Notes from the 2005 ASPO-USA Peak Oil Conference

August 31, 2006 at 7:02 pm
Contributed by: Chris

Folks,

Here are my notes from the 2005 ASPO-USA First World Oil Conference in Denver, Colorado.

For those of you in the Boston area, I highly recommend attending the upcoming ASPO-USA conference at Boston University:

Who: ASPO-USA & BU Conference to Address Peak Oil Challenge

What: Experts to discuss impacts of – and responses to – Peak Oil

When: Wed. Oct. 25 to Fri. Oct. 27 (Plus Evening & Sat. Sessions)

Where: Boston University, One Sherborn Street, Boston, MA

For full conference details, see http://www.aspousa.org/fall2006/index.cfm .

–C

[These notes are also available as a Word document here.]

 

Chris Nelder’s Notes from the

2005 ASPO-USA First World Oil Conference

 

Nov 10-11, 2005

Denver, Colorado

 

Here are my notes from the first ASPO-USA conference, using Steve Andrews’ Notes from the National Academy of Sciences Oct 20-21 Workshop on Peak Oil Potential as a template.

 

These are merely my notes, of the key points I picked up during the conference. Any errors or omissions are undoubtedly mine and I welcome corrections. I only wrote down the answers, not the questions, in the Q&A sessions. My personal comments are [bracketed] and are minimal. Perhaps these notes will be useful to others as an index to the volumes of material that were covered in the conference.

 

For bios on the speakers, see http://www.aspo-usa.com/fall2005/IntroSpeakers.cfm.

 

Day 1 – Thursday, November 10, 2005

 

8:15 – 8:45

The Peak Oil Context                

Tom Petrie, Co-founder, Petrie Parkman & Co.

 

·         Excess capacity ~1-1.5 mbpd worldwide

·         US consumption 21 mbpd

·         Global decline rate ~4-6%, nobody knows

·         Non-OPEC will peak by 2010

·         OPEC numbers are suspect & subject to “gamesmanship”

·         We’re within 5-10 yrs of peak, after peak a “long tail” reaching out for 100 yrs

·         Policy responses to 1970s crisis extended the problem

·         World depletion rates:

o        At 2.5%, 10.1 mbpd shortfall by 2010

o        At 5%, -19.2 mbpd shortfall by 2010

o        (…)

·         Potential new production by 2010, 13-22 mbpd (brackets the CERA case)

o        [table showing the best, mid, & worst case scenarios for decline rates & net gain/loss]

·         Likely: 3-6 mbpd growth by 2010

·         Countries in decline or at plateau
Conclusion: Ex Caspian Sea, West Africa, [illegible] and Arctic are all probably close to decline

·         World discoveries peaked in 1964. New discoveries are “extending the tail”. We find one for every 3-4 bbls[i] consumed. Technology hasn’t changed this reality.

·         Natural gas trade

o        Shift under way to LNG

o        Possibly 4 mbpd of oil equivalent by 2010 to be imported into N. America

·         Peak Date: 5-10 years is the consensus

·         US production curve was somewhat shifted to the right by new discoveries & technologies, but only really bumps on the backside of the curve. ANWR would likewise shift us slightly to the right.

·         “If this were a party, we’re down to the last two beers in the six-pack.”

 

8:45 – 9:15
Expansion vs. Depletion    

Chris Skrebowski, Editor, Petroleum Review

·         We need to talk about flows more than reserves…how much will actually reach the market?

·         What have I learned in 35 years?

o        Plan early & often – revise calcs frequently

o        Try to ignore your own hopes & fears

·         “We’ve got a rough period coming up”

·         Decline rates will trump new E&P

 

·         TotalFinaElf claims 5% decline rate, Schlumberger agrees, others say 4-6%

·         Likes to use public domain data

·         Expects 16.8 mbpd of new capacity by 2010 (excludes tiny new projects < 1mbpd)

·         Fairly small gap between supply & demand until ~2007-8, then it widens. But this could be too optimistic.

·         A former senior oil company exec says this is too optimistic. More realistically, significant gap develops by 2007.

·         Oil is critical to transport & everything & has few substitutes

·         All alternatives are inferior (less energy density) to oil

·         Substitutes can extend & supplement traditional oil uses. Can our economies go all-electric?

·         How high to prices need to go to balance supply & demand?

·         About 5 yrs lead time for the oil industry across-the-board (new wells, new refineries, etc.)

·         CIBC (Canadian bank) looked at price to balance supply & demand and found $110/bl by 2010

·         2004 was a key year in terms of spare capacity used, etc.

·         10 largest private oil companies found $4 billion worth of oil at a cost of $10 billion between 2000-2003

·         All new flows take 2-25 yrs to develop

o        Only 10% of total is now not in production

·         Oil companies are struggling to maintain production flows

o        Biggest companies are doing worst – “elephants on a small patch of grass”

o        20 companies produce 67% of global production

·         Future demand growth is 2% (rule of thumb)

·         Alaskan North Slope production started high, then plateaued, then went into decline after ~15 yrs

·         North Sea Forties field – same – decline sets in after 10 yrs

·         Technology – questionable – Colin Campbell: “Lets you find a needle in a haystack, but it’s still a needle”

9:15 – 9:45
Q&A

·         Petrie: Saudi claims are suspect, but they claim they can add 100 billion bbls. Adding only smaller fields. Suspects that 260 billion is optimistic. Ghawar water cut at 30%. Largest fields producing 60^ of Aramco’s production.

·         2020-2035 likely peak for nat gas

·         “Windfall profits tax is an intelligence test for elected officials” – would have a negative effect on industry investment

·         In Russia, everything over $25/bbl goes to the government. Companies are draining some of their fields faster than optimally to grab the cash before Putin takes more.

·         Check out the 8-part series “The Prize” by Daniel Yergin

·         Petrie thinks CERA has failed to really take maturity & depletion rates into account. “We’re climbing the down escalator” & CERA has underestimated the speed. Their unconventional sources expectations may only be 40% fulfilled.

