energy commodity.

However, even the dramatically lower reserves figure of 152 Gb may seem high to those with a pessimistic view of Saudi resources. While we may question recent claims that Shaybah has over 20 billion barrels of oil, the figure of 7 Gb reported by Carmalt and St John still seems robust. The growth increment applied here to their figures appears justified but even discounting that, the evidence does not support an initial reserves estimate of anything less than the 221 Gb estimated in 1986, given that Ghawar and Abqaiq estimates alone have now come in a combined 16 billion barrels higher.

1979 US Senate Commitee Report

The 1979 staff report to the US Senate Subcommittee on International Economic Policy on “The Future of Saudi Arabian Oil Production” supports the figures in the 1986 Carmalt and StJohn paper. Aramco (prior to nationalisation and operating in line with standard US industry practice) estimated to the Senate Subcommittee that Saudi Arabia had 2P reserves of 177 Gb and 3P reserves of 245 Gb (proven plus probable plus possible).

Cumulative production to the time of the report was 35 Gb, so the corresponding initial reserves estimates were 212 Gb (2P) and 280 Gb (3P). Seven years later, Carmalt and St John’s combined assessment was 9 Gb higher, which provides confirmation that their field sizes were close to consistent with Aramco’s best estimates at the time.

Even including NGLs, it is impossible that minimum initial reserves of 384 Gb could be valid, but that is what Saudi Arabia imply now with 120 Gb of cumulative production and 264 Gb now claimed as ‘proven’ reserves. On the other hand, it is encouraging that the new figure presented here (265 Gb) falls within the range identified by Aramco in 1979. After three decades of field development, it is perhaps not surprising that the new estimate falls in the high end of their range, but as the fields mature the opportunity for further gains diminishes.

While reserves of 152 Gb are well below official statements, it is still an enormous volume. However, not all barrels are created equal and this analysis in no way implies that Saudi Arabia has the ability to maintain higher levels of production. As Matt Simmons states repeatedly, it is clear that the high quality, high flow rate fields which have been the mainstay of Saudi production are now very mature. While production from these fields may be declining, there is still a large remaining resource of lower quality oil that is more difficult to produce. Saudi Arabia may never sustain crude and condensate production of much more than ten million barrels per day, but they do have the resources to support flow rates of half their current level for several decades.

Because production has been limited to well below the theoretical Hubbert profile (fig 1), the large and conservatively exploited initial reserves base of 265 Gb allows for a relatively modest 2% long-term average annual decline. Crucially though, this analysis and the chart presented in figure 1 have no immediate predictive ability with respect to production. This analysis only indicates that reserves are sufficient to support a moderate production level well into the future. In the near-term, Saudi Aramco is engaged in an epic struggle to offset declines in mature fields with new production from several large field re-development projects over the next five years.

Figure 1: Saudi Arabia – Actual Production vs Theoretical (Click to Enlarge)

One interesting interpretation of Figure 1 is that some kind of oil crisis in the 1970′s was inevitable. World consumption and Saudi production was growing at a breathtaking but unsustainable rate. The crises in 1973 and 1979 served to drastically cut consumption and it wasn’t until the Chinese and world demand surge 25 years later that Saudi Arabia again reached its resource and capacity constraints. If they do succeed in regaining higher production levels, it will only ensure that future decline rates are greater than 2%.

OPEC Reserves

Importantly, it is not only Saudi Arabia for which there is evidence that reserves have been grossly overstated. Quoted reserves for the six largest OPEC members, and large upward revisions during the 1980′s in particular, give cause for concern. The International Energy Agency⁵ has supported this interpretation, saying that “the hike in OPEC countries’ estimates of their reserves was driven by negotiations at that time over production quotas, and had little to do with the actual discovery of new reserves.”

More revealing is recent IHS data, in this case specifically for Kuwait⁶ (fig.2). This suggests that Kuwait’s reserves are barely half the 101 billion barrels reported publicly. Further confirmation comes in the IEA’s definitive World Energy Trends 2005 – Middle East and North Africa (MENA)⁷. They estimate remaining proved and probable (2P) reserves in Kuwait (including half share of Neutral Zone) at 54.9 billion barrels from 9 named and two ‘other’ fields. For the UAE, proven and probable reserves (2P) are put at 55.1 billion barrels from 9 named fields and one ‘other’. These estimates for the end of 2004 are sourced from IHS Energy and IEA databases.

Figure 2: Kuwait Reserves – OPEC vs IHS (Click to Enlarge)

It is almost certain that reserves in Iran, Iraq and Venezeula are overstated to a similar degree. Reserves for other OPEC members Algeria, Indonesia, Libya, Nigeria, Qatar and now Angola appear somewhat more realistic, although these are still are not provided with any form of audit or verification that they meet external reporting standards.

Claimed OPEC reserves are overstated by approximately 340 Gb. They are, with a high degree of certainty, rather much closer to 570 billion barrels than the 904 claimed. Combining this with the Oil and Gas Journal’s non-OPEC conventional oil reserves estimate of 280 Gb⁹, yields a global reserves base of 846 billion barrels, well short of the 1140 level assumed.

The implications of this circa 340 billion barrel reserves shortfall for global forecasts of petroleum supply cannot be overstated. With cumulative consumption at 1180 Gb¹⁰ and reserves of less than 850 Gb, we have consumed well over half our conventional oil reserves base.

