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Surprise! The world is NOT running out of oil

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Posted by: fossten

Peak Oil Theory – “World Running Out of Oil Soon” – Is Faulty; Could Distort Policy & Energy Debate
November 14, 2006
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Correct Model for Post-2030 Oil Supply is Undulating Plateau

In contrast to a widely discussed theory that world oil production will soon reach a peak and go into sharp decline, a new analysis of the subject by Cambridge Energy Research Associates (CERA) finds that the remaining global oil resource base is actually 3.74 trillion barrels -- three times as large as the 1.2 trillion barrels estimated by the theory’s proponents -- and that the “peak oil” argument is based on faulty analysis which could, if accepted, distort critical policy and investment decisions and cloud the debate over the energy future.

Complete Press Release

CAMBRIDGE, Mass., November 14, 2006 – In contrast to a widely discussed theory that world oil production will soon reach a peak and go into sharp decline, a new analysis of the subject by Cambridge Energy Research Associates (CERA) finds that the remaining global oil resource base is actually 3.74 trillion barrels -- three times as large as the 1.2 trillion barrels estimated by the theory’s proponents -- and that the “peak oil” argument is based on faulty analysis which could, if accepted, distort critical policy and investment decisions and cloud the debate over the energy future.

“The global resource base of conventional and unconventional oils, including historical production of 1.08 trillion barrels and yet-to-be-produced resources, is 4.82 trillion barrels and likely to grow,” CERA Director of Oil Industry Activity Peter M. Jackson writes in Why the Peak Oil Theory Falls Down: Myths, Legends, and the Future of Oil Resources. The CERA projection is based on the firm’s analysis of fields currently in production and those yet-to-be produced or discovered.

“The ‘peak oil’ theory causes confusion and can lead to inappropriate actions and turn attention away from the real issues,” Jackson observes. “Oil is too critical to the global economy to allow fear to replace careful analysis about the very real challenges with delivering liquid fuels to meet the needs of growing economies. This is a very important debate, and as such it deserves a rational and measured discourse.”

“This is the fifth time that the world is said to be running out of oil,” says CERA Chairman Daniel Yergin. “Each time -- whether it was the ‘gasoline famine’ at the end of WWI or the ‘permanent shortage’ of the 1970s -- technology and the opening of new frontier areas has banished the specter of decline. There’s no reason to think that technology is finished this time.”

The report emphasizes the importance of focusing on the critical issues. “It is not helpful to couch the debate in terms of a superficial analysis of reservoir constraints. It will be aboveground factors such as geopolitics, conflict, economics and technology that will dictate the outcome.” The report also points to such aboveground questions as timing and openness to investment, infrastructure development, and the impact of technological change on demand for oil

Undulating Plateau

The new report describes CERA’s liquids supply outlook as “not a view of endless abundance.” However, based on a range of potential scenarios and field-by-field analysis, CERA finds that not only will world oil production not peak before 2030, but that the idea of a peak is itself “a dramatic but highly questionable image.”

Global production will eventually follow an “undulating plateau” for one or more decades before declining slowly. The global production profile will not be a simple logistic or bell curve postulated by geologist M. King Hubbert, but it will be asymmetrical – with the slope of decline more gradual and not mirroring the rapid rate of increase -- and strongly skewed past the geometric peak. It will be an undulating plateau that may well last for decades.

During the plateau period in later decades, according to the CERA analysis, demand growth will likely no longer be largely met by growth in available, commercially exploitable natural oil supplies. Non-traditional or unconventional liquid fuels such as production from heavy oil sands, gas-related liquids (condensate and natural gas liquids), gas-to-liquids (GTL), and coal-to-liquids (CTL) will need to fill the gap.

Critical Issue

CERA argues that understanding the difference between a plateau and a peak followed by a precipitous decline, as well as the timing of events, is critical to the global energy future. “Corporations, governments, and other groups, including nongovernmental organizations, need to have a coherent description of how and when the undulating plateau will evolve so that rational policy and investment choices can be made,” according to the report.

“It is likely that the situation will unfold in slow motion and that there are a number of decades to prepare for the start of the undulating plateau. This means that there is time to consider the best way to develop viable energy alternatives that would eventually provide the bulk of our transport energy needs and ensure that there is a useable production stream of conventional crude for some time to come,” CERA concludes.

Peak Theory Shortcomings

The CERA review also finds that current “peak oil” advocacy suffers from several problems:

The peak argument is not presented in the context of a credible systematic evaluation of available data; its proponents have not made available a transparent and detailed analysis that would allow an objective and rational discussion. At base “their methodology is to impute decline curves against currently proven reserves and declare that the game – and the argument – is over.”