·         Skrebowski: The CERA report has a mismatch between the actual report & the summary! They willfully confuse the graphs and bring new projects online more quickly than is realistic.

·         Petrie: our timing in going to war in Iraq was timed to elections. The US is seriously overextended in its military commitments & is unsustainable.

·         Q: “Why are the EIA estimates so out of whack?” Skrebowski: “You may say that, but I couldn’t possibly comment.”

·         Skrebowski: At $70/bbl, farmers stop growing potatoes & start growing rapeseed; leading to price inflation for food & competition between food & fuel.

 

10:10 AM to 12:00 PM

Perspectives

10:10 – 10:40
What We Know and What We Think We Know
Jeremy Gilbert, British Petroleum Chief Petroleum Engineer (Retired): The ASPO-Ireland (Association for the Study of Peak Oil) Numbers; Alaska’s Past, Present & Future

·         40% of traded energy is oil

·         >90% of transport fuel is oil

·         World oil demand – Asia set to overtake the U.S. around 2010 – most growth in Industrial & Transport sectors

·         World reserve estimates have an amazing range

·         Most remaining oil is in ME, under government control. Oil companies regard reserves as commercially secret. SEC rules on reporting are archaic.

·         Oil formation: Excessive algae growths in two periods, 90 & 150 million years ago, falling into rifts in the ocean floor, later filled, heated, and pressurized, led to formation of hydrocarbons which drifted to the top.

·         Bad information – public data unreliable

·         We were not told [sooner about oil depletion] because:

o        SEC reporting requirements favored conservative reporting

o        Discovery underreported, revised upwards later. No conspiracy here.

·         OPEC reserve reporting radically revised upward 1986-1990

·         53 countries are past peak, including the U.S., Indonesia, FSU, China

·         Thinks that Matt Simmons is a bit too pessimistic about Saudi production

·         Saudis settle for depletion rates of about 1-2% a year, so there is more fat left to trim

·         Wildcat drilling isn’t helping. Around 1980, we wildcatted the most & discovered less

·         Doubts OPEC can make up the deficits by 2030

·         We’re emptying the tank at 5x the rate of our refilling it

 

10:40 – 11:10
Peak Oil: Myth Vs. Reality
Henry Groppe, Founder, Groppe, Long & Littell: A Perspective from a long time participant.

·         Major Myths

o        (Most of what we know is wrong)

o        Especially the idea that we can increase production by 50% by 2030

·         Reality

o        Little doubt that production is peaking

o        NGL will supplement crude

o        Shift attention to the consumption side. “High prices are required to constrain consumption.”

o        “The world oil industry will continue to operate essentially at capacity & with permanent major price volatility.”

o        About 20 mbpd currently used to generate heat, will be replaced by other fuels.

·         By 2015, Canada will surpass the US as the largest non-OPEC producer

·         The increase in FSU production over the last ~10 years, leading to a second peak in production, was due almost entirely to privatization.

·         OPEC crude production at peak ~2004. Thinks Saudis will continue to produce ~9 mbpd even though they may increase capacity to 12 mbpd.

·         Total crude production worldwide peaks ~2005-6, so all additional supply comes from NGL & condensates

·         [IEA (DOE) projected production got a laugh out of everybody]

·         Most of OECD hasn’t’ returned to its 1979 highs of consumption (except US, who got there in 2003) despite economic growth.

·         World use by sector:

o        Transportation: 51%

o        Industrial & power: 39% (mostly for heat)

o        Residential & commercial: 10%

·         China is adding a new big coal fired electrical plant every 2 weeks. Will have an electricity surplus in the next few years.

·         Suggestions for municipal policy:

o        Improve transport efficiency

o        Especially for poor people to get to/from low-cost housing

o        Improve the environment for high density housing

Q&A

·         Groppe: A 100,000 bpd change in supply moves the price by ~$1/bbl. There are only about 330 refining “customers” in the world. Their demand is what controls price. Ergo: markets are not “manipulated”

·         Gilbert:: Thinks BP is serious about developing alternatives to oil

·         Gilbert: Thinks African interior is fairly well explored, thinks large discoveries are fairly unlikely.

·         Gilbert: Arctic deposits likely, but not enough to fundamentally change things.

·         Groppe: Oil at ~$100/bbl leads to ~0% growth in demand. We’re now 2x as efficient per dollar of GDP as we were 25 years ago, expects this to continue.

 

11:10 – 11:35
Drilling with Charlie and John
Charles Brister, Experienced Driller: Insights from a field hand about technology, constraints, and peak oil.
John Barnes, Chairman, B & R Energy: Shares his experience with drilling in Texas today.

Charles Brister [One of only about 200 horizontal directional drillers in the US]

·         Directional drillers are mainly Schlumberger, Halliburton

·         Mostly old hands, >70 yrs old

·         There are basically no more rigs available – we’re now brining them from China

·         Rig count plummeted after 70’s [?] They were recycled into scrap.

·         Costs $21/min. to run a rig – errors are costly

·         Bits are $30,000 each

 

John Barnes

·         Micro-economic factors of being in the drilling business

·         There are about 5000 independent producers. Independents produce about 90% of US oil [?]

·         Believes we’re at peak natural gas in North America. Katrina didn’t help.

·         Imported oil is the biggest factor in our national current account deficits

·         There are no “windfall profits” – it takes money to drill. Their profits are finally catching up to other industries after 23 years.

·         Cost of doing business between Jan – Oct 2005:

o        Day rates +48%

o        Steel casing +243%

o        Rig fuel +64%

o        […]

·         Labor shortage

o        1 million jobs lost over the last 20 years

o        50% of workers reach retirement in 10 years

o        Big trouble coming in 10 years due to labor shortage

·         Challenges in the business: Access, regulation, new taxes, political scapegoating

·         Solutions:

o        Do them all, stop being picky

o        Maximize production

o        Use telecommuting

12:00 PM to 1:15 PM

Lunch: Awards & Keynote Address

First Annual M. King Hubbert Awards

Keynote:

Zeroing in on Peak Hydrocarbon Use
Matthew R. Simmons, Chairman & CEO, Simmons & Co.

