What is Peak Oil - Oil & Gas Production & Reserves, Fossil Fuel Reference

The Hubbert peak theory posits that for any given geographical area, from an individual oil field to the planet as a whole, the rate of petroleum production tends to follow a bell-shaped curve. It also shows how to calculate the point of maximum production in advance based on discovery rates, production rates and cumulative production. Early in the curve (pre-peak), the production rate increases due to the discovery rate and the addition of infrastructure. Late in the curve (post-peak), production declines due to resource depletion.

The Hubbert peak theory is based on the fundamental observation that the amount of oil under the ground is finite. The theory is named after American geophysicist Marion King Hubbert, who created a method of modeling known oil reserves and production rates. Hubbert's theory was initially greeted with skepticism by many in the oil industry, but oil companies now routinely use Hubbert's methods to predict future yields of existing oil fields.

Hubbert's peak can refer to the peaking of production of a particular area, which has now been observed for many fields and regions. "Peak Oil" as a proper noun, or Hubbert's peak applied more generally, refers to a singular event in history: the peak of the entire planet's oil production. After Peak Oil, according to the Hubbert Peak Theory, the rate of oil production on Earth will enter a terminal decline. Based on his theory, in a paper[1] he presented to the American Petroleum Institute in 1956, Hubbert correctly predicted that production of oil from conventional sources would peak in the continental United States around 1965-1970 (actual peak was 1970). Hubbert further predicted a worldwide peak at "about half a century" from publication. Many observers such as Kenneth S. Deffeyes, Matthew Simmons, and James Howard Kunstler believe that because of the high dependence of most modern industrial nations on inexpensive oil, the impending post-peak production decline and resulting severe price increases will herald grim implications for the future global economic outlook. Note, because of world population growth, oil production per capita peaked in 1979 (with a plateau 1973-1979).[14]

Contents

1 Hubbert's theory

1.1 Hubbert curve

1.2 Definition of reserves

2 Predictions

2.1 Reliability of predictions

2.2 Other models

3 Current events

3.1 Peak oil production—has it happened already?

3.2 Oil price

3.3 Other oil related

4 Mitigation

4.1 Uses of oil

4.1.1 Transportation

4.1.2 Other distallates

4.2 Alternative sources for oil

4.2.1 Popular alternatives

4.2.2 Energy return on energy investment

4.3 Market economy versus government

4.4 Growth-based economic models

4.5 Implications of an unmitigated world peak

5 Other Hubbert peaks

5.1 Natural gas

5.2 Longterm

5.2.1 Coal

5.2.2 Fissionable materials

5.2.3 Metals

5.2.4 Phosphorus

5.3 Underground water reserves and lakes

5.4 Fisheries

6 Criticism

7 References

8 See also

8.1 Books

9 External links

9.1 Sites

9.2 Articles

9.3 Reports, essays and lectures

Hubbert's theory

Hubbert curve

The standard Hubbert curve. For applications, the x and y scales are replaced by time and production scales.

U.S. Oil Production and Imports 1920 to 2005

Norway's oil production and a Hubbert curve approximating it.‎In 1956, Hubbert proposed that fossil fuel production in a given region over time would follow a bell-shaped curve without giving a precise formula; he later used the Hubbert curve, the derivative of the logistic curve, for estimating future production.

Hubbert assumed that after fossil fuel reserves (oil reserves, coal reserves, and natural gas reserves) are discovered, production at first increases approximately exponentially, as more extraction commences and more efficient facilities are installed. At some point, a peak output is reached, and production begins declining until it approximates an exponential decline.

The Hubbert curve satisfies these constraints. Furthermore, it is symmetrical, with the peak of production reached when half of the fossil fuel that will ultimately be produced has been. It also has a single peak.

