U.S. Report Predicts Peak Oil by 2040
By Jon A. Nones
14 Apr 2007 at 11:35 AM GMT-04:00
LAS VEGAS (ResourceInvestor.com) -- Many analysts say peak oil production will occur before 2040; some say it’s already happened. Even some big oil producers say peak production will happen prior to 2050. Now, a U.S. report confirms the validity of Hubbert’s theory.
In 1956, American geophysicist Marion King Hubbert created a method of modelling a peak rate of production given an assumed ultimate recovery volume.
Hubert predicted the 1970 U.S. peak in oil production at close to 10 million barrels per day, and the number has since declined to about 5 million barrels per day.
In Feb. 2007, the U.S. Government Accountability Office (GAO) released a report to Congressional Requestors entitled, “Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production.”
The report examines 22 studies for estimated timing of peak oil production; 18 forecast peak production before or around 2040, with 2 more at or prior to 2050.
The International Energy Agency (IEA), which acts as energy policy advisor to 26 Member countries, puts peak production at 2040 in its World Energy Outlook 2004.
Hubbert’s Peak
Source: Wikipedia, Peak Oil
Among oil companies, Exxon Mobil’s The Outlook for Energy: A View to 2030 predicts peak production after 2030; Total’s Sharing Our Energies: Corporate Social Responsibility Report 2004 forecasts the peak around 2030; Shell’s Energy Needs: Choices and Possibilities. Scenarios to 2050. estimates the date to be prior to 2050.
Authors Kenneth S. Deffeyes, A.M. Samsam Kakhtiari and Richard C. Duncan forecast peak production before 2010.
Matthew Simmons, Chairman of Simmons & Company International, said on October 26, 2006 that global oil production peaked in December 2005.
The report recommends “the Secretary of Energy take the lead to establish a peak oil strategy.”
Demand
Global demand is expected to rise 1.8% to 85.8 million barrels a day (bpd) this year, from a revised 84.3 million bpd last year. The world may need 100 million bpd by 2010 to meet demand. By 2020, the number increases to 110 million bpd, and by 2030, 116 million bpd.
The U.S. was importing 7% of its oil in 1929. Today it’s 70%. In 2005, the U.S. accounted for 25% of the world’s oil consumption at 20 million bpd, yet it only controls 5% of the world's reserves. The EIA predicts that U.S. consumption will continue to increase and will reach 27.6 million barrels per day in 2030.
The U.S. transportation sector accounts for 66% of all U.S. consumption and relies almost entirely on petroleum to operate. In an article entitled “Military Oil Usage Statistics,” Byron W. King gives a detailed breakdown of how much oil the U.S. military machine consumes alone. According to these stats, the U.S. military is the world’s largest fuel-burning entity.
The U.S. government, as a whole, consumes not quite 2% of all the liquid fuel that the entire U.S. economy uses in a given year at about 440,000 barrels of oil per day. Multiply by 365 days per year, and the U.S. government burns up about 160 million barrels of oil per year.
Of the total U.S. government liquid fuel use, about 97% of that is consumed by the Department of Defense, making that agency the world’s single largest fuel-burning entity.
According to the GOA report, the United States will be “particularly vulnerable” to peak oil production as the largest consumer of oil and one of the nations most heavily dependent on oil for transportation.
Oil Imports by Country (bpd)
Source: Wikipedia, Peak Oil
China is the world’s second biggest importer of oil behind the U.S at about 7.2 million bpd last year. In 2005, the country consumed 6.9 million barrels daily, a 100% increase over its consumption level 10 years before.
The IEA has raised its forecast for oil product demand growth in China for this year to 6.8%, up from the 6.1% growth it had previously estimated, representing demand of 7.64 million bpd in 2007. China's energy consumption will increase to 15 million barrels per day by 2030, according to U.S. government estimates.
Using the data above, at a population of about 300 million, each U.S. citizen consumes 0.067 bpd versus 0.0055 bpd in China with 1.31 billion people. If China were to match its consumption per person to the U.S., it would need 88 million bpd. Just 0.016 bpd per person puts China with the U.S. at 20 million barrels.
Supply
World oil production growth trends have been flat over the last 18 months. Global production averaged 85.24 million bbd in 2006, up only 0.9% from 84.48 million barrels in 2005.
Of the 1.1 trillion barrels of reserves worldwide, about 80% are controlled by OPEC countries, with the U.S. holding only 2%. The Middle East holds 62%.
