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Revisiting the IEA's World Energy Outlook 2013 » Peak Oil BarrelPeak Oil Barrel

Revisiting the IEA’s World Energy Outlook 2013 » Peak Oil BarrelPeak Oil Barrel.

I was going over the IEA’s World Energy Outlook 2013 and noticed a few things you might find interesting. Exactly what is their opinion on Peak Oil? Here, cut and pasted from the report.

IEA 2

Got that? The URR is great enough to delay any peak until after 2035. Here is one of their graphs that indicate how much they think is left, coal, gas and oil.

IEA 1

Okay 54 years of proven reserves. That puts the peak out to well past mid century. Likely well past 2100 if you count those remaining recoverable resources. And just who has all this oil?

IEA 10

2.2 trillion barrels of conventional crude oil resources. However only 1.7 trillion barrels of that has a 90% probability of being recoverable. Of this the Middle East has the lions share, 971 billion barrels of resources with a 90% probability of recovering 813 billion barrels of that.

 

The Middle East, of course, mostly OPEC. And if you count the four OPEC countries of Africa and the two in South America, the vast majority of the world’s oil reserves are in OPEC nations. In fact OPEC claims 81% of all the proven reserves in the world.

OPEC Reserves

So with 81% of the world’s proven reserves what is the IEA expecting from OPEC in the future?

IEA 6
IEA 22

A word of explanation is needed here. New Policies Scenario: A scenario in the World Energy Outlook that takes account of broad policy commitments and plans that have been announced by countries, including national pledges to reduce greenhouse-gas emissions and plans to phase out fossil-energy subsidies, even if the measures to implement these commitments have yet to be identified or announced.

450 Scenario: A scenario presented in the World Energy Outlook that sets out an energy pathway consistent with the goal of limiting the global increase in temperature to 2°C by limiting concentration of greenhouse gases in the atmosphere to around 450 parts per million of CO2.

Current Policies is business as usual. Or, basically, we will keep on doing what we are doing. Which is of course exactly what will happen. However what the IEA sees as happening, above, is not exactly what will happen, far from it.

So, looking at Conventional Crude Oil Production in 2012, 2020 and 2035 we find this. All data on all charts below are in million barrels per day:

IEA 23

Well hell, OPEC production will be lower in 2020 than it is today. And non OPEC production will be lower in 2035 than it is today. But not to worry, total conventional crude production will be up 2.9 percent in the 23 years between 2012 and 2035.

But they are expecting Natural Gas Liquids to increase by almost 57 percent.

IEA 24

And let us not forget about Unconventionals. What are Unconventionals?

IEA 26

IEA 25

Unconventionals, Light Tight Oil and Oil Sands increase from 5 mb/d to 10.6 mb/d in 2020 to 17.1 mb/d in 2035. That is an increase of 242 percent in 23 years.

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Why turning a buck isn’t easy anymore for oil’s biggest players | Jeff Rubin

Why turning a buck isn’t easy anymore for oil’s biggest players | Jeff Rubin.

Posted by Jeff Rubin on January 27th, 2014

Judging by pump prices, Canadian drivers might think oil companies were rolling in profits that only move higher. Lately, though, the big boys in the global oil industry are finding that earning a buck isn’t as easy as it used to be.

Royal Dutch Shell, for instance, just announced that fourth quarter earnings would fall woefully short of expectations. The Anglo-Dutch energy giant warned its quarterly profits will be down 70 percent from a year earlier. Full year earnings, meanwhile, are expected to be a little more than half of what they were the previous year.

The news hasn’t been much cheerier for Shell’s fellow Big Oil stalwarts. Exxon, the world’s largest publicly traded oil company, saw profits fall by more than 50 percent in the second quarter to their lowest level in more than three years. Chevron and Total, likewise, are warning the market to expect lower earnings when fourth quarter results are released.

What makes such poor performance especially disconcerting to investors is that it’s taking place within the context of historically high oil prices. The price of Brent crude has been trading in the triple digit range for three years running, while WTI hasn’t been far off. But even with the aid of high oil prices, the supermajors haven’t offered investors any returns to write home about. Since 2009, the share prices of the world’s top five publicly traded oil and gas companies have posted less than a fifth of the gains of the Dow Jones Industrial Average.

The reason for such stagnant market performance comes down to the cost of both discovering new oil reserves and getting it out of the ground. According to the International Energy Agency’s 2013 World Energy Outlook, global exploration spending has increased by 180 percent since 2000, while global oil supplies have risen by only 14 percent. That’s a pretty low batting average.

Shell’s quest for new reserves has seen it pump billions into money-devouring plays such as its Athabasca Oil Sands Project in northern Alberta and the Kashagan oilfield, a deeply troubled project in Kazakhstan. It’s even tried deep water drilling in the high Arctic. That attempt ended when the stormy waters of the Chukchi Sea crippled its Kulluk drilling platform, forcing the company to pull up stakes.

