Executive Summary

1. World total liquids production (Fig 1) remains on a peak plateau since 2006 and is forecast to fall off this peak plateau in 2009. Increasing numbers of oil experts are forecasting impending peak production plateaus. According to the International Energy Agency (IEA), the current peak production of 87.2 mbd occurred on January 2008. As long as demand continues increasing then prices will continue increasing.

2. Forecast world crude oil and lease condensate (C&C) production retains its 2005 peak (Fig 2). The forecast to 2100 shows declining C&C production, using a bottom up forecast to 2012 (Fig 3). The forecast to 2012 shows a slight decline to 2009, followed by a 3%/yr decline rate to 2012.

3. World oil discovery rates peaked in 1965 (Fig 4) and production has exceeded discovery for every year since the mid 1980s. Discoverable reserves in giant fields also peaked during the mid 1960s (Fig 5). The time lag between world peak discovery in 1965 and world peak production in 2005 of 40 years is similar to the time lag of 42 years for the USA Lower 48 (Fig 6).

4. World C&C year on year production changes to October 2007 and November 2007 (Figs 7 and show significant declines for Mexico, North Sea and Saudi Arabia and significant increases for Russia, Azerbaijan and Angola. As Russia is likely to be on a production plateau and Saudi Arabia, Kuwait and the UAE have probably passed peak production, the world C&C production will continue to decline slowly.

5. Saudi Arabia retains its 2005 C&C peak (Fig 10), which is the same as the peak year for world C&C (Fig 2). Saudi Arabia C&C production has dropped to 9.0 mbd which is 0.6 mbd less than its peak in 2005. It is now almost a certainty that Saudi Arabia passed peak C&C production of 9.6 mbd in 2005 (Figs 9 and 10).

6. Kuwait retains its 2006 minor C&C peak (Fig 12). Kuwait C&C production has now dropped to 2.5 mbd which is less than its peak in 2006. There is a strong likelihood that Kuwait has passed its minor 2006 peak (Figs 11 and 12). Kuwait’s major peak was 3.3 mbd in 1972.

7. UAE retains its 2006 C&C peak (Fig 14). UAE C&C production has now dropped to 2.6 mbd, adjusted for maintenance, which is just less than its peak in 2006. There is a reasonable likelihood that UAE passed its 2006 peak (Figs 13 and 14).

8. World natural gas plant liquids is forecast to increase due mainly to new OPEC projects (Fig 15). World ethanol and XTL production is forecast to almost double by 2012 (Fig 16). World processing gains are forecast to decline slowly to 2012 (Fig 17).

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Major Changes from the Previous Update Oct 2007

The major changes from the previous update are the inclusion of additional forecast production from the projects listed at Wikipedia Oil Megaprojects and the increase in OPEC production quota by 0.5 mbd starting 1 Nov 2007. There are also a few paragraphs added in section 1 below describing the increased consensus about peak oil by more oil industry experts.

1. World Total Liquids Supply & Demand

Although crude oil & lease condensate (C&C) production is forecast to continue declining, the total liquids supply remains on a plateau until 2009 (Fig 1), due to offsetting production increases from natural gas plant liquids (NGPLs), ethanol and XTL (BTL – biomass to liquids, CTL – coal to liquids and GTL – gas to liquids). The main causes for the end of the total liquids plateau in 2009 (Fig 1) are that the C&C production decline rate accelerates to 3%/yr in 2009 (Fig 3) and the production growth from natural gas plant liquids stalls (Fig 15).

Fig 1 – Total Liquids Supply & Demand to 2012 (bottom up forecast) – click to enlarge

Is future total liquids production likely to exceed the current peak of 87.2 mbd on January 2008? It might be possible but it appears unlikely. North Sea production continues to decline. Mexico’s production is also in decline. Former USSR production might increase by a small amount. Canada’s production should increase slowly but the oil sands are experiencing production constraints and despite claimed reserves of up to 315 Gb (billion barrels), the oil sands will probably produce, at best, a maximum of only 2.5 mbd (million barrels/day). Biofuels production should also continue increasing. Non OPEC total liquids production might increase slowly, assuming that no unexpected disruptions occur.

Increasing Numbers of Oil Experts are Forecasting Impending Peak Production Plateaus

Matt Simmons’ presentation to the Minnesota House of State Representatives, February 4, 2008, shows the current production plateau on slide 29, with a forecast of 69 mbd crude oil and lease condensate by 2012. On January 31, 2008, Kang Wu and Fereidun Fesharaki, of the East-West Center, released a book titled “Asia’s Energy Future: Regional Dynamics and Global Impliciations” which stated that global oil production might increase to 100 or perhaps even 105 mbd somewhere between 2015 and 2020. Jeff Rubin and Peter Buchanan, CIBC World Markets, wrote a report, dated January 10, 2008, which forecasts a peak production plateau of just over 88 mbd from 2011 to 2012. On January 22, 2008, Jeroen van der Veer, CEO of Shell, in an email to all Shell employees, acknowledged the reality of peak plateau when he said that “after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand”. In a similar acknowledgement in November 2007, the CEO of Total, Christophe de Margerie, and the CEO of ConocoPhillips, James Mulva, both stated that supply would not exceed 100 mbd. Colin Campbell, in his November 2007 newsletter also stated the possibility of a peak plateau now, altering his original forecast of a depletion based “Peak in 2010 at 87.3 Mb/d that becomes 90 Mb/d with refinery gain. A depletion-based Peak may not of course be reached if high prices hold down demand, delivering more of a plateau than a peak”.

On October 30, 2007, Shokri Ganem, Libya’s National Oil Corp Chairman, said that supply may not exceed 100 mbd and later, in January 2008, he said that OPEC can do little and that most OPEC countries are producing at capacity. Sadad Al-Husseini, former Saudi Aramco exploration and production head, presented this production forecast at the Oil & Money October 2007 conference which showed a production plateau of crude oil, condensate and natural gas liquids extending from 2009 to 2012 at 83 mbd, followed by a decline. Dr. Werner Zittel and Jorg Schindler, Energy Watch Group, wrote a report, dated October, 2007, which forecasts a historic peak of 81 mbd in 2006 of crude oil, condensate and natural gas liquids. On October 8, 2007, Jim Buckee, retired CEO of Talisman Energy, said that the world is at peak production or close to it. Finally, Chris Skrebowski, editor UK Petroleum Review, said in October 2007, that world total liquids production will reach a peak plateau of 92 mbd during 2010 to 2011 but he adds: “so what my analysis is saying is that we’ve got another 5 to 7 million barrels a day to come if everything works properly”.

Another expert who made great contributions to the awareness of peak oil is Dr. Ali Morteza Samsam-Bakhtiari, a retired director of the National Iranian Oil Co., who regrettably passed away in October 2007. Dr Samsam-Bakhtiari, using his WOCAP model, predicted a 2006 to 2007 peak plateau of 81 to 82 mbd of crude oil, lease condensate and natural gas plant liquids. He also said that “it became clear that the modelling phase of ‘Peak Oil’ had come to an abrupt close and that henceforward ‘Peak Modelling’ should be shelved once and for all”.

