[Graeme]

I referred to the following paper in the Shale Gas Thread but it really belongs in a thread of it's own. "Oil's tipping point has passed" was written by James Murray and David King and published in Nature 481: 433-435 in January 2012. There are comments posted at the Resilience, Sceptical Science and USNews sites. Even this one a year ago!

Click on the Oil's-tipping-point-has-passed link above or read this excerpt:

The idea of ‘peak oil’ — that global production will reach a peak and then decline — has been around for decades, with academics arguing about whether this peak has already passed or is yet to come. The typical
industry response is to point to increasing assessments of global reserves — the amount known to be in the ground that can be produced commercially. But this is misleading. The true volume of proven global reserves is clouded by secrecy; forecasts by state oil companies are not audited and seem to be
exaggerated3. More importantly, reserves often take 6–10 years to drill and develop before they become part of supply, by which time older fields have become depleted. It is far more sensible to look instead at actual production records, which are less encouraging. Even while reserves are apparently increasing, the percentage available for production is going down. In the United States, for example, production as a percentage of reserves has steadily decreased from 9% in 1980 to 6% today2. Production at existing oil fields around the world is declining at rates of about 4.5% (ref. 4) to 6.7% per year5. Only by adding in production from new wells is overall global production holding steady.

In 2005, global production of regular crude oil reached about 72 million barrels
per day. From then on, production capacity seems to have hit a ceiling at 75 million barrels per day. A plot of prices against production from 1998 to today2 shows this dramatic transition, from a time when supply could respond elastically to rising prices caused by increased demand, to when it could not (see ‘Phase shift’). As a result, prices swing wildly in response to small changes in demand. Other people have remarked on this step change in the economics of oil around the year 2005, but the point needs to be lodged more firmly in the minds of policy-makers.

Does everyone agree that peak oil was in 2005?

[Plantagenet]

Does everyone agree that peak oil was in 2005?

I met Prof. Ken Deffeyes of Princeton when he visited the University of Alaska in November 2005. Thats what got me interested in peak oil. Deffeyes said at that time that his calculations suggested oil was peaking right then in 2005-----and effectively he has been proven correct.

[Graeme]

Plant, Thanks. Deffeyes prediction was discussed at the Greencarcongress site in 2006.

The Deffeyes Date: Peak Oil Was 16 December 2005

Ken Deffeyes, Princeton geology professor emeritus, former Shell geologist and author of two books on peak oil, has calculated that the world passed the peak of oil production (production of half of available oil) on 16 December, 2005.

Two years ago, Deffeyes, who had worked early in his career with M. King Hubbert at Shell, had forecast crossing the peak threshold on Thanksgiving Day, November 24, 2005. Deffeyes revised his calculations based on 2005 data.

[dorlomin]

Its a pity the oil mega projects page does not seem to have been updated for a while. Was a good indicator of the state of play.

[TheAntiDoomer]

Graeme, you just come across as desperate with your 2005 number. You know very well we have hit new highs the past year. Do you even bother to ready OF2's thread?

[Arthur75]

paper available below :
http://iiscn.files.wordpress.com/2012/0 ... y12oil.pdf

As to whether the peak is actully passed or not, the key point is that prices spike do not drive global production up anymore (or as it used to).

[dorlomin]

Graeme, you just come across as desperate with your 2005 number. You know very well we have hit new highs the past year. Do you even bother to ready OF2's thread?

In 2005, global production of regular crude oil reached about 72 million barrels
per day. From then on, production capacity seems to have hit a ceiling at 75 million barrels per day.

You did not even read this thread.

[Graeme]

Graeme, you just come across as desperate with your 2005 number. You know very well we have hit new highs the past year. Do you even bother to ready OF2's thread?

I don't think so. Adding condensate to crude is misleading. But when you correlate price of crude with production, the change in trend to higher prices at about 72 mb/d is clear from the figure above. This identifies peak oil.

[Pops]

The giveaway is the second chart Graeme posted. 8 years of evermore expensive oil has given us nothing but more expensive oil.

In the past when demand and prices rose we just looked a little harder, drilled a few more holes and came up with more cheap oil. But that time looks gone for good, there is no more cheap oil, that is the one thing that people just can't get their heads around. Fracked wells aren't the same and hopefully we'll come to our senses as the hype looks more and more threadbare.

Here's David Hughes in Nature:

"high-productivity shale plays are not ubiquitous, as some would have us believe. Six out of 30 plays account for 88% of shale-gas production, and two out of 21 plays account for 81% of tight-oil production."