Given past oil production data, a Hubbert curve may be constructed that attempts to approximate past data, and used to provide estimates for future production. In particular, the date of peak oil production or the total amount of oil ultimately produced can be estimated that way. Cavallo [2] defines the Hubbert curve used to predict the U.S. peak as the derivative of:

where Qmax is the total resource available (ultimate recovery of crude oil), Q(t) the cumulative production, and a and b are constants. The year of maximum annual production (peak) is:

Definition of reserves

Almost all of Hubbert peaks must be put in the context of high ore grade. Except for fissionable materials, any resource, including oil, is theoretically recoverable from the environment with the right technology. A current example would be biofuel. However, a genetically engineered organism that produces crude oil would not invalidate Hubbert's peak for oil. His research was about the "easy" oil, "easy" metals, and so forth that can be recovered before a society considers greatly advanced mining efforts and how to time the necessity of such resource acquisition advancements or substitutions by knowing an "easy" resource's probable peak. Also, as reserves become more difficult to extract there is the tragedy of the commons possibility that mining or alternatives are too expensive for developing countries.

The "easy" oil constraint also applies to "abiotic oil", a theory believed by virtually no notable U.S. geologists, although it is believed by some Russian and Ukrainian geologists. This theory states that some oil is created through other methods than conventionally understood biogenic processes. However, in order to have any effect on Hubbert peak theory applied to oil, this other creation of oil would have to occur at a rate comparable to current oil depletion, something that has not been credibly observed.

For heavy crude or deep water drilling attempts such as Noxal oil field or tar sands or oil shale, the price of the oil extracted will have to include the extra effort required to mine these resources or for areas such as the outer continental shelf, environmental concerns - see Minerals Management Service. So all oil reserves are not equal and the more difficult reserves are predicted by Hubbert as being typical of the post peak side of the Hubbert curve.

Predictions

Generally the only reliable way to identify the timing of any production peak, including the global peak, is in retrospect. United States oil production peaked in 1971 [15]. The peak of world oilfield discoveries occurred in 1965[3]. Some estimates for the date of worldwide peak in oil production, made by Hubbert and others, have already passed.

Reliability of predictions

In 2004, ASPO predicted that conventional plus unconventional oil production would peak around 2007.In 1974, Hubbert projected that global oil production would peak in 1995 "if current trends continue" [4]. However, in the late 1970s and early 1980s, global oil consumption actually dropped (due to the shift to energy efficient cars[5], the shift to electricity and natural gas for heating[6], etc), then rebounded to a lower level of growth in the mid 1980s (see chart on right). The shift to reduced consumption in these areas meant that the projection assumptions were not realized and, hence, oil production did not peak in 1995.

Colin Campbell of the Association for the Study of Peak Oil and Gas (ASPO) has suggested that the global production of conventional oil peaked in the spring of 2004 albeit at a rate of 23-GB/yr, not Hubbert's 13-GB/yr. During 2004, approximately 24 billion barrels of conventional oil was produced out of the total of 30 billion barrels of oil; the remaining 6 billion barrels coming from heavy oil and tar sands, deep water oil fields, and natural gas liquids (see adjacent ASPO graph). In 2005, the ASPO revised its prediction for the peak in world oil production, from both conventional and nonconventional sources, to the year 2010[16]. These consistent upward (into the future ) revisions are expected in models which don't take into account continually increasing reserve estimates in older accumulations.[17]

Another peak oil proponent Kenneth S. Deffeyes predicted in his book Beyond Oil - The View From Hubbert's Peak that global oil production would hit a peak on Thanksgiving Day 2005 (Deffeyes has since revised his claim, and now argues that world oil production peaked on December 16, 2005[18]).

Texas oilman T. Boone Pickens has stated that worldwide conventional oil production will top out at 84 MB/day[19] (31 GB/yr).

Other models

By United States government prediction [20], world consumption of oil will increase to 98.3 million barrels a day in 2015 and 118 million barrels a day in 2030. This represents more than a 25% increase in world oil production. The Energy Information Administration's study breaks with Hubbert peak theory on several points[21]:

Does not use symmetry

Uses a post-peak constant reserves to production ratio of 10

Authors believe in recovery from "geologically conceivable small sources of conventionally resevoired crude oil"

The United States Geological Survey claimed at one time that there are enough petroleum reserves to continue current production rates for 50 to 100 years. That is countered by an important Saudi oil industry insider who says the American government's forecast for future oil supply is a "dangerous over-estimate."[22] Campbell argues that the USGS estimates are methodologically flawed [23]. One issue that Campbell raises, for example, is that he believes OPEC countries raise their reserves to get higher oil quotas and to avoid internal critique.