As world total liquids production is forecast to decrease to 2012 (Fig 1), two important consequences are likely to occur. First, as demand is forecast to increase, prices are forecast to rise, using short and long run price elasticities, which will force demand downwards to equal supply. Second, the decreased available supply may invoke the IEA Response System for Oil Supply Emergencies. Unexpected supply reductions could trigger oil rationing among the 26 countries which are signatories to this IEA Response System, but unfortunately China, Russia, India and Brazil, which are not signatories, are highly unlikely to agree to the IEA’s rationing method because its rationing basis is by country rather than by person. The resulting tensions, from oil supply shortages, among the signatory and non-signatory countries could lead not only to continued competitive oil bidding, but also to continued conflicts and violence in order to secure vital oil supplies.

2. World Crude Oil & Lease Condensate Production

The largest component of world total liquids production is world C&C production. The first part, 2008 to 2012, of the forecast to 2100 (Fig 2), is created using a bottom up forecast based on over 350 continuously updated regions/projects from 2008 to 2012 (Fig 3). After 2012, two scenarios are shown.

The first scenario, shown by the red line, is based partly on BP reserves data, but large downward revisions are made to OPEC reserves and small upward revisions are made to the reserves of many countries to derive a more accurate estimate of proven and probable reserves. Yet to find C&C reserves are added to this estimate of proven and probable reserves to give world total ultimate recoverable reserves (URR) of 1.85 Tb (trillion barrels) including remaining URR of 0.78 Tb as at end 2007.

The second scenario, shown by the green line, uses Colin Campbell’s URR estimate from his February 2008 newsletter. His URR estimate is equal to 2.23 Tb, excluding natural gas plant liquids. His estimate is higher than the first scenario estimate of 1.85 Tb due to an additional 0.23 Tb URR from the UAE, Iran, Iraq, Kuwait and Saudi Arabia, and higher URR estimates from heavy oil and polar oil. The green line forecast shows what might be possible if the middle east gulf countries really do have the reserves close to what they have claimed, if promised production increases from heavy oil occur and if additional significant polar oil is discovered.

Fig 2 – World Crude Oil & Lease Condensate Production, including OPEC Core, to 2100 – click to enlarge – (the reserves and production of the Neutral Zone are shared equally between Saudi Arabia and Kuwait)

The production from OPEC Core countries of Saudi Arabia, Kuwait and UAE is shown by the blue line and retains its 2005 peak (Fig 2). These three countries are labelled as OPEC Core because these countries have over 50% of proven reserves of OPEC-12 total proven reserves, (according to BP statistics) and produce almost 50% of the OPEC-12 total C&C production. Gately also labelled these countries as core potentially due to similar reasoning. There is a strong correlation between the production from the OPEC Core and the world.

Fig 3 – World Crude Oil & Lease Condensate Production to 2012 (bottom up forecast) – click to enlarge

World C&C production retains its May 2005 peak and is forecast to decline slightly until 2009. The decline rate from early 2009 to 2012 is 3%/year.

3. Peak Production and Peak Discovery Time Lags

Although the forecast production decline rate in Fig 2 appears high, it is a natural time lagged response to the peak year for discoveries as shown in this section. Fig 4 shows the peak discovery year in 1965, followed by a steady decline in the discovery rate. For every year since the mid 1980s, annual production has been greater than annual discoveries. This is not sustainable and it is inevitable that world annual production will start to decline. This timing of peak production and rate of decline is forecast by Fig 2.

Fig 4 – World Discoveries (source ASPO Ireland Newsletter No. 80, August 2007) – click to enlarge

The figure below focuses on giant oil field discoveries and shows a similar shape to the figure above. The number of giant oil fields discovered peaked in the 1960-69 decade and both the number of giant fields and their respective recoverable reserves have declined steadily. The shape of the discovery decline curve below from 1960 to 2006 is similar to the production decline curve (Fig 2) from 2005 to 2100.

Fig 5 – World Discoveries, Giant Oil Fields (source Giant Oil Fields – The Highway to Oil, Fredrik Robelius, March 2007) – click to enlarge

A very good example of the time lag between peak discovery and peak production is the USA (Fig 6). Peak discovery was 1930 and peak production occurred 42 years later in 1972. Fig 4 shows peak discovery for the world occurred in 1965. Fig 3 predicts that peak production occurred in 2005, which is 40 years later than peak discovery, a similar time lag to the USA.

Fig 6 – USA Lower 48 Peak Discovery and Peak Production (source Peak Oil: an Outlook on Crude Oil Depletion, Colin J.Campbell, February 2002) – click to enlarge

4. World Crude Oil & Lease Condensate Production Changes

Year on year production changes, represented by the green bars in Figures 7 and 8 below, show the biggest declines for Mexico, North Sea and Saudi Arabia and the biggest increases for Russia, Azerbaijan and Angola. Angola has many projects which should increase its production capacity but actual crude production rates will be limited to its new OPEC quota of 1.9 mbd. Russia’s mature field production will probably limit Russia’s future production growth.

Month on month changes from Sep 2007 to Oct 2007 (Fig 7), represented by the light blue bars, indicate decreases for Canada, Egypt and Mexico. Over the same time period, Angola, Azerbaijan, Iraq, USA and the North Sea showed good increases.

Fig 7 – World Crude Oil & Lease Condensate Production Changes to October 2007 – click to enlarge

Month on month changes from Oct 2007 to Nov 2007 (Fig showed good increases for Azerbaijan and Saudi Arabia. Production fell for UAE due to significant maintenance. The production drop for Mexico is due mainly to continued geological decline as PEMEX announced that “oil reserves may run out in seven years”. Also from Oct 2007 to Nov 2007, Canadian production remained constant, despite the optimism about oil sands. Russia showed a small decrease in production. Could this mean that Russia’s C&C production is on a slight decline now?

Fig 8 – World Crude Oil & Lease Condensate Production Changes to November 2007 – click to enlarge

World C&C production is dropping, on an annual basis, by about 0.4 mbd (Figs 7 & 8). This is not a high decline rate but given that Russia is probably unable and unwilling to increase production and that Saudi Arabia, Kuwait, the UAE, the North Sea and Mexico are unlikely to reverse their decline rates, the world C&C production rate is forecast to continue its decline (Fig 3).

5. Saudi Arabia Crude Oil & Lease Condensate Production

Saudi Arabia remains a key producer in the world and continually reminds the world of its enormous reserves and surplus production capacity. This paragraph on capacity in IEA’s 12 June 2007 Oil Market Report, page 15, explains Saudi Arabia’s current surplus capacity situation within an OPEC context.

Notional spare capacity stands at 4.0 mb/d, while our measure of effective spare capacity (excluding Indonesia, Iraq, Nigeria and Venezuela) stands at 2.85 mb/d. Although these volumes are physically producible, even this lower figure likely overstates what OPEC could actually shift onto the market given current prices and shortages in refinery upgrading capacity. Heavy, sour Saudi Arabian and Kuwaiti crude accounts for 88% of the effective spare capacity figure. In the absence of substantial discounts, these volumes might struggle to find buyers while sizeable amounts of refinery upgrading capacity remain offline for scheduled and unscheduled maintenance. Readily marketable spare crude capacity may therefore be much lower, and a more accurate reflection of current market tightness.