Investors can’t simply count on ever rising oil prices to justify Shell’s lavish spending on quixotic drilling adventures around the world. Prices are no longer soaring ahead like they were prior to the last recession, when heady global economic growth was pushing energy prices to record highs.

Costs, however, are another matter. As exploration spending spirals higher, investors are seeing more reasons to lighten up on oil stocks. Wherever oil producers go in the world these days, they’re running into costs that are reaching all-time highs. Shell’s costs to find and develop oil fields, for instance, have tripled since 2003. What’s worse, when the company does notch a significant discovery, such as Kashagan, production seems to be delayed, whether due to the tricky nature of the geology, politics, or both.

Shell ramped up capital spending last year by 50 percent to a staggering $44 billion. Oil analysts are basically unanimous now in saying the company needs to rein in spending if it hopes to provide better returns to shareholders.

Big Oil is discovering that blindly chasing production growth through developing ever more costly reserves isn’t contributing to the bottom line. Maybe that’s a message Canada’s oil sands producers need to be listening to as well.

Peak Oil Is Dead | Michael T. Klare

Peak Oil Is Dead | Michael T. Klare.

Long Live Peak Oil!

Cross-posted with TomDispatch.com

Among the big energy stories of 2013, “peak oil” — the once-popular notion that worldwide oil production would soon reach a maximum level and begin an irreversible decline — was thoroughly discredited.  The explosive development of shale oil and other unconventional fuels in the United States helped put it in its grave.

As the year went on, the eulogies came in fast and furious. “Today, it is probably safe to say we have slayed ‘peak oil’ once and for all, thanks to the combination of new shale oil and gas production techniques,” declared Rob Wile, an energy and economics reporter for Business Insider.  Similar comments from energy experts were commonplace, prompting an R.I.P. headline at Time.com announcing, “Peak Oil is Dead.”

Not so fast, though.  The present round of eulogies brings to mind the Mark Twain’s famous line: “The reports of my death have been greatly exaggerated.”  Before obits for peak oil theory pile up too high, let’s take a careful look at these assertions.  Fortunately, theInternational Energy Agency (IEA), the Paris-based research arm of the major industrialized powers, recently did just that — and the results were unexpected.  While not exactly reinstalling peak oil on its throne, it did make clear that much of the talk of a perpetual gusher of American shale oil is greatly exaggerated.  The exploitation of those shale reserves may delay the onset of peak oil for a year or so, the agency’s experts noted, but the long-term picture “has not changed much with the arrival of [shale oil].”

The IEA’s take on this subject is especially noteworthy because its assertion only a year earlier that the U.S. would overtake Saudi Arabia as the world’s number one oil producer sparked the “peak oil is dead” deluge in the first place.  Writing in the 2012 edition of itsWorld Energy Outlook, the agency claimed not only that “the United States is projected to become the largest global oil producer” by around 2020, but also that with U.S. shale production and Canadian tar sands coming online, “North America becomes a net oil exporter around 2030.”

That November 2012 report highlighted the use of advanced production technologies — notably horizontal drilling and hydraulic fracturing (“fracking”) — to extract oil and natural gas from once inaccessible rock, especially shale.  It also covered the accelerating exploitation of Canada’s bitumen (tar sands or oil sands), another resource previously considered too forbidding to be economical to develop.  With the output of these and other“unconventional” fuels set to explode in the years ahead, the report then suggested, the long awaited peak of world oil production could be pushed far into the future.

The release of the 2012 edition of World Energy Outlook triggered a global frenzy of speculative reporting, much of it announcing a new era of American energy abundance. “Saudi America” was the headline over one such hosanna in the Wall Street Journal.  Citing the new IEA study, that paper heralded a coming “U.S. energy boom” driven by “technological innovation and risk-taking funded by private capital.”  From then on, American energy analysts spoke rapturously of the capabilities of a set of new extractive technologies, especially fracking, to unlock oil and natural gas from hitherto inaccessible shale formations.  “This is a real energy revolution,” the Journal crowed.

But that was then. The most recent edition of World Energy Outlook, published this past November, was a lot more circumspect.  Yes, shale oil, tar sands, and other unconventional fuels will add to global supplies in the years ahead, and, yes, technology will help prolong the life of petroleum.  Nonetheless, it’s easy to forget that we are also witnessing the wholesale depletion of the world’s existing oil fields and so all these increases in shale output must be balanced against declines in conventional production.  Under ideal circumstances — high levels of investment, continuing technological progress, adequate demand and prices — it might be possible to avert an imminent peak in worldwide production, but as the latest IEA report makes clear, there is no guarantee whatsoever that this will occur.

