IEA Expert: World's Oil Running out

[DReynolds]

http://www.independent.co.uk/news/sc...t-1766585.html

Warning: Oil supplies are running out fast

By Steve Connor, Science Editor

Monday, 3 August 2009

The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production, a leading energy economist has warned.

Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course, said Dr Fatih Birol, the chief economist at the respected International Energy Agency (IEA) in Paris, which is charged with the task of assessing future energy supplies by OECD countries.

In an interview with The Independent, Dr Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated.

But the first detailed assessment of more than 800 oil fields in the world, covering three quarters of global reserves, has found that most of the biggest fields have already peaked and that the rate of decline in oil production is now running at nearly twice the pace as calculated just two years ago. On top of this, there is a problem of chronic under-investment by oil-producing countries, a feature that is set to result in an "oil crunch" within the next five years which will jeopardise any hope of a recovery from the present global economic recession, he said.

In a stark warning to Britain and the other Western powers, Dr Birol said that the market power of the very few oil-producing countries that hold substantial reserves of oil – mostly in the Middle East – would increase rapidly as the oil crisis begins to grip after 2010.

"One day we will run out of oil, it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for that day," Dr Birol said. "The earlier we start, the better, because all of our economic and social system is based on oil, so to change from that will take a lot of time and a lot of money and we should take this issue very seriously," he said.

"The market power of the very few oil-producing countries, mainly in the Middle East, will increase very quickly. They already have about 40 per cent share of the oil market and this will increase much more strongly in the future," he said.

There is now a real risk of a crunch in the oil supply after next year when demand picks up because not enough is being done to build up new supplies of oil to compensate for the rapid decline in existing fields.

The IEA estimates that the decline in oil production in existing fields is now running at 6.7 per cent a year compared to the 3.7 per cent decline it had estimated in 2007, which it now acknowledges to be wrong.

"If we see a tightness of the markets, people in the street will see it in terms of higher prices, much higher than we see now. It will have an impact on the economy, definitely, especially if we see this tightness in the markets in the next few years," Dr Birol said.

"It will be especially important because the global economy will still be very fragile, very vulnerable. Many people think there will be a recovery in a few years' time but it will be a slow recovery and a fragile recovery and we will have the risk that the recovery will be strangled with higher oil prices," he told The Independent.

In its first-ever assessment of the world's major oil fields, the IEA concluded that the global energy system was at a crossroads and that consumption of oil was "patently unsustainable", with expected demand far outstripping supply.

Oil production has already peaked in non-Opec countries and the era of cheap oil has come to an end, it warned.

In most fields, oil production has now peaked, which means that other sources of supply have to be found to meet existing demand.

Even if demand remained steady, the world would have to find the equivalent of four Saudi Arabias to maintain production, and six Saudi Arabias if it is to keep up with the expected increase in demand between now and 2030, Dr Birol said.

"It's a big challenge in terms of the geology, in terms of the investment and in terms of the geopolitics. So this is a big risk and it's mainly because of the rates of the declining oil fields," he said.

"Many governments now are more and more aware that at least the day of cheap and easy oil is over... [however] I'm not very optimistic about governments being aware of the difficulties we may face in the oil supply," he said.

Environmentalists fear that as supplies of conventional oil run out, governments will be forced to exploit even dirtier alternatives, such as the massive reserves of tar sands in Alberta, Canada, which would be immensely damaging to the environment because of the amount of energy needed to recover a barrel of tar-sand oil compared to the energy needed to collect the same amount of crude oil.

"Just because oil is running out faster than we have collectively assumed, does not mean the pressure is off on climate change," said Jeremy Leggett, a former oil-industry consultant and now a green entrepreneur with Solar Century.

"Shell and others want to turn to tar, and extract oil from coal. But these are very carbon-intensive processes, and will deepen the climate problem," Dr Leggett said.

"What we need to do is accelerate the mobilisation of renewables, energy efficiency and alternative transport.

"We have to do this for global warming reasons anyway, but the imminent energy crisis redoubles the imperative," he said.

Oil: An unclear future

*Why is oil so important as an energy source?