Peak oil production—has it happened already?

Chevron states that "oil production is in decline in 33 of the 48 largest oil producing countries". [24] Other countries have also passed their individual oil production peaks.

World oil production growth trends, in the short term, have been flat over the last 18 months. Global production averaged 85.24 mbbl/d in 2006, up 0.76 mbbl/d (0.9%), from 84.48 mbbl/d in 2005 [25]. Production in Q4 2006 was 85.38 Mbbl/d, up 1.09 mbbl/d (1.3%), from the same period a year earlier. Average yearly gains in world oil production from 1987 to 2005 were 1.2 million barrels per day (mbbl/d) (1.7%), with yearly gains since 1997 ranging from -1.4 mbbl/d, (-1.9%; 1998-1999) to 3.3 mbbl/d (4.1%; 2003-2004)[26].

Of the three largest oil fields in the world, two have peaked. Mexico announced that its giant Cantarell Field entered depletion in March, 2006 [27], as did the huge Burgan field in Kuwait in November, 2005 [28]. Due to past overproduction, Cantarell is now declining rapidly, at a rate of -13% year over year. [29] In April, 2006, a Saudi Aramco spokesman admitted that its mature fields are now declining at a rate of 8% per year, and its composite decline rate of producing fields is about 2%[30], thus implying that Ghawar, the largest oil field in the world, may have peaked [31].

The Jack 2 deep water test well in the Gulf of Mexico, announced September 5, 2006, may have the potential, however, to provide as much as slightly less than 2 years of U.S. consumption at present levels.

Global warming could make drilling unknown reserves in the arctic less problematic.[32] Increasing investment in harder to reach oil is a sign of oil companies' belief in the end of easy oil:

"All the easy oil and gas in the world has pretty much been found," said William J. Cummings, ExxonMobil's spokesman in Angola. "Now comes the harder work in finding and producing oil from more challenging environments and work areas."[33]

The "harder work" mentioned has, however, already displayed the potential to unlocking crude oil measured in the trillions of barrels. Chuck Masters of the USGS says:

"Unconventional resources, such as extra heavy oils, tar sands, gas in tight sands, and coal bed methane are not considered [in the USGS 2000 assessment] but they must, nonetheless, be recognized as being present in very large quantities.... The two major sources of unconventional oil ... are the extra heavy oil in the Orinoco province of Venezuela and the ... tar sands in the Western Canada Basin. Taken together, these resource occurrences, in the Western Hemisphere, are approximately equal to the Identified Reserves of conventional crude oil accredited to the Middle East."

Oil price

In 2004, 30 billion barrels of oil were consumed worldwide, while only eight billion barrels of new oil reserves were discovered. New discoveries of huge, easily exploitable oil fields are most likely a thing of the past. In August 2005, the International Energy Agency reported global demand at 84.9 million barrels per day, resulting in an annual demand of over 31 billion barrels. This means consumption is now within 2 Mbbl/d of production. At any one time there are about 54 days of stock in the OECD system plus 37 days in emergency stockpiles. In June 2005, OPEC admitted that they would 'struggle' to pump enough oil to meet pricing pressures for the fourth quarter of that year. The summer and winter of 2005 brought oil prices to a new high (not adjusted for inflation). On the other hand, some analysts attribute much of this new high to disruptions caused by the war in Iraq.[8]

Other oil related

Chevron has launched the Will You Join Us? [34] campaign, seeking to alert the public to the possibility of petroleum depletion and encourage discussion.

New York recently tested a fleet of Dodge Sprinter plug-in hybrid delivery vans [35].

High oil prices have started to affect some transportation industries. The United Arab Emirates lead the world in Airbus A380 orders because higher oil prices give the airlines of oil exporting countries an advantage.

