August 31, 2006 at 9:33 pm
Contributed by:
Folks,
You may recall the name of Dr. Ali Morteza Samsam Bakhtiari, a senior expert to the Iranian national oil company, National Iranian Oil Co. (NIOC), who was featured in the film The End of Suburbia. (And if you haven’t seen it, you must!)
A man with decades of experience, Dr. Bakhtiari has been one of the few top names in the oil business to acknowledge the urgency and seriousness of peak oil, and speak fairly candidly about it.
This article, from yesterday’s Daily Reckoning investment newsletter, has a nice roundup of his views and adds some fresh material from the author’s personal correspondence with Dr. Bakhtiari.
What prompted me to blog it was that Dr. Bakhtiari proposed a framework to describe the post-peak scenario between now and 2020, in four phases. Now, I have put the challenge, to various discussion groups about energy, for anyone to come up with a realistic 20-year scenario. So far, there have been some admirable attempts, but nothing I would consider too seriously. I even tried to get it submitted as a standard question to all speakers at the upcoming ASPO conference, but that get much response. Perhaps it’s too daunting. The problem is, there are just too many variables, and their interaction is too unpredictable.
While simple, I think Dr. Bakhtiari’s T1 - T4 framework could be a useful foundation. Food for thought, anyway.
–C
THE FOUR PHASES OF TRANSITION
by Byron W. King
In a recent article entitled “Nothing Like Business
as Usual,” published Aug. 11, 2006, in Whiskey & Gunpowder, I outlined the
views on Peak Oil of a man named Ali Morteza Samsam Bakhtiari. Dr. Bakhtiari is
a former senior energy expert who spent his long career, which started in 1971,
employed by the National Iranian Oil Co. (NIOC) of Tehran, Iran. During the
course of his employment with NIOC, he held many important positions of trust
and responsibility.
Dr. Bakhtiari is now fully retired from NIOC, in
accordance with a mandatory age requirement. He has no current official link
with the company. But, luckily for us in the Western world, he is among the
pioneers of the global “Peak Oil” theory.
My recent article on Dr. Bakhtiari discussed in
general his views and recent comments on Peak Oil and worldwide oil depletion. I
noted his predictions of oil costing in the range of $100-150 per barrel in the
not-too-distant future. And I referred to what Dr. Bakhtiari characterizes as
the “Four Phases of Transition” (which he labels T1, T2, T3, and T4) in a world
of declining conventional oil output. I received much e-mail from readers asking
me to amplify what Dr. Bakhtiari means by these latter terms. That is, what are
the “Four Phases of Transition”?
I asked the good doctor this very question, and his
reply was, “As for T1, T2, T3, and T4, they are still very vague concepts, but
if you allow me a few days…I shall try to explain to you what I think about
these four.”
And good to his word, within a few days, Dr.
Bakhtiari was kind enough to forward some amplifying thoughts on the matter.
Here is what he sent to me, to share with you:
“The four Transition periods (T1, T2, T3, and T4)
will roughly span the 2006-2020 era. Each Transition [will] cover, on average,
three to four years.
“The major palpable difference between the four Ts
is their respective gradient of oil output decline - very small for T1,
perceptible for T2, remarkable in T3, and rather steep for T4. In fact, this
gradation in decline is a genuine blessing for those having to cope and
adapt.
“It should be borne in mind that these four Ts are
only an overall theoretical structure for future global oil output. The
structure is thus so orderly because [it is] predicted with ‘Pre-Peak’ methods,
‘Pre-Peak’ assumptions, and [a] ‘Pre-Peak’ set of rules.
“The problem is that we now are in ‘Post-Peak’
mode, and that none of [the] above applies anymore.
“The fact of being in ‘Post-Peak’ will bring about
explosive disruptions we know little about, and which are extremely difficult to
foresee. And the shock waves from these explosions rippling throughout the
financial and industrial infrastructure could have myriad unintended
consequences for which we have no precedent and little experience.
“So the only Transition we can see rather clearly
(or rather, we hope to be able to comprehend) is T1. It is clear that T1 will
witness the tilting of the ‘Oil Demand’ and ‘Oil Supply’ scales — with the
former dominant at the onset and the latter commanding toward the close (say, by
2009 or 2010).
“But even during that rather benign T1, the
unexpected might become the rule and the orderly ‘Pre-Peak’ rapidly give way to
some chaotic ‘Post-Peak.’
“In any instance, the overall structure of the
‘Four Transitions’ is a general guideline for the next 14 years or so — as far
as global oil output is concerned. In practice, reality might prove to be worse
than these theoretical Transitions; but certainly not better.”
Dr. Bakhtiari has a background in chemistry. He
holds a B.Sc. and Ph.D. in chemical engineering, granted by the Swiss Federal
Institute of Technology in Zurich, Switzerland. He has worked in industry and
taught at a university level in the fields of both chemistry and chemical
engineering for about four decades.
I asked Dr. Bakhtiari if it would be fair to say
that he is using the term “Transitions” in a manner similar to what are known as
“phase transitions”
in physical chemistry? Of course, the analogy need
not be an exact chemical description. But I asked him if that concept from
chemistry would be a proper way of helping to explain his thinking
process.
The reason I asked the question of Dr. Bakhtiari,
and used terms from physical chemistry, was his statement, “The major palpable
difference between the four Ts is their respective gradient of oil output
decline.”
My interpretation of that comment is that at each
“transition” point where the gradient changes, we might view that as the “phase
change” analogous to, say, frozen water melting, or hot water
boiling.
And as for how much we do not know in a post-Peak
Oil world, as Dr. Bakhtiari noted, that could be analogous to the phenomenon
known as “flash evaporation.” That is, if you raise the temperature of water to
something well below its standard boiling point, but then rapidly change some
other condition, such as lowering the atmospheric pressure above the water, the
water “boils” at a lower temperature and lower pressure regime. This might be
considered similar to some abrupt, unanticipated event reducing the supply of
oil; for example, warfare, natural disaster, or unexpectedly rapid depletion and
decline in a major oil-producing region of the world.
Dr. Bakhtiari replied as follows:
“I certainly like your idea of ‘phase
transition,’…especially the analogy from ice to water, which occurs gradually.
Start with ice and end with water, while to the very last second there is some
ice present.
“I also agree that at the junction of two Ts, there
should be some kind of a milestone. For example, at the close of T1, Supply
should totally dominate Demand…I am toying with [the] idea, very preliminary,
that close of T2 could be OPEC [oil production] surpassing non-OPEC [oil
production], although OPEC died in 2004.”
Dr. Bakhtiari’s statement that “OPEC died in 2004″
is an interesting viewpoint, in light of his idea about the nature of T2, when
OPEC production will surpass non-OPEC production. To explain this further, let
me refer back to February 2006, in the ASPO-USA newsletter, in which Dr.
Bakhtiari wrote:
“It goes without saying that when assaying Middle
Eastern oil reserves, one should tread carefully. Because, on the one hand, oil
reserves’ estimation is both a science and an art; and on the other hand, seen
from the point of view of most Middle Eastern countries, oil reserves are more
political than geological. Thus, nonscientific views come to prime over science
and further enhance the various types of shades that have led to an overall
opaque situation in the Middle East.”
Dr. Bakhtiari wrote this in the context of a
discussion in which he estimated total oil reserves in the Middle Eastern group
of major oil-producing nations (Iran, Iraq, Kuwait, Saudi Arabia, and the United
Arab Emirates) as about half, or even less, than what the respective national
governments claim.
Dr. Bakhtiari noted in the article
that:
“As for Iran, the usually accepted official 132
billion barrels is almost 100 billion barrels over any realistic assay. If the
higher figure was for real, its oil industry would not be struggling day in and
day out to keep output at between 3.0-3.5 million barrels per day (inclusive of
Persian Gulf offshore).”
Coming from a former senior official of NIOC, this
is an utterly astonishing comment with immense implications. It may explain much
about the current Iranian government’s view of its options for setting future
industrial, economic, political, and military policy, although Dr. Bakhtiari
certainly did not say this, and I do not want to put words in his
mouth.
In February 2006, Dr. Bakhtiari further summarized
his thinking on the subject of oil reserve estimates as follows:
“Notwithstanding the importance of conventional oil
reserves, their days might now be numbered (both in the Middle East and
elsewhere).
