What’s up with oil supplies these days? The first place to go to find out is usually the International Energy Agency (IEA), the multinational body charged with overseeing global prevention, mitigation, and management of oil shocks. IEA publishes an annual “World Energy Outlook” (WEO) as a guideline for the energy sector, governments, and the public to help determine likely future petroleum supplies and determine effective policies to help offset the impacts of future shortages. Until very recently, IEA has been unabashedly bullish on the possibility of future growth in both oil demand and production. As recently as 2002, the WEO predicted that growth in total liquid fuel production, including conventional light crude oil as well as alternative sources such as natural gas liquids (condensates), tar sand, heavy oils, biofuels, and technically difficult deepwater resources, would keep up with a projected demand of 130 million barrels per day (mbd) by 2030, up from today’s total production of roughly 85 mbd. But such predictions beg the big questions: where is all that oil going to come from? Will we be able to, and should we, ramp up production of unconventional oil fast enough to offset the natural declines in production and energy return from conventional light crude oil development? More recent IEA projections have in fact cast doubt on the veracity of the information published previously: over the course of the past decade, 2030 production forecasts were revised down to 116 mbd, many producing countries and oil companies have slashed their proven reserves estimates, and since 2008, the agency has shifted into damage control mode, predicting an imminent supply crunch and recommending quick action to keep the oil flowing. Even Saudi Arabia, the world’s largest oil exporter, was recently caught red-handed lying about the number of wells drilled in Ghawar, the largest oilfield in the world, which suggests that even major producers are facing imminent production declines and will be unable to maintain even current, let alone growing, supply levels. Are IEA’s recent revisions a classic case of locking the barn door after the horse has already escaped?
Keep in mind I am not talking about what replacements or supplements for oil might theoretically be possible to produce absent technical and economic constraints. Sure, if infrastructure were in place and enough energy and materials were readily available to invest in production of alternative liquid fuels from say, kerogen shale, then it might be technically possible to produce large enough quantities of synthetic crude to close any projected supply gap. But assuming such infrastructure gets us nowhere, and the existence or absence of acceptable replacements in theory says little about the real-world prospects for future liquid fuel production; what matters far more is actual online, planned and projected production capacity, in the form of specific projects. Oil does us no good if it is sitting in shale and needs to be cooked out, yet extraction and refining capacity has not materialized and insufficient energy supplies are available to do the cooking. Such a resource cannot be considered a “reserve,” since little to no hard evidence exists to suggest the resource will be developed and produced for economic uses in the foreseeable future. What we need to begin to effectively manage the peak oil transition is transparent, publicly available data on the amount of remaining oil likely to be recovered and the rate at which it will be recovered; in other words, we need a database of the oilfield development projects that are either already online or likely to come online in the next few years, in time to help prevent a supply crunch given the decline rates of current oilfields.
The MegaProjects database has embarked upon a mission to collect and publicize exactly this data, and a current listing of oilfield projects and their expected output rates and “ultimately recoverable reserves” (URR) is available on Wikipedia. This database of nearly 300 projects planned to come online in the next ten years or so includes all but the tiniest of projects, which have very little impact on overall supply, and it reflects the long lead time for construction and startup of oilfield projects. It is, therefore, a very reliable assessment of the probability of different oil supply scenarios. IEA, on the other hand, has historically relied on estimates from the United States Geological Survey (USGS), which assesses not current and planned online development, but rather potential fossil resources. Unlike MegaProjects, which draws its data from the available facts on the ground regarding projects actually likely to be developed in the foreseeable future, USGS data and hence IEA projections do not take into account the effects of current or planned investment, permitting and construction delays, or project cancellations, and therefore represent only one possible scenario for output at some point in the indefinite future.
So what is really going on here? Why do the IEA and USGS, agencies charged with ensuring accurate accounting of oil reserves, continually publish overly optimistic assessments of petroleum supply? Do these forecasts represent the best available data, or are they merely reflections of the political imperative to see no evil, hear no evil, and speak no evil when it comes to the possibility of permanent shortages in fuel supplies? Is the possibility that liquid fuel production will begin to irreversibly decline in the near future so damaging to the influence and credibility of the powers that be that any evidence of such a decline must be continually suppressed, dismissed, and denied, even relying on phantom reserve data to do so if necessary? To answer these questions, we dig a little bit deeper again and look at where our oil production is coming from today, as well as some of the oil substitutes that have been proposed and/or are in limited production currently.
Read the rest of this entry »