In other words, this IEA paragraph says that the world has only 0.35 mb/d spare capacity of readily marketable light sweet crude because the spare capacities of 2.20 mb/d from Saudi Arabia and 0.30 mb/d from Kuwait are hard to sell heavy sour crudes. In August 2007, energy analyst Bill Herbert reaffirmed IEA’s views when he said that “even if OPEC decides to open the spigot a bit more, it’s hardly a guarantee prices would stay in check. Most of OPEC’s spare capacity is in heavy sour crude oil, which must be processed in types of refineries that already are running at full capacity. There’s very little ability on the part of the supply system to respond to more demand”. Furthermore, the EIA Short Term Energy Outlook, 7 August 2007 stated that “The low level of surplus OPEC oil production capacity, which is primarily in heavy crude oil, remains a key reason for the continued tight market conditions…Further, the apparent unwillingness by OPEC to use available surplus capacity in the face of rising crude oil prices reduces any downward price impact that additional surplus capacity might have.” Given these statements by the IEA, Herbert and the EIA, the following forecast assumes no effective spare capacity of easily marketable Saudi Arabia crude.

It is also assumed that Saudi Arabia will produce their fields while maintaining the annual depletion rate, which is annual production as a percentage of ultimate recoverable remaining reserves, at less than 5.0%/yr. This should ensure that reservoir damage does not occur due to overproduction from their fields. The figure of 5.0%/yr was selected because it’s slightly more than the annual depletion rate of remaining reserves reaching a previous peak of 4.5%/yr in the third quarter of 2006 (Fig 9), based upon estimated ultimate recoverable reserves (URR) of 185 Gb for Saudi Arabia. This figure of 5.0%/yr could be slightly optimistic. Tariq Shafiq, a petroleum engineer who was Vice President and Executive Director of the Iraq National Oil Company (INOC), said that a depletion rate of 4-5% is well within good reservoir management for large fields. In addition, Colin Campbell stated on page 7 of his ASPO Ireland Newsletter No. 80, August 2007 that “a Depletion Rate of 4.2%…sounds quite reasonable for a mature country like Kuwait, compared for example with 6.5% in the United Kingdom or 4.5% in the US-48”. If a lower forecast annual depletion rate is assumed then Saudi Arabia’s production rate would drop faster than is forecast (Fig 9).

The estimated URR of 185 Gb is equal to 150 Gb of non heavy crude plus 35 Gb of heavy crude. The 35 Gb includes the heavy sour crude fields of Safaniya and Manifa, which is slightly less than Horn’s 2006 estimate of 37 Gb. The non heavy crude URR of 150 Gb includes 75 Gb for Ghawar (light) which is greater than Horn’s estimate of 66 Gb, 13 Gb for Abqaiq (extra light), 9 Gb for Berri (extra light), 6 Gb for half of the Neutral Zone and the remaining URR is assigned to Aramco’s other non heavy crude fields including Marjan, Qatif, Khurais, Zuluf, Shaybah, Abu Safah and Khursaniyah. The estimated URR is based on the information sources about Saudi Arabia, located at the end of this article and the previously mentioned Horn’s 2006 paper. Furthermore, this estimate of URR 186 Gb, from this source, gives good support for the estimated URR of 185 Gb.

The possibility of a lower Saudi Arabia total URR exists. Based on this mathematical technique, this recent research “suggests that the Saudi Qt (or total URR) is only 150 Gb, which in turn suggests that Saudi Arabia is now over 70% depleted, with about 40 Gb in remaining recoverable reserves.” A 2006 research paper, using the same method, estimated a total URR of 160 Gb, as shown in this plot. Another source of oil reserves, prior to nationalization of Saudi Aramco in 1980, is a report titled “Critical Factors Affecting Saudi Arabia’s Oil Decisions”, published by the US General Accounting Office in 1978. As referenced on page 72 of Twilight in the Desert, this report stated that the remaining proven reserves as at the end of 1976 was 110 Gb with 70 Gb in the four super giants of Ghawar, Safaniya, Abqaiq and Berri. Cumulative production from these four giant fields was 26 Gb and cumulative production for all Saudi Arabia was 29 Gb. Thus, total proven reserves (produced and remaining) at the end of 1976 was equal to 139 Gb (29 Gb plus 110 Gb), of which 96 Gb (26 Gb plus 70 Gb) was attributable to the four super giants and 43 Gb (3 Gb plus 40 Gb) was attributable to the rest of the fields. This figure of 139 Gb does not include probable reserves, unlike total URR, and is less than the total URR estimates of 150 Gb and 160 Gb from the two research sources above. Allowing for the inclusion of probable reserves, heavy oil reserve upgrades and only small discoveries since the last giant field Shaybah was found in 1968, an appreciation from 139 Gb to the total URR of 185 Gb appears reasonable.

As of December 2007, Aramco’s total cumulative C&C production was 113 Gb, being 61% of the URR 185 Gb. Over half of the 113 Gb has been produced from the super giant Ghawar. Abqaiq, Berri and Safaniya have also been significant producers. Aramco has increased their production during this winter to 9 mbd according to recent OPEC quota increases. Aramco has produced over half of the estimated URR and the production curve is forecast to follow a typical post peak decline curve, shown by the red line in Fig 9. Unfortunately, the new production capacities from AFK, Shaybah expansion, Nuayyim and Khurais are not enough to offset decline from existing fields. Aramco has probably scheduled Manifa last because it will produce heavy oil which is less marketable than lighter grades.

Fig 9 – Saudi Arabia Crude Oil & Lease Condensate Production to 2020 (bottom up forecast) – click to enlarge

Figs 9 and 10 have been updated for Wikipedia Oil Megaprojects.. Although Khurais is forecast to produce 1.1 mbd, Matt Simmons doubts that Khurais will produce 0.8 mbd. This report stated that the “Khurais field west of the giant Ghawar field could potentially increase Saudi production by a further 800,000 b/d” and another report made a similar statement “Another potential project, at the Khurais field, could increase Saudi production capacity by 800,000 bbl/d”. These statements indicate that the forecast production of 1.1 mbd from Khurais might be too high.

There are three forecast scenarios from 2008 to 2080, shown in Fig 10. The solid red line shows a “Do Nothing” forecast scenario. This represents a production decline rate of 8%/yr which is equivalent to ultimate recoverable reserves of 148 Gb (billion barrels). This scenario is highly unlikely but serves as a useful lower bound for the forecast production profile. The “New Peak?” dashed red line represents a scenario for which another peak is attained. However, the inset in the chart explains that another 1.75 mbd would be required from other projects and infill drilling. This is highly unlikely and predicts that a peak in 2005 has passed. The “Bottom Up” dark blue line in Fig 10 represents the most likely scenario and includes the bottom up forecast to 2020 from Fig 9, followed by an annual production decline rate of 4.5%/yr.

Fig 10 – Saudi Arabia Crude Oil & Lease Condensate Production to 2080 – click to enlarge

Saudi Arabia has never directly admitted that it has passed peak C&C production, but in August 2004 a former OPEC president, Purnomo Yusgiantoro, admitted that “oil prices were at crazy levels, but that OPEC was powerless to cool the market…There is no more supply”. Thus, based on Yusgiantoro’s statement, in August 2004, Saudi Arabia’s C&C production was at maximum capacity of 9.5 mbd, up by a significant 1.1 mbd from April 2004 (EIA). Furthermore, on 11 April 2006, according to this source and requoted here, Platts quoted a Saudi Aramco spokesman saying that “Saudi Aramco’s mature crude oil fields are expected to decline at a gross average rate of 8%/yr without additional maintenance and drilling” and that “This maintain potential drilling in mature fields combined with a multitude of remedial actions and the development of new fields, with long plateau lives, lowers the composite decline rate of producing fields to around 2%.” Therefore, as of April 2006, Aramco’s crude oil production was forecast by this Aramco spokesman to decline at 2%/yr which means that Saudi Arabia has passed peak crude oil production.