“Oil reserve estimates were useful in the era
before ‘Peak Oil.’ But in the aftermath of the mighty Peak (as, for example, in
the present ‘T1′ period), they tend to become stale and rather useless, as
field-by-field analysis and prediction takes over (e.g., Ghawar,
Cantarell).
“So it will not be long now before we will have to
say goodbye to all these mesmerizing oil reserve figures and dump the whole
reserves file into the all-encompassing ‘dustbin of history.’”
In another recent statement, Dr. Bakhtiari has said
this:
“The decline of global oil production seems now
irreversible. It is bound to occur over a number of transitions, the first of
which I have called T1, which has just begun in 2006. T1 has a very benign
gradient of decline, and it will take months before one notices it at all. But
T2 will be far steeper…My World Oil Production Capacity model has predicted
that over the next 14 years, present global production of 81 million barrels per
day will decrease by roughly 32%, down to around 55 million barrels per day by
the year 2020.
“Thus, in the face of Peak Oil and its multiple
consequences, which are bound to impact upon almost all aspects of our human
standards of life, it seems imperative to get prepared to face all the
inevitable shock waves resulting from that. Preparation should be carried out on
individual, familial, societal, and national levels as soon as possible. Every
preparative step taken today will prove far cheaper than any step taken
tomorrow.”
In his message to me, Dr. Bakhtiari stated that the
“gradation in decline (between T1, T2, T3, and T4) is a genuine blessing for
those having to cope and adapt.” Indeed, it is a blessing, but only if informed
people and the industrial and political policymakers of the world will actually
take Peak Oil as a serious matter and set policy accordingly.
In this regard, when it comes to his efforts in
explaining Peak Oil to a worldwide audience, Dr. Bakhtiari is a prophet. He is
both predicting something, and giving a 14-year time frame for its occurrence.
Thus his efforts, his writings, and his work embody the old saying that “Time
takes no holiday.” Simply allow me to end by expressing my deepest thanks to Dr.
Bakhtiari for sharing his thoughts with me, and recalling the words of Dante
Alighieri, who wrote in Purgatorio, Canto III, “It is the wisest who grieve most
at the loss of time.”
Until we meet again…
Byron W. King
for The Daily Reckoning
Editor’s Note: Byron King currently serves as an
attorney in Pittsburgh, Pennsylvania. He received his Juris Doctor from the
University of Pittsburgh School of Law in 1981 and is a cum laude graduate of
Harvard University. He is a regular contributor to the free e-letter, Whiskey
and Gunpowder, which covers resources, oil, geopolitics, military history,
geology and personal freedom. To get your free subscription, click
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– Posted Wednesday, 30 August 2006
August 28, 2006 at 3:39 pm
Contributed by:
Here’s another rare, good piece of journalism about peak oil, global warming, and redesigning communities. This is an excellent primer for those who are still getting up to speed on those topics. Highly recommended.
–C
Feeling the heat
By Mark Derewicz
Published on Wednesday, May 24, 2006 by Endeavors (U. of North Carolina,
Chapel Hill)
Floods obliterate Wilmington, Norfolk, even New York. Millions of people
relocate inland. America’s bread-basket — the world’s main producer of grain —
returns to its Dust Bowl days. Hurricanes as wicked as Katrina regularly ravish
the Southeast. East Coast weather imitates Ontario. Southern Europe swelters and
then the North plunges into a deep freeze. Our global economy is shattered in
one day. Sounds like the movie The Day After Tomorrow, which left
scientists scoffing. Weather changes on a dime. Climate doesn’t. But it can
change quicker than you might think.
“It won’t happen on Tuesday at 2:52
p.m.,” says Doug Crawford-Brown, director of the Carolina Environmental Program.
But, he says, the time frame “is stunningly short.” By 2100 the Earth will be a
very different place, he says. Here’s why. In the mid-1990s, ice core samples
from Greenland revealed that climate has severely changed throughout Earth’s
history due to increased amounts of atmospheric greenhouse gasses. But some of
these changes happened over a span of only fifty to one hundred years.
(Photo: Dale Taylor)
“This really scared people because climatologists thought climate changed
subtly over centuries,” Crawford-Brown says. Now climatologists fear the worst
could unfold within decades, drastically altering global civilization.
If we do nothing to curb carbon dioxide emissions from automobiles,
homes, and industry, Crawford-Brown and many other scientists predict, global
mean temperature will increase four to seven degrees Fahrenheit by 2060. If this
happens, look out. Icecaps, which are already melting, will thaw even quicker.
Ocean levels will rise. Already, rising waters have swallowed up small islands
located halfway between Hawaii and Australia. Satellite images show that
Switzerland has lost 20 percent of its glaciers over the past fifteen years. The
signs aren’t good.
Under the worst-case predictions, Crawford-Brown
says, the resulting floods “will be enough to inundate North Carolina’s coast
thirty or forty miles inland and displace half the East Coast by 2100.” Other
calamities include the outbreak of infectious and malarial diseases that could
creep north from the tropics, and more days of deadly heat and cold. That’s not
the worst of it. Siberian and northern Alaskan permafrost is thawing, releasing
methane — another greenhouse gas. This could accelerate global warming and cause
ocean temperatures to rise, which would create a breeding ground for intense
hurricanes, Crawford-Brown says. High water temperatures are already killing
coral that are vital to Caribbean and Southeast Asian fish nurseries. Melting
icecaps will also decrease ocean salinity. In 2005 scientists discovered that
ocean temperatures were rising, which their computer models had predicted.
Scientists fear that desalination and increasing ocean temperatures will
eventually shut down the global oceanic conveyor belt. If that happens, northern
Europe freezes and the United States gets much drier and cooler — in a hurry —
imperiling mass agriculture that feeds much of the world’s 6.5 billion people.
(Photo:
Jason Smith.)
Douglas Crawford-Brown:
“If we continue to settle the way
we do — with people in suburbs working thirty miles away and shopping twenty
miles away — forget it. We’re doomed to high levels of energy use.”
Tom Meyer, professor of chemistry at Carolina, says
that this sci-fi climate change seems a little extreme, but, “this has happened
historically. Geological records are clear.”
Meyer says that atmospheric
CO2 levels are now at 380 parts per million. “Most of the models say that when
we reach four hundred fifty to seven hundred, the heat will build up quite
dramatically.” And, he adds, we might not have until 2060. Meyer says
that three factors are pushing us over the edge: industrial nations pumping out
CO2, other nations imitating our industrial revolution, and global population
reaching ten billion (ETA: 2100). More humans plus more energy use equals
increased global warming.
Both Crawford-Brown and Meyer say that global
climate change is the most urgent and complex issue of our time because it’s
interwoven with energy consumption and fossil fuels. The big three: coal,
natural gas, and oil. Global warming isn’t in doubt. But the severity and
timeline of drastic climate change are.
“These are our best
predictions,” Crawford-Brown says of the 2060 CO2 projections. “But there’s a
lot that’s left out of the models.”
Such as the end of cheap oil and
natural gas. Wouldn’t limited supplies of those fuels affect the models?
(Photo: Jason Smith)
Tom Meyer:
Three factors are pushing us over the edge:
industrial nations pumping out C02, other nations imitating our industrial
revolution, and global population reaching ten billion.
Peak Oil
Astrophysicist Gerald Cecil, the former project scientist of Carolina’s
SOAR telescope in Chile, was reviewing global warming models for an
undergraduate class in 2001 when a big red flag went up. Economists had advised
the United Nations’ Intergovernmental Panel on Climate Change that more than
twice the world’s current energy consumption would come from oil in 2030, but
Cecil was skeptical. “I recalled 1980 concerns that we were running out of oil,”
Cecil says. “They talked about a thirty-year time frame.”
He searched
for information on the longevity of oil supplies, and stumbled onto the concept
of peak oil — the moment when oil can be extracted from the ground no
faster. Once that happens, less and less oil will be available on the market.
Prices shoot way up — not only gas prices, but prices for food, clothes,
shelter, plastics, and just about everything else — because oil is integral to
their production and distribution.
“As I got deeper into it, I started
to switch fields,” Cecil says. “I could not in good conscience expend my efforts
solely on astrophysics when I saw this massive problem that few people
recognized.” As first steps, he has developed two undergraduate energy courses
and is finishing a book, Out of the Oil Trap, in an attempt to quantify
an understudied subject.