The underlying analytical model formulated by the late M. King Hubbert both fails to recognize that recoverable reserve estimates evolve with time and are subject to significant change, and it also underplays the substantial impact of technological advances. Consequently, total annual production at the high point in 1970 was 600 million barrels higher – 20 percent -- than Hubbert’s projection of peak production for the US Lower 48, although he correctly anticipated its timing within two years.

Hubbert’s method requires accurate knowledge of the ultimate recoverable reserves of an area, but his 1956 analysis could never have incorporated the impact of giant discoveries in Alaska and the deepwater Gulf of Mexico, and therefore couldn’t have predicted the production profile for the U.S. As a result, total cumulative U.S. production between the high point in 1970 and 2005 exceeded Hubbert’s predictions by the equivalent of more than 10 years of US production at present rates.

Hubbert-posited post-peak reservoir decline curve assumptions are rebutted by observation that the geometry of typical oilfield production profiles is often distinctly asymmetrical and does not generally show a precipitous mirror-image decline in production after an apparent peak, even without the application of new technology or enhanced oil recovery techniques. As a result, in the US Lower 48 where Hubbert came closest to accurately forecasting a peak, oil production in 2005 was some 66 percent higher than projected by Hubbert, and cumulative production between 1970 and 2005 was some 15 billion barrels higher, a variance equal to more than eight years of US production at present rates.

Those who believe a peak is imminent tend to consider only proven remaining reserves of conventional oil, which they currently estimate at about 1.2 trillion barrels. In the view of many petroleum geologists, this is a pessimistic estimate because it excludes the enormous contribution likely from probable and possible resources, those yet to be found, and plays down the importance of unconventional reserves in the Canadian oil sands, the Orinoco tar belt, oil shale and GTL projects. CERA believes the global inventory is some 4.8 trillion barrels, of which about 1.08 trillion barrels have been produced, leaving 3.72 trillion conventional and unconventional barrels, an order of magnitude that will allow productive capacity to continue to expand well into this century.

The “peak oil” argument is frequently supported with data indicating that new exploration finds are not sufficient to replace annual production. Their data sets have serious deficiencies. The peak argument is an incomplete and therefore misleading analysis because it ignores the role of development (vs exploration) projects in expanding reserves, fails to understand economic factors that can point company and national strategies to emphasize development vs exploration work. By focusing on “discovery” and ignoring the increased knowledge and confidence about field volumes, it disregards the fact that revisions, additions and exploration together have generated resource growth of 320 billion barrels – 80 billion barrels more, or one-third more, than total production – during the period from 1995 to 2003. CERA draws both on its own data bases and those of its parent company IHS, which has the world’s most complete proprietary data bases on oil production and resources.

Hubbert’s method does not incorporate economic or technical factors that influence productive capacity; most importantly, it ignores the impact of both price and demand, both major drivers of production.

Peakists’ projections of the date a peak would be reached continue to come and go, the most recent targeted around Thanksgiving Day 2005, give or take a few weeks.

Signposts

“It is no longer sensible to allow the issues about future supplies to be clouded in a debate grounded in a flawed technical argument,” the CERA report concludes. “There is general agreement that a peak or plateau of sorts will develop in the next 50 years, and it is not helpful to couch the debate in terms of a superficial analysis of reservoir constraints.” The report emphasizes the importance of the aboveground factors cited earlier.

“There is a need to identify the signposts that will herald the onset of the inevitable slowdown of production growth and ensure that policymakers outside the energy community have a clear understanding of possible outcomes and risks.”

Cambridge Energy Research Associates (CERA), an IHS company, is a leading advisor to energy companies, consumers, financial institutions, technology providers, and governments. CERA (www.cera.com) delivers strategic knowledge and independent analysis on energy markets, geopolitics, industry trends, and strategy. CERA is based in Cambridge, Massachusetts, and has offices in Bangkok; Beijing; Calgary; Dubai; Johannesburg; Mexico City; Moscow; Mumbai; Oslo; Paris; Rio de Janeiro; San Francisco; Tokyo; and Washington, DC.

For more information on CERA's Global Oil Advisory Service or our other service please visit our service offerings page.

© 2006, Cambridge Energy Research Associates, Inc. All rights reserved. CERA and the CERA logo are registered trademarks of Cambridge Energy Research Associates, Inc.

Posted by: MAC1

Fraud No. 2: Oil is a fossil fuel.

Posted by: RRocket

Big f-ing deal. The problem isn't running out of oil. The problem is you guys supporting/paying for terrorism by buying plenty of oil from terrorist breeding ground Saudi Arabia. Running out of oil pales in comparison to this....

Posted by: Marcus

Quote:

Originally Posted by MAC1

Fraud No. 2: Oil is a fossil fuel.