These three sources provide additional information about Saudi Arabia’s production decline rates. Aramco Senior Vice President Abdullah Saif admitted that “One challenge for the Saudis in achieving this objective is that their existing fields sustain 5 percent-12 percent annual “decline rates,” (as reported in Petroleum Intelligence Weekly and the International Oil Daily) meaning that the country needs around 500,000-1 million bbl/d in new capacity each year just to compensate”. The Schlumberger CEO said that “the industry is dealing with a phenomenon that is exaggerated by the lack of investment over the past 18 years. This phenomenon is the decline rate for the older reservoirs that form the backbone of the world’s oil production, both in and out of OPEC. An accurate average decline rate is hard to estimate, but an overall figure of 8% is not an unreasonable assumption.” The EIA also stated that a “challenge for the Saudis in achieving their strategic vision to add production capacity is that their existing fields sustain, on average, 6 to 8 percent annual “decline rates” (as reported by Platts Oilgram) in existing fields, meaning that the country needs around 700,000 bbl/d in additional capacity each year just to compensate for natural decline.”

Saudi Arabia C&C production was 9.5 mbd in August 2004. According to the previous EIA statement, Saudi Arabia needs 0.7 mbd additional capacity each year just to compensate for natural decline. Therefore, three years later, by August 2007, additional capacity of 2.1 mbd (3*0.7 mbd) would have been required just to compensate for natural decline. Since August 2004 there was a total capacity addition of only 1.1 mbd from these two projects as stated by Saudi Aramco’s Press Kit on their website. In late 2004, Qatif (including Abu Safah) began operations with production capacity of 0.8 mbd and in early 2006, 0.3 mbd capacity from Haradh III, 0.3 mbd (Fig 9), which leaves a shortfall of 1.0 mbd. This implies that Saudi production in August 2007 is 8.5 mbd, 1.0 mbd less than the 9.5 mbd production in August 2004, excluding capacity additions from infill drilling. Accordingly, this number of 8.5 mbd is slightly less than the number of 8.6 mbd for July 2007, from the EIA Short Term Energy Outlook, Table 3a, 7 August 2007. Based on the quotes and statements in this and the previous two paragraphs, it is highly unlikely that capacity additions from new projects, including infill drilling, are sufficient to compensate for existing production decline, and consequently the “Bottom Up” scenario in Fig 10 remains the most likely scenario.

6. Kuwait Crude Oil & Lease Condensate Production

It is assumed that Kuwait will produce their fields while maintaining the annual depletion rate below 4.5% which is slightly higher than its peak depletion rate of 4.1% on Oct 2006. The URR of Kuwait, including its share of the Neutral Zone, is assumed to be 60 Gb. This is based partly on Colin Campbell’s August 2007 newsletter which states that the balance of evidence points to a total URR of 53 Gb for Kuwait only (excluding the Neutral Zone – NZ). Adding in 6 Gb for half the Neutral Zone and rounding up gives a total URR of 60 Gb. This research estimates Kuwait URR to be 75 Gb, but if the most recent data point is treated as an outlier then the URR could drop to about 65 Gb. Furthermore, in January 2006, this surprise downgrade of remaining proven reserves to only 24 Gb, 25% of the BP Annual Statistics official figures of 99 Gb, with 15 Gb in its biggest field Burgan, adds further support to a URR of 60 Gb. The accompanying reserves data table shows the total produced and remaining proven reserves to be 60.2 Gb, including the NZ. This figure may indicate that the above URR might be too low, but given the insignificant new scheduled production capacity by KOC (Fig 11), the URR of 60 Gb will be assumed for forecasting the production rates.

As of December 2007, Kuwait’s total cumulative C&C production was 38 Gb, being 63% of the URR 60 Gb. Over half of the 60 Gb has been produced from the super giant Burgan. It is assumed that Kuwait will increase their production during this winter according to recent OPEC quota increases. Kuwait has produced over half of the estimated URR and the production curve is forecast to follow a typical post peak decline curve, shown by the red line in Fig 11. Unfortunately, the insignificant new scheduled production capacities from Project Kuwait Phase 1 and Sabriya GC-24 are not enough to offset decline from existing fields.

Fig 11 – Kuwait Crude Oil & Lease Condensate Production to 2020 (bottom up forecast) – click to enlarge

There are only two new projects shown in Fig 11, Project Kuwait Phase 1 and Sabriya GC-24, according to Wikipedia Oil Megaprojects. Project Kuwait, costing $US8.5 billion, which has been discussed in Kuwaiti parliament for ten years has still not been officially approved as of February 5, 2008. This extensive delay probably means that Project Kuwait’s key assets are difficult reservoirs similar to heavy oil which will comprise a large part of Kuwait’s future oil production.

The unsubstantiated production targets of the Kuwait Oil Company (KOC) are partly explained in their publication, The Kuwaiti Digest, on KOC’s website. The Jan-Mar 2006 issue stated that the KOC’s production target is 4 mbd, up 1.5 mbd from their current 2.5 mbd production at that time. However, the only significant project mentioned is the $US8.5 billion Project Kuwait which aims to raise production by only 0.37 mbd, over a 20 year period, which is small relative to the required 1.5 mbd increase. The Jul-Sep 2007 issue stated that “There may be surprises for our general readers – that we cannot reach our 4 million barrels per day strategy for 2020 without unlocking the potential partnerships of International Oil Companies (IOC).” In other words, the KOC is struggling to increase their output without assistance from the IOCs. However, even if an agreement can be made with the IOCs to start Project Kuwait and identify other projects, the time to first oil could be several years which means that decline rate in Fig 11 may only be a little less than forecast and that the minor peak of 2006 would not be exceeded.

There are three forecast scenarios shown below. The solid red line shows a “Do Nothing” forecast representing an equivalent URR of 53 Gb, which serves as a lower bound. The “New Peak?” dashed red line represents a scenario for which another minor peak is attained. However, the inset in the chart explains that at least another 0.49 mbd would be required from other projects and infill drilling. This is highly unlikely and predicts that a minor peak in 2006 has passed. The “Bottom Up” dark blue line in Fig 12 represents the most likely scenario and includes the bottom up forecast to 2020 from Fig 11, followed by an annual production decline rate of 4.5%/yr.

Fig 12 – Kuwait Crude Oil & Lease Condensate Production to 2080 – click to enlarge

Like Saudi Arabia, Kuwait has never directly admitted that it has passed peak C&C production. However, in November 2005, the Kuwait Oil Company admitted that Burgan, Kuwait’s biggest field and the world’s second largest, had passed peak. This admission is further supported by EIA data showing that Kuwait C&C production fell off a 2.6 mbd peak plateau in February 2006. As Burgan is Kuwait’s largest field, comprising at least 60% of the total URR, the Kuwait Oil Company admission provides strong evidence for Kuwait having passed its minor peak C&C production in 2006.