Ford's reliance on SUVs has contributed to its recent financial and market share challenges.

A speech[36] by Bill Clinton, early supporter of the Baku-Tbilisi-Ceyhan pipeline, explaining peak oil and later warning:

And then finally, and I think most important of all, more important than the deficit, more important then healthcare, more important than anything, is we have got to do something about our energy strategy because if we permit the climate to continue to warm at an unsustainable rate, and if we keep on doing what we’re doing 'til we’re out of oil and we haven’t made the transition, then it’s inconceivable to me that our children and grandchildren will be able to maintain the American way of life and that the world won’t be much fuller of resource-based wars of all kinds.

General Motors became the first automaker to announce plans for producing a plug-in hybrid electric vehicle.[37][38]

Mitigation

World energy consumption, 1970-2025. Source: International Energy Outlook 2004.Mitigation can reduce oil consumption so it is very important in calculating the timing and shape of a peak. In the chart of world oil consumption it can be seen that only mitigation efforts after 1973 and 1979 oil shocks lowered oil consumption. Most recessions since the 70s have had no effect on curbing the oil consumption shown in the graph.

Conversely the shape of the peak[9] affects mitigation efforts. Key questions for mitigation are the viability of solutions such as alternative fuel cars, the roles of government and private sector [39] [40], and how early the switch to these technologies would have to be in order to maintain the lifestyle of a country or even prevent changes to the Earth's carrying capacity.

Oil imports by country

Uses of oil

Transportation

Main article: Energy conservation#Transportation sector

Because most oil is consumed in transportation, approximately 66.6% in America[41] and 55 percent worldwide[10], much of the discussion regarding mitigation of the effects of oil depletion center around the development of transportation that uses less oil.

There are many forms of transportation that do not require oil or require much less than the standard automobile. Today, these include the application of biofuels, high mpg hybrid vehicles and diesel vehicles[42], battery electric vehicles, and plug-in hybrid electric vehicles. Hydrogen vehicles [43] such as General Motors Sequel are also being developed. Because America uses 1 out of every 4 barrels of global oil consumed [44] [45] and uses 66.6% for transportation, it uses roughly 17% of global oil consumption for transportation and is potentially the largest market for any new type of vehicle. However less than 30% of personal auto expenditures in 2003 were on gasoline and oil as compared with over 40% in 1980[46] and personal use is just one component of overall transportation.

More comprehensive mitigations include better land use planning through Smart growth to reduce transportation inducements, increased capacity and use of mass transit, vanpooling and carpooling, bus rapid transit, telecommuting and human powered transport from current levels [47]. Rationing is also a form of mitigation - see [48] for driving ban schemes and a list of policies and their oil savings in table E-1. In order to deal with potential problems from peak oil, Colin Campbell has proposed the Rimini protocol.

Refineries can choose what quantity of each oil product to produce. Therefore the more heating oil produced the less gasoline refined from a barrel of oil and vice versa. [49] Heating oil is used by 7% of 2005 American households.[50] Residential and commercial use accounts for roughly 6% of US total 2004 oil consumption.[51]

Other Hubbert peaks

Natural gas

While Hubbert correctly predicted peak oil timing in the United States (under his higher of two scenarios), the peak he predicted for natural gas was very far off. In 2000, U.S. natural gas production was 2.4 times higher than Hubbert had predicted in 1956 and has not produced in a fashion of the logistic curve Hubbert initially envisioned.

The North American peak happened in 2001, according to Western Gas Resources Inc; according to Doug Reynolds, the peak will occur in 2007[75]; according to Bentley, production will peak anywhere from 2010 to 2020[15].

Since compressed natural gas powered cars are already available in North America, peak oil and peak gas are related for transportation usage.

Because gas transport is a complicated operation, the global peak of gas is currently less important than the peak per continent. Due to higher gas prices LNG transportation has become economic. This leads to high investments in LNG production and transportation, which will lead to a more global gas market.