Crude oil has been critical for economic development and the smooth functioning of almost every aspect of society. Agriculture and food production is heavily dependent on oil for fuel and fertilisers. In the US, for instance, it takes the direct and indirect use of about six barrels of oil to raise one beef steer. It is the basis of most transport systems. Oil is also crucial to the drugs and chemicals industries and is a strategic asset for the military.

*How are oil reserves estimated?

The amount of oil recoverable is always going to be an assessment subject to the vagaries of economics – which determines the price of the oil and whether it is worth the costs of pumping it out –and technology, which determines how easy it is to discover and recover. Probable reserves have a better than 50 per cent chance of getting oil out. Possible reserves have less than 50 per cent chance.

*Why is there such disagreement over oil reserves?

All numbers tend to be informed estimates. Different experts make different assumptions so it is under- standable that they can come to different conclusions. Some countries see the size of their oilfields as a national security issue and do not want to provide accurate information. Another problem concerns how fast oil production is declining in fields that are past their peak production. The rate of decline can vary from field to field and this affects calculations on the size of the reserves. A further factor is the expected size of future demand for oil.

*What is "peak oil" and when will it be reached?

This is the point when the maximum rate at which oil is extracted reaches a peak because of technical and geological constraints, with global production going into decline from then on. The UK Government, along with many other governments, has believed that peak oil will not occur until well into the 21st Century, at least not until after 2030. The International Energy Agency believes peak oil will come perhaps by 2020. But it also believes that we are heading for an even earlier "oil crunch" because demand after 2010 is likely to exceed dwindling supplies.

*With global warming, why should we be worried about peak oil?

There are large reserves of non-conventional oil, such as the tar sands of Canada. But this oil is dirty and will produce vast amounts of carbon dioxide which will make a nonsense of any climate change agreement. Another problem concerns how fast oil production is declining in fields that are past their peak production. The rate of decline can vary from field to field and this affects calculations on the size of the reserves. If we are not adequately prepared for peak oil, global warming could become far worse than expected.

[DReynolds]

Originally Posted by DReynolds

The IEA estimates that the decline in oil production in existing fields is now running at 6.7 per cent a year compared to the 3.7 per cent decline it had estimated in 2007, which it now acknowledges to be wrong.

This is the number that should send shivers down your spine. This is the warning that modern civilization has about a decade left.

Your children and mine will grow up in a disastrous, post-petroleum, Mad Max world. And there's not a damn thing anyone is doing about it.

[Ought Six]

DR:

"Your children and mine will grow up in a disastrous, post-petroleum, Mad Max world. And there's not a damn thing anyone is doing about it."

Baloney. There are enough hydrocarbons on this planet to keep our society going for at least a century. What will happen is that we will be forced to chuck these 'global warming' restrictions, and start using technoligies like making liquid fuels from coal. Energy prices will go up; a lot. But we will not run out of energy.

[DReynolds]

Originally Posted by Ought Six

There are enough hydrocarbons on this planet to keep our society going for at least a century.

There is less oil being produced per day now than in 5 years (here's a reference to the US dept. of Energy data: http://www.eia.doe.gov/oil_gas/petro...petroleum.html). At the current rate of decline, we will have to consume about 50% less oil (including condensates and distillates) within a decade at most.

And, by the way, even the most optimistic energy experts (e.g. Exxon-Mobil) have hydrocarbon production peaking in around 20 years. So your statement goes far beyond the ridiculous over to the religious.

[Ought Six]

http://en.wikipedia.org/wiki/Oil_sands

Excerpt:

Oil sands may represent as much as two-thirds of the world's total petroleum resource, with at least 1.7 trillion barrels (270×109 m3) in the Canadian Athabasca Oil Sands and perhaps 235 billion barrels (37×109 m3) of extra heavy crude in the Venezuelan Orinoco oil sands.[9] Between them, the Canadian and Venezuelan deposits contain about 3.6 trillion barrels (570×109 m3) of oil in place, compared to 1.75 trillion barrels (280×109 m3) of conventional oil worldwide, most of it in Saudi Arabia and other Middle-Eastern countries.