·         “A crisis is a series of problems ignored until they become terminal.”

·         “Track record of ignoring regional peaking is nearly perfect.” Conventional wisdom missed every year (of every region’s) peak.

·         1973 was when conventional natural gas peaked in the US

o        The NPC (National Petroleum Council) study of 2000 said that gas can easily grow

o        The NPC study of 2003 said gas supply can stay flat (with a spurt of new supply in 2010)

·         North Sea: In 1995, major field operators told IED at UK that Norway would produce >7 mbpd by 2000 and reach peak after 2010. In 1999 it hit peak.

·         A field by field comparison shows the simple peak…

·         Reserves appreciation permits additional funding, but is basically irrelevant.

·         Mid 70’s estimates were +/- 120% of 2005 estimates

·         Prudhoe Bay case study – initial est. of production rates were all wrong

·         Between 1990-2005, 85% of US proven reserve additions were just reserve additions (only 15% actual new production)

·         On the idea that rapidly changing oilfield tech will accelerate production: “THIS IS BUNK” There is no significant new technology in the offing.

·         Middle East oil might be the last great energy illusion

·         This a.m., Kuwait reported that their field, the world’s second-largest, is exhausted [past peak and in decline]

·         Al-Husseni on 9/20/05:

o        Current ME capacity: 21-23 mbpd capacity

o        Best case: 25 mbpd by 2025 (USGS prediction: 50?)

·         7 “supergiant” oil fields in Saudi Arabia account for 7.4 of their 8.1 mbpd production

·         35 years of exploration found only one supergiant field

·         Could they stay at 9.5 mbpd for 15 yrs? Maybe. More? Not likely.

·         Peaking might now be past tense

·         Conservation is the best insurance policy

·         68-70% of current production is in countries whose natural gas production has peaked.

·         Most “stranded gas” has never been discovered

·         “Conceptual oil & gas reserves are easy to talk about, but very hard to use.”

·         We must have more nuclear

·         The peak oil problem has started to look like a “theological debate.”

o        “Hunches, opinions, & hopes prop up the Peak Oil scoffers.”

o        “’It is time to leave “I believe” inside a church.’ – Dr. Herman Franssen, Sept 2005”

·         Top 250 oil fields make up ~85% of world’s oil output

·         Average decline rate is 7% (18% at the well bore)

·         Remember the First Rule of Holes

·         Ignorance can be bliss

·         There are no (unused) rigs left in the world. It will take 60 years to replace the rigs

 

1:30 PM to 1:45 PM

Net Energy: The backdrop for all forward thinking about substitute liquid fuels.

Charles Hall, Distinguished Professor of Environmental Science, State University of New York:

·         Charles Hall is “the Adam Smith of energy economics” (a trained ecologist)

·         EROI has been wrongly submerged by economic cost-benefit analysis

·         Evolution means we must get more energy than we expend

·         EROI is an idea that was first put forward in his PhD dissertation on fish migration (1968)

·         See also his 1981 paper on fish

·         Since 2001, expenditures for oil & gas has been negative return in dollar terms

·         EROI for oil:

o        1930: 100 to 1

o        1970: 25 to 1

o        1990: 11-18 to 1

·         We use a rational, best-to-worst approach to resource exploitation

·         Good data:

o        US Bureau of Commerce

o        Woods Mackenzie

o        John S. Herold

·         Boundaries are the interesting problem with EROI analysis. Do we include:

o        Direct costs (drilling & labor)

o        Indirect costs (steel, transport)

o        Environment (pollution, erosion, etc.)

o        […]

·         Rebuilding from Katrina will require 3% of remaining US oil reserves

·         EROI of biofuels is a stupid argument because IT CAN’T HELP US

·         He is setting up a new foundation & looking for funding

 

1:45 PM to 2:00 PM

The Resource Pyramid

Randy Udall: Not all oil is created equal.

 

·         Societal taboos around energy & depletion

·         We suffer from a “mentality of abundance”

·         [on natural gas depletion] “The only one in a society who can break a taboo is the oracle” (pic of Greenspan)

·         After Greenspan, Exxon, Chevron, etc. could break the taboo

·         [on the conference] “This is an energy Woodstock”

·         “Our challenge is to develop an energy ethic”

o        We’re as dependent on oil as the Sioux were on bison, but they had rituals to honor that connection

·         [Graphic of a “resource triangle” with high-medium quality oil at top, low quality oil & tight sands gas in the middle, and oil shale at the bottom]

 

2:00 PM to 2:30 PM

Oil Sands and the View from Canada
Mike Ashar, Executive Vice-President, Suncor – USA: Oil from the Canadian tar sands; expected growth put in context; a comment about natural gas from Canada

·         Requires ramping up investment & infrastructure by 1000%

·         Oil sands contain ~175 billion bbls recoverable economically – could be as much as 300 billion

·         Production projection:

o        2004: 1 mbpd

o        2010: 2 mbpd

o        2020: 3 mbpd

o        2030: 5+ mbpd

·         Industry average: $20 for upgraded product

·         Natural gas a major risk. Uses about 1/8 bbl to upgrade & refine product

·         $35 billion capital over next 5 years will be needed

·         Need a massive upscaling of everything: labor, housing, cable, steel, everything. The scale of the problem is huge.

·         Environmental issues…

·         Refinery upgrades are necessary to accept crude from oil sands

·         Recommendations, three C’s:

o        “Challenge” the conventional wisdom

o        “Conserve” energy

o        “Collaborate” on new ideas

·         [This note-taker had the strong impression that Ashar was presenting a very best-case scenario in his presentation.]

2:30 PM to 2:45 PM

Coal – to – Liquid

Dennis L. Yacobson, CEO, Rentech: Quick history & planned new development.

On Fischer-Tropsch technology

·         There is no one solution to the problem. We need to develop all alternatives. No one technology can solve a problem of the scale of fossil fuels.