I assume you're referring to the "abiotic" theory of the origin of oil? You're not going to find very many oil company geologists who buy it. And they should know. About the only ones trying to sell it are a few Ukranians and a handful of book authors.

Posted by: fossten

Quote:

Originally Posted by RRocket

Big f-ing deal. The problem isn't running out of oil. The problem is you guys supporting/paying for terrorism by buying plenty of oil from terrorist breeding ground Saudi Arabia. Running out of oil pales in comparison to this....

You have a point, but that is only part of the problem. The other part of the problem is "you guys" who won't allow us to drill in obvious places for our own oil. We can't exactly boycott Saudi oil without having a replacement supplier.

Posted by: RRocket

Quote:

Originally Posted by fossten

Don't blame me. I'm not one of the "you guys". I'm Canadian. Drill your oil where ever you'd like. Although I can appreciate people not wanting an environmental calamity. Oh..and it does happen often enough. My bro is a petroleum geologist that owns a few wells. I'll post some pics of what happens when there's a pressure surge, and all the water they've used for drilling comes back up. Not pretty...

Posted by: Dereck

Hi Fossten

Who cares if the world is running out of oil? The world/people was here millions of years before we discovered oil and I geuss the world/people will be here millions of years after the oil runs out, it's just the lifestyle that will be different.

It would be nice if the oil would last another 30 - 40 years that should see me out

Regards

Dereck

Posted by: fossten

Quote:

Originally Posted by Dereck

Hi Fossten

Who cares if the world is running out of oil? The world/people was here millions of years before we discovered oil and I geuss the world/people will be here millions of years after the oil runs out, it's just the lifestyle that will be different.

It would be nice if the oil would last another 30 - 40 years that should see me out

Regards

Dereck

Hey Dereck,

I believe you should go back and read the title of this thread, paying close attention to the part where I said "...NOT running out of oil."

Do that and get back to me.

Posted by: Dereck

Quote:

Originally Posted by fossten

Hey Dereck,

I believe you should go back and read the title of this thread, paying close attention to the part where I said "...NOT running out of oil."

Do that and get back to me.

Hi Fossten

I did read the title and fully understood its meaning, afterall I am from the country that invented the lanuage

I also read the report in your post and fully understood what it was saying.

Quote:

Originally Posted by Fossten (from the CERA report)

Global production will eventually follow an “undulating plateau” for one or more decades before declining slowly.

I interperated the phrase "before declining slowly" as "will run out eventually", the report doesn't say we will NOT run out of oil it mearly says we will not run out of oil for a long time.

Quote:

Originally Posted by Dereck

Who cares if the world is running out of oil?

Perhaps the word "is" in my question should have been in itallics and like I previously said the world/people will still be here with or without the black gold.

Regards

Dereck

Posted by: MAC1

Quote:

Originally Posted by TommyB

With over half the worlds geologists working for oil companies it’s no wonder they are willing to walk lockstep with what oil companies want consumers to believe, which is that there is a limited supply of oil deposited in finite quantities near the planet's surface.

However, scientists are becoming more and more persuaded that geo-physical/ geo-thermal mechanics within the Earth and not decomposition of living matter under pressure produces oil. In fact, the Abiotic theory is backed up by 50 years of scientific research by hundreds scientists from around the world.

In light of the fact that oil deposits have been found at depths well below levels at which even the most liberal of scientists agree that fossils could account for, it is absurd to suggest that oil is a merely a product of formerly living organisms. The “fossil” theory gets even more absurd since it is based upon a limited source of formerly living organisms. However, the amount of oil that is continuously flowing from the Earth clearly suggests that a limited supply of fossils could not produce such vast amounts of oil. The truth is that scientists have already agreed that the Abiotic oil is fact not just some concocted theory by a bunch of Ukrainian and Russian scientists.

This past summer’s Gulf of Mexico Green Canyon record breaking oil strike announced by Chevron was under 6,734 feet of water and 22,400 feet under the seabed, which some believe will increase our domestic oil supply by about 50%. Again, even the most liberal of scientists would have to agree that it’s unlikely that fossils could account for oil at such great depths in such a vast amount. Remember the “fossil” theory states that oil lies at shallow depths below the Earth’s surface. However, to the contrary, since the 1950s the evidence indicates that the deeper oil companies drill the more oil they find. The recent Gulf of Mexico strike is but one example. Thus, contrary to the “fossil” theory, oil deposits are not primarily at shallow depths under the Earth. In fact, oil company executives acknowledge that past technology would not have permitted drilling to the depths necessary to strike the Green Canyon field. Now, oil executives are clamoring for even more technology to drill even deeper.

My view is that technology advancements allowing for deeper oil strikes will eventually compel even the oil company geologist to admit that the “fossil” theory will have to be abandoned. If the truth be known, it should have already been abandoned.