Natural gas production may have peaked on the North American continent in 2003, with the possible exception of Alaskan gas supplies which cannot be developed until a pipeline is constructed. Natural gas production in the North Sea has also peaked. UK production was at its highest point in 2000, and declining production and increased prices are now a sensitive political issue. Even if new extraction techniques yield additional sources of natural gas, like coalbed methane, the energy returned on energy invested will be much lower than traditional gas sources, which inevitably leads to higher costs to consumers of natural gas.

The United States accounts for 24% of world natural gas consumption [76]. Since natural gas is the single largest feedstock used to produce fertilizers, an increase in natural gas prices could provide upward pressure on food costs, in addition to the increase in the transportation component of food prices.

Longterm

Hubbert explains [77] application of basic mathematics to the (smoothened) rate of production of any finite resource:

(1) For any production curve of a finite resource of fixed amount, two points on the curve are known at outset, namely that at t = 0 and again at t = infinity. The production rate will be zero when the reference time is zero, and the rate will again be zero when the resource is exhausted; that is to say, in the production of any resource of fixed magnitude, the production rate must begin at zero, and then after passing through one or several maxima, it must decline again to zero. (2) The second consideration arises from the definition of the definite integral in calculus; namely if there exists a single valued function y = f(t), then is a function of x, A = A(x), and represents the area between the curve y = f(t) and the t-axis from the origin out to the distance x.

Here Hubbert expresses the fact that finite resources will eventually run out.

Coal

Peak coal is significantly further out than peak oil, but we can observe the example of anthracite in the USA, a high grade coal whose production peaked in the 1920s. Anthracite was studied by Hubbert, and matches a curve closely.[78]. Pennsylvania's coal production also matches Hubbert's curve closely, but this does not mean that coal in Pennsylvania is exhausted--far from it. If production in Pennsylvania returned it its all time high, there are reserves for 190 years. Hubbert had recoverable coal reserves worldwide at 2500 × 109 metric tons and peaking around 2150 depending on how the usage graph is drawn.

This analysis is put into context by the fact that the U.S. has the world's largest reserves of coal, almost as much as the the combined reserves of the countries with the second and third highest amounts of coal (Russia and China, respectively) [79].

Fissionable materials

In a paper in 1956 [80], after a review of US fissionable reserves, Hubbert notes of nuclear power:

There is promise, however, provided mankind can solve its international problems and not destroy itself with nuclear weapons, and provided world population (which is now expanding at such a rate as to double in less than a century) can somehow be brought under control, that we may at last have found an energy supply adequate for our needs for at least the next few centuries of the "foreseeable future."

Also technologies such as thorium, reprocessing and fast breeders can in theory considerably extend the life of uranium reserves. Roscoe Bartlett claims[81]

Our current throwaway nuclear cycle uses up the world reserve of low-cost uranium in about 20 years.

Caltech physics professor David Goodstein has stated [82] that

...you would have to build 10,000 of the largest power plants that are feasible by engineering standards in order to replace the 10 terawatts of fossil fuel we're burning today..that's a staggering amount and if you did that, the known reserves of uranium would last for 10 to 20 years at that burn rate. So, it's at best a bridging technology...You can use the rest of the uranium to breed plutonium 239 then we'd have at least 100 times as much fuel to use. But that means you're making plutonium, which is an extremely dangerous thing to do in the dangerous world that we live in.

Metals

Hubbert applied his theory to "rock containing an abnormally high concentration of a given metal" [83] and reasoned that the peak production for metals such as copper, tin, lead, zinc and others would occur in the time frame of decades and iron in the time frame of two centuries like coal. The recent jump in the price [84] of copper [85] has become known among traders as "peak copper". Lithium availability is a concern for a fleet of Li-ion battery using cars but world reserves are estimated as adequate for at least 50 years [86]. A similar prediction [87] for platinum use in fuel cells notes that the metal could be easily recycled.

Phosphorus

Phosphorus supplies are essential to farming and depletion of reserves is estimated at somewhere from 60 to 130 years [88]. Individual countries supplies vary widely; without a recycling initiative America's supply [89] is estimated around 30 years [90]. Phosphorus supplies affect total agricultural output which in turn limits alternative fuels such as biodiesel and ethanol.