·         Fischer-Tropsch can be used with any hydrocarbon (coal, pet coke, wood, etc.)

·         New GTL [gas-to-liquids] plant in Qatar will produce 34,000 bpd at a cost of $32 million

·         US consumption: 20 mbpd, and the refining capacity is 17 mbpd, so the built-in additional increase to refining capacity of Fischer-Tropsch is significant

·         US and Asia together use 50% of the world’s 85 mbpd, to be 2/3 by 2025 [?]

·         Fewer than 10 companies in the world employ the Fischer-Tropsch process, and only two concentrate on coal that can use “clean coal” processes

·         Locating new plants with landfills, waste products

·         We are now importing 50% of our fertilizer

·         Fischer-Tropsch has the advantage of locating production where it’s needed

·         Could reduce dependence on imported fertilizer

3:15 PM to 3:45 PM

Q&A

·         Ashar: “We think there will be a little natural gas left over” (after using it to produce oil sands)

o        Ratio of return: about 10-to-1 (including natural gas), produces light sweet crude.

o        Need new technology to bring down costs

o        Upset about “myths & misconceptions”

·         Yacobson: Some CO2 used for beverages, exploring subsurface sequestration

·         Ashar: Q: “Will the US have to choose between importing oil or natural gas?” A: US demand for oil is most urgent [again ducking the natural gas question]

·         Hall: Our biggest problem isn’t going to be finding the oil but paying for it. Unsustainable rate of debt growth…

o        Paying off the US debt to Japan, in terms of real goods, would be ~1/3 of remaining US oil (equivalent)

·         Q: “Won’t population growth in the US make a soft landing difficult?”

o        Hall: “Yes.”

o        Ashar: Gas is still cheaper than water, etc…

·         Yacobsen: Mercury is removed from coal before the Fischer-Tropsch process

·         Q: Will nukes be used to generate the steam for tar sands development? Ashar: Makes sense in the long term, but not near term, has to be natural gas for now

·         Ashar: $40,000 per barrel of daily capacity is the investment it will take

·         Randy Udall: We use 100,000 bbls/minute. $4 billion investment gives you a 7 minute solution.

3:45 PM to 4:45 PM

Alternative Fuels Panel, Question & Answer

“Peak Oil and the Biomass Opportunity”

Michael Pacheco, PhD, Director, National Bioenergy Center, National Renewable Energy Laboratory (NREL)

·         Biomass can fill the gap between demand & petroleum supply

·         Biomass currently ~3% of total US energy mix

·         Many kinds of feedstock, conversion methods, products

·         DoE bioenergy goal: develop technology for biorefineries of the waste feedstocks by 2010

·         Cellulosic biofuel – we could be the Saudi Arabia of biofuel. Made from lignin, hemicellulose & cellulose

·         Resource potentials:

o        Corn: 10-20% displacement potential (maybe) of gasoline, requiring about half of our corn crop. We currently use about 10% to produce gasoline

o        Soybeans: 5-10%

o        Cellulosic biomass: 50-70% (not a food supply)

·         Corn EROI (Ethanol)

o        Most studies conclude that EROI is positive. Pimentel & Patzek are the main naysayers

·         Getting lignin & cellulose to hydrolyze & ferment is difficult

·         Cost of cellulosic fuel production is dropping – hoping to achieve a target of $1.70/gal

·         Resource is ~1.3 billion tons of biomass-heating value equivalent

·         Corn is a tiny component, mostly lignin cellulosic

·         Just the unwanted components of pulp & paper mills could produce ~3 billion bbls/yr

·         Algae – lipid & carbohydrate synthesis

o        Can produce food, fuel

o        Reduce land demands

o        We’re doing no research on this due to funding constraints

·         Can meet the near-term gap in supply and is sustainable

·         Net energy balance is good

Biodiesel
Jeff Probst, Chairman and CEO, Blue Sun Biodiesel

[Former consultant to Duracell etc….battery expert]

·         Blue Sun biodiesel is mostly sold as B20 (a 20% component of a fuel blend with dino diesel) & approved as an alternative fuel. B20 is more efficient than B100.

·         By 2010, will equal .003% of US petroleum bbls

o        24 mbpd production in US

·         Farmers who produce Blue Sun feedstock are equity investors in the company

·         Working on a more productive oil seed

4:45 PM to 5:15 PM

Summary Q & A, Closing Remarks & Adjourn
Conference hosts summarize the day.

Steve Andrews

Summary of substitute fuels capacity by 2015

Substitution Offset capacity (mbpd)
Efficiency 2 – 3.5
Oil sands 1.5 – 2.0
GTL 5 – .75
Ethanol .5 (max)
CTL [Coal-to-liquids] .2 – 4
Biodiesel 0.1
Electricity for PIH 0 – 0.2
Oil shale 10,000 bbls (effectively 0)
Hydrogen 0

 

Q&A

·         Pacheco: Pimentel & Patzek are using out of date data

 

Governor Richard Lamm (CO) comments

·         We’re seeing a clash of cultures – culture of exploitation vs. sustainability

·         We see the world the way we are

·         “The opposite of the truth is a lie. The opposite of a great truth is another great truth.” – Neils Bohr

·         Peter Drucker made the point that every 500 years, humanity has to re-ask the basic questions

·         Jacques Chirac said that politics is making possible what is necessary. My question is: can we do politically what we must do economically, socially, etc.?

·         Going beyond the law of the jungle…

·         Public policy must get involved, however difficult that is.

 

Day 2 – Friday, November 11, 2005

8:15 AM to 8:45 AM     The Peak Oil Story
Tom Petrie, Petrie/Parkman: Overview and Summary geared especially to Day 2-only attendees.

[Recap of yesterday]

·         Many people in the oil business are not convinced about peak oil & don’t yet recognize the challenge.

·         “This is not business as usual, this is the most transforming event…since the Great Depression.”