He wants to make something clear: there is no
big pool of oil in the ground. “It’s distributed throughout pores in only a
restricted range of rock types,” Cecil says. Oil depletion, then, is not like
pouring gasoline from a can. Instead, he says, think of a straw sucking on a
milk shake.
“If you pull too hard, the milk slurps as it mixes with
air,” Cecil says. “There’s a disconnection, and you actually end up drawing less
fluid. You have to pull it with a slow, steady tug so that it connects by
pressure and pulls itself out.” Similarly, oil is stranded if pumped too fast.
This is why the flow rate of an oil reservoir is key, he says, not how
much crude oil it holds. He says that a large volume of oil remains underground,
but after peak oil, it will take longer and longer to get it out.
For
example, American oil discoveries continued to increase until they
topped out in the 1930s. After that geologists discovered smaller and smaller
oil fields in the lower forty-eight states each year. Thirty years later
American oil production peaked at nearly ten million barrels daily. But
since 1970 the extraction rate has decreased steadily. Today, Texas oil wells
produce just a few barrels a day — a mere trickle — but the fields still contain
about 10 percent of the original recoverable oil. Global oil discoveries crested
in 1964, when easily accessible oil gushed from gigantic pressurized fields
around the Persian Gulf, Cecil says. Later discoveries throughout the world
paled in comparison, forcing non-OPEC nations to develop expensive and
sophisticated ways to drill horizontally, under water, and under ice floes. “All
of this effort affects the flow rate from discovery to delivery to the
consumer,” Cecil says. The other problem, he says, is that there are many kinds
of oil. The light, “sweet” stuff was easier to find and produce. Right now
companies are recovering heavier oil, which is tougher to refine, and this also
affects prices.
Cecil points to the work of industry experts such as
geologist Colin Campbell and energy investment banker Matt Simmons. They
underscore that at least thirty-three of the forty-eight major oil-producing
nations outside the Persian Gulf, including OPEC members such as Indonesia, have
declining flows. Saudi Arabia, the world’s biggest oil producer, is now
injecting massive volumes of expensive desalinated water into three huge but
aging fields. Water repressurizes the fields’ fluids to maintain high flow
rates, Cecil says. The Saudis have been using it for years to stabilize the
world oil market when production elsewhere goes awry.
Saudi Arabia,
which is notoriously secretive about the decline rates of its fields, says it
can increase the overall flow of oil to meet increased demand. The Saudis,
though, haven’t released field-by-field justification of this statement for
decades and, in fact, they are mostly just reworking old oil fields to squeeze
out more oil, not bringing large new fields on line. This, Cecil says, will
bring on peak oil faster, and the decline rates will likely be even steeper than
projected, which are typically between 4 and 7 percent annually. Cecil says that
if there’s a 7 percent decline rate, which was typical in North Sea oil fields
that used water injection, then within 15 years, oil will be flowing from
today’s fields at half its present rate. “This,” Cecil says, “is a very big
deal.”
(Photo: Jason Smith)
Gerald Cecil:
“I think the big picture is absolutely
overwhelming. But this is something that could energize every department on
campus.”
When
will oil peak? Cecil says it’s a tough call, but thinks we could decline
permanently from present near-peak rates within five years. Because of this,
Cecil says, global warming trends should be lower than expected — “unless we go
absolutely nuts with coal, or have somehow missed a major feedback in the
regulation of atmospheric CO2.”
Crawford-Brown isn’t so sure. He says,
“I’m always a little bit skeptical of arguments about us running out of stuff
because, to our detriment, we seem to be very clever at coming up with new
things.”
Oil companies, for instance, say that they have new recovery
technologies ready to leave the lab and enter the field. But the faster we pump
out the oil, Cecil says, the harder we’ll fall after peaking. They also say that
massive tar-sand deposits in Canada and Venezuela, and later, shale from the
United States, will delay any peak beyond 2030. Tar sands are a mixture of clay,
sand, water, and bitumen — a hydrocarbon. But you can’t stick a pipe in the
ground to hit a bitumen gusher, Cecil says. It has to be strip-mined in large
amounts to produce a relatively small volume of crude oil. It’s an expensive and
intensive process. Cecil’s research shows that projections from Canadian
tar-sand developers won’t come close to replacing the declining flow of
conventional crude oil. Neither will oil from the Arctic National Wildlife
Refuge in Alaska, should drilling there proceed. Cecil says that oil prices
likely will spike sharply instead of climbing gradually.
Coming up short
In his book, Cecil shows what sort of energy upgrade we will soon need
from alternatives. For this, he developed a web tool, the U.S. Energy Simulator,
which can plot exponential increases in alternative forms of energy, not to
mention fossil fuel growth, decline, or stability. For instance, the United
States currently gets about 20 percent of its electricity from nuclear reactors,
according to the Department of Energy. The simulator can plot that, and increase
it year by year until 2040. The tool then breaks down the information into
useful units, such as how many nuclear plants we will have to build. Cecil’s
program makes it clear that replacing fossil fuels will be extremely difficult,
if not impossible, without changing the way American society functions — people
consuming much less stuff, especially gasoline. He says that as oil supplies
begin to decrease per capita, we will become much less mobile, eventually
relying on slower, less convenient, and more expensive electric cars. And, he
says, this electricity will increasingly come from solar, wind, and most of all
nuclear energy.
For smaller communities, such as those in North
Carolina, another alternative is biomass — generating energy from landfills, hog
waste, wood chips, and other renewable sources. Such projects are under way
across the nation, but the short-term problem remains the same — we need liquid
fuel.
Cecil’s research shows that other fuel alternatives, such as
hybrid technology, ethanol, and biodiesel, are not long-term solutions if
society remains structured as it is today. He researched the topic and
co-authored a paper in which he calculates that America’s entire corn crop could
produce enough ethanol to fuel just 7 percent of this nation’s automobiles. And
ethanol’s energy ratio — how much energy is put into its creation compared to
how much energy it will produce — is so bad that production depends on three
billion dollars in state and federal subsidies. Cecil adds that massive ethanol
production — which uses coal, largely imported oil, and natural gas — would
degrade the environment, including global warming. Using more land for mass
agriculture is also problematic because tilling soil is a major CO2 contributor.
On the other hand, ethanol and methanol can be made from other biomass, such as
wood chips and sugar cane, so they could provide a slice of the energy pie,
especially for smaller communities. As for biodiesel — fuel made essentially
from new or used vegetable oil — Americans used about sixty-five million gallons
in 2005. But that’s a mere drop in the tank: it only takes about a dozen typical
gas stations to sell that much gasoline in a year. The jump in alternative
production would have to be enormous, so biofuels barely register on Cecil’s
energy simulator.
Cecil’s energy outlook doesn’t include hydrogen, which
many people assume has the most potential. Hydrogen, though, has to be
chemically extracted from substances, such as water or coal. Extraction consumes
significantly more energy than is released when hydrogen powers a fuel cell.
Meyer, who has followed hydrogen’s journey for years, says that fuel cells are
still very expensive, and a hydrogen-based economy will take years of research
and development, not to mention tons of money.
Coal and natural gas can
be liquefied to make car fuel, although such liquefaction facilities pollute
worse than typical coal plants. Another problem is that domestic supplies of
natural gas peaked in 1973, and the infrastructure to distribute them between
continents is almost nonexistent, Cecil says. “The constricted flow of natural
gas is also not reflected in most global warming models,” he adds. If global
production of natural gas peaks, could our cumbersome coal infrastructure be
ramped up to quench our energy thirst? Although it’s abundant, coal is like oil
— there are different grades. We’re just about out of the best stuff, and we’re
mining lower quality brown coal instead. Brown coal yields less energy, which
means we need more of it. And it’s dirtier than the pure black kind, Cecil says.
It’s easy to see how we got into the twin troubles of peak oil and
global warming. It’s not so easy to see the way out because, as Cecil points
out, we chose to move from wood to coal and then to oil. Each transition was to
cheaper and more convenient fuel. This time we have to move away from fossil
fuels out of necessity, and it won’t be cheap or easy.
Coal has been
with us since Englishman Abraham Darby decarbonized it to make coke in 1712. Oil
entered the mainstream around the same time that German Karl Benz invented
gas-powered automobiles in 1886. And thanks to the free market and a bit of
ingenuity, American industry rose swiftly in the nineteenth and twentieth
centuries. Vast factory lands consumed urban centers. Henry Ford installed the
first moving assembly line in 1913 and began churning out cars. Machine labor
replaced manual labor. After World War II, dirty cities, a swelling population,
and cheap oil helped create suburbia and superhighways. Driving became our way
of life.
