Media Release for Immediate Use
5 October 2004, Wellington
'The real point is not so much the exact date of peak but the statement that the First Half of the Oil Age, which was characterised by growing production, is about to be followed by the Second Half when oil production is set to decline along with all that depends upon it.' -- Colin Campbell, Sept 2004.
As peak oil theory begins to break in Governments and the mainstream media around the world there is some confusion as to how we have arrived at the 2007 date.
The following explains in simple terms the 2007 peak date.
It first must be acknowledged that reliable reserve data is difficult to access. Furthermore the process of refining and adjusting the date based on new data is merely part of the scientific process and is not an argument against peak oil or depletion. The fact that global oil production will peak is a fact already evidenced in many large oil-producing countries for example the US, the UK, Venezuela and Norway.
Factors that influence the peak date include world-wide recession which will dampen demand. Military or political factors may curb supply with similar consequences. According to Campbell’s calculations it is a fairly flattish peak which indicates minor adjustments to the input data could shift the peak a few years either way.
One of the most influential industry energy statistics report to come out in recent months is BP's Statistical Review of World Energy. This report served to support a 2007 peak date. Some of the findings are summarised below.
Nine major oil producers have clearly moved beyond peak since 1998 including the UK and Norway (Norway is the 3rd largest OECD producer). Prior to this many other major producers including United States all peaked.
Cumulative depletion amongst this group is now about 1.5 Million barrels per day (Mbpd). Depletion is currently running at 4.91% compounding. In other words declining nations are running out of oil at 4.91% per year.
The remainder of world oil is coalescing around the OPEC nations and the FSU.
Combined production increases in these nations increased over 3.66% in the year 2002-2003. Some nations Iran, UAE, Qatar, Kuwait and Saudi Arabia have all increased production over 10%. This level of production increase has been necessary to meet the extraordinary demand, particularly from industrialising nations such as China and India. It is unlikely that these levels of production increase will be maintained even with massive new investment.
Thus, presently we have a situation where the current demand for oil is growing at about 3.5%. We have a combined 3.66% increase in production (we are currently just keeping ahead of demand). The world consumes 82 odd Mbpd. This year supply security has raised it's head as the issue of the day, unsurprising with such a tight supply demand gap.
The clear conclusion to be drawn from the BP statistics is that depletion is now a significant influence and that rapid production increases are sustainable only in a very limited number of nations with high levels of further investment required.
Based on the best currently available reserves data known the peak production is unlikely to be significantly above 90Mbpd. The International Energy Agency (IEA) as well as the OECD authorities claim that production can exceed 110Mbpd within the next 10-14 years however these claims make the assumption that future discovery will be as significant as it was during the 1960s and that major non-conventional reserves (shale oil, oil sands etc.) can be bought on board very quickly. Furthermore the IEA currently underestimate demand growth by about 1.5%.
It is considered probable by many analysts that increasing depletion in some nations will offset much of the non-conventional oil production and discovery taking into consideration long lead in times and levels of investment required.
Nevertheless there is wide acceptance by industry and analysts that about another 4-8Mbpd of conventional oil is possible based on currently available data. Given current demand growth rates this meets demand for another 2-3 years.
Hence we come to the 2007 peak date based on current demand growth, and expectations of production increases offset by existing depletion statistics.
After this date the most likely scenario is that supply will begin to increasingly falter. A global annual decline of 2-3% initially is expected with that figure accelerating a few years later. One thing is certain, after the peak date a mad scramble to maintain current levels of production will ensue, supply will become increasingly erratic with massive investment required to maintain something of a semblance of normality.
Calculations don’t typically take into account political, military or security of supply issues which are already dogging the industry. Minor hiccups in supply from now on are likely to result in supply disturbances further down the chain.
Nobody currently knows where (or if) the oil to meet growing demand beyond 2007/08 is located? In prior world energy reports the IEA have referred to the shortfall as “unidentified non-conventional reserves”.
Current discovery trends typically throw up low yield fields and much of the remaining Middle East oil in increasingly heavy and sulphur laden requiring higher levels of refining. These factors alone point clearly toward an uncertain future in regard to oil production.
Nevertheless the UN, IEA, USGS, the New Zealand Government and the AA all argue that there is enough oil to meet demand until 2030. None of these groups however can say exactly where that oil is. It's just assumed to be there, somewhere, over the rainbow.
To put the problem into perspective consider the following. Saudi Arabia currently produces about 10% of the world’s oil. Almost half of that coming from the Ghawar oil field alone. Ghawar was discovered in the 1940’s and nothing of its size has ever been discovered since. It produces about 5% of the world’s current oil. ExxonMobil argue that beyond 2020 an extra 65-85 Million barrels of oil per day will be needed to meet demand. This is almost double the current consumption. Exactly how much is 65-85 Million barrels per day? It’s in the range of 8-10 times Saudi Arabia’s total oil production.
We suggest this amount of oil simply doesn’t exist on the planet in quantities that are exploitable to meet demand. However, if we are to continue living the fossil fuel driven lifestyles we have all become accustomed to, if we are to continue experiencing robust growing economies quite simply this is what is required.
It is clear then that there is a problem.
The actual date year of “peak oil” is largely academic but we can be sure that serious problems will emerge long before 2020. The symptoms of emerging dysfunction are already manifestly evident. The current rising price of oil, OPEC’s lost ability to control prices with large supply backstops. Increasing concern about the economy it’s relation to oil prices as well as growing worry about supply security. It has recently been expressed that New Zealand may have less than 10 days of on the ground oil reserves. At anytime we are potentially a week away from shortages.
Ref: BP Statistical Review of World Energy, 2003.
5 October 2004
PowerLess NZ is a growing group of scientists, energy analysts and concerned citizens whose principle objectives are to alert both Government and the general public to New Zealand’s looming energy crisis. Our aim is to support development of renewable energy resources at both a private and public level, as well as encourage a firm move away from dependence upon fossil fuels.
More information about global peak oil and resource depletion can be found at www.oilcrash.com