 

8:45 AM to 9:45 AM     Impacts, Mitigation & Risk Management
Roger Bezdek, President MISI, Co-Author: Explanation of Issues raised in US Department of Energy-funded paper – “Peaking of World Oil Production: Impacts, Mitigation & Risk Management” [aka the Hirsch Report]

·         This is not an energy crisis, but a liquid fuels crisis

·         Many people forget that in the boy who cried wolf story, the people were eventually eaten by the wolf.

·         Many experts are pessimistic

·         There will never be a shortage of oil, price will always equalize supply and demand

·         As late as 2001-2, experts predicted no problem with natural gas supplies, but we’re already in decline. If there were wrong about that so recently, what about oil?

·         Oil price spikes have preceded (precipitated?) the major US recessions

·         1973 & 1979 recessions were brief; world oil peaking impacts could last for decades.

·         “The world has never faced a problem like oil peaking.”

·         2/3 of our oil is transport, which is huge, and evolves slowly. Intractable, hard to solve problem.

·         Auto median lifetime is 17 years, 130 million of them, cost to replace ~$1.3 trillion

·         Light trucks: $1 trillion

·         Heavy trucks, busses: $1.5 trillion

·         [Total: ~$4 trillion] & 15-25 years to replace

·         Change is slow, fuel must be provided for existing fleets

·         The report covered three mitigation scenarios:

o        No action til peak

o        10 years before peak

o        20 years before peak

o        All mitigation programs are assumed to begin immediately and as intensive, crash programs

·         Did not consider non-liquid fuel options, hydrogen, things not ready for market

·         Vehicle fuel efficiency

o        Diesel 30% more efficient than gas

o        Hybrids 40-80% more efficient

o        Savings estimated at 30% after 3 yrs, then 50% next three

·         GTL isn’t an option for us because we don’t have the stranded gas & the process isn’t yet commercially viable

·         Estimate 2x increase in GTL projections (assuming greater imports of LNG)

·         Estimate 2-2.5x production from oil sands & heavy oil from Canada & Venezuela, 3 mbpd by 2030 from Canada

·         CTL – estimates 5 new plants @ 100,000 bpd each year

·         EOR (enhanced oil recovery) limited by availability of CO2 to inject into wells

·         “Wedge” results of mitigation…all assume 3-5 years for retooling & preparation

·         Best case: 20 mbpd from all of the above, worldwide, 10 years after mitigation programs initiated

·         Assuming 2% decline rate after peak, 2% annual growth rate, peak @ 100 mbpd

·         Conclusion: Start early!

·         Scenario 1 (do nothing until peak): Most likely a huge shortage for 15-20 years after peaking

·         Scenario 2 (10 yrs before peak): Shortage after ~8-9 years

·         Scenario 3 (20 years before peak): Mitigation averts shortage & delays the peak

·         Issues

o        Skilled workers & industrial capacity in short supply

o        Startup will almost certainly be much slower than predicted

o        Some nations will delay (China, Venezuela)

o        Will the environment survive crisis modes?

·         Oil peaking is “soon” – < 20 yrs is “soon”

·         Economic damage can be mitigated if timely action is taken

·         Prudent risk management argues for early action

·         The shortage after 20 years could be 80% of today’s consumption

·         Three policy recommendations:

o        [Blank screen – laugh – unintentional comedy]

o        Federal level: much higher fuel efficiency standards & begin substitute liquid fuel options

o        State & local: smart growth, mass transit, telecommuting

o        All levels: educate the population and warn of the consequences

·         “There are no magic bullets, only poison pills.”

·         We blame everybody but ourselves for this problem

 

Q&A

·         A 2% decline rate is very optimistic [see Simmons’ average decline rate of 7%], and if it’s higher, everything is much worse.

·         3 mbpd from EOR is optimistic

·         Immediate goal is to avoid economic catastrophe – long term is to substitute renewable liquid fuels

 

10:15 AM to 10:45 AM           Caution for the Investment Community

Charles T. Maxwell, Weedon & Co.

·         Three policy recommendations

o        Turn out the lights in government buildings at night

o        Use “energy savers” [e.g., GlobalLight, auto-off switches]

o        Adjust indoor temperatures – America didn’t have A/C 40 years ago, and it did just fine

·         In the past, energy shocks didn’t last long, and far-seeing people could see that. The Shah, the oil embargo, etc., were all fairly short-term problems

·         We need high prices to stay in order to achieve change. Exxon, the media, the administration, all think we’re kooks and the social, political, etc., changes that would avoid the “harsh shocks” of the price mitigator

·         Energy conservation will see a big boom

·         WTI price projections (2003-5 prices are “doubling” and 2005-7 is “adjustment”)

2003

$31

2004

$41

2005

$57

2006

$45-67

2007

$56

2008

$62

2009

$68

2010

$75

 

·         $75 in 2010 approximately equal to $60 today due to inflation & dollar devaluation

·         Expects non-OPEC peak in 2010 [vs. Groppe’s claim that they’re already at peak] – tar sands included

·         References Oliver! – “Please sir, may I have some more?” OPEC: “More!?”

·         After 2010, prices will rise higher because OPEC will be back in control of price

·         Big oil companies will have to admit to no-growth scenario in 2006-8

·         In 2006-7, supply & demand will reach balance as big oil capex matures into new production – should offset other factors & demand will drop.

·         Yukos, Putin, Chavez, Nigeria…all are unpredictable. There is a rise of nationalism. Assassination of Chavez scares him the most – would be followed within 48 hours by the Venezuelan government brining on a civil war and shutting down exports. We could lose 14% of our capacity within 2 weeks. Oil would go to $100 bbl within two days.

·         It would take Saudi Arabia 50 days to respond (45 days shipping time plus loading/unloading)

·         Natural gas $15-18 this winter, $7-8 next summer

o        Advent of imported LNG by 2008, at $6-7 by 2009-10

·         Likes renewables especially solar for long term effects

·         He sees same kinds of shortages as other peak observers. Agrees with Bezdek – we’ll do nothing until the peak hits.

·         “Planned conservation & planned going without” will be necessary and manageable. Americans will have to change our habits, despite resistance, because Nature insists.