7. UAE Crude Oil & Lease Condensate Production

It is assumed that UAE will produce their fields while maintaining the annual depletion rate below 5.0% which is the same as its peak depletion rate of 5.0% on Oct 2007. The URR of UAE is assumed to be 45 Gb which is between the two following estimates. This chart predicts that the total URR is just over 43 Gb. Page 49 of this MIT source from August 1977 stated that the URR of Abu Dhabi, which holds almost all the oil of the UAE, was 49 Gb.

As of December 2007, UAE’s total cumulative C&C production was 26 Gb, being 57% of the URR 45 Gb. The drop in November 2007 was due to previously scheduled maintenance. UAE has produced over half of the assumed URR and the production curve is forecast to follow a typical post peak decline curve, shown by the red line in Fig 13. Unfortunately, the new scheduled production capacities do not start until 2009 and are not enough to offset decline from existing fields.

Fig 13 – UAE Crude Oil & Lease Condensate Production to 2020 (bottom up forecast) – click to enlarge

There are three forecast scenarios shown below. The solid red line shows a “Do Nothing” forecast representing an equivalent URR of 40 Gb, which serves as a lower bound. The “New Peak?” dashed red line represents a scenario for which another peak is attained. However, the inset in the chart explains that at least another 0.23 mbd would be required from other projects and infill drilling. This is highly unlikely and predicts that the peak in 2006 has passed. The “Bottom Up” dark blue line in Fig 14 represents the most likely scenario and includes the bottom up forecast to 2020 from Fig 13, followed by an annual production decline rate of 5.0%/yr.

Fig 14 – UAE Crude Oil & Lease Condensate Production to 2080 – click to enlarge

Also like Saudi Arabia, UAE has never directly admitted that it has passed peak C&C production. The scheduled maintenance in November 2007, reducing production by 0.6 mbd, may only serve to ensure that production remains at just over 2.5 mbd for 2008, as there has been no disclosure by UAE about the impact of this maintenance on future production rates. As UAE does not have any projects scheduled until 2009, it is likely that UAE has passed its peak in 2006.

8. Other Components of Total Liquids Production

Natural gas plant liquids show an increase in production due to OPEC projects from Saudi Arabia, Algeria, Iran and Qatar. Saudi Aramco’s most recent project schedule, released in June 2007, shows two significant NGPL projects to be completed by the middle of 2008: Hawiyah at 318,000 barrels/day and Khursaniyah at 290,000 barrels/day.

Fig 15 – World Natural Gas Plant Liquids Production to 2012 (bottom up forecast) – click to enlarge

Ethanol and XTL (BTL, CTL and GTL) production is forecast to almost double by 2012. Unfortunately, the increased production of government subsidised corn based ethanol in the USA is increasing the prices of many other food products.

Fig 16 – World Ethanol & XTL Production to 2012 (bottom up forecast) – click to enlarge

Processing gains are defined by the EIA as “The volumetric amount by which total output is greater than input for a given period of time. This difference is due to the processing of crude oil into products which, in total, have a lower specific gravity than the crude oil processed.” These gains are forecast to decline slowly based on the decline in C&C (Fig 3).

Fig 17 – World Processing Gains to 2012 (bottom up forecast) – click to enlarge

9. Additional Information Sources

For more forecasts please refer to this article by Khebab, Peak Oil Update – December 2007: Production Forecasts and EIA Oil Production Numbers and to Peak Oil Media Redux by Prof Goose, including this lecture by Dr. Albert Bartlett.

Further articles about Saudi Arabia, Kuwait and UAE:

by Stuart Staniford

• Satellite O’er the Desert
• Saudi Arabia and Gas Prices
• Depletion Levels in Ghawar
• The Status of North Ghawar
• Further Saudi Arabia Discussions
• Water in the Gas Tank
• A Nosedive Toward the Desert
• Saudi Arabian oil declines 8% in 2006
• What would we have predicted for Kuwait?

by Euan Mearns

• Ghawar reserves update and revisions (1)
• GHAWAR: an estimate of remaining oil reserves and production decline (Part 2 – results)
• GHAWAR: an estimate of remaining oil reserves and production decline (Part 1 – background and methodology)
• Saudi production laid bare
• Saudi Arabia and that $1000 bet
• IHS Data Suggest Kuwaiti and Global Proved Oil Reserves Significantly Lower Than BP Estimates

by Gail the Actuary

• President Bush Questions Saudi Ability to Raise Oil Supply

by Jerome a Paris

• Saudis officially happy with $100 oil

by Heading Out

• Another look at the Kingdom of Saudi Arabia
• Simple mathematics – The Saudi reserves, GOSPs and water injection
• Of Oil Supply trains and a thought on Ain Dar

by Khebab

• Saudi Arabia: An Attempt to Link Oil Discoveries, Proven Reserves and Production Data
• The Hubbert Linearization Applied on Ghawar
• An Attempt to Apply The Parabolic Fractal Law to Saudi Arabia

by Ace

• World Oil Forecasts, including Saudi Arabia, Kuwait and the UAE – Update Oct 2007
• Saudi Arabia’s Reserve “Depletion Rates” provide Strong Evidence to Support Total Reserves of 175 Gb with only 65 Gb Remaining
• Further Evidence of Saudi Arabia’s Oil Production Decline

http://biz.yahoo.com/ap/080212/venezuela_us_oil.html?.v=9

CARACAS, Venezuela (AP) — Venezuela’s state oil company said Tuesday that it has stopped selling crude to Exxon Mobil Corp. in response to the U.S. oil company’s drive to use the courts to seize billions of dollars in Venezuelan assets.

Exxon Mobil is locked in a dispute over the nationalization of its oil ventures in Venezuela that has led President Hugo Chavez to threaten to cut off all Venezuelan oil supplies to the United States. Venezuela is the United States’ fourth largest oil supplier.

Have at it.

We found this video over at Kerry Trueman’s blog, TakePart. Words under the fold.

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“Gasoline,” from Sheryl Crow’s just-released Album “Detours,” is set in 2017, and foresees a nightmarish future when the world runs out of gas:

It was the summer of the riots

And London sat in sweltering heat

And the gangs of Mini Coopers

Took the battle to the streets

But when the creed was handed down

For no more trucks and no more cars

They threw cans of petrol through the windows at Scotland Yard…

…When the Mounties stormed the palace of the Saudi family

They held them up for ransom

Without disturbing their high tea

But their getaway was shaky

They stalled in the Riyadh streets

Cause you can’t make it very far

When your tank is on empty

Crow’s song sends the message that we’ve built our whole way of life on a shaky foundation that’s bound to crack when we run out of gas. Towards the end of “Gasoline,” she sings: I’ve got a message and a megaphone, and I’ll scream it to the death…”

Will a post-petroleum scenario set to music get more Americans reflecting on the fact that there’s only so much oil in the ground? No doubt someone, somewhere, right now, is sitting in their car, stuck in traffic, grooving to the strains of “Gasoline.” I hope it sinks in, and makes a stain.

This is Part 2 of my rewrite of my earlier post relating to curriculum for a science peak oil course. The earlier version can be found here. Part 1 can be found here.

Part 2 has been substantially rewritten. One theme is energy, and why energy is important to our standard of living. I try to compare the energy in oil to the energy in food. To make the comparison more understandable, I convert energy to kilocalories, since most people are familiar with calories in food. I also point out the errors of economists, both in the text and in the discussion questions at the end.