================================================== ============

http://en.wikipedia.org/wiki/Coal

Excerpts:

World coal reserves

At the end of 2006 the recoverable coal reserves amounted around 800 or 900 gigatons. The United States Energy Information Administration gives world reserves as 930 billion short tons[47] (equal to 843 gigatons) as of 2006. At the current extraction rate, this would last 132 years.[48] However, the rate of coal consumption is annually increasing at 2-3% per year and, setting the growth rate to 2.5% yields an exponential depletion time of 56 years (in 2065).[49] At the current global total energy consumption of 15.7 terawatts,[50] there is enough coal to provide the entire planet with all of its energy for 37 years (assuming 0% growth in demand and ignoring transportation's need for liquid fuels).
---

Liquefaction

Coal can also be converted into liquid fuels like gasoline or diesel by several different processes. In the direct liquefaction processes, the coal is either hydrogenated or carbonized. Hydrogenation processes are the Bergius process,[23] the SRC-I and SRC-II (Solvent Refined Coal) processes and the NUS Corporation hydrogenation process.[24][25] In the process of low temperature carbonization coal is coked at temperatures between 680 °F (360 °C) and 1,380 °F (750 °C). These temperatures optimize the production of coal tars richer in lighter hydrocarbons than normal coal tar. The coal tar is then further processed into fuels. Alternatively, coal can be converted into a gas first, and then into a liquid, by using the Fischer-Tropsch process. An overview of coal liquefaction and its future potential has been done by others.

================================================== ============

http://www.naturalgas.org/overview/resources.asp

Excerpts:

U.S. Natural Gas Resource Estimates

Below are three estimates of natural gas reserves in the United States. The first, compiled by the Energy Information Administration (EIA), estimates that there are 1,747.47 Tcf of technically recoverable natural gas in the United States. This includes undiscovered, unproved, and unconventional natural gas. As seen from the table, proved reserves make up a very small proportion of the total recoverable natural gas resources in the U.S.

Natural Gas Technically Recoverable Resources
Natural Gas Resource -- Category
(Trillion Cubic Feet)

As of January 1, 2007

Nonassociated Gas
Undiscovered 373.20
Onshore 113.61
Offshore 259.59
Inferred Reserves 220.14
Onshore 171.05
Offshore 49.09
Unconventional Gas Recovery 644.92
Tight Gas 309.58
Shale Gas 267.26
Coalbed Methane 68.09
Associated-Dissolved Gas 128.69
Total Lower 48 Unproved 1366.96
Alaska 169.43
Total U.S. Unproved 1536.38
Proved Reserves 211.09

Total Natural Gas 1747.47
---

Historical Proved Natural Gas Reserves

The graph below shows the change in proved natural gas reserves in the United States from 1990 to 2000, as recorded by the EIA. As can be seen, the levels of proved reserves in the United States have not changed significantly over the past 10 years. If the additions to proved reserves in a given year are larger than the subtractions from production, then proved reserves will increase, and vice versa. Usually, however, the additions are close enough to the subtractions to maintain a relatively constant level of proved reserves.

================================================== ============

http://en.wikipedia.org/wiki/Oil_shale

Excerpt:

A 2005 estimate set the total world resources of oil shale at 411 gigatons — enough to yield 2.8 to 3.3 trillion barrels (520 km3) of shale oil.[2][3][4][5] This exceeds the world's proven conventional oil reserves, estimated at 1.317 trillion barrels (209.4×109 m3), as of 1 January 2007.[22] The largest deposits in the world occur in the United States in the Green River Formation, which covers portions of Colorado, Utah, and Wyoming; about 70% of this resource lies on land owned or managed by the United States federal government.[23] Deposits in the United States constitute 62% of world resources; together, the United States, Russia and Brazil account for 86% of the world's resources in terms of shale-oil content.[20] These figures remain tentative, with exploration or analysis of several deposits still outstanding.[2][6] Professor Alan R. Carroll of University of Wisconsin-Madison regards the Upper Permian lacustrine oil-shale deposits of northwest China, absent from previous global oil shale assessments, as comparable in size to the Green River Formation.[24]

[DReynolds]

Originally Posted by Ought Six

Oil sands may represent as much as two-thirds of the world's total petroleum resource

Oil sands are not economically feasible. It does no good proposing solutions than would cost $200 or $300 per barrel, since they translate into $8 or $12 per gallon. (The proof that Canadian oil-sands are not economically feasible is in the pudding -- Canadian oil sand conversion into oil is less than 2% of global production even at $70/barrel).