Today, China — with its 1.3 billion people — is on the same
path. Picture Shanghai’s many bicycles filling the streets. No more. China
banned bikes on Shanghai’s main roads to make room for millions of cars. China
also wants to build more than five hundred coal-fired plants. India wants more
than two hundred, and the United States has plans for seventy-two more.
Techno-fixes
Global warming models factor in CO2 increases from coal, but the models
vary quite a bit because of unknowns, such as the rate of thawing permafrost,
possible cloud cover, and atmospheric water vapor. These and other factors could
speed up or slow down global warming. And, as Cecil admits, the peak oil
situation is a physical scientist’s nightmare, due to scattered data that
researchers such as Campbell and Simmons are only now piecing together. In light
of the unknowns, researchers focus on what they do know. Ninety-eight percent of
the world’s mountain glaciers are melting. Even if we cease all CO2 emissions
right now, the Earth’s mean temperature will still rise another degree,
according to scientist Bob Corell’s Arctic Climate Impact Assessment. He says
that would cause the entire Arctic ice mass to melt. Adding a few more degrees
could do even further damage. And scientists say to avoid that, we have to limit
CO2 emissions.
Scientists are researching and developing clean-coal,
zero-emissions technology, but so far the newest coal-fired plants still produce
CO2. Back home, Chapel Hill’s biggest single CO2 emitter is the university’s
cogeneration plant, which produces one-fourth of UNC’s energy. In most energy
plants, heat is an unused by-product. But Carolina’s award-winning plant
captures heat to create steam for electricity and chilled water for air
conditioning. The facility, built in 1992, gets more than twice the energy from
a pound of coal than standard plants do. It also has the best pollution controls
available.
Meyer, former associate director of research at Los Alamos
National Laboratories, believes that American and European researchers are close
to finding affordable ways to intercept CO2 before it enters the atmosphere.
Once captured, the CO2 must be stored. The United States and Europe are testing
underground aquifers for that.
In the short term, Meyer points to
high-temperature superconducting technology, which is already making
high-powered transmission lines two hundred times more efficient. Right now the
United States loses 10 percent of its electricity — three hundred million
kilowatt hours each year — due to resistance problems of copper and aluminum
wires.
At Carolina, Meyer has delved into renewable energy research in
green chemistry. The goal is to shine sunlight on water to make oxygen and
hydrogen. “If you do that, you can run them through a fuel cell to make
electricity,” he says. The problem is that a glass of water doesn’t absorb
visible light. Meyer is trying to create an energy interface that can rip apart
the water molecule to produce energy. “This has a long-term future,” he says,
“and will probably have a slice of the action.” But, he notes, a slice won’t cut
it.
Nuclear power can be a more substantial piece. Although few people
like it, many scientists, including those contacted for this story, believe that
nuclear is back on the table because it’s the cleanest, most cost-effective
alternative to fossil fuel. A chunk of uranium the size of a golf ball stores as
much energy as 2.3 million pounds of coal, and it releases no CO2. The United
States shied away from nuclear power after the Three Mile Island accident in
1979, when the fear of catastrophic meltdowns was rampant. Other countries,
though, embraced nuclear, including France, which gets 80 percent of its
electricity from nuclear reactors. Although nuclear reactors create miniscule
amounts of waste, disposing of leftover uranium and plutonium has always been
problematic. But spent fuel rods can now be recycled so that almost no waste is
left. Nuclear weapons, though, can still be made from the waste. “We would need
a new nuclear order that would have designated nations as manufacturers of
nuclear fuels and the same countries would take back the spent fuel rods,” Meyer
says. “And this makes things even harder.” But, he adds, the Department of
Energy has announced plans for a new Global Nuclear Energy Initiative for such
controls.
If we want to limit nuclear energy, or abandon it altogether,
can the world conserve enough?
Your carbon footprint
Crawford-Brown leads the United States chapter of the Carbon Reduction
Program (C-Red), which calls for a 60 percent reduction in CO2 emissions by
2025. It’s an ambitious project based on a 2003 British government goal of the
same reduction by 2050. Scientists at Britain’s East Anglia University say that
the reduction would keep CO2 levels from doubling the pre-Industrial Revolution
levels. This, Crawford-Brown says, could hold off or lessen the worst
climate-change scenarios while alternative energy sources and sustainability
practices take hold.
As part of C-Red, Crawford-Brown and Carolina
students assessed plans for Cambridge University’s new off-campus research
center and proposed energy-efficient changes, such as parking space reductions,
alternative transportation, free buses, energy-efficient buildings, water
recycling, and energy-efficient boilers and other equipment. The students also
worked out financing plans to show how green initiatives save money in the long
run.
Chapel Hill and UNC were the first in this country to sign on to
the C-Red program, and Carolina students are now evaluating emissions here. They
say that 27 percent of town emissions come from transportation, 33 percent from
commercial development, and 40 percent from residential areas. Crawford-Brown
says that the heating and cooling of homes account for 80 to 90 percent of
residential energy use. So the first step, he says, is to separate legitimate
need from obsession. “UNC Hospitals must run kidney dialysis machines,” he says.
“But there are illegitimate needs, like my son wanting to keep the upstairs
eighty degrees in the winter so he can wear beach clothing.”
Lowering
the winter thermostat to 65 degrees and upping the summer AC closer to 80 can
make big differences, Crawford-Brown says. It helps to turn off appliances and
lights and to use high-efficiency light bulbs — but not nearly as much as
monitoring HVAC units and filters. Insulation, double-glazed windows,
energy-efficient appliances, solar water heaters, and even photovoltaics are all
initial steps. The next one is getting people out of their single-occupancy
vehicles.
Politicians are considering a carbon tax, but that always
raises the question of oil subsidies. U.S. oil companies reported billions of
dollars in record earnings in 2005, but the government still subsidizes oil
exploration and production. The government also gives incentives to small
businesses that buy sport-utility vehicles, but not high-efficiency cars. In
essence, the government subsidizes people to use more fuel. Why? “It’s
political,” says Mort Webster, a public policy professor who specializes in
climate change policy. “Oil and auto industries have access, money, and
influence.”
Plus, cheap gas and driving are rooted in the American
conscience as inalienable rights. Stripping oil subsidies — raising gas prices
in the process — is political suicide, Webster says. His research shows that
more policymakers are talking about tradable carbon permits. Here’s the idea: a
country sets a goal to reduce emissions, and it sets a limit to the amount of
CO2 each company can emit. If a company prefers to reduce emissions even
further, it can choose to emit CO2 amounts that fall below the mandate and sell
a permit to another company, which is then allowed to emit more CO2. Together
the two companies meet the reduction goal. Such CO2 cuts would likely not come
close to 60 percent, Webster says, but it’s important to steer policy in the
right direction. Policymakers move slowly because they typically look ten or
twenty years into the future, he says. That’s problematic because coal-fired
plants have a fifty-year life span and, as for global warming and climate
change, we’re talking about a century of constant policy assessment.
Also, the government relies on companies to invest in technologies
purely on their own. “We ask them to be nice guys, and do this,” Webster says.
This is fundamentally flawed, he believes. Companies need incentives. But,
Webster says, the government should not subsidize one thing — such as ethanol —
and not others. “History shows that whenever governments try to pick winners,
they always get it wrong,” he says.
The government currently subsidizes
some alternatives, Meyer says, such as wind power. And government subsidies are
critical to the push by utility companies to consider constructing more nuclear
plants, he adds.
Photo: Jason Smith.
Mort Webster:
“History shows that whenever governments
try to pick winners, they always get it wrong.”
Big houses, long commutes
Carolina researchers agree that the federal government should lead the
way on global warming and peak oil, but they also agree that these issues have
deep roots that all of us should understand. Our sustainability nightmare began
with the American dream — suburbia. At the turn of the twentieth century, cities
were crowded and polluted, which caused public health problems. The government
subsidized cars, oil, and highway construction. Banks gave better mortgage deals
for suburban development. “We subsidized our way into sprawl,” says Philip
Berke, professor of city and regional planning and chair of environmental
studies. From an economic standpoint, it made sense. Environmentally, the
problems keep popping up.