Inching Toward the Peak

Before plunging deeper into the IEA’s assessment, let’s take a quick look at peak oil theory itself.

As developed in the 1950s by petroleum geologist M. King Hubbert, peak oil theory holdsthat any individual oil field (or oil-producing country) will experience a high rate of production growth during initial development, when drills are first inserted into a oil-bearing reservoir.  Later, growth will slow, as the most readily accessible resources have been drained and a greater reliance has to be placed on less productive deposits.  At this point — usually when about half the resources in the reservoir (or country) have been extracted — daily output reaches a maximum, or “peak,” level and then begins to subside.  Of course, the field or fields will continue to produce even after peaking, but ever more effort and expense will be required to extract what remains.  Eventually, the cost of production will exceed the proceeds from sales, and extraction will be terminated.

For Hubbert and his followers, the rise and decline of oil fields is an inevitable consequence of natural forces: oil exists in pressurized underground reservoirs and so will be forced up to the surface when a drill is inserted into the ground.  However, once a significant share of the resources in that reservoir has been extracted, the field’s pressure will drop and artificial means — water, gas, or chemical insertion — will be needed to restore pressure and sustain production.  Sooner or later, such means become prohibitively expensive.

Peak oil theory also holds that what is true of an individual field or set of fields is true of the world as a whole.  Until about 2005, it did indeed appear that the globe was edging ever closer to a peak in daily oil output, as Hubbert’s followers had long predicted.  (He died in 1989.)  Several recent developments have, however, raised questions about the accuracy of the theory.  In particular, major private oil companies have taken to employing advanced technologies to increase the output of the reservoirs under their control, extending the lifetime of existing fields through the use of what’s called “enhanced oil recovery,” or EOR.  They’ve also used new methods to exploit fields once considered inaccessible in places like the Arctic and deep oceanic waters, thereby opening up the possibility of a most un-Hubbertian future.

In developing these new technologies, the privately owned “international oil companies” (IOCs) were seeking to overcome their principal handicap: most of the world’s “easy oil” — the stuff Hubbert focused on that comes gushing out of the ground whenever a drill is inserted — has already been consumed or is controlled by state-owned “national oil companies” (NOCs), including Saudi Aramco, the National Iranian Oil Company, and the Kuwait National Petroleum Company, among others.  According to the IEA, such state companies control about 80 percent of the world’s known petroleum reserves, leaving relatively little for the IOCs to exploit.

To increase output from the limited reserves still under their control — mostly located in North America, the Arctic, and adjacent waters — the private firms have been working hard to develop techniques to exploit “tough oil.”  In this, they have largely succeeded: they are now bringing new petroleum streams into the marketplace and, in doing so, have shaken the foundations of peak oil theory.

Those who say that “peak oil is dead” cite just this combination of factors.  By extending the lifetime of existing fields through EOR and adding entire new sources of oil, the global supply can be expanded indefinitely.  As a result, they claim, the world possesses a “relatively boundless supply” of oil (and natural gas).  This, for instance, was the way Barry Smitherman of the Texas Railroad Commission (which regulates that state’s oil industry)described the global situation at a recent meeting of the Society of Exploration Geophysicists.

Peak Technology

In place of peak oil, then, we have a new theory that as yet has no name but might be called techno-dynamism.  There is, this theory holds, no physical limit to the global supply of oil so long as the energy industry is prepared to, and allowed to, apply its technological wizardry to the task of finding and producing more of it.  Daniel Yergin, author of the industry classics, The Prize and The Quest, is a key proponent of this theory.  He recently summed upthe situation this way: “Advances in technology take resources that were not physically accessible and turn them into recoverable reserves.”  As a result, he added, “estimates of the total global stock of oil keep growing.”

From this perspective, the world supply of petroleum is essentially boundless.  In addition to “conventional” oil — the sort that comes gushing out of the ground — the IEA identifies six other potential streams of petroleum liquids: natural gas liquids; tar sands and extra-heavy oil; kerogen oil (petroleum solids derived from shale that must be melted to become usable); shale oil; coal-to-liquids (CTL); and gas-to-liquids (GTL).  Together, these “unconventional” streams could theoretically add several trillion barrels of potentially recoverable petroleum to the global supply, conceivably extending the Oil Age hundreds of years into the future (and in the process, via climate change, turning the planet into an uninhabitable desert).

But just as peak oil had serious limitations, so, too, does techno-dynamism.  At its core is a belief that rising world oil demand will continue to drive the increasingly costly investments in new technologies required to exploit the remaining hard-to-get petroleum resources.  As suggested in the 2013 edition of the IEA’s World Energy Outlook, however, this belief should be treated with considerable skepticism.

