Peak Oil: The World Greatest Challenge

http://upload.wikimedia.org/wikipedia/commons/c/ce/Oil_well.jpghttp://en.wikipedia.org/wiki/Image:Moscow_traffic_congestion.JPG

NASA

en.wikipedia.org/wiki/Image:Oil_platform.jpgen.wikipedia.org/wiki/Image:Ceratium_hirundinella.jpg

“Peak Oil” is comingIt can’t be ignored

ASPO-Australia

General Observations

• Prediction is hard, especially about the future!• Peak oil will happen in stages T1-T4• The global situation will set the stage • Australia is lucky with large reserves of natural gas,

although not where we want it. Potential for mitigation

• Climate Change is a lot scarier than Peak Oil and they have a common solution set

What Is Peak Oil?

• The date an area’s oil production reaches its maximum

• Means that about half the oil has been produced– Does not mean “running out of oil” – Does mean a continuous decline in production

• When oil half gone, the flow of oil begins to fall– Not like a gas tank – Oil in the ground is not in a pool but in tiny droplets– Droplets move slowly through the earth due to

pressure– At halfway point pressure drops – flow decreases

Peak Oil Discoverer: Dr. King Hubbert1903-1989

• Shell Oil Geologist/ Petroleum Scientist

• 1949 – projected short historical oil period– Triggered by 1930 U.S. discovery peak

• 1956 – predicted 1970 as U.S. Peak Oil year– Came as predicted

• 1969 – predicted World Peak Oil year 2000– 1970-80 demand decline delayed it

Dr. Colin Campbell – King Hubbert 2006

• Geologist/ Petroleum Scientist

• Worked for most major oil companies

• Founder, Association for Study of Peak Oil – Wrote “The Coming Oil Crisis” in 1997

• Estimates World Peak for regular oil in 2010

• Published two other books– “Essence of Oil and Gas Depletion”– “Oil Crisis”

Matthew Simmons

• Oil Investment Banker– Backed many oil and gas drilling

projects

• Advisor to President Bush

• Challenges Saudi Reserve Estimates– Thinks Saudi oil may soon peak

• Author, “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy”

• Given 100s of talks to government and business

Talk outline

Origin – How do oil and gas form?Practical: Non-Renewable Energy

Exploration and Production – How do we find oil and gas and how is it produced?Practical: Prospector Game

Politics – Why are oil and gas important?

Origin (1): Chemistry

Crude Oil

Hydrocarbon

en.wikipedia.org/wiki/Image:Octane_molecule_3D_model.pngen.wikipedia.org/wiki/Image:Petroleum.JPG

• Oil and gas are made of a mixture of different hydrocarbons.

• As the name suggests these are large molecules made up of hydrogen atoms attached to a backbone of carbon.

Origin (2): Planktoncache.eb.com/eb/image?id=93510

en.wikipedia.org/wiki/Image:Copepod.en.wikipedia.org/wiki/Image:Ceratium_hirundinella.jpg

• Most oil and gas starts life as microscopic plants and animals that live in the ocean.

Plant plankton Animal plankton

Origin (3): Bloomsserc.carleton.edu/images/microbelife/topics/red_tide_genera.v3.jpg

• Today, most plankton can be found where deep ocean currents rise to the surface

• This upwelling water is rich in nutrients and causes the plankton to bloom

• Blooms of certain plankton called dinoflagellates may give the water a red tinge© Miriam Godfrey

Dinoflagellate bloom

Origin (4): On the sea bedupload.wikimedia.org/wikipedia/en/0/04/Plankton.jpg

When the plankton dies it rains down on sea bed to form an organic mush

Sea bed

en.wikipedia.org/wiki/Image:Nerr0328.jpg

If there are any animals on thesea bed these will feed on theorganic particles

Origin (5): Black Shaleupload.wikimedia.org/wikipedia/en/0/04/Plankton.jpg

• However, if there is little or no oxygen in the water then animals can’t survive and the organic mush accumulates

• Where sediment contains more than 5% organic matter, it eventually forms a rock known as a Black Shale

© Earth Science World Image Bank

Origin (6): Cooking

www.oilandgasgeology.com/oil_gas_window.jpg

As Black Shale is buried, it is heated.

Kerogen

Gas

Oil

Organic matter is first changed by the increase in temperature into kerogen,which is a solid form of hydrocarbon

Around 90°C, it is changed into a liquid state, which we call oil

Around 150°C, it is changed into a gas

A rock that has produced oil and gas in this way is known as a Source Rock

Origin (7): Migrationwww.diveco.co.nz/img/gallery/2006/diver_bubbles.jpg • Hot oil and gas is less dense than

the source rock in which it occurs

• Oil and gas migrate upwards up through the rock in much the same way that the air bubbles of an underwater diver rise to the surface

• The rising oil and gas eventually gets trapped in pockets in the rock called reservoirs

Rising oil

Exploration and Production: Oil Traps

• Some rocks are permeable and allow oil and gas to freely pass through them

• Other rocks are impermeable and block the upward passage of oil and gas

• Where oil and gas rises up into a dome (or anticline) capped by impermeable rocks it can’t escape. This is one type of an Oil Trap.

Impermeable

PermeableDome Trap

Exploration and Production: Reservoir Rocks

Earth Science World Image Bank Image #h5innl

• The permeable strata in an oil trap is known as the Reservoir Rock

• Reservoir rocks have lots of interconnected holes called pores. These absorb the oil and gas like a sponge

This is a highly magnified picture of a sandy reservoir rock (water-filled pores are shown in blue)

As oil migrates it fills up the pores(oil-filled pores shown in black)

How long will current reserves last?