“If we continue to settle the way we do — with
people in suburbs working thirty miles away and shopping twenty miles away —
forget it,” Crawford-Brown says. “We’re doomed to high levels of energy use.
Redesigning our communities is the ultimate answer.” (see Endeavors, Winter
2004,
“Made for
Action.”)
Berke believes that we should concentrate commercial and
residential areas together and then provide mass transit if none exists.
“There’s a notion that transit is expensive,” he says. “Well, so are highways.”
Transit-oriented developments would justify alternative forms of transportation,
he says.
There are favorable trends. Since 1990, city centers of
Charlotte, Raleigh, and Durham have gained popularity. Some towns are building
up instead of out. And, according to Berke, more than one million Americans have
moved into planned new urban communities, such as Southern Village and
Meadowmont in Chapel Hill. Cecil says that a local agriculture component would
help sustain new and old communities.
(Photo: Jason Smith)
Philip Berke:
“There’s a notion that transit is
expensive. Well, so are highways. … We subsidized our way into sprawl.”
Also, Berke says, education is essential, starting
with elementary school-age kids. As for the rest of us, we’ll likely have to
adjust our lifestyles. For example, when it comes to peak oil, Cecil says, “the
easiest way to adapt in the short-term will be to carpool.”
Ultimately,
our entire transportation system will have to be reconfigured, he says. The
final part of his book addresses such massive changes. “We need much more
efficient ways to move goods — by barge or train,” he says. Not by truck. “We’ll
have to transport people by trains, bikes, and much better cars than even
hybrids.” We’ll have to develop better housing and working patterns to lessen
transport time and energy. Air travel, Cecil thinks, will once again be only for
the rich.
“I think the big picture is absolutely overwhelming,” Cecil
says. “But this is something that could energize every department on campus in a
common-sense way. As in, ‘here’s a really tough problem to tackle. What do we
do? Let’s have a significant impact on the community.’”
Cecil adds that
the best way to pitch all of this might be to ask ourselves what sort of world
we want to leave for our children and grandchildren. “It’s not a world that’s
going to get easier; it’s going to get harder. We
must be vigilant
about our energy use for decades to come.”
Mark Derewicz is a writer
at the award-winning Endeavors magazine, published three times
a year by the Office of the Vice Chancellor for Research and Economic
Development at the University of North Carolina at Chapel Hill.
Original article :
http://research.unc.edu/endeavors/spr2006/feature_01.php
August 21, 2006 at 11:18 pm
Contributed by:
Folks,
The ASPO is gearing up for a proper and complete rebuttal to the aforementioned CERA report. Here is a precursor commentary by Randy Udall and Matthew Simmons. Smart, concise and on-the-money. The bottom line? “Taking such Pollyannish scenarios at face value threatens economic prosperity and national security.” Couldn’t have said it better myself.
–C
Published on Monday, August 21, 2006 by ASPO-USA’s Peak Oil Review / Energy Bulletin
CERA’s Rosy Oil Forecast – Pabulum to the People
By Randy Udall and Matthew R. Simmons
(Note: Commentaries do not necessarily represent ASPO-USA’s positions; they are personal statements and observations by informed commentators.)
At a moment when a tank full of gasoline costs $75, the Chinese are eagerly trading bicycles for cars, and Americans are consuming their body weight in petroleum each week, it would be nice to know how much oil will be readily available a decade from now. In a thirsty world, will supply be adequate to satisfy demand?
A new study from Cambridge Energy Resources Associates, a prominent research firm, says not to worry. “Capacity growth will accommodate rising world oil demand so long as there are no major disruptions in the actual flow of oil,” said CERA’s Chairman Daniel Yergin. Global supply could increase 25% by 2015 to 110 million barrels a day, he says. This surge of new oil would meet forecast increases in demand, with a surplus to spare, putting downward pressure on prices, the study notes.
The report might be reassuring if CERA did not have a checkered forecasting record, and if its findings were not hedged six ways to Sunday. “Our focus is on physical capacity, not actual production which can fluctuate for political, economic, or technical reasons,” Yergin explains. In CERA’s feel-good scenario, “there are no problems below ground” and the myriad problems aboveground, although real, are likely to be short-lived, and thus can be ignored in their Reference Case. This is an absurd and dangerous nostrum, false on both counts.
In truth, the energy business is plagued by problems in Nigeria (violent insurgency), Venezuela (Chavez), Alaska (pipeline corrosion), the Gulf of Mexico (hurricane damage), Canada (cost overruns), Iraq (civil war), Sudan (ditto), Mexico (declining production), the North Sea (ditto), and Iran (new project delays, saber rattling). While prices should remain volatile in the short term, it’s exceedingly difficult to foresee a return to anything resembling CERA’s orderly market, abundantly supplied with a surplus of cheap oil for the next decade. Indeed, we think oil will be in shorter supply and much more costly in 2015 than it is today.
For the past decade, CERA, the U.S. Energy Information Administration, and the Paris-based International Energy Agency have produced important forecasts whose predictions would be comic if they hadn’t been so tragically misleading. In an effort to reassure politicians, these groups have become purveyors of petro-prozac.
In 1998, the IEA, struggling to balance its forecasts of future demand with supply, created a mysterious new category of “unidentified unconventional” oil which would supposedly provide 19 million barrels a day by 2020. When independent analysts ridiculed this fudge factor, the agency deleted the category, but continued to insist that the 11 OPEC nations could double supply, a geopolitical improbability and a geological impossibility, since production in half of them has already peaked.
At home, the EIA has surrendered serious credibility since its late 1990s predictions that natural gas would sell for $2.50 +/- in 2015. Tell that to grandma in Duluth, since the futures market expects gas to bring 12 bucks next March. For its part, in 2002 CERA forecast that North American gas supply would increase by 15 percent. In reality, production has fallen by 4 percent, forcing CERA to admit that “gas production in the United States appears to be in permanent decline.”
These erroneous forecasts are not just embarrassments, they have had profound real world impacts, misleading politicians, misallocating capital, and obscuring the growing dangers that energy shortfalls pose to national prosperity. The EIA’s don’t-worry, be-happy forecasts of cheap natural gas prices helped entice independent power producers to spend $150 billion on gas-fired power plants, some of which have now become too costly to operate. IEA and CERA’s forecasts of long-term cheap oil have misled automakers like Ford and GM into believing their markets for gas guzzling SUVs were secure, even as Toyota and Honda hit the market with fuel thrifty, gas-electric hybrids. .
What’s going on here, how can so many bright people get it so wrong?
In the EIA’s case, it turns out that the computer model it used to forecast natural gas supplies lacked serious resource constraints. CERA, too, seems to have difficulty grasping the havoc that declines in production are wreaking on aging oil fields. Petroleum engineers are intimately familiar with depletion; it’s what keeps them awake at night. But depletion is inexhaustible; it’s an implacable foe that never sleeps, yet grows stronger each day. Even if CERA’s forecasted 21 million barrels a day of new supply were to appear, world oil supplies might grow only a bit or perhaps not at all due to depletion in existing fields.
Despite a growing body of evidence to the contrary, CERA has concluded that world oil production will not peak until after 2020, that “peak oil remains firmly out of sight.” Meanwhile a long list of informed observers, including T Boone Pickens, Henry Groppe, Charlie Maxwell, Jeremy Gilbert, Tom Petrie and Chris Skrebowski, have come to believe that a peak is likely between now and 2015. The Chinese agree, and there’s nothing inscrutable about what they are doing, in their race to secure petroleum assets all around the world.
At peak, the world will not be “running out.” Indeed, more than half the world’s conventional oil and a larger share of its unconventional oil will remain to be extracted. . What the world is running out of is cheap oil, the $20 oil we built our civilization around. Suggesting that there are no insurmountable problems for the oil industry above or below ground and that a return to inexpensive oil and orderly oil markets is in the cards is a fool’s forecast. Taking such Pollyannish scenarios at face value threatens economic prosperity and national security.
Abe Lincoln once said, “I’m a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the real facts, and beer.”
CERA offers us a stout panacea, but on closer inspection it’s not so much a forecast as a vision in search of reality. Its predictions for Russian additions are larger than those of the Russian government, its forecast for OPEC higher than OPEC’s own.