·         Worries about fairness & justice in the adjustment

·         Will we “powerdown” and relocalize, or “grab the oil?” [referencing Richard Heinberg’s book, Powerdown]

·         Referenced Thucidites and the Golden Age of Athens. It came to an end with decision to go to war with Sparta, and embark on Empire. Athenian politics locked up and democracy was eclipsed by a tyrant in order to get decisive decision-making

 

Randy Udall

·         Cars are breeding 5x faster than humans – total mass of cars exceeds mass of humanity by 3 to 1.

10:45 AM to 11:30 AM           Panel: The Vehicle in Your Future

Jason Mark, Clean Vehicles Program Director, Union of Concerned Scientists: Fleet changeout, vehicle efficiency and technology issues.

·         We spend $500K a minute to import oil

o        Imports equal ¼ of our trade deficit

o        Passenger vehicle fuel economy is at a 20 year low

·         Air pollution & climate change

·         Under business as usual, we will emit more greenhouse gases than we can stabilize with by 2030

·         Using existing technologies, we can raise today’s Ford Explorer from 20 to 28 mpg @ $800 higher cost per

·         Hybrids are good but we’re developing hybrid muscle vehicles – larger, heavier, more powerful

·         Flex fuel, PIHEV, fuel cells – can we handle the cost, the lead times, the fleet replacement?

·         Long term opportunities for hydrogen, but tomorrow not today

·         We’re headed to a doubling of passenger fuel consumption by 2035, but if we had all hybrid fleets and alternative fuels, could go to slightly less than today by 2030

·         Policy solutions – beg, bribe, or bludgeon our way to energy independence

·         Incentives for buildings and buying hybrids and flex fuel vehicles

·         Fuel economy standards stuck at 1975 levels

·         Signs of hope

o        State & local governments’ initiatives to get people out of their cars

o        State global warming standards

o        Ex-CIA, ex-oil industry execs talking about oil depletion

o        Faith community – “what would Jesus drive?”

o        Consciousness rising

o        This new range of stakeholders can influence policy

Kelli Kammerer, Honda: A Quick Overview of Honda’s Hybrid and Civic GX (dedicated natural gas vehicle).

·         We import 60% of our oil – 10 mbpd – $600 million per day for foreign oil

·         Honda is a leader in hybrids, flex fuel vehicles

·         Accord hybrid 29/37 mpg

·         2006 Civic 49/51

·         Insight up to 66

·         Best solution: Compressed Natural Gas (CNG)

o        Biomethane, traditional natural gas is “greenest” & emissions are super low

·         The exhaust from the Honda Civic GX is cleaner than the air

·         Safe, no leakage in collision

·         Similar in cost to hybrid Civic

·         Deploying the GX to municipal fleets

·         Can fill at home (1 gal/hr) w/ an appliance

·         Ultimately, fuel cell vehicles (future) 15-20 years

o        Imagines home co-gen plants to generate electricity & heat (using solar?)

Q&A

·         Honda has no plans to develop PIHEV [plug-in hybrid electric vehicles]

 

11:40 AM to 12:20 PM           Oil Shale: Today’s R&D, Tomorrow’s Possibility

Steve Mut, CEO Shell Unconventional Resources Unit: Oil Shale, where we are and where we might go.

·         In situ recovery of oil shale is known as “retorting”

·         US has largest resources of oil shale in the world – 1200 billion bbls

·         Kerogen – H/C ratio > 1.2

·         Tar sands have oil that has already been expelled from kerogen. Oil shale is much younger.

·         Retorts – rotary kilns, high temperature over short time

o        Surface methods produce unacceptable loads of tailings, emissions, surface disruptions

·         In situ conversion (ICP) has done five very small pilot tests. Now beginning major test before deciding to go commercial.

·         ICP is slow heating, by an electrical element buried in the ground, of rock to 600-700° for 3-4 years

o        Oil & gas is expelled from the kerogen

o        Hydrocarbons are changed into light oil & gas

o        60-70% of original carbon in place is harvested – leftover is “char”

o        ISP is energy intensive – each unit of primary heat to drive the process yields 3.5 units of fuel

o        Must keep ground water away from the process, so they propose to freeze the ground around the area and create a “freeze wall”

·         In sum, carbon net is similar to crude production

·         ICP can also be applied to some oil sands

·         Needs testing

·         Expects to reach commercial production by 2010

·         By 2015 <1 mbpd expected production

·         10 mbpd by 2030 is hard to imagine – technology is too young to predict out that far

·         5 mbpd by 2030 is possible

·         Economically realistic with oil at $20-30 bbl

·         1 mb yield requires 8-10 GW of energy input

·         Freezing is a small part of the energy budget

12:00 PM to 1:15 PM              Lunchtime Keynote: U.S. Representative Roscoe Bartlett (R-MD)

Washington Reality: The process of and hope for adding peak oil into today’s Washington D.C. policy debates and decisions.

Introductions by Mayor John Hickenlooper and U.S. Congressman Mark Udall (D-CO)

Mark Udall

·         [brief comments…he’s on the Armed Services Committee and made an implied point about the Iraq war being about oil]

 

Rep. Roscoe Bartlett

·         In the 5000 years of recorded human history, the 150 years of oil is a blip. Growth of population roughly parallels the discovery of oil & gas

·         Referenced Al Bartlett’s exponential function work

o        Divide rate of growth into 70 to get the doubling period in years. E.g., 10% growth rate doubles in 7 yrs

·         We’ve blown about 25 years since we knew there would be a problem with energy depletion

·         Referenced Apollo 13 – barely saving enough energy to get home

·         Referenced Easter Island – they overran their resource base and didn’t make it

·         Re: the oft-quoted 250-year supply of coal “at current rates of use,” if we increase our use by 2% a year, it will only last 85 years.

·         Fissionable uranium for nuclear – 80 years “at current rates” goes to 30 years. Not to mention the waste issues…

·         Supports funding of fusion, but it’s no answer, nothing to bet on but it’s the only one that gets us home free.

·         “There is no such thing as sustainable growth.”