Another theme is the special characteristics of oil, and why oil is valued as a liquid fuel. I think we are sometimes kind of fuzzy in our thinking about substitutes for liquid fuel. We don’t think about our built infrastructure, and just assume electricity can be substituted for oil when it really is at best a very long-term alternative. I discuss various alternatives including battery-operated cars, hydrogen, and conservation. The two sections relating to corn ethanol could probably be a post of their own.

I also talk about the impact of oil on prices. I make the point that big increases in petroleum prices are likely, with only a small shortage of oil. I also point our that food prices are likely to increase, partly because of the use of petroleum for food production, and partly because corn for ethanol competes with food for land use.

I made a small change to the section on actions young people can take. I also added some discussion questions at the end.
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1. Why is petroleum so highly valued?

The main reason that petroleum is highly valued is for its energy content. If petroleum is burned, it can do work that makes our lives easier. For example it can be used to power an automobile or an airplane. We eat food to give us energy that allows us to do work of various kinds. In many ways, petroleum is the equivalent of food for many types of mechanical objects. For example, petroleum allows us to drive a car, and to do the work of transporting our luggage and ourselves. If we didn’t have petroleum, we would have to do the work ourselves – walk and carry our own luggage.

Another reason petroleum is valued is for all the things that can be created from the petroleum itself, without burning it. Final products include fabrics, plastics, drugs, herbicides, insecticides, and much more. At some point, we may decide oil is too valuable to burn. These products are very valuable, and it would be difficult to find replacements.

2. What is the relationship between energy use and standard of living?

There is a close tie between energy use and standard of living. Energy use gives us mechanical slaves that can do much work that we could do ourselves, but would take much longer. For example, mechanical equipment is used to plant and harvest crops, and to wash and package the food. Trucks are used to transport food to market. We could do many of these steps ourselves, by digging in the ground, picking the crops ourselves, and walking to market with the produce, but it would take much more of our own physical work.

Many economists dismiss the close tie between energy and standard of living. They say that energy costs are only a small portion of total costs, so energy is not very important. This reasoning is not correct. If there is a shortage of petroleum, it is in some ways analogous to a shortage of food. The real problem is not that we have to pay more; it is that we have to get along with less. If our diet were reduced from 2,000 calories a day to 1,900, it would make a difference to our lives. If the economy suddenly experiences a shortfall in petroleum products, fewer goods can be transported to market, and someone will have to do without a product or service that they would otherwise have had.

Robert Ayers and Benjamin Warr showed the close relationship between energy use and standard of living, disproving the standard belief of economists. In particular, they showed that there is a very strong tie between energy use, including the more efficient use of energy, and economic growth. http://www.iea.org/Textbase/work/2004/eewp/Ayres-paper1.pdf

3. Why is petroleum more highly valued than other forms of energy?

There are many reasons:

a. Its abundance. Petroleum is the largest energy source for the United States, comprising 40% of our energy use. Coal and natural gas are each a little over half as big (23%). The new alternatives are tiny in comparison.

b. The fact that it is a liquid. Liquids are easy to transport and store. Imagine filling your fuel tank with coal!

c. Its high level of concentration. Those of us who have done cooking or counted calories know that oils have a lot more calories for the same volume than other foods. It is the same way with fuel. Gasoline has 115,000 Btu per gallon, or in terms we are more familiar with, 29,000 calories (of the type you eat in food –- actually kilocalories) per gallon. Ethanol, which is equivalent to alcohol in alcoholic beverages, has only two-thirds as many calories (that is, energy) per gallon.

d. Its low price. The reason oil has historically been inexpensive is that it takes a relatively small amount of resources to extract oil. In the early days of production, it took roughly the energy of one barrel of oil, plus a few other inputs (human labor and iron ore) to extract 100 barrels of oil. Even recently, it has taken as little as the equivalent as 15 barrels of oil (plus human labor and a few other inputs) to produce 100 barrels of oil.

e. Very favorable energy balance. This is just the flip side of Item d, oil’s low price. If it only takes one barrel of oil to produce 100 barrels of oil, a small investment can create a huge amount of energy. Even if it takes 15 barrels of oil to produce 100 barrels of oil, there is still a very favorable return. This extra energy benefits society in many ways. It gives us the extra energy we need to build roads and malls and better our lifestyle.

f. Built Infrastructure. Nearly all of the cars, trucks, airplanes, and farm equipment currently in use were designed to burn oil products. While theoretically they could be replaced, this is a huge sunk cost. It would require technical innovation, a large investment of fuel and other resources, plus a timeframe of thirty or more years to convert to a new base.

g. Non-intermittent supply. At least historically, the supply of oil has been there, so that we could depend on it. We didn’t have to worry whether the wind was blowing, or a cloud was covering the sun.

4. What are petroleum’s disadvantages?

a. Not renewable. The supply is depleting. Decline may begin within a few years.

b. Not environmentally friendly. There are problems in three different areas:

Global warming gases. Oil is only 80% as bad as coal in terms of the amount of carbon dioxide formed per unit of energy, but 40% worse than natural gas. Because we use so much oil, total carbon dioxide is more from oil than from coal or natural gas.

Air pollution. Smog, airborne particulate matter, and some carcinogens are the indirect result of the burning of petroleum.

Local environmental damage. Spills. Pollution problems particularly for Canadian oil sands, where much water is required for extraction. http://www.commondreams.org/archive/2008/01/10/6304/

5. How are oil and gasoline priced?

Oil is priced based on supply and demand. If there is not sufficient oil for everyone who wants it, the price increases until some would-be buyers are priced out of the market or an alternative appears. Additionally, the price must be high enough to cover the cost of extraction of even recently discovered oil. If the price drops too low, or it the likelihood of profit is too low because of punitive taxation, oil companies will discontinue their attempts to produce more oil.

Prices tend to “shoot up” if there is a shortage oil or gasoline, because people are unwilling to go without, and substitutes are very limited. A rough estimate is that 1% shortfall in supply will result in a 17% increase in gasoline prices, and a 2% shortfall will result in a 33% increase in prices. (This is based on a shot-term price elasticity of demand of .06. See http://www.cbo.gov/ftpdocs/88xx/doc8893/01-14-GasolinePrices.pdf )

The price of gasoline is fairly closely related to the price of oil, plus the additional costs involved. One US Energy Information Administration government website shows this relationship:

6. How does corn-based ethanol compare to petroleum as a solution to our energy needs?

Corn-based ethanol is a very poor substitute for petroleum. Actually, it is only, at best, a substitute for gasoline. Other petroleum products, such as diesel, lubricating oil, and asphalt require different types of substitutes.