What are the real facts? Today, twenty nations produce 85% of the world’s oil, and production in half of these nations has already peaked, as it did in the United States 35 years ago. Despite new production in places like Angola, Kazakhstan and Brazil, two thirds of the world’s remaining conventional oil is in the tinderbox of the Middle East. Oil is becoming more difficult to find; 2005 was the worst exploration year since World War II. Globally, new discoveries turn up only one barrel for every three barrels we use, which is the reason large oil companies continue doing much of their prospecting on Wall Street. As Chevron notes in its recent ad campaign, “the era of easy oil is over.”
As they struggle to afford the next fill-up, Americans deserve a frank appraisal of our energy circumstances, not pablum and happy talk. With respect to petroleum, America has been sleepwalking toward disaster for twenty years. The nation desperately needs a wakeup call, not a fairy tale masquerading as a forecast.
Randy Udall directs the Community Office of Resource Efficiency in Aspen (CO) and co-founded ASPO-USA. Matthew R. Simmons is Chairman of Dallas-based Simmons & Company International—an investment bank specializing in the energy industry—and a member of ASPO-USA’s Advisory Board.
~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~
Contributor Steve Andrews writes:
ASPO-USA is preparing a more detailed rebuttal of the CERA report; this commentary precedes that effort.
ASPO-USA’s Peak Oil Review is a free weekly newsletter. Subscribe at the ASPO-USA website: www.aspo-usa.org
August 18, 2006 at 8:51 pm
Contributed by:
Folks,
Here’s a fresh perspective, tales from an insider on British Petroleum’s “beyond petroleum” ad campaign. It’s a fun read.
–C
NYTIMES:
Beyond Propaganda
By JOHN KENNEY
Published: August 14,
2006
FOR some men, it’s cars, a sports team or watching “The Godfather” over and
over. For me, it’s oil companies. They fascinate me. Their size, their power,
their reach. So I was particularly interested in the recent news about BP
shutting down the nation’s largest oil field, in Prudhoe Bay, Alaska.
I was interested in part because six years ago I helped create BP’s current
advertising campaign, the man-in-the-street television commercials. I can’t take
credit for changing the company’s name from “British Petroleum” to “beyond
petroleum” (lower case is cooler); my boss at the time came up with it.
That was the summer of 2000. Ideas were needed. We were pitching to the top
man, Sir John Browne (now Lord Browne). My partner and I got the assignment.
Other agencies got to work on Nike, Apple, Super Bowl spots. I would have taken
Taco Bell. We got an oil company. At the time, I knew nothing about oil
companies.
I started reading. The facts alone are amazing: 85 million barrels of oil a
day used worldwide; 250,000 people born every day; climate change. I read Sir
John’s speeches and read about BP and its technological achievements and
investment in hydrogen.
This wasn’t my idea of an oil company chief. This was hope. Why didn’t they
talk about this stuff? And why did all big oil company advertising look alike?
The typical helicopter shot of a tanker at sea, sunlight reflecting off the logo
as it dissolves to a towheaded urchin on the beach, frolicking in the pristine
waters. A voice like Morgan Freeman’s saying, “At Gigantico Petroleum, we’re on
the move to keep the world on the move. And to fill this tanker with cash.”
So we thought, what if you stripped away the corporate speak? What if you
engaged in the debate that was happening with oil and energy and the
environment?
We borrowed a video camera and approached people on the street, asking them
questions: Would you rather have your car or a cleaner environment? Is global
warming real? (Remember, this was 2000, when only one oil company, BP, had even
admitted the possibility of global warming.) If you could say something right
now to the head of a big oil company, what would you say?
It was an amazing experience. I had done man-in-the-street interviews for
other products and knew that it was exceptionally difficult to get someone to
stop and talk. People are simply too busy to talk seriously about, say, toilet
paper with a stranger.
But with oil it was different. People stopped. They talked. They were
intrigued and passionate and intelligent and a little angry. They understood
that oil companies simply deliver a product. Yet — and I think this has to do
with their size and profit — people often expected something more from them than
they did of other large industries. A gallon of milk costs more than a gallon of
gas, but it doesn’t cause global warming. And we don’t need 85 million barrels
of it a day.
In short, they knew the power of an oil company executive. And they wanted
leaders.
After a day and a half of interviews, we had enough footage for five
commercials. They were raw and emotional. The things people said were sometimes
none-too-flattering to BP or the industry. At the end of each spot, we put up a
list of what BP was doing in terms of cleaner fuels, alternative forms of
energy, recognizing global warming and reducing their own emissions; stuff you
didn’t hear from an oil company. Before the “beyond petroleum” tagline, we
added, “It’s a start.”
We did print ads too. The same way. Real people, real quotes as headlines
that challenged BP and the industry. No oil company — few companies at all — had
ever spoken like this, confronting the debate so frankly.
They liked it.
Advertising is a funny business. You get to help shape the personalities of
huge companies. Most often it’s for cellphone service or credit cards or fast
food or paper towels. Rarely are you faced with whether you “believe” in a
product or service. This was different. This was serious. I believed
wholeheartedly in BP’s message, that we could go — or at least work toward going
— beyond petroleum.
The campaign first appeared a few days before Sept. 11, 2001. It was shelved
for a long time. Then relaunched. In that time, I moved on to other assignments
and later another agency.
The campaign is running again. I heard that the interviewees are prescreened
now, which is too bad. And last week, I heard that the pipeline in Prudhoe Bay
is corroded and leaking. The company that claims to be beyond petroleum shut
down a pipeline that serves up 400,000 barrels of petroleum a day. Maybe
Coca-Cola’s new line should be “It’s good for your teeth.”
I read too that the energy expert Daniel Yergin claimed last week that “new
analysis of oil-industry activity points to a considerable growth in the
capacity to produce oil in the years ahead.” It seems unlikely that anyone’s
going to push hard to change our energy future.
I guess, looking at it now, “beyond petroleum” is just advertising. It’s
become mere marketing — perhaps it always was — instead of a genuine attempt to
engage the public in the debate or a corporate rallying cry to change the
paradigm. Maybe I’m naïve.
It’s just that I believe that the handful of men who run these remarkable
companies possess something more valuable than wealth, privilege and power. They
have at their disposal the truly rare possibility of creating a legacy, the
ability to change things, on a huge scale.
I never actually met Lord Browne. He announced recently that he’ll retire at
the end of 2008, when he reaches BP’s mandatory retirement age of 60. I have no
doubt he is a good, decent and exceptionally bright person. But imagine what the
headlines could have read: “Lord Browne to retire; changed oil industry and the
world.”
Think of it. Going beyond petroleum. The best and brightest, at a company
that can provide practically unlimited resources, trying to find newer, smarter,
cleaner ways of powering the world. Only they didn’t go beyond petroleum. They
are petroleum.
The problem there is that “are petroleum” just isn’t a great tagline.
John Kenney is a creative director at an advertising
agency.
August 15, 2006 at 10:03 pm
Contributed by:
Folks,
Whenever the corporate media want to present a “balanced” view of our oil and natural gas problem, there’s one guy they always call upon: Daniel Yergin of Cambridge Energy Research Associates, or CERA. He’s that benign face on the TV assuring you that we’ll have ample supplies for the foreseeable future, who projects that we’ll add another 40 million barrels per day (mbpd) of production capacity by 2015, magically matching our projected demand. He’s the one who’s opinion is supposed to be as valid as the host of petroleum geologists who make up the ASPO, who say that we’ll hit the peak around 90 mbpd in 2010, or 4 mbpd more than today, in four years.
As for Yergin himself, here’s how FTW’s Dale Allen Pfeiffer describes him in his excellent critique of Yergin’s analysis:
Though Daniel Yergin is considered to be an authority on international politics, economics and energy, he is neither a scientist nor an engineer. Despite this lack of credentials, Daniel Yergin was awarded a Pulitzer for his book The Prize: The Epic Quest for Oil, Money and Power, and he is currently a member of the Board of the United States Energy Association, the National Petroleum Council, the US Secretary of Energy’s Advisory Board, and the US Department of Energy’s Task Force on Strategic Energy Research and Development. He is also a member of the Committee on Studies of the Council on Foreign Relations and a Foreign Associate of the Royal Institute of International Affairs.
With all of these credentials, one might wonder how he could author an article which is so misleading. However, I have seen him in action, arguing with several of my colleagues, and I can state that the man is a true cornucopian. He will not recognize any data that might shake his faith in Neoliberalism or free market economic theory. No doubt, he will consider this article to be rubbish, if he even bothers to read it.