And when it costs $200 to fill your car with gas it's the same as if there was no gas. The American model of civilization doesn't work when it costs $200 to buy a tank of gas.

[Ought Six]

That is static thinking. You assume the cost to extract will remain the same, when historically the opposite is true.

Technological advances in the extraction process have made extraction more efficient. The original cyclic steam stimulation method has been replaced by steam-assisted gravity drainage on the first pass, and vapor extraction process on the second pass where drilling extraction is used. They are now experimenting with toe to heel air injection, which is showing promise as the next even cheaper technology. In other areas, the stuff is very close to the surface with a thin layer on top, and is simply stripmined, mixed with hot water and sodim hydroxide, and the slurry pumped to a plant where it is stirred and the bitumen skimmed from the top.

Right now, large amounts of natural gas are burned to extract oil from the sands. There are plans to start burning the byproducts of the process to provide that energy instead. But what would really by a synergistic combination (as dharma has pointed out in the past) is using nuclear power to provide the energy to process the oil sands. If Canada does that, the costs will drop dramatically. Another alterative is using clean coal technology to provide the energy for extraction. Canada has a hell of a lot of coal. As energy prices ramp up, the demand for oil sands products will increase, making them economically feasible and providing the necessity to break through political barriers to increased production and importation of this fuel to the United States. The sheer economies of scale of this vastly increased production will also reduce extraction prices.

[DReynolds]

Originally Posted by Ought Six

You assume the cost to extract will remain the same, when historically the opposite is true.

I am sure that extraction technology (and refining technology) will advance significantly over the coming decade. But there is an opposite force -- crude oil and LNG are a major input to oil sand production.

It takes a significant amount of diesel and LNG to produce a barrel of oil from oil sands. So the problem is that we get to a point, in the next year or two or three, where spot crude is suddenly back up to $150 or higher at $200. And LNG is back at $12. And then the cost of converting oil sands to oil also doubles or triples.

Of course we are talking about scale here. We do not run out of oil sands. But it becomes impossibly expensive, as do all petroleum substitutes because we have to replace 85million barrels/day. So we move from a world where a tank of gas costs $40 to one where it costs $200 very quickly, perhaps within a couple years from now. It'll almost immediately make the 25 mile commute to NYC, or to Chicago, or to LA financially impossible. The suburbs become untenable. Imagine what will happen then...

[BirdGuano]

Originally Posted by DReynolds

It'll almost immediately make the 25 mile commute to NYC, or to Chicago, or to LA financially impossible. The suburbs become untenable. Imagine what will happen then...

Rip out the parkland and everybody in the burbs becomes dirt farmers ?

[DReynolds]

Originally Posted by BirdGuano

Rip out the parkland and everybody in the burbs becomes dirt farmers ?

Most Americans under 40 would have no idea how to raise food on their own. But I guess they'll learn. Because the cheap gasoline that allows half the workforce to commute dozens of miles a day to LA/Chicago/NYC/Boston/Phoenix/Houston/Philadephia is coming to an end.

The IEA data says we are about at the end of cheap, easy oil which lasted about 130 years. The world now produces less oil (including oil sand production) that it did in 2008, 2007, 2006 and 2005.

We are entering the age of difficult, expensive oil. And of all countries in the world, this puts the US at perhaps the greatest disadvantage. We are the disproportionate users of oil.

[Ought Six]

DR:

Did you even read my post? I specifically addressed the exact issue you brought up. You also commented only on oil sands, and ignored the other things I listed.