With those kinds of numbers, peak oil cannot be far away, and exploration and ‘reserves growth’ will not be enough to get us out of the woods.

This article is available as a PDF here.

Try these tags for other relevant articles at The Oil Drum:
Ghawar
Saudi Arabia
OPEC Reserves
Reserves Growth

References:

1. Staniford, S., Depletion Levels in Ghawar. http://www.theoildrum.com/node/2470 (May 16) 2007.
2. Carmalt, S.W. & St. John, B., Giant Oil and Gas Fields, in Harbouty, M.T., ed, Future Petroleum Provinces of the World: AAPG, P.11-53. 1986.
3. Kompanik, G.S. et al., Geologic Modelling for Reservoir Simulation: Hanifa Reservoir, Berri Field, Saudi Arabia. Society of Petroleum Engineers (25580). 1993.
4. Mearns, E (2007) GHAWAR: an estimate of remaining oil reserves and production decline
(Part 2 – results). http://europe.theoildrum.com/node/2494 April 28, 2007.
5. International Energy Agency, World Energy Outlook. 2004.
6. Chew, K. (IHS), Oil Depletion – dealing with the issues. Energy Institute Nov 2006.
7. International Energy Agency, World Energy Trends 2005 – Middle East and North Africa. 2005.
8. Organization of the Petroleum Exporting Countries, Annual Statistical Bulletin. 2005.
9. Oil & Gas Journal, PennWell Corporation, Vol 104 Issue 47, 2006.
10. Jackson, P.M. (Cambridge Energy Research Associates), Peak Oil Theory Could Distort Energy Policy and Debate. SPE Journal of Petroleum Technology Feb 2007.

Press Release from Eat The Suburbs: The Australian co-founder of the permaculture concept David Holmgren has today launched a new global scenario planning website, Future Scenarios: www.FutureScenarios.org.

Holmgren says his future scenarios will help both policy makers and activists come to terms with the end of the era of growth.

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While the end of growth is so unthinkable to many policy makers and economists that they use the term ‘negative-growth’, Holmgren says we are already entering a generations-long era of ‘energy descent.’ We now face less and less available energy each year, coupled with a destabilised climate.

“The simultaneous onset of climate change and the peaking of global oil supply represent unprecedented challenges for human civilisation. Each limits the effective options for responses to the other,” writes Holmgren on www.futurescenarios.org.

Holmgren uses a scenario planning framework to bring to life the likely cultural, political, agricultural and economic implications of peak oil and climate change.

“Scenario planning allows us to use stories about the future as a reference point for imagining how particular strategies and structures might thrive, fail or be transformed,” says Holmgren

Future Scenarios depicts four very different futures. Each is a permutation of mild or destructive climate change, combined with either slow or severe energy declines. Scenarios range from the relatively benign Green Tech to the near catastrophic Lifeboats scenario.

“Many futurists are looking at Facebook, robot pets and other i-fads, whereas David has been studying a much bigger picture. He works from the fundamental resource and environmental constraints, and I’m convinced that he’s got his assumptions right where others have them very wrong. He has followed through with unusual insight, drawing on 30 years of permaculture thinking, which I would say makes him the most important futurist in the world right now,” said Adam Grubb founder of Energy Bulletin (www.energybulletin.net.)

“These aren’t two dimensional nightmarish scenarios designed simply to scare people into environmental action. They are compellingly fleshed out visions of quite plausible alternative futures which delve into energy, politics, agriculture, cultural and even spiritual trends. They help us reconcile our own competing fears and hopes for the future, and to consider the best strategies for adapting to a changing world,” says Grubb.

Holmgren says “we will need resilience and adaptability in the face of radical change.”

‘Energy Descent’

Holmgren coined the term ‘energy descent’ in 2005 as a less negatively loaded way than ‘decline’ or ‘collapse’ for describing a future defined by constantly diminishing energy production.

“I chose the word ‘descent’ because it implies a long and sustained process through which it is possible to survive and even thrive. While energy descent does suggest the demise of globalised industrial civilisation, that process will play out over many decades, if not centuries. For individuals, households, organisations and communities focused on socially and ecologically adaptive design, energy descent is as much an opportunity as an obstacle. Realistic assessment of the larger forces at work in the world helps empower us to better refine our strategies.”

About Permaculture

Permaculture is an environmental design framework modelled on the patterns and relationships found in nature, yielding an abundance of food, fibre and energy for provision of local needs.

About David Holmgren

Holmgren co-wrote the first permaculture text Permaculture One in 1976 with Bill Mollison (published in 1978). With his 2002 book Permaculture: Principles and Pathways Beyond Sustainability David re-emerged from the relative shadows as the leading intellectual force of the permaculture movement. Rob Hopkins, founder of the popular Transition Towns initiatives in the UK, described Principles and Pathways as “the most important book of the last 15 years.”

David, his partner Su Dennett, and their son Oliver live at ‘Melliodora’ a small permaculture demonstration property in central Victoria, Australia where they are self sufficient in fruit, vegetables and animal products and provide most of their own energy needs.

Futher info:

David Holmgren
+61 3 5348 3636
info@holmgren.com.au
www.futurescenarios.org
www.holmgren.com.au