Unfortunately, your average hapless viewer has no way of knowing that CERA’s projections are ridiculously optimistic, stretching the bounds of reason. He or she probably doesn’t know that CERA is “an independent research firm that gets its funding from a mixture of utilities, state regulators and other clients.” That certainly wasn’t mentioned when the Wall Street Journal printed Yergin’s commentary on August 9, 2006, wherein he blamed oil prices on a “wall of worry” and dismissed the Prudhoe problem. The pipeline shutdown is merely “precautionary,” and only five barrels were spilled! It’s not like BP has been criminally negligent in their maintenance of the pipes for the last couple of decades or anything.
In other words, asking Yergin and CERA for their opinion on oil depletion is like asking the Pope for his opinion of Catholicism. These are True Believers we’re dealing with here, people who have a deep and vested interest in maintaining business as usual. They are hardly objective observers, and their opinions are hardly as worthy as those of other well-known and scientifically objective observers, such as those of ASPO.
Let’s have a little reality here, shall we? Yergin’s case projects a wildly successful campaign to developing known sources previously considered exotic, and improved extraction methods. But he never mentions that improved extraction has not increased flows where it is practiced–at best, it delays the peak date and then produces a steeper falloff on the back side of the production curve, that’s all. And all the unconventional sources he pins his hopes on–ultra-deepwater/polar/NGL/oil shale/etc.–are going to prove much more difficult to bring to market, much slower to arrive, & much more expensive than projected. Hmm, how long would it take to build a pipeline from Antartica to…uh…?
Indeed, in recent weeks we have already seen various warnings that the cost of much-ballyhooed projects to produce liquid fuels from exotic sources like coal, oil shales, and tar sands will be double or triple the cost previously projected, and investors are fleeing for the exits. Why? Because of the cost of oil, natural gas, and base metals is skyrocketing–a highly predictable factor that somehow nobody doing the original estimates ever seems to take into account.
Here are two critiques of CERA’s latest report, both by members of ASPO. Professor Kjell Aleklett of the ASPO shows how and why CERA’s estimates cannot be believed, and Chris Skrebowski casually points out some of the more obvious “nonsense” in the report.
Beware of anyone who preaches business as usual about energy. We lose precious time letting the likes of Yergin lull us into complacency, time that would be better spent on mitigating the effects of the coming depletion. And the next time you see “that guy” on the TV, assuring you that everything will be just fine if we could all just stop worrying, know who you’re dealing with.
–C
Review: CERA’s Report is
Overly-Optimistic
by Kjell Aleklett
Uppsala University, Sweden
Uppsala
Hydrocarbon Depletion Study Group and ASPO
Tuesday, August 8, 2006
http://www.peakoil.net/Aleklett/Review_CERA_report_20060808.doc
In accordance with Title 17 U.S.C. Section 107,
this material is distributed without profit to those who have expressed a prior
interest in receiving the included information for research and educational
purposes.
On August 8, 2006, CERA (Cambridge Energy Research
Associates) released a new private report with the title “Expansion Set to
Continue – Global Liquids Capacity to 2015”. “Private report” means that CERA
expects you to purchase the report for $2,500. The data files used in the report
are also “private” rather than being audited or refereed like the data in normal
scientific articles.
In the complete press release CERA present 2 of the
31 figures in the report, and both figures show very optimistic growth in the
global productive capacity. The conclusion is that the report “reinforces CERA’s
view that the specter of “peak oil” is not imminent”.
It is now time to make some comments about the CERA
report. It is obvious that ASPO, the Association for the Study of Peak Oil &
Gas, is a problem for CERA, or maybe a business opportunity as Daniel Yergin in
the overview of the report announce a forthcoming report, “Myths and Legends
Concerning Peak Oil”. In the report is the first of four key conclusions; The
much discussed “peak oil” is not imminent nor is the start of the “Undulating
plateau”.
When discussing different opinions it is always good
to look for the common ground and figure 8 is therefore a good starting point.
We and CERA agree that production from existing oilfields is declining on
average at about 5% per annum and this means, according to CERA, that 40 million
barrels per day extra capacity is needed by 2015. CERA has looked at planned
projects from now till 2012. They believe that all projects will be completed to
100% but with 30% of the projects delayed one to two years. Even with this very
optimistic assumption they need more production and the addition is smaller
fields/upgrades, fields under appraisal, NGL and yet to find.
The extrapolation to 2015 can be found for
individual countries and what is needed to support an increasing production is
an enormous success in new discoveries and that these discoveries can be put in
production very quickly. As example CERA think that Saudi Arabia need more than
2 million barrels per day from fields that not have been found today. Shaybah is
the latest giant field that Saudi Arabia started up in 1998 with a production
capacity of 500,000 barrels per day. In principle CERA is saying that production
equivalent to 4 Shaybah fields will be found and put into production during the
next 9 years in Saudi Arabia.
When it comes to Russia, the number two global
producer, CERA forecasts its production will rise to 11.2 mbpd. That is 1.3 mbpd
more than the estimates from the Russian government itself.
Some people say that ASPO is pessimistic when it
comes to future supply. We think that we look at the future in a realistic
manner. It is clear that CERA is very optimistic, and the fact that they believe
that OPEC will increase the production capacity with 12.9 mbpd is an example of
optimism.
The global consumption of oil is now around 31
billion barrels per year and the discovery in 2005 was only 8.95 billion barrels
according to CERA and they show that the average world discovery rate the last
11 years is 11.5 billion barrels p.a. The bulk of these discoveries comes from
regions that were opened up for exploration after the collapse of Soviet Union
and from exploration in deep water. We can now see a decline in the discoveries
in these regions and we expect that this decline also will give an overall
decline in discoveries worldwide.
Figure 11 gives significant liquid discoveries
2005-06 and one of the listed discoveries is Noxal in Mexico. Earlier this year
President Vicente Fox announced that Noxal-1 was a new discovery of the order of
10 billion barrels. This was from just one exploration well without detailed
studies. In the end of May a newspaper in Mexico reported that “Noxal-1 was
confirmed a failure and there is no hope of realizing a new structure with
reserves of 10 billion of oil”. David Shields, a respected consultant working
for Pemex, stated this. CERA think that Mexico will have a more or less constant
production of 4 mbpd till 2015, even though Cantarell, that today accounts for
close to 60% of Pemex’s production, is expected to decline by 50% over the next
few years. This is another example of unrealistic over-optimism.
More things can be said about the report, but it is
obvious that it is not worth $2,500. Part of the report is based on data not
open for the public and the obvious reason for this is that CERA seek to make
money from this hidden information. Oil production figures and data on reserves
are of greatest importance for the global future and these should be available
in the public domain as is the case in Norway and the
UK.
Commentary: Chris Skrebowski on OPEC trends and CERA’s new
report
[Source: ASPO-USA Peak Oil Review,
14 August 2006]
(Note: Commentaries do not necessarily represent ASPO-USA’s
positions; they are personal statements and observations by informed
commentators.)
We caught up with Chris Skrebowski for a quick Q&A just as he
was preparing to depart for the airport, bound for Australia. He had time to
provide quick observations about OPEC’s production trends and CERA’s new report.
POR:
We sometimes
read statements like this: “About 98 percent of global crude oil comes from 50
nations, of which more than half have already peaked in oil production,
including seven of the 11 OPEC nations.” Our question: since some of these OPEC
nations peaked during the 1970s, then deliberately cut production, then lost
production, and are now increasing production with more in the works, isn’t the
more important issue “which OPEC nations can increase production, from today
going forward, and by how much, and for how long,” rather than who peaked when?
Skrebowski:
I totally
agree with that view. Let’s take a quick look at the OPEC production trends, one
by one.
• Algeria can go on squeezing out a little more oil every year until
around 2010.
• Libya has big unknowns but can expand fairly gently certainly to 2010
and, depending on exploration success, probably for some time after that.
• Indonesia is in terminal decline but may get the odd year off
(production stabilizing).
• Kuwait has a little more increase in their production to come but is
likely to peak around 2010-2012.
• UAE/Abu Dhabi probably won’t peak till 2015.
• Qatar’s expansion is overwhelmingly linked to gas liquids and
condensates associated with the gas/LNG production. In theory it could expand
for some time but this really depends if the North field is as big as is
claimed. Qatar is the original all-the-eggs-in-one-basket producer.