U.S. Gov. Predictions for Oil Production, Minus OPEC and Former USSR
According to the IEA, most countries outside of the Middle East have reached their peak in conventional oil production, or will do so in the very near future. However, supply discrepancies in the Middle East make it difficult to accurately account for reserves.
The IEA reports that reserve estimates in Kuwait were unchanged from 1991 to 2002, even though the country produced 8 billion barrels of oil over that time and did not make any new discoveries.
Of the three largest oil fields in the world, two have peaked. Mexico announced that its giant Cantarell Field entered depletion in March 2006, as did the huge Burgan field in Kuwait in Nov. 2005. Due to past overproduction, Cantarell is now declining rapidly at a rate of -13% per year.
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%, thus implying that Ghawar, the largest oil field in the world, may have peaked.
The IEA said on Wednesday that Organization of Petroleum Exporting Countries (OPEC) production had hit its lowest since January 2005. March crude output by the OPEC, the producer of about 41% of the world’s oil, dropped by 165,000 bpd to 30.1 million bpd.
According to the IEA, preliminary figures showed that inventories for states in the Organisation for Economic Co-operation and Development (OECD) were on track for a drawdown of 1 million barrels a day, the biggest first-quarter decline since 1996.
Discovery
In 2000, the U.S. Geological Survey estimated there to be 732 billion barrels of undiscovered oil, with 25% coming from the Arctic, including Greenland, Northern Canada and the Russian portion of the Barents Sea. However, relatively little exploration has been done in these regions since.
The IEA believes there could be upwards of 7 trillion barrels of oil in the Canadian Alberta oil sands, extra-heavy oil deposits in Venezuela and oil shale in the U.S. However, the IEA said the amount of this non-conventional oil that will eventually be produced remains in question do to costly challenges facing production.
Likewise, deepwater and ultra-deepwater drilling in the Gulf of Mexico, could reach 2.2 million barrels per day by 2016, but accessing and producing oil from these locations present several challenges, according to the IEA.
At the Uranium Stock Summit, Bud Conrad, chief economist for Casey Research, said discovery has peaked.
From 1960-69, companies reported more than 400 oil discoveries globally. From 2000-2007, less than 50 have been made. Conrad said we’re discovering about 1/3 of what we are using.
At a conference in Paris last week, CEOs of both Total and Royal Dutch Shell concurred that the days of “easy oil” are over.
Meeting such targets with conventional oil sources will be “extremely difficult,” said Christophe de Margerie, CEO of Total, Europe’s third-largest oil company. He said new supply will be based on “huge high-tech” projects.
Jeroen van der Veer, CEO of Royal Dutch Shell, Europe's largest oil company, agreed: “We can’t expect profits in easy oil,” he said.
Oil companies are expected to boost exploration spending by 9% worldwide this year, according to Lehman Brothers Holdings. Spending on exploration in deep water will rise 44% to $18 billion by 2011 from $12 billion in 2006.
Alternatives
The GAO report notes that it is more expensive to produce ethanol than gasoline at present, and the industry will require costly investments to ramp up technology and infrastructure to make it financially feasible.
“In the United States, alternative fuels and transportation technologies face challenges that could impede their ability to mitigate the consequences of a peak and decline in oil production, unless sufficient time and effort are brought to bear,” according to the report.
The Department of Energy projects that even under optimistic scenarios, by 2015 alternative transportation technologies could displace only the equivalent of 4% of projected U.S. annual consumption.
Kevin Bambrough of Sprott Asset Management, said that nuclear power will be prominent in the future of energy consumption.
In dealing with peak oil and climate change, “nuclear power is going to be the only way to make a dent in the problem,” he said.
About 16% of the world's electricity came from 440 nuclear reactors last year, according to the World Nuclear Association. France leads the world with 80% nuclear power, while U.S. is in the middle with about 20%.
There are currently 20 plants under construction with plans for 72 more in Russia, China, India and Japan. In the U.S.,
16 companies have submitted proposals for 25 new plants.
“I think we are going to peak out in oil, natural gas shortly thereafter, coal will go on for a little while,” said Conrad, adding that beyond nuclear energy, “we just have hope.”
Conclusion
It takes energy to pull oil out of the ground, Conrad explained. When it takes 2 barrels to pull 1 out of the ground, “we won’t do it ... the last barrel will never leave the ground.”
He said we have used 1 trillion barrels of oil since 1950, while the remaining world reserves amount to only another 1 trillion barrels.
“We are headed towards peak production,” he plainly said.
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