Among the principal challenges to the theory are these:

1. Increasing Technology Costs: While the costs of developing a resource normally decline over time as industry gains experience with the technologies involved, Hubbert’s law of depletion doesn’t go away.  In other words, oil firms invariably develop the easiest “tough oil” resources first, leaving the toughest (and most costly) for later.  For example, the exploitation of Canada’s tar sands began with the strip-mining of deposits close to the surface.  Because those are becoming exhausted, however, energy firms are now going after deep-underground reserves using far costlier technologies.  Likewise, many of the most abundant shale oil deposits in North Dakota have now been depleted, requiring anincreasing pace of drilling to maintain production levels.  As a result, the IEA reports, the cost of developing new petroleum resources will continually increase: up to $80 per barrel for oil obtained using advanced EOR techniques, $90 per barrel for tar sands and extra-heavy oil, $100 or more for kerogen and Arctic oil, and $110 for CTL and GTL.  The market may not, however, be able to sustain levels this high, putting such investments in doubt.

2. Growing Political and Environmental Risk: By definition, tough oil reserves are located in problematic areas.  For example, an estimated 13 percent of the world’s undiscovered oil lies in the Arctic, along with 30 percent of its untapped natural gas.  The environmental risks associated with their exploitation under the worst of weather conditions imaginable will quickly become more evident — and so, faced with the rising potential for catastrophic spills in a melting Arctic, expect a commensurate increase in political opposition to such drilling.  In fact, a recent increase has sparked protests in both Alaska and Russia, including the much-publicized September 2013 attempt by activists from Greenpeace toscale a Russian offshore oil platform — an action that led to their seizure and arrest by Russian commandos.  Similarly, expanded fracking operations have provoked a steady increase in anti-fracking activism.  In response to such protests and other factors, oil firms are being forced to adopt increasingly stringent environmental protections, pumping up the cost of production further.

3. Climate-Related Demand Reduction: The techno-optimist outlook assumes that oil demand will keep rising, prompting investors to provide the added funds needed to develop the technologies required.  However, as the effects of rampant climate change accelerate, more and more polities are likely to try to impose curbs of one sort or another on oil consumption, suppressing demand — and so discouraging investment.  This is already happening in the United States, where mandated increases in vehicle fuel-efficiency standards are expected to significantly reduce oil consumption.  Future “demand destruction” of this sort is bound to impose a downward pressure on oil prices, diminishing the inclination of investors to finance costly new development projects.

Combine these three factors, and it is possible to conceive of a “technology peak” not unlike the peak in oil output originally envisioned by M. King Hubbert.  Such a techno-peak is likely to occur when the “easy” sources of “tough” oil have been depleted, opponents of fracking and other objectionable forms of production have imposed strict (and costly) environmental regulations on drilling operations, and global demand has dropped below a level sufficient to justify investment in costly extractive operations.  At that point, global oil production will decline even if supplies are “boundless” and technology is still capable of unlocking more oil every year.

Peak Oil Reconsidered

Peak oil theory, as originally conceived by Hubbert and his followers, was largely governed by natural forces.  As we have seen, however, these can be overpowered by the application of increasingly sophisticated technology.  Reservoirs of energy once considered inaccessible can be brought into production, and others once deemed exhausted can be returned to production; rather than being finite, the world’s petroleum base now appears virtually inexhaustible.

Does this mean that global oil output will continue rising, year after year, without ever reaching a peak?  That appears unlikely.  What seems far more probable is that we will see a slow tapering of output over the next decade or two as costs of production rise and climate change — along with opposition to the path chosen by the energy giants — gains momentum.  Eventually, the forces tending to reduce supply will overpower those favoring higher output, and a peak in production will indeed result, even if not due to natural forces alone.

Such an outcome is, in fact, envisioned in one of three possible energy scenarios the IEA’s mainstream experts lay out in the latest edition of World Energy Outlook. The first assumes no change in government policies over the next 25 years and sees world oil supply rising from 87 to 110 million barrels per day by 2035; the second assumes some effort to curb carbon emissions and so projects output reaching “only” 101 million barrels per day by the end of the survey period.

It’s the third trajectory, the “450 Scenario,” that should raise eyebrows.  It assumes that momentum develops for a global drive to keep greenhouse gas emissions below 450 parts per million — the maximum level at which it might be possible to prevent global average temperatures from rising above 2 degrees Celsius (and so cause catastrophic climate effects).  As a result, it foresees a peak in global oil output occurring around 2020 at about 91 million barrels per day, with a decline to 78 million barrels by 2035.