[DReynolds]

Originally Posted by Ought Six

Did you even read my post? I specifically addressed the exact issue you brought up. You also commented only on oil sands, and ignored the other things I listed.

Yeah, if Canada builds nuclear power plants then they won't need as much LNG and Diesel to process the oil sands.

Even forgetting the impossibility of getting Nuke plants built fast enough, it abstracts from reality in at least 2 other ways:
1)It takes a massive amount of petroleum to build a nuclear power plant, and to find and process Uranium. If we wait until oil becomes scarce (what we're doing now), it will be economically infeasible to build a nuke plant. This is the "waiting too long" problem.
2) There is even less Uranium in the world than there is crude oil. If countries started building Nuke plants to replace oil, we'd run out of uranium in about 15 years.

[DReynolds]

Originally Posted by Ought Six

the demand for oil sands products will increase, making them economically feasible

You have this backwards. As the demand for oil alternatives increases, they become more expensive, not less.

And it's already extremely expensive now, even with cheap LNG and cheap diesel.

[Ought Six]

I said there are already plans in the works to burn the byproducts of the extraction process, instead of natural gas. If that can be made to work, problem solved. You also ignored coal liquefication, a well-established technology.

[penguinzee]

First off, o6, NEVER depend on that font of questionable information, Wikipedia...

Oil sands may represent as much as two-thirds of the world's total petroleum resource, with at least 1.7 trillion barrels (270×109 m3) in the Canadian Athabasca Oil Sands and perhaps 235 billion barrels (37×109 m3) of extra heavy crude in the Venezuelan Orinoco oil sands.[9] Between them, the Canadian and Venezuelan deposits contain about 3.6 trillion barrels (570×109 m3) of oil in place, compared to 1.75 trillion barrels (280×109 m3) of conventional oil worldwide, most of it in Saudi Arabia and other Middle-Eastern countries.

Bad math there, or lack of clarity, to say the least...

But the biggest problem with the oil sands is energy return on energy invested... it takes energy to dig up the rock, crush and process it, and lots of it. Current EROEI for the Alberta oil sands has been running around 1.7-1, IIRC, not all that great compared to a standard oil well (20-1 up to 100-1 for shallow wells). It's the old 2 steps forward, one step back deal again. Further, to crack all that rock (assuming you can even get all of it with the same energy inputs) you would wind up nearly exhausting all other energy forms left in the world (last I remember, it's been estimated there's about 1 trillion barrels of recoverable oil left in the ground, don't know the number offhand for nat gas).

In short, no we're not saved by the oil sands-I personally think we'd be doing good to get half that number out of the oil sands, and suspect it's going to come in somewhat lower than that...

Of course, the wild card in all this is a war over resources...

Franc (penguinzee)

[DReynolds]

Originally Posted by penguinzee

In short, no we're not saved by the oil sands-I personally think we'd be doing good to get half that number out of the oil sands, and suspect it's going to come in somewhat lower than that...

Indeed, Canada said last week that they would not be able to produce 2million barrels/day from the oil sands in 2010 as planned, but rather it wouldn't be until 2014-2015.

And 2million barrels/day is a pathetically small amount, barely more than 2% of daily global consumption. So, no, oil sands are not going to do it. As global production of oil declines (at about 6% per year) from now on, we need to find new production of almost 5million barrels per day just to stand still.

And much of the claims about new fields over the last couple years turned out to be hype. For example, Brazil claimed Santos was a supergiant field. A few weeks ago, a $150million well project in Santos was abanoned-- it came up dry. Reference: http://www.rigzone.com/NEWS/article.asp?a_id=78056

[Ought Six]

I did not say that oil sands alone would do it. But as prices skyrocket upward, much more money will be invested in both Canadian and Venezuelan oil sands production, and production will go up. Current linear projections on output will be rendered meaningless. Meanwhile, new technologies to make production cheaper and more efficient will be coming on line. Coal liquifaction plants will be built. Research into oil shale production will intensify. Deep sea drilling technology will continue to improve. Oil that is now considered 'unrecoverable' will be recovered. Methane clathrates will be mined on the sea floor. The demand will be there, and the market will not be denied.