The major problems with ethanol from corn are

a. Not scalable. A very large amount of land is required to produce a small amount of fuel. In 2007, over 20% of America’s corn was devoted to ethanol, but this provided only the energy equivalent of 3% of our gasoline use (or 1.1% of our petroleum use). More than doubling this will be very difficult.

b. Causes food prices increases. Competition of corn for land raises food prices. We end up paying a second time for corn ethanol through higher food prices.

c. Causes fertilizer shortages. Corn uses a lot of fertilizer. Fertilizer is made from natural gas and mostly imported. Fertilizer prices are now double what they were a year ago. The situation may get worse in future years and lead to shortages of fertilizer for food crops.

d. Environmental impacts as bad as gasoline (or worse). There are problems in several areas. Ethanol produces more global warming gasses than gasoline, according to recent studies. Older studies say that ethanol might produce slightly less global warming gasses than gasoline, but even this is not much help. http://www.rsc.org/chemistryworld/News/2007/September/21090701.asp http://www.independent.co.uk/environment/climate-change/biofuels-make-cl…

A Stanford study says that air pollution is also worse than with gasoline. Ozone, which causes smog, is likely to be worse with ethanol than gasoline. Ethanol decreases some carcinogens, but increases others. http://news-service.stanford.edu/news/2007/april18/ethanol-041807.html

The planting of corn also has negative environmental impacts, including aquifer depletion, topsoil erosion, and fertilizer runoff. These are especially problems if expansion of corn acreage means that corn is planted in hilly or arid locations where it would not usually be planted.

e. Energy intensive. Nearly as much energy must be used to make ethanol as is gotten back in return, so we are mostly recycling scarce fuels. Ethanol is not like petroleum, which has a positive energy balance to benefit our standard of living. If corn ethanol replaces petroleum, the impact on standard of living is likely to be negative. (See Item 3e)

f. Poor fit with petroleum system. At most 10% ethanol can be used in gasoline, without causing corrosion, unless autos are especially modified. Ethanol cannot be transported by pipeline, so costly and complex special arrangements must be made.

g. Less energy per gallon than oil. Ethanol has only about two-thirds the energy (calories) of gasoline.

h. Summer gasoline price run-up. Adding ethanol to gasoline makes gasoline evaporate at lower temperatures. To counter this, the fraction of gasoline that evaporates most easily (molecules with 4 or 5 carbon atoms, rather than 6 to 10 carbon molecules) must be removed from the gasoline mixture. Removing this portion of the gasoline reduces supply in the summer, and increases prices.

i. Drought sensitive. Supply depends on good weather in growing regions. http://collinpeterson.house.gov/PDF/ethanol.pdf

j. Expensive. Requires subsidies to be cost-competitive. Subsidies raise tax levels. Even with subsidies, ethanol’s cost is often higher than that of gasoline.

7. Why is ethanol so popular?

The primary reason ethanol is popular is because it makes legislators look like they are doing something about reducing imports of gasoline. People do not realize that the benefit is tiny at best, and offset by many other problems.

The use of corn ethanol was expanded before people had a chance to learn its real-world problems. Many continue to support it because they believe it will be a “bridge” to better second generation fuels, such as cellulosic ethanol.

Corn ethanol also provides income to investors in biofuel refineries and jobs in rural areas. The offsetting costs of subsidies and higher food prices are far enough removed that people are not aware of them.

Car manufacturers like ethanol also because of a loophole that allows them to get credit for cars with higher mileage than they really have. Because of this, car manufacturers can build more gas-guzzlers than they would otherwise and still meet mileage requirements.

Ethanol’s use was expanded in 2005 and 2006 because clean air laws required the use of an additive called an “oxygenate”. The previous oxygenate, MTBE, had been found to be unsatisfactory. A number of people have raised the question as to whether oxygenates are really needed any more. Engines manufactured since 1994 have substantially reduced tailpipe emissions, so that an oxygenate may not to be needed.
http://www.foxnews.com/story/0,2933,104259,00.html

8. What other possibilities are there as a replacement for oil as a liquid fuel?

Some other biofuel possibilities include the following:

a. Biodiesel from rapeseed. This is equivalent to what we in the US would call “canola oil”. Use of farmland for nonfood items is likely to drive up food costs. Heavy user of fertilizer. Has somewhat better energy balance than corn-ethanol. Mostly produced in Europe.

b. Cellulosic ethanol. Can be made experimentally, but isn’t yet commercially viable. Would be made from non-food bio-products such as wood, switchgrass, and corn stalks. Likely to be more energy efficient than corn ethanol, and cause less pressure on land use. Most methods are not economic at this time, but one approach claims better success.

Larger potential volume than corn ethanol, but still would not replace more than 20% of petroleum use. Cellulosic ethanol will compete with electricity generation for the use of the same biomass. Some analyses indicate that cellulosic ethanol is not the best use for biomass. http://www.coskataenergy.com/process.html http://www.technologyreview.com/Energy/19842/ (Requires free registraton)

c. Biodiesel from left-over oil. Can be made from leftover vegetable oil or from animal fat. Energy efficient, but total volume likely to be small.

d. Ethanol from sugar cane. Not cost efficient in US; Brazil makes low-cost product with much hand labor. Brazilian product is very energy efficient, but has human rights issues for laborers. Relatively small amount available for export. Would be another source of imported fuel.

e. Biodiesel from palm oil. Also made from other tree fruits. Often grown on forest land that has been cleared for this purpose, so has very adverse environmental impacts. Often competes with food use for oil. Would be another source of imported fuel.

f. Biodiesel from algae. Under investigation, but no one has found a way to do this in a commercially viable way yet. Requires little land use.

Besides biofuel approaches, there are also fossil fuel approaches:

a. Coal to liquid. Process to convert coal to a petroleum substitute was developed many years ago. Method is quite energy intensive. Has much worse carbon dioxide impact than petroleum. Probably less expensive than most biofuels. Several plants now being planned.

b. Natural gas to liquid. It is theoretically possible to convert natural gas to a liquid fuel, but it is very expensive and not much used. Cars can also be adapted to run on compressed natural gas. Natural gas solutions may work in some parts of the world, but supply is not adequate in North America, and imports are very limited.

9. How about solutions such as wind turbines, solar voltaic panels, battery operated cars, and hydrogen powered cars?

None of these are liquid fuels. They don’t directly solve our need for something to keep are current fleet of vehicles and other devices using petroleum products operating. It is possible that over the very long term they can be part of the solution, but they cannot keep our current fleet on the road and our airplanes in the air.

Wind turbines and solar voltaic panels really relate to our need for better sources of electricity. Electrical supply is likely also to be a problem in the future, but we have not attempted to address the electrical supply issue in this document.

Battery-powered cars are a worthwhile idea, but there are some obstacles that need to be overcome. http://www.evworld.com/

a. Common materials. Batteries that require rare minerals will not scale up to the volume needed for millions of cars. If we do not require too long a range, more options may be available. It is possible that ultra-capacitors may be part of the solution. http://www.nrel.gov/vehiclesandfuels/energystorage/ultracapacitors.html

b. Long time frame. Even if technology were fully perfected today, it would still take 15 to 20 years to get factories built, and the current fleet of cars replaced. Peak oil may delay this further.

c. Electricity issues. We assume that adequate excess electricity will be available to charge the cars 20 or 30 years from now, but that may not be the case. It would be ideal if a way could be found to use solar power to charge the cars. http://www.theoildrum.com/node/3316 http://jalopnik.com/335956/austrailian-solar-bus-is-mighty-green-mighty-…

Hydrogen powered cars seem to be much farther in the future than battery powered cars. Hydrogen is not a fuel source; it is more like a battery. Somehow, we would have to produce the huge amount of energy that would be necessary to separate the hydrogen from the compounds in which it is found. Besides having to build new cars, we would have to build a new pipeline network, a new set of filling stations, and the infrastructure to make this work. The whole process would be extremely expensive and likely require over 30 years.

10. Will biofuels and the other alternatives be sufficient to compensate for the petroleum shortage?

No, not based on what we know today. If nothing else, there will be a time-gap before the transition to alternatives can be made. There are a lot of alternatives under consideration, but none, by itself, seems likely to solve our need for a liquid fuel substitute in the timeframe in which it is needed.