It would be premature to suggest that the “450 Scenario” will be the immediate roadmap for humanity, since it’s clear enough that, for the moment, we are on a highway to hell that combines the IEA’s first two scenarios.  Bear in mind, moreover, that many scientists believea global temperature increase of even 2 degrees Celsius would be enough to produce catastrophic climate effects.  But as the effects of climate change become more pronounced in our lives, count on one thing: the clamor for government action will grow more intense, and so eventually we’re likely to see some variation of the 450 Scenario take shape.  In the process, the world’s demand for oil will be sharply constricted, eliminating the incentive to invest in costly new production schemes.

The bottom line: Global peak oil remains in our future, even if not purely for the reasons given by Hubbert and his followers.  With the gradual disappearance of “easy” oil, the major private firms are being forced to exploit increasingly tough, hard-to-reach reserves, thereby driving up the cost of production and potentially discouraging new investment at a time when climate change and environmental activism are on the rise.

Peak oil is dead!  Long live peak oil!

Michael T. Klare, a TomDispatch regular, is a professor of peace and world security studies at Hampshire College and the author, most recently, of The Race for What’s Left.  A documentary movie version of his book Blood and Oil is available from the Media Education Foundation.

peak oil climate and sustainability: When will US LTO(light tight oil) Peak?

peak oil climate and sustainability: When will US LTO(light tight oil) Peak?.

The rapid rise in oil output since 2008 has the mainstream media claiming that the US will soon be energy independent.  US Crude oil output has increased about 2.8 MMb/d (56%) since 2008 and about 2 MMb/d is from the shale plays in North Dakota ( Bakken/Three Forks) and Texas (Eagle Ford). My modeling suggests that a peak from these two plays may be reached by 2016, other shale plays (also known as light tight oil [LTO] plays) may be able to fill the gap left by declining Bakken and Eagle Ford output until 2020, beyond that point we will see a rapid decline.

US Light Tight Oil to 2040

fig 1

There are two main views:

  1. There will be little crude plus condensate (C+C) output from any plays except the Bakken/Three Forks in North Dakota and Montana and the Eagle Ford of Texas.
  2. The other LTO plays will come to the rescue when the Bakken and Eagle Ford reach their peak and keep LTO near these peak levels to about 2020 with a slow decline in output out to 2040.
Where are these “other LTO plays”?  There are a couple of these in Oklahoma and Texas (in the Permian basin, Granite Wash, Mississippian basin), the Appalachian, the Niobrara in Colorado, and others (see slide 17 of the USGS presentation link below).  Is it possible for these LTO plays to offset future declines in the Bakken and Eagle Ford?  I hope to answer that in this post.
When doing my modeling of the Eagle Ford, I needed an estimate of the technically recoverable resource(TRR) for that play.  The April 2013 USGS Bakken Three Forks Assessment roughly doubled their earlier assessment of that play (mostly this was due to not including the Three Forks in their earlier assessment.)
see slide 17 at the USGS Bakken/Three Forks Assessment presentation.
   In light of this I decided to increase the earlier (1.73 Gb) Eagle Ford estimate of undiscovered technically recoverable resources(TRR) from the USGS by a factor of 2.3 to 4 Gb.  To determine total TRR, the proved reserves and oil already produced need to be added to the undiscovered TRR, in the case of the Eagle Ford output to the end of 2011 was only 0.1 Gb and proved reserves were about 1 Gb (check the EIA data on the change in proved reserves since 2009 in districts 1 and district 2 of Texas):

So for the Eagle Ford estimated TRR would be 4+1=5 Gb.

For the North Dakota Bakken undiscovered TRR is 5.8 Gb, 2.2 Gb of proven reserves, and 0.5 Gb of oil produced for a Total TRR of 8.5 Gb. See my previous post for more details.

For the rest of the US we can deduct Bakken (7.38 Gb), Eagle Ford(1.73 Gb), and Alaska(0.94 Gb) from the US total (13 Gb) which leaves about 3 Gb, now assume that a reassessment by the USGS increases this by a factor of 2.3 to 7.2 Gb, then add the Montana Bakken/Three Forks (1.6 Gb) and reserves from the Permian basin and other plays (1.3 Gb) to get 9.2 Gb for a TRR estimate for US “other LTO”(Total LTO minus [North Dakota Bakken/Three Forks plus Eagle Ford play]). Total TRR for all US LTO is 22.7 Gb. (I have assumed LTO from Alaska’s North Slope will not be produced.)