Underground water reserves and lakes

Although water is a renewable resource, a reserve such as the Ogallala Aquifer can be mined at a rate that far exceeds replenishment. This turns much of the world's underground water [91] and lakes [92] into finite resources with peak usage debates similar to oil. These debates usually center around agriculture and suburban water usage but generation of electricity[93] from nuclear energy or coal and tar sands mining mentioned above is also water resource intensive. The term fossil water is sometimes used to describe older aquifers.

Fisheries

Noting that the Hubbert curve seems to be applicable to any resource that can be harvested much faster than it can be replaced, at least one researcher has attempted to perform Hubbert linearization on fisheries, notably the whaling industry, as well as charting the transparently dependent price of caviar on sturgeon depletion.[94] Other example is the Cod of the north sea[95].

Criticism

Economist Michael Lynch[96] claims that the theory behind the Hubbert curve is overly simplistic, and that in his opinion available evidence contradicts some of the more specific predictions.[97] He points to the date of the coming peak, which was initially projected to occur by 2000, but has now been pushed back to 2010, and note that Campbell's predictions for world oil production are strongly biased towards underestimates[98]. Throughout 2001-2003, in his monthly newsletters, Campbell maintained that his 1996 prediction of a peak in 2000 was unchallenged. Finally in his April 2004 Newsletter, Campbell relented and shifted the peak to 2010. Later this was brought forward to 2007 but in October 2005, was shifted back to 2010.

Critics such as Leonardo Maugeri, vice president for the Italian energy company ENI, claim that Hubbert peak supporters such as Campbell previously predicted a peak in global oil production in both 1989 and 1995[99], based on oil production data available at that time. Maugeri claims that nearly all of the estimates do not take into account non-conventional oil even though the availability of these resources is significant and the costs of extraction and processing, while still very high, are falling due to improved technology. Furthermore, he notes that the recovery rate from existing world oil fields has increased from about 22% in 1980 to 35% today due to new technology and predicts this trend will continue. The ratio between proven oil reserves and current production has constantly improved, passing from 20 years in 1948 to 35 years in 1972 and reaching about 40 years in 2003.[16] These improvements occurred even with low investment in new exploration and upgrading technology due to the low oil prices during the last 20 years. However, Maugeri feels that encouraging more exploration will require relatively high oil prices [100].

Edward Luttwak argues that peak oil is a myth. He claims that unrest in countries such as Russia, Iran and Iraq has lead to a massive underestimate of oil reserves. [17] The ASPO response to Luttwak's article is here[101].

Cambridge Energy Research Associates sells a report[102] that is critical of Hubbert influenced predictions:

Despite his valuable contribution, M. King Hubbert's methodology falls down because it does not consider likely resource growth, application of new technology, basic commercial factors, or the impact of geopolitics on production. His approach does not work in all cases-including on the United States itself-and cannot reliably model a global production outlook. Put more simply, the case for the imminent peak is flawed. As it is, production in 2005 in the Lower 48 in the United States was 66 percent higher than Hubbert projected.

ASPO notes[103] that

We and CERA agree that production from existing oilfields is declining on average at about 5% per annum and this means, according to CERA, that 40 million barrels per day extra capacity is needed by 2015.

Alfred J. Cavallo while predicing a conventional oil supply shortage by no later than 2015 [104] does not think Hubbert's peak is the correct theory to apply to world production[2].

http://en.wikipedia.org/wiki/Peak_oil

Related Topics & Questions

When was the modern oil industry born?

How much oil does the world consume per day?

How much oil does the United States consumer per day?

What percent of oil can be recovered from a newly discovered oil hole?

By what % is the demand for oil increasing annually?

How much investments would be required increase oil production to meet future demand?

What is OPEC's influence on oil prices?

How was oil formed?

What is Peak Oil and when will oil peak?

Which are the largest oil fields in the world? And how much oil reserves do they have?