Robert L. Hirsch, SAIC
Roger Bezdek, MISI
Robert Wendling, MISI
May 2005
|
|
THE PROBLEM:
Soon world conventional oil production will no longer meet demand.
|
|
WHY THE PROBLEM?
- World conventional oil resources are finite.
- Oil discovery has lagged consumption for two decades; the resource is being rapidly depleted.
|
|
WHEN WILL PEAKING OCCUR?
- No one knows for sure.
- Some think 1 - 10 years.
|
|
WHY CAN'T THE PROBLEM BE FIXED QUICKLY?
- The scale of consumption worldwide is enormous.
- Mitigation will take a decade or more, based on crash programs.
- With timely mitigation, dire economic consequences can be avoided.
|
|
|
|
THE PROBLEM
|
|
LEARNING FROM EXPERIENCE
|
|
TRANSPORTATION FLEET LIFETIMES
|
|
MITIGATION OPTIONS
|
|
THREE MITIGATION SCENARIOS
|
|
PRUDENT RISK MANAGEMENT
|
|
|
Oil is the lifeblood of modern civilization, esp. transportation.
|
|
Geologists agree: World conventional oil production will peak.
|
|
|
|
|
|
|
|
|
World oil demand is huge and growing.
|
|
Most past peaking predictions were wrong.
+ Hubbert was right on the U.S. Lower 48.
+ Recent predictions may be right.
+ Wrong isn't forever.
|
|
Why reconsider peaking now?
- World oil consumptioin outstripping new discoveries.
- Extensive drilling worldwide - Large database
- Advanced technology: Modern geology & 3D seismic
- Many experts are pessimisitic.
- The economic consequences could be dire.
|
|
|
|
|
North American natural gas
|
|
U.S. Lower 48 states oil production
|
|
Economic impacts in 1973 & 1979
|
|
|
Experts overestimated North American natural gas reserves & future production as late as 2001.
- National Petroleum Council - 1999
- DOE EIA - 1999
- Cambridge Energy Research Associates - 2001
|
|
U.S. natural gas production is now flat/in decline.
|
|
|
Impacts of world oil production peaking are exemplified by the 1973 & 1979 oil interruptions.
+ Inflation
|
+ Recession
|
+ Unemployment
|
+ High interest rates
|
|
|
1973 & 1979 were relatively brief.
|
|
World oil peaking impacts could last a decade or more.
|
|
|
|
|
U.S. 2003 consumption: ~20 MM bpd
~25% of world oil demand
~Two thirds used in transportation
|
|
The U.S. transportation fleet
+Very large
+Huge investment
+Evolves slowly
|
|
|
Fleet
|
Size
|
Median Lifetime (Years)
|
Cost to Replace Half the Fleet (2003 $)
|
|
Automobiles
|
130 million
|
17
|
$1.3 trillion
|
|
Light Trucks, SUVs, etc.
|
80 million
|
16
|
$1 trillion
|
|
Heavy Trucks, Buses, etc.
|
7 million
|
28
|
$1.5 trillion
|
|
Aircraft
|
8,500
|
22
|
$.25 trillion
|
|
|
Large efficiency improvements possible in some fleets, smaller in others.
|
|
Some fuel switching possible in the short term, more longer term.
|
|
| |
|
|
| |
|
Scenario I - No action until peaking occurs
|
|
Scenario II - Mitigation started 10 years before peaking
|
|
Scenario III - Mitigation started 20 years before peaking
|
Assumptions:
|
>> All mitigation initiated immediately
>> Crash program implementation
|
|
| |
|
|
| |
|
Vehicle Fuel Efficiency
|
|
Gas-To_Liquids (GTL)
|
|
Heavy Oil/Oil Sands
|
|
Coal Liquefaction
|
|
Enhanced Oil Recovery (EOR)
|
|
| |
|
| |
MITIGATION OPTIONS & ISSUES - I
|
|
Automobiles & light trucks (LDVs) are largest liquid fuel consuming opportunity.
- Diesel engines are up to 30% more efficient than gasoline engines.
- Hyrbrids are 40% more efficient in small cars/ 80% in medium cars.
- Enhancements to existing technologies can also contribute.
|
|
|
| |
MITIGATION OPTIONS & ISSUES - II
|
|
Now commercial & could be significant
|
|
Must compete with LNG
|
|
Non-U.S. resource
|
|
| |
|
|
| |
MITIGATION OPTIONS & ISSUES - III
|
|
Canada + Venezuela: 3-4 trillion barrels
|
|
~600 billion barrels economic
|
|
Only part clean fuels - Canada: 0.6 of 1.0 MM bpd
|
|
Current plans - Canada: 3 MM bpd synthetic oil by 2030
|
|
Large energy input required
|
|
Oils harder to refine
|
|
Significant environmental problems
|
| |
|
|
| |
MITIGATION OPTIONS & ISSUES - IV
|
|
Now commercial / near commercial
|
|
Cost: $30-35/bbl
|
|
Huge coal resource in U.S., elsewhere
|
|
Liquids don't need refining
|
|
|
|
| |
MITIGATION OPTIONS & ISSUES - V
|
|
EOR has been utilized for decades.
|
|
It's usually applied after primary and secondary recovery.
|
|
It helps recover additional oil from reservoirs past peak production.
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
EIA (Hakes, J.) ...................................~8%
|
Saudi Aramco (Al-Husseini, S) ..........3-5%
|
ExxonMobil .......................................4-6%
|
|
|
|
| |
|
| |
|
Skilled workers & industrial capacity worldwide are in short supply for the level of effort described herein.
|
|
Massive commercial cash programs are rare. Startup will almost certainly be much slower than assumed in this analysis.
|
|
Some countries may delay, others will proceed rapidly with mitigation. China may have started. (Canada, Venezuela).
|
|
It is not clear how environmental protection will fare if there is widespread joblessness, high inflation & severe recession.
|
| |
|
| |
|
Oil peaking timing is uncertain.
|
It may be soon
|
|
"Soon" is less than 20 years hence.
|
|
|
The world's first forced energy transition.
|
|
It's a world liquid fuels problem.
|
|
A number of mitigation technologies are ready.
|
|
With timely mitigation, economic damage minimized.
|
|
Prudent risk management = Early action, not reaction after the fact.
|
| |
|
| |
|
World's last Super Giant oil fields found in the 1960's.
|
|
From 1996 - 1999, >$400 billion in E & P only kept production flat.
|
|
In mid 1980s, OPEC production quotas became partly based on "reserves".
+
|
From 1986 to 1990 "reserves" increased by ~300 Gb
|
+
|
Only ~10 Gb were actually discovered.
|
+
|
Games then / honest now?
|
|
| |
|
| |
Williams, B.
Shrinking OPEC Cushion Bodes Scary Surprises.
OGJ. June 14, 2004.
|
| |
