Dr. Ali Bakhtiari’s Four Phases of Transition
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.
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.
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”?
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.”
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:
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.
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.
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.
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.
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.
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).
(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.’
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.”
‘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.
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”
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.
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.”
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.
“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.
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.
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.”
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:
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.”
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.
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:
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).”
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.
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:
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).
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).
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.’”
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:
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.
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.”
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.
“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.”
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
below:
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
below:
Whiskey and Gunpowder
Byron King will be speaking at the first-ever Agora
Financial Commodities & Traders Seminar at the world-famous Bellagio Hotel
and Casino in Las Vegas, Nevada on October 4-5. Secure your spot by clicking
here:
Financial Commodities & Traders Seminar at the world-famous Bellagio Hotel
and Casino in Las Vegas, Nevada on October 4-5. Secure your spot by clicking
here:
Commodities & Traders Seminar in Las Vegas http://t100g.com/agorafinancialvegas
– Posted Wednesday, 30 August 2006