·         One casualty will be our monetary system, which is predicated on continuous growth.

·         Big fan of solar and wind – has an off-grid home.

·         Ocean energy is powerful but too distributed – not concentrated

·         Hydro is tapped out

·         Heat pumps are good

·         True geothermal needs to be better exploited

·         Biomass & agriculture – tradeoffs with food production – must move to vegetarian diets to make room for biofuel production. Mill & eggs best sources of protein.

·         Worried about topsoil degradation

·         Take advantage of waste energy, e.g., burning trash

·         “Hydrogen is not an energy source…I’m not sure our administration knows this.” Hydrogen economy is a cruel hoax but there is hope for hydrogen batteries.

·         All renewables combined amount to only 7% of the total energy mix

·         “Our goal ought to be to use no more energy than we do today” and then reduce it. We shouldn’t “fill the gap” (with oil sands, etc.) because “the higher you climb, the farther you’ll fall.” Conserve time, money, and energy to invest in renewables.

·         Drilling in ANWR is really dumb – “If you could drill it today, what will you do tomorrow?”

·         Referenced Jevon’s Paradox – if we become more efficient, the Chinese might use up what we didn’t.

1:30 PM to 2:30 PM                Land Use and Transportation Planning as if Peak Oil Mattered: Policy Options

Paul Morris, Parson Brinkerhoff, Placemaking Division

·         Create a common dialog with public policymakers by focusing on the “BTU burn”

·         Real world reminders – unpredictability of supply – natural disasters, economic vulnerabilities, global warming…

·         For planning, timing of peak doesn’t matter. Basic conclusion of the Hirsch report: plan for less energy.

·         Smart growth planning – alternatives to sprawl

o        Community building – environmental responsibility – energy efficiency

o        Sprawl is associated with obesity & hypertension

·         “Placemaking” – integrated approach to planning & community development, mixed use, higher density, civic places, green spaces, mass transit

Terrey Penney, National Renewable Energy Laboratory

·         Selling 400,000 hybrids in 2005, when the vehicle fleet is 230 million, is negligible

·         Can fill a PHEV for 3 cents/mile vs. 11 cents/mile for gasoline

·         Battery manufacturers are all liars

o        LiMH popular  - lithium batteries are better

o        Lithium battery (new model) can be 80% recharged in 2 minutes

·         PHEV offers best savings opportunity for fuel savings while we’re waiting for the hydrogen vehicles

·         PHEVs can provide swing capacity for storage – could dramatically boost wind production because they can store intermittent energy, especially distributed generation. Can improve utility performance and voltage stabilization.

·         Transport fuel today: 75% gasoline, 21% diesel

·         In the future, electricity could provide 50% – remaining fuel might be made up by other renewables

·         Needs to be integrated with renewable community planning.

o        House becomes an appliance to the car (for refueling)

o        A renewable community (cost & energy integrated) can be cheaper than a non-renewable one

·         Examples of PHEV builders [see slide deck]

o        Destiny

o        Big Town USA

o        Sarasota, FL

o        Austin, TX

2:30 PM to 3:00 PM     The Built Environment As If Peak Oil Mattered:
Peter Dea, Western Gas Resources: A Denver Metro R&D Project, plus a few words about natural gas supply.

·         Natural gas – 90s were the decade of excess capacity – $2/tcf

·         Since 2002, much higher prices – $11-14/tcf

·         No excess capacity since 2000

·         Capacity utilization > 99% leads to exponential prices rises

·         Despite 63% increase in rig count since Jan ’03, has resulted in a 2% decline in supply. Probably an additional decline this year due to Katrina.

·         Half of gas supply needed by 2010 hasn’t even been discovered – will come from unconventional & undiscovered conventional fields & imports

·         Even if we discover those fields (he’s confident that we will) the gas productivity per rig falls by 325% as second half of wells are drilled [see slide!]

·         Rockies represent the largest single untapped source

o        mid-continent and GOM production is in steep decline

o        Rockies will surpass mid-continent by 2008

·         Can replace about 19% of expected need by 2020 with renewables & efficiency [but what about anticipated demand growth identified by other speakers? Where is the projected additional demand coming from?]

·         “We need it all – yesterday” (coal, renewables, etc.)

·         Metro Denver program

o        Develop energy efficiency program for metro Denver

·         Demand will continue to be tight – must increase supply & decrease demand as much as possible

·         Impressive voluntary participation in a company-wide drive for greater efficiency

Q&A

·         “We’re a little bit arrogant here in the US in that we think all the LNG we need is going to make it here to our shores” [cited recent LNG tanker on its way here that was turned around & sent to Spain – we were outbid! Shades of the Fox TV special Oil Storm?]

 

3:30 PM to 4:45 PM                Panel: Intelligent Responses at the Municipal Level

Brief comments by and a discussion between civic leaders and two peak oil commentators: individuals who must balance and integrate peak oil with multiple competing demands and individuals who are working hard to develop and implement community-based strategies that address peak oil impacts.

Pat Murphy, Executive Director, Community Service, Inc.

·         Supports small communities – against large cities – preserve rural life

·         Most important challenge is food – restore family farms and de-stigmatize farmers

·         Reduce cars – ridesharing via cell phone reservation systems – Can build such a system for ~$10-15 million

·         Zoning & building codes – zoning has done more to harm communities than anything – must re-invigorate

·         Lives in a model town of Yellow Springs, OH

·         Localization & rebuilding small townships is what we must do. Needs a lot more vision, not small technological solutions.

Julian Darley, Founder, Post Carbon Institute and Global Public Media

·         We’re using Big Energy to destroy the planet. Looking for more big energy is a mistake.

·         Climate change is real and very threatening like peak oil.

·         Growth is the main problem. We’ve got a nightmare at 6.5 billion population already.

·         “Sustainable development was a way around the fundamental limits of growth. If sustainable growth isn’t possible, then neither is sustainable development.

·         We must go back ~50+ years

·         Natural gas has peaked in North America

·         If the techno-fix & grand substitution strategies don’t work, what’s next?