Conservation will need to be an important part of the solution to our liquid fuel shortage. Better use of what we have, like carpooling, is one possibility. Another is electrified rail transportation. Streetcars were used years ago in many places, and could be built again, without developing new technology. Existing rail systems could be enhanced to permit more freight to be transported by rail. In some cases, sails can be added to boats to reduce fuel needs. If need be, personal vehicles can be made much smaller than we drive today, perhaps akin to golf carts or electric bicycles. http://en.wikipedia.org/wiki/Tram

11. Besides higher oil prices, what types of impacts can we expect from peak oil?

Increasing food prices. One reason is that oil is used in planting, harvesting, packaging, and transporting food. Another reason is that growing corn for ethanol will compete with other uses of land, and drive food prices up. Also, if there are fertilizer shortages, yields may be lower.

More defaults on loans can be expected, as food and petroleum prices increase. Families will have less money left over to pay mortgages and credit card debt.

Pre-peak impacts. Increases in oil and food prices are likely to begin even before peak hits, and seem to be happening already. All that is needed is a gap between oil supply and demand (see Part 1, Figure 5), not an actual decline. Ethanol-induced land shortages also contribute to the food price increases. Higher oil and food prices may be contributing to current US financial problems.

Reduced discretionary spending. People will spend less on things like restaurant food and out-of-town vacations.

Reduced economic growth or actual decline appears likely.

12. What are the implications of the likely shortfall in oil production on career opportunities?

Careers in fields that are very petroleum-dependent may not be good choices. For example, there will likely be fewer airline pilots in 2040 than there are today.

If there is less petroleum, people are likely to be interested in having stores nearby that they can walk to. Thus, there may be an opportunity for starting a small store in your own neighborhood, or developing a neighborhood clinic.

Recycled products, especially those using petroleum inputs, are also likely to become more important. There may be careers in buying and selling these products.

There is clearly a need for more scientist and engineers in many energy-related fields. We need to find better ways to extract the oil that is available, and we need to develop more fuel-efficient vehicles. We need to find more and better petroleum alternatives, and to find ways to scale up these alternatives to the quantities needed as replacements for petroleum products.

13. Are there any actions we should take?

These are several ideas:

a. When buying a car, purchase the smallest, most fuel-efficient model you can find.

b. Consider sharing rides with someone else who is commuting in the same general direction, or take public transportation.

c. Make greater use of work-at-home programs and distance learning programs. Or live in a dorm.

d. Move closer to work or school.

e. When distances are short, walk or ride a bicycle, rather than drive.

f. Use recycling, especially for petroleum-based products like plastic. Other recycling is also helpful from a general energy-saving perspective, but not necessarily from a petroleum-saving perspective.

g. Avoid fruits and vegetables that have been flown to the United States from around the world. These tend to be quite expensive.

h. Reduce trips taken to distant locations, whether by air or automobile.

One idea which looks at the shortfall in a different way is to reduce meat consumption by eating smaller portions of meat or by substituting beans for meat in some meals. We are currently using biofuels as a substitute for petroleum, and this puts huge pressure on the food supply. By eating less meat, a person can help reduce the pressure on the food supply.

Animals eat several times as many calories in grain products as they produce in meat calories. By eating less meat, fewer acres of grains need to be planted to meet our food needs. We also reduce the production of global warming gasses, because animals, particularly cows, are big contributors to these gasses.

Another idea is to get involved with campus groups or political groups to try to solve some of the problems in the years ahead. It is likely to be a difficult adjustment, but working together we are likely to be able to accomplish more than we can as individuals.

Part 2 – Discussion Questions

1. US oil consumption is about 25 barrels per year for each person in the United States. There are 42 gallons in a barrel, and each gallon contains on averages 34,800 (kilo) calories (gasoline has less, asphalt has more). How many (kilo) calories does this equate to? (Answer: 36,540,000)

If we had food equivalent to this many calories, how many people could be fed with this many calories, assuming people, on average, eat 2,000 (kilo) calories a day? (Answer: 50)

What does this relationship say about the likelihood that we will be able to grow enough crops to turn into biofuels to meet our current petroleum usage?

2. If oil rationing were imposed, and the amount of gasoline you could purchase were limited to half of what you are currently using today, how would that change your driving / commuting?

3. If you were the president of the United States, and needed to impose rationing, in what order would you rank the following in priority.

a. Military
b. Farmers
c. Chemical feedstock use
d. Transportation of food
e. Mining of coal and uranium
f. Transportation of non-food items
g. Railroad and bus fuel
h. Air travel
i. Emergency services (ambulance, police)
j. People with jobs
k. People without jobs (retired, students)

4. There have been numerous governmental studies about peak oil. It is clear from public comments that Alan Greenspan is a believer in peak oil, as is former President Clinton. President Bush and Dick Cheney worked in the oil industry before their election.

Do you think that President George W. Bush is aware of peak oil? If so, how do you think it has affected Bush’s presidency? How long do you think that they have been aware of peak oil? Do you think it has had any impact on their policies? Why haven’t they said anything about peak oil? http://search.doe.gov/search?output=xml_no_dtd&sort=date%3AD%3AL%3Ad1&ie… http://www.peakoil.net/Articles2005/Westervelt_EnergyTrends__TN.pdf http://www.straight.com/article/clinton-raises-alarm-about-oil-depletion… http://online.wsj.com/article/SB119763743685729349.html (Greenspan) http://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf

5. One of the reasons that there has been little said about peak oil is that economists keep saying that peak should not be no problem; in a free market economy, substitutes will be found.

Name three substitutes for food.

How does your answer to the substitutes for food question suggest that economic theory may be incorrect in with respect to replacements for liquid fuels?

6. If biofuels, at least at this point, seem to have as many environmental problems as oil, would it make sense to concentrate our efforts on enhanced oil recovery? How about coal to liquid?

For further reading – Relates to both Part 1 and Part 2:

A number of links are given in the reading material. In addition, some websites that may be of interest are

www.TheOilDrum.com – Discussion about energy and our future, including peak oil. Many articles written for the site, plus news items related to energy, and discussion about the various items. I write as “Gail the Actuary” for this site. A list of my articles can be found at http://www.theoildrum.com/user/Gail+the+Actuary/stories

www.EnergyBulletin.net – Peak oil related news items. No discussion.

Association for the Study of Peak Oil and Gas – USA http://www.aspo-usa.com/ Has a good weekly newsletter, and an annual conference.

Educational website about oil and gas, how it is formed, and production ins and outs http://www.ukooa.co.uk/education/storyofoil/index.cfm

“Peaking of World Oil Production: Impacts, Mitigation, and Risk Management” by Robert Hirsch, Roger Bezdek, and Robert Wendling. Analysis of peak oil and mitigation options, prepared for the for US Department of Energy in early 2005. http://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf

Rear Admiral Hyman Rickover’s 1957 speech talking about the expected future decline in fossil fuel resources and the need to tell the younger generation. http://www.theoildrum.com/node/2724

Myths of Biofuels – Talk by David Fridley – Free video for download – http://www.sfbayoil.org/sfoa/myths/index.html

Peak Oil and the Fate of Humanity – Series of downloadable presentations – Canadian http://www.peakoilandhumanity.com/chapter_choice.htm