For the North Dakota Bakken/Three Forks and Eagle Ford plays we use the following economic assumptions to find the Economically Recoverable Resource (ERR):

OPEX (operating expenditure) is $4/barrel, royalty and tax payments are 24.5 % of wellhead revenue, annual discount rate is 12 % (used to find the net present value[NPV] of a well over its 30 year life). Transport costs are $12/barrel for the Bakken and $3/barrel for the Eagle Ford.  Well costs are 9 million for the Bakken in Jan 2013 and fall by 8% per year to 7 million in 2016 and for the Eagle Ford well costs are $8 million in Jan 2013 and fall 8% per year to $6.5 million in mid 2017.  Real oil prices follow the EIA’s 2013 Annual Energy Outlook reference case to 2040 and then continue to rise at the 2030 to 2040 rate to the end of the scenario.  All costs and prices are in May 2013$ so they are real prices rather than nominal prices.
The concept of ERR is discussed in detail in the Sept, 2013 post after figure 3.

Figure 1

fig 2
I will use the Eagle Ford play as my template because it has ramped up much more quickly than the Bakken, this is a very optimistic scenario and it is unlikely that there will be greater output from US LTO than the scenario I will present.

The underlying assumptions are:
-the average well will look like the average Eagle Ford well
-ramp up of additional wells will be slow until the peak of combined Bakken and Eagle Ford output
-in 2015 the Bakken and Eagle Ford peak and reach break even levels of profitability by 2016
-in response to reaching break even the number of new wells per month added in both the ND (North Dakota) Bakken and the Eagle Ford are reduced substantially.
-new wells added in the other US LTO plays ramp up as the rate that wells added to the Bakken and EF are reduced
As before we adjust the decrease in new well EUR (both when it begins and how long it takes to reach its maximum) so that the TRR matches our estimate of 9.2 Gb.  In this case the EUR starts to decrease in July 2018 and reaches its maximum monthly rate of decrease of 2.37 % in June 2020. The “other LTO” peaks in 2020 at about 2 MMb/d.
To determine ERR we make identical economic assumptions as our Eagle Ford case above except that we assume transport costs are $5/barrel on average ($3/barrel in EF case).

Figure 2

fig 3

When we combine our North Dakota Bakken/Three Forks, Eagle Ford, and “other LTO” models we get the following chart:

Figure 3

fig 4

This scenario is indeed optimistic, but not nearly as optimistic as the EIA’s scenario for LTO in the 2013 Annual Energy Outlook.  For comparison I computed the ERR for 2013 to 2040 for my US LTO scenario, it was 17.6 Gb over that period, the EIA scenario has a total output of 24.5 Gb over the same period, 40% higher output than an already optimistic scenario.  My guess is that reality will lie between the blue curve and the green curve with the most likely peak around 2018+/- 2 years at about 3.1+/- 0.2 MMb/d.

Dennis Coyne

 Appendix Bakken and Eagle Ford Details
I am still working on this section, check back for details
Using the USGS TRR estimates as our guide we assume new well estimated ultimate recovery (EUR) eventually decreases as the room for new wells in the most productive areas (the sweet spots) starts to run out.  If new wells are producing an average of 450 kb over 30 years before this decrease begins, we assume at some point, say June 2014 the new well EUR starts to decrease maybe by 0.4% per month, the rate of decrease continues to increase for 18 months so that after 18 months the new well EUR is decreasing at a monthy rate of 7.2 %.

fig 5

fig 6

The IEA raises a little warning flag on future oil production – World Energy Outlook 2013 | ASPO International | The Association for the Study of Peak Oil and Gas

The IEA raises a little warning flag on future oil production – World Energy Outlook 2013 | ASPO International | The Association for the Study of Peak Oil and Gas.

By Kjell Aleklett
Uppsala University
Department of Geosciences and
Visiting professor at University of Texas at Austin
Department of Petroleum and Geosystems Engineering

On 12 November the International Energy Agency (IEA) released this year’s edition of their World Energy Outlook report, WEO-2013. I have not studied all the detail in the report but I listened to the presentation that the IEA’s chief economist, Dr Fatih Birol, gave in London. During the past 10 years I have studied and analysed the World Energy Outlook reports. One of the first detailed analyses that I did was in 2004 regarding WEO-2004. At that time the IEA thought that oil demand in 2030 would be 121 million barrels per day (Mb/d). The conclusion I drew from my analysis was that their prognosis was unrealistic. (http://www.peakoil.net/uhdsg/weo2004/AnalysisWorldEnergyOutlook2004.pdf)
Last year the IEA focused on shale oil in the USA as their main story and the news spread around the world that the USA would overtake Saudi Arabia as the world’s leading oil producer. The news generated many new declarations in the world’s press of “Don’t worry, be happy”. Every year the IEA also focuses on one particular nation or phenomenon that is presented as a large source of oil in future so that we do not need to worry about Peak Oil. Last year it was Iraq that would help to solve all our problems and this year it is Brazil. With this as a background, it is time to look a little more closely at the presentation of the newly released WEO-2013 report.