• Venezuela is a bit of a mystery. Maintaining conventional oil
production requires (because of a high decline rate) a level of drilling and
investment that is currently not happening. Expanding heavy oil (Orinoco)
requires new projects. Higher tax take and preference for Chinese and Russian
companies means no plans have been sanctioned, so even if there is sudden
progress there will be no supply impact before 2010/2011. The longer
investment is postponed the less chance of expanding supply; remember —
Depletion Never Sleeps. So Venezuelan production is more likely to decline
than expand under Chavez’s leadership.
• Iran is clearly struggling. Decline rates in existing fields are high
and although there are new projects they’re not coming through fast enough to
expand production. I would expect production to remain around current levels
with slow decline more likely than expansion.
• Saudi is also clearly struggling. They’re draining rigs and completion
engineers from around the world. They’re already up to 100 big rigs and
expect to get to 120; just two or three years ago they were running a
mere 30 rigs. I would guess that Saudi production will now have a saw-tooth
profile with jumps in production as reworked/redeveloped fields come
on-stream. All the new field developments they tout, with the exception of the
100,000 b/d Nuayyim field, are redevelopment of old fields that have actually
been in production several times. All the super-duper new technology will do
is extract the last knockings – fast. I’m with Matt Simmons on the Saudi
outlook.
• Iraq is Iraq, but a not-too-cynical guess is no real expansion before
2010, probably holding at around current levels between now and then.
• Nigeria has expansion potential till 2010/2012 when rapid onshore
declines are likely to overwhelm offshore gains. However, we have a replay of
the Biafran Civil War underway (although we’re too polite to mention it). So
far some 800,000 b/d of production has been shut in. So the Nigerian
production outlook? Cloudy and unpredictable.
POR: Cambridge Energy Research Associates just came out
with a new report—”Expansion Set to Continue: Global Liquids Productive Capacity
to 2015″–that projects a 25% production increase between now and 2015. Can you
comment? We realize you’re off on an extended trip to Australia momentarily, so
you probably haven’t had a chance to look at the full report…
Skrebowski: Very briefly, consider a few of the key facts
from CERA’s summary:
• CERA has higher Russian production than the Russian government.
• CERA projects higher OPEC production than even OPEC claims on its
website. In terms of some individual fields they have higher output than OPEC
claims.
• In 2009 they project production from Uruguay, despite the fact that the
Petrobras house magazine (latest issue) says it’s a 2011 start-up for a
project they’ve only just sanctioned.
• BP’s start up in Angola by 2009 is another implausibility zone (among
many).
As if that was not enough they have global production several
million b/d higher in 2011 than the IEA’s new Medium Term Market Report (this
only goes to 2011). As the IEA is usually criticized (correctly) for being too
optimistic, CERA’s estimates (which escalate dramatically after 2011) are
frankly just plain fantasy.
This raises two immediate questions: First, did CERA just start
with the answer — 110 million b/d in 2015 — and then work backwards to fit?
Second, on whose behalf or behest are they issuing this nonsense?
Chris Skrebowski, with the Energy Institute (London), has
edited The Petroleum Review since 1997. He has spent his entire working career
in the oil industry, split roughly two-thirds as an oil journalist and one-third
as a planner/market analyst within the industry (for BP, Saudi Arabia, etc.).
August 14, 2006 at 10:12 pm
Contributed by:
When I blasted the generally poor reportage about energy in my last blog, I was unaware of this outstanding piece published by the Chicago Tribune a week earlier. But it’s burning up the blog charts now. It’s long, so download the complete PDF and read it at your leisure, but do check it.
The author, Paul Salopek, has done what no one had ever done before–indeed what most said couldn’t be done–and that’s to trace a tankful of gas back to its oil fields of origin. But aside from that feat, he’s done his homework about the various perspectives on the future of oil, and has come up with a sensible, balanced, and mostly correct conclusion.
It also has some well-done and very pithy appendixes (listed as “Sidebars” in the Web version) that do a decent job of covering the peak oil debate, the nature of oil, and the debate over the Saudi peak.
A Tank Of Gas, A World Of Trouble
By Paul Salopek
Chicago Tribune
Published July 29, 2006
http://www.chicagotribune.com/news/specials/chi-oil-1-story,0,7163057.htmlstory
Seriously, read it. It’s great, and a compelling bit of journalism, not your usual dry stuff. I give it an A+. I hope he wins his third Pulitzer for this one.
–C
Update Saturday August 26, 2006:
Paul Salopek imprisoned in Darfur and charged with spying
WASHINGTON, Aug. 26 /PRNewswire/ — Paul Salopek, who was traveling in Africa to report on the culture and history of the Sahel for National Geographic magazine, was detained by Sudanese authorities and on Aug. 26 charged with espionage in a North Darfur court in El Fashir, Sudan. National Geographic magazine vigorously protests this accusation and appeals to Sudan for his immediate release and the release of two Chadians assisting him.
Update September 9, 2006:
Salopek, his driver and his interpreter were released after Sudanese President Omar al-Bashir pardoned them on September 9.
August 4, 2006 at 2:21 am
Contributed by:
Howdy folks,
Well it’s been nearly two years
since I last blogged regularly, and it’s high time I got back on my high horse
for some high times in the blogosphere. GRL is now
sporting a new face (thanks to poddesigns for the new header logo!),
on a new version of GeekLog, on a new server, under its own
domain name (
www.getreallist.com)
. And along with its new face, it’s got a new mission:
educating as many people as possible about the coming energy crunch, and what
they can do about it. Never mind the politics, we’ve got a lot of urgent work to
do.
The world certainly has changed a lot in the last two
years. Peak oil has been covered by many of the mainstream media, documentaries
about global warming and energy and alternative vehicles are out, books about
energy are being published at a breakneck pace, and there’s even a peak oil
caucus in the House (thanks to Rep. Roscoe Bartlett and Rep. Mark Udall). Many
regular folks are starting to wake up and pay attention to where their energy is
coming from, and what that means for geopolitics and American foreign policy.
The drumbeat has begun!
On the other hand, most of the
reportage I’ve seen is either wrong or politically twisted or just badly done
(did anybody see that horrible abortion of a production called “We Were Warned: The Coming Oil
Crisis” that CNN did back in March?), and full of misinformation and
unreasonable projections. Meanwhile, the White House and Congress are still
without any plan to wean us off of oil and natural gas and start making serious
tracks to a renewable energy future. In fact, right now their biggest objective
is to do more offshore drilling on the continental shelf and in ANWR, with
renewable energy investment still a pittance. Apparently they still haven’t
gotten the message that we can’t drill our way out of this mess.
I hope
I don’t need to tell you that time’s a-wastin’. The ASPO (Association for the Study of Peak Oil and Gas)
is projecting that we’ll reach the global production peak of all oil (including
the “unconventional oil” category which includes tar sands, oil shale, polar
oil, and ultra-deepwater oil) around 2010-2011, and it looks as though the peak
of “conventional oil” (light sweet and heavy sour crude from on-shore, and
offshore drilling in shallow to deep water) was last year.
Meanwhile, at the ASPO Conference in Pisa two weeks ago, Robert Hirsch, co-author the now-famous ‘Hirsch Report‘ on mitigation scenarios
for the next 50 years, doubts that the world can keep increasing oil flows for
much longer. “CERA sees a long plateau ahead,” he said. “But I can’t find a
plateau in the data I’m looking at.” The downturn, when it comes, could take the
world by surprise. “Peaking could come with little warning and sharp declines,”
he said. His latest projection? We’ll need to spend a trillion dollars a year
for the next 20 years, globally, to come up with adequate substitutes and
mitigation plans.
Also
at the conference, Chris Skrebowski said we have 1500 days to prepare for the
peak..er, make that 1486 days, give or take. Hm, that’s not much time to muster
the political and popular support for spending a trillion a year, certainly not
at our current rate.
So
there is still plenty of work for me to do, getting the story straight and
educating as many people as possible about energy.
This
is where you come in. Please invite your friends and associates to join the GRL mailing
list and help me rebuild the readership! Your help will enable me to start
producing some revenue from the blog and establish a basis for some much more
ambitious public education projects I am contemplating.
I hope
you enjoy the new GRL and its new focus on all things energy. I love to hear
from you, so don’t be shy, drop me an email or a headsup on anything you think
might be relevant!
Stay tuned, much more to come!
Cheers,
–Chris