1000 bn bbl

25 bn bblp.a.

Reserve Adds:

• Exploration• Reserves Growth• Nonconventionals

0

5

10

15

20

25

30

35

10 20 30 40 50 60

Years

Pro

du

cti

on

(b

n b

bl)

10% Decline

5% Decline

3% Decline

1.5% Up, 5% down

31 years21 years

10 years

15 years

A 40 year supply?

Exploration Potential – Discovery Trend

Data based on those of IHS Energy

• Decreasing trend in volumes found from the early 60’s (peak) to the early ’90’s.• Slight increasing trend over the last decade.• Production exceeds discoveries for last ca. 20 years• Are these numbers consistent?

0

5

10

15

20

25

1990 1995 2000

Dis

co

ve

red

Vo

lum

es

(b

nb

bl)

Kashagan

Deepwater

Other

• Reversal in discovery decline largely due to the deepwater exploration theme – will this continue?• Is Kashagan unique or are there other supergiants?• Are the peak years of ’99 and ’00 anomalous?

0

5

10

15

20

25

1990 1995 2000

Dis

co

ve

red

Vo

lum

es

(b

nb

bl)

Kashagan

Deepwater

Other

• Reversal in discovery decline largely due to the deepwater exploration theme – will this continue?• Is Kashagan unique or are there other supergiants?• Are the peak years of ’99 and ’00 anomalous?

0

10

20

30

40

50

60

70

80

90

100

1950 1960 1970 1980 1990 2000

Dis

co

ve

red

Vo

lum

es

(b

nb

bl)

Discovered

Produced

Canada36%

Canada36%

Venezuela19%

Venezuela19%

Others9%

Others9%

MidEast1%

MidEast1%

Africa3%

Africa3%

USA32%USA32%

Nonconventional Oil

Resource Type and Distribution

Data from IEA 2004 (WEO)

7 trillion bbl Oil-in-Place

(Extra)-Heavy Oil

Bitumen

Oil Shale

N.America360 bnbl

N.America360 bnbl

S.America200 bnbl

S.America200 bnbl

FSU330 bnbl

FSU330 bnbl

MidEast810 bnblMidEast810 bnbl

AsiaPacific130 bnbl

AsiaPacific130 bnblAfrica

190 bnblAfrica

190 bnbl

Europe80 bnblEurope80 bnbl

World

2100 bnbl

2

Distribution, Maturity of Conventional Oil

• Most regions of the world are either at or past the mid-point of depletion• MidEast (and FSU and Africa) have produced <50% of their known resource

ProducedReserves

Oil – “Black Gold”• Provides 40% of our primary energy

– 95% of all transportation fuel is from oil– Huge part of life – not just gas in the car

• Fossil fuels are the basis of Industrial Agriculture– Oil is feedstock for herbicides and pesticides– With natural gas fertilizers, there are 10 calories of fossil

fuel inputs for each food calorie output

• Raw material for many plastics

• Basis of 300,000 manufactured products

• Cheap oil makes globalization possible– In U.S. average food product travels 1500 miles

Why Is Peak Oil So Important?

• Core assumptions– Our economy “runs on oil” – oil “fuels our economy”– We measure our material welfare (income) by the economy– To paraphrase – our income is based on oil consumption

• Economy grows when oil consumption increases

• Economy shrinks when oil consumption decreases

• Implies major societal change when demand exceeds supply– Oil prices will rise rapidly but shortages will still occur– Could have long-term recessions

The Money Implications of Peaking

• $40-$90+ oil lasted from early 1970s – mid-1980s• Oil shortfall was approximately 3%• North Sea, Alaska & Mexico discoveries increased supply• There are no new regions to explore now

Inflation Adjusted Monthly Crude Oil Prices 1946-Present

World Population – Billions in 2000 Years

• Invention of the steam engine – 1698 (Thomas Savery)• First oil well – 1859• Earliest major fossil fuel was coal

World Population – Billions 1900-2000

• First half 1.5 Billion to 2.3 Billion – 150% increase• Second half 2.5 billion to 6 Billion – 240% increase• Spurt in growth correlates with switch from coal to oil

World Oil Usage – Billion Barrels/Year

• Production vs. Population

All Energy per Capita Projected Decline

• Slide/cliff – Declining fossil fuels meet growing population• From 10.4 boe/c/yr to 3.3 boe/c/yr is 4.5% decline

– 3 % source decline, 1.5% population growth• Remember population – and fuel – in 2030 =~4x 1930

Government View 2005 – DOE Report

• As peaking is approached…the economic, social, and political costs will be unprecedented.

• …peaking will be extremely complex, involve literally trillions of dollars and require many years of intense effort.

• Peaking…will cause protracted economic hardship in the United States and the world.

• …the problem of the peaking of world conventional oil production is unlike any yet faced by modern industrial society.

Alternative transport fuels?

• Renewables

• Biofuels

• Conventional oil

• Unconventional oil

• Natural gas

• Coal

• Nuclear

• Hydrogen

Conclusions

• Transport over 40% of final energy use in Australia

• Transport heavily dependent on liquid fuels (oil)

• The age of cheap oil is almost over• Short-term urgency in planning for

post-oil age• More mitigation options in cities than

in rural areas

What to do?• Commonwealth to become involved• “Do nothing” not an option• No magic bullet • ASPO Australia advocates

– community engagement, individualised marketing, fuel tax escalator, tradeable fuel allocation system

• Leadership required • Buy time!

Presented by:BEED II

• Mabalay Jona• Miguel Jobelle Keith• Valdoz Kim Adalen• Gacutan Katrina• Jovero Jonalyn• Paulo MilJoice• Aripal Philana