First, Maria van der Howeven, the Executive Director of the IEA, made some introductory remarks. She noted that the trend we currently have of fossil fuel use will lead to an inability to limit climate change to +2 C of temperature increase. At the same time she also noted that one fifth of the world’s population did not have sufficient access to energy. However, her most remarkable statement was:
“For billions more, any true sense of energy security is undermined by high energy prices. It is now more than five years after the onset of the global financial crisis, yet the recovery remains fragile; for many consumers and businesses, energy prices remain stubbornly high. Alarmingly, oil prices have averaged over $110/barrel since 2011. Such a sustained period of high oil prices is without parallel.

Security, sustainability, and economic prosperity – this is the classic “energy trilemma” that we face.”
When I read those comments I thought of what Christine Lagarde, the Managing Director of the International Monetary Fund (IMF) said in Davos last January regarding the megatrends she saw ahead,

”Increasing vulnerability from resource scarcity and climate change, with the potential for major social and economic disruption”.

We have never previously had global economic growth without increased use of energy. In reality, that means energy from fossil fuels for which oil is the leading component. Ten years ago the coupling between increased energy use and economic growth was what led the IEA to predict an energy demand of 121 Mb/d in 2030. Now they have reduced their expectations to around 100 Mb/d and the analyses we have made of the future show that this level of supply/demand cannot be realized. As IEA this year makes a detailed analysis of oil I have to come back and discuss this. The warning flag that the IEA has now raised should be taken with utmost seriousness.
Dr Fatih Birol’s slides and oral presentation can be found at the IEA’s website (www.iea.org). Considering the limits he probably has on making statements on the future I would regard this year’s presentation as much more nuanced than last year’s. Last year I was actually present when he repeated his presentation in Stockholm. Below are some comments on his presentation.
I share his view that high oil prices affect the economies of oil-importing nations. The fact that the USA has increased production of shale oil means that they do not have the same severity of economic problems with oil as the EU. To import oil at higher prices one must be able to pay for it with increased exports of goods and services. Sweden has succeeded quite with this well while other nations in the EU have not been as successful. The fact that the IEA now asserts that the high oil prices will persist means that it is time for oil importing nations to make fundamental changes in their energy policies.
When the IEA studies which regions have a need to increase oil use it is mainly in the Middle East and India that this is seen. That the increase in use in China is slowing down is expected since they will become increasingly efficient with their energy use in future. The rate of increase of renewable energy use is not expected to grow more than for fossil fuels which means that the proportion that renewables make up of total energy use will continue to be the same as 20 years ago. This rate of increase of fossil fuels points to global warming of +3.6 °C.
Regarding transport fuels the demand for diesel increases three times more than the demand for gasoline. This confirms what I wrote approximately 6 months ago. Another significant change is that the proportion of NGL, natural gas liquids, that is included in oil production statistics increases. In the USA, NGL has already replaced large volumes of oil feedstocks in the chemical industry and this will be an increasing trend.
Then it was time to look at shale oil in the USA. Dr Birol asserted that there would be no second chapter of the shale oil success story that is now playing out in the USA. If one includes NGL then it may be that the USA becomes the world’s largest oil producer around 2020 but its production will then decline. Last year the IEA played down the future importance of the Middle East in oil production but this year they indicated that an increase in oil production from the Middle East is necessary. Those projects that are now seen ahead as necessary have long lead times and the investments must be made now. The increase in oil production that the IEA regarded as necessary from Middle Eastern sources was 6 Mb/d.

Regarding production of conventional oil the IEA maintained its position that the decline in production from existing producing fields is 6% per year, i.e. that same decline rate that we published in 2009. The current rate of production of around 67 Mb/d will decline to 17 Mb/d by 2035 (i.e. in 22 years). Earlier, we don’t see that a realistic compensation for this decline in oil production could be envisaged. A later, more detailed study will show how things progressed this year. What the IEA currently presents as very important is Brazil. Thus, it is time to show again Olle Qvennerstedt’s illustration that describes the World Energy Outlook.

IEA_EIA_OPEC_Qvennerstedt
IEA, EIA and OPEC say “Don’t worry be happy”. Brazil is the happy soccer player in the back corner.

Regarding production of natural gas in the USA expectations are still quite high and my judgment is that these expectations are far too great. To make a better analysis I will need to read the complete WEO-2013 report and that will take some time. The conclusion that the IEA makes is that the price of natural gas in the USA will continue to be much lower than in other parts of the world and this will be significant for global industrial production. This must be interpreted as meaning that industrial production will increase in the USA.

A detailed reading of WEO-2013 will probably give a more nuanced picture of the current and future situation than that I have gained from Dr Birol’s presentation in London. I see future developments of oil production to be weaker than expected and I can definitely say that the polished future predictions made by the IEA ten years ago are well and truly dead and buried. My 2004 analysis has proven justified.