·         What if capitalism is a bad system with no future? For it is. The answer is re-localization.

·         Four practical suggestions:

o        The Oil Depletion Protocol

o        Car co-ops – good example in Vancouver (can be done for <$50K)

o        Local energy farms- see Post Carbon Institute

o        Community supported (local) manufacturing

The Honorable Jack Pommel, Chair Transportation and Energy Committee, Colorado House of Representatives

·          Everything we do is designed to prolong the problem

Counselor Rex Burkholter (sp?), Portland sustainability guy

·         “Unabashed urbanist”

·         What they’re doing in Portland

o        Average person-miles per day is falling (~20)

o        Greenhouse gas emissions about the same as they were in 1990

o        Obesity is falling

o        13th highest mass transit ridership nationwide

o        One of the highest rates of bicycle ownership

o        City of ~500,000 people

o        Urban growth boundary around the city center

o        Good crop growth

o        Rezoning for higher density

o        Installed growing light rail system

·         New ideas like “Flex car” car-sharing – Steve Case just bought it. $9/hr to borrow a pickup truck.

·         Downtown neighborhoods becoming more like small towns with equivalent livability, walkability.

Saturday, November 12, 2005

8:30 AM to 11:00 AM             Mobilizing a U.S. Response: The 2005 ASPO-USA Meeting

[Randy and Steve acknowledged that many people had expressed a desire to hear more topics and divergent perspectives at the conference than the ones that were presented. They admitted frankly that they wanted to create a conference that would appeal to “serious guys in suits” (or words to that effect) and gain some legitimacy & good media coverage for that focus.

I have no notes from Steve Andrews’ recap of the conference, but he presented an idea that had come to him at oh-dark-thirty that morning, of a graphic to show the influences & attitudes of people with respect to peak oil. He wasn’t too happy with his labels on the axes of the diagram, and it occurred to me that they could have been labeled “Attachment / Non-attachment” on the horizontal, and “Artistic / Scientific” on the vertical axis.]

Breakout Session 3: “Garbage in – Garbage Out: Getting Better Information”

There were voluntary participation sessions this morning, and I decided to participate in the one dedicated to data modeling.

Leader: Ron Swenson

Facilitator: Morey Wolfson

 

Participants:

Dave ___ – Data modeler

Morey Wolfson – NREL

Hugh ___ – DOE old-timer, formerly with Occidental Petroleum etc.

Robert Hellesley – oil & gas

Charlie Stevens – efficiency & RE

Tracy Rockwell – software engineering / telecom

Steven Johnson – President Clean Coal Fuels – former hedge fund manager – interested in CTL tech

Douglas Balcomb – PhD engineer – nukes & passive solar – on the board of solar energy association & NREL. Wrote “Energy 10” modeling software for solar evaluation

Bert Melcher – retired civil engineer/architectural engineer – interested in institutional change with regard to land use planning & data aggregation. Did a paper in the 70s on Net Energy Modeling. Former state transportation director for Sierra Club.

Jack Hurie (sp?) – Former oil company worker, Wall Street focus

Ron Swenson – Solar contractor in Santa Cruz

Chris Nelder – solar designer & interested layman

 

·         Hugh: In 2004, the federal government took in $7.5 billion income in royalties on oil & gas. In 2005, will be >$10 billion. Get a share of that and spend it on efficiency & renewables!

·         Look at Richard Duncan’s model (runs under “Stella” modeling software environment)

·         Doug: Look at the Limits to Growth model. Stella modeling tool is clumsy (Tracy thinks it’s fine)

·         Look at Dick Lawrence’s “Global energy model” – 2004

·         My suggestion: Evaluate each energy option along a multidimensional scale such that the key factors can be rated, to allow cross-comparison of each option more easily, e.g.,

o        EROI

o        Social desirability (externalities)

o        Environmental cost

o        Practical feasibility / deployability

o        Financial viability

o        Usefulness (e.g., a tiny or a large part of the solution?)

·         Read “Beyond Oil”- Gever, Kaufman Skole & Vorosmarty

·         Look at findsolar.com

·         Check out USGS’ Emile Attanasi – USGS contrarian

 

My List of Notable Omissions

 

Personally, I would have liked to see more coverage at the conference of:

·         Population

·         Electric cars

·         Oil Depletion Protocol

·         Full plenary session for Julian Darley

·         Richard Heinberg (notably absent, I thought)

·         Opposing (if discredited) views, e.g., Mike Lynch, abiotic oil proponents, Daniel Yergin

·         Global warming & environment

 

All in all, I thought it was the best conference I’ve ever been to, by far. The information density was high, the fluff was low, the speakers were all excellent, the event was well executed, everybody was comfortable, the sound and AV were good, and we stayed on schedule. The quality of participants was universally high and very broad spectrum, offering lots of opportunity for interesting conversation and networking. Kudos and thanks to Steve Andrews, Randy Udall, and the event team for laying an excellent foundation stone for ASPO-USA. I hope everybody else at the conference was as energized as I was to continue the work that needs to be done.

 

–Chris Nelder

chris.nelder@idiotwind.net

 

 

[i] The word “barrel” only has one “b”, so why is the abbreviation for a barrel of petroleum “bbl”? In the early 1860’s, when oil production began, there was no standard container for oil, so oil and petroleum products were stored and transported in barrels of all different shapes and sizes (beer barrels, fish barrels, molasses barrels, turpentine barrels, etc.). By the early 1870’s, the 42-gallon barrel had been adopted as the standard for oil trade. This was 2 gallons per barrel more than the 40-gallon standard used by many other industries at the time. The extra 2 gallons was to allow for evaporation and leaking during transport (most barrels were made of wood). Standard Oil began manufacturing 42 gallon barrels that were blue to be used for transporting petroleum. The use of a blue barrel, abbreviated “bbl“, guaranteed a buyer that this was a 42-gallon barrel.

http://www.eia.doe.gov/kids/energyfacts/sources/non-renewable/bluebarrel.html

 


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