(Comments at Aleklett’s Energy Mix)
Bloomberg has made released an journalist analysis of WEO-2013 that can be read here (Bloomberg)

 

Will the real International Energy Agency please stand up?

Will the real International Energy Agency please stand up 

by Kurt Cobb, originally published by Resource Insights  | NOV 16, 2013

It was as if the International Energy Agency were appearing on the old American television game show To Tell the Truth last week as it offered a third contradictory forecast in the space of a year.

You may recall that on To Tell the Truth the host would begin by reading a statement from a person with an unusual story or profession. Then, a celebrity panel would question three contestants who claimed to be that person. Afterwards, the panelists would vote on whom they believed was the real person. Finally, the host would say, “Will the real [name of person] please stand up?” (Some episodes are still availablehere on YouTube.)

The difference is that the contestants on To Tell the Truth would try to tell similar, plausible stories so as to stump the panel. In the non-game-show world of energy forecasting, the IEA–a consortium of 28 countries, all net oil importers except for Canada and Norway–plays all three contestants and does not even attempt to be consistent. So, it’s possible that the agency is just a collective mental case withmultiple personality disorder.

However, one has to allow for the fact that the IEA is not just one person or one voice. Still, if the agency were a single person, what it has released over the last year as official pronouncements would likely have a psychiatrist reaching for theDSM-IV (Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition).

Last November in its 2012 World Energy Outlook (WEO), the agency noted rising U.S. oil production and even predicted that the United States would become energy self-sufficient by 2035 (a doubtful call, in my view). It also noted that growing oil demand in the Asia has more than outweighed declines in European and U.S. consumption, keeping upward pressure on prices. It said that growth in Iraq’s oil exports was not a sure thing. While the 2012 WEO is really a rather optimistic document on supply, it did not paint an especially rosy picture, indicating that obtaining the supplies of oil necessary to meet projected demand was not a foregone conclusion.

Then, only six months later came the agency’s so-called Medium-Term Oil Market Report which read like an ad for the North American oil and gas industry. The agency touted a “supply shock” in oil from American tight oil fields unleashed by a new kind of hydraulic fracturing–a shock that would send “ripples throughout the world.” Unlike six months earlier, worldwide supply was supposed to take flight on the wings of fracking.

This enthusiasm didn’t last long. In its latest report, the just-issued 2013 World Energy Outlook, the agency sounded like a group of Gloomy Guses noting that “Brent crude oil has averaged $110 per barrel in real terms since 2011, a sustained period of high oil prices that is without parallel in oil market history.”

The report goes on to say, “The capacity of technologies to unlock new types of resources, such as light tight oil (LTO) and ultra-deepwater fields, and to improve recovery rates in existing fields is pushing up estimates of the amount of oil that remains to be produced. But this does not mean that the world is on the cusp of a new era of oil abundance.” The most recent forecast calls for rising oil prices in real terms through 2035. This is in part because the agency expects that “no country replicates the level of success with LTO” that we are seeing in the United States today.

What’s really happening here? Is the IEA getting better at seeing the future? Not really. What’s happening is that the IEA is being asked to do something which it cannot possibly do: accurately predict oil supplies 22 years into the future. So, given this impossible task, the agency responds by following current trends (and industry hype) and then extrapolating them.

Now that the IEA has had a chance to re-examine the industry’s claims in light of more experience with tight oil development, it is backing off its previous assessment in its Medium-Term Oil Market Report from May. Fatih Birol, chief economist for the IEA, told the Financial Times that he would now characterize rising oil production in the United States as “a surge, rather than a revolution.” He expects OPEC to become dominant once again in oil markets early in the next decade. The Financial Times characterized the report as predicting an oil supply crunch.

But, will the IEA have a change of heart once again? It might, depending on what it hears from industry sources and what it chooses to believe. But, the takeaway from the last year of IEA projections is not that the agency is suffering some sort of breakdown, but that it has been given an impossible task that in the volatile world of oil supplies has it casting about for a coherent story. In short, it is trying to tell the truth without knowing the truth for the simple reason that in this case the truth cannot known. That has made it a poor contestant in its own real-life episode of To Tell the Truth stretched out over the past year.

It is a fool’s errand to try to predict the future of world energy supplies. But, it is even more foolish to base our public policy, business and personal decisions on such predictions.

P. S. There is a minor acknowledgement that such forecasts are exercises in futility in a disclaimer at the end of the 2013 World Energy Outlook summary. The disclaimer reads: “The IEA makes no representation or warranty, express or implied, in respect of the publication’s contents (including its completeness or accuracy) and shall not be responsible for any use of, or reliance on, the publication.” This is standard boilerplate, I know. But, it is not the kind of language that inspires confidence.

 

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