Add in the admission by CHK that they "underestimated" some depletion numbers prior to IPO and that particular unicorn is starting to look like a pig in a poke.

Flow is the thing, everyone glosses over. It doesn't matter if there are 1, 2 or 10 trillion barrels of tight bakken oil, or shale in colorado, or tar in the athabasca or Orinoco or 10 miles down in Lula if you can't get it out as fast as we need it. You can say we have 40 years worth of reserves at current consumption but if it will take 240 years to produce what do you really have?

And all the while we masturbate ourselves dreaming of "Energy Independence" the legacy giants that produce 75% of what we consume are depleting, day in and day out... drip.. drip.

[vision-master]

Oil's tipping point has passed, but NEW advanced energy tech will be released within 10 years time. First it was the 'computer revolution, next will be the 'energy revolution.

[ralfy]

Oil's tipping point has passed, but NEW advanced energy tech will be released within 10 years time. First it was the 'computer revolution, next will be the 'energy revolution.

Lag time of several decades plus an energy trap.

[ROCKMAN]

I’ll offer a perspective that might seem argumentative but it really isn’t: the date of PO isn’t critical. We may have passed that tipping point some years ago (probably IMHO) or it may be some few years ahead. Consider that the vast majority of conversations deal with the impact of the combination of the inevitable increase in energy demand and the inability of oil (and other energy sources) to meet that demand. Increased oil prices are just one aspect of the dynamic. It includes everything from concerns over climate change, CAFÉ standards, Deep Water Gulf of Mexico fields, export embargos, increased oil consumption by the exporting nations, military activities in the Middle East, fracture reservoir drilling boom, Keystone Pipeline debates, etc., etc. Elsewhere I’ve offered one simpler acronym: the POD: the Peal Oil Dynamic.

The debate over PO timing will only whimper away years in the future when we can look back. But consider some of the optimistic expectations that the US may reach oil production levels exceeding the now accepted peak of 1971. Not very likely IMHO but that new debate has already begun. While US oil production has increased it hasn’t changed the POD. In fact, it can be argued that the rise in production is a manifestation of the POD: increased oil prices have allowed the development of oil reserves that have been known for decades using technology (horizontal drilling/frac’ng) that was known long before the current drilling boom.

I’ll also offer that the POD isn’t a new phenomenon. When I started my career as a petroleum geologist for Mobil Oil in 1975 my first mentor explained PO in detail and how it would define my future. It wasn’t called PO back then…it was the “reserve replacement problem”. Same animal. And the POD had a significant impact on the US mindset in the late 70’s with increased fuel prices, long lines at gas stations and a drilling boom with more than twice as many rigs running as we have during the current POD induced drilling boom. The 70‘s POD led to developing oil reservoirs long known but not previously economic, increased development of NG resources due to booming prices, emphasis on vehicle fuel efficiency, focus on Middle East politics, focus on the Green River Shale, focus on the Deep Water Gulf of Mexico (first discovery in 1976), emphasis on potential environmental impact of increased energy development, discussions about raising motor fuel taxes and excess profits taxes on oil companies, etc. Sound familiar? One could post hundreds of articles from the 70’s and many would seem to come right out of today’s headlines.

I’ll make one more bold statement: it has never been easier to explore for oil/NG. Just consider seismic technology. With 3d seismic and modern computers I can create the same exploration output in one month that it would have taken 3 geophysicists 6 months in 1975. And produce a much higher success rate than the old doddle buggers ever expected. Similar with respect to drilling technology. The difficulty isn’t finding what’s left but that there are few fields left to find. That seems to be the major difference between the 70’s POD and the 21st century POD. Consider the Deep Water GOM and future expectations. A few folks think this trend is a new potential recently discovered silver bullet. In fact it’s rather mature: more than 160 fields have been developed out there since the play began more than 30 years ago. Developing drilling/production in even deeper water will be of limited value: the vast majority of the world’s ocean depths have no hydrocarbon potential. Another fact proven as a result of the 70’s POD.

The POD is dominating our discussions and lives today the same whether PO happened years ago or years in the future. Just as the 70’s POD did back then.

[ROCKMAN]

I’m not trying to takes sides as to whether it’s misleading to add “condensate” production to oil production stats. But the reason I used the “ ” is that condensate is oil. It is a high API gravity oil but oil none the less. And it may have different product yields, different heat content, a different pricing (although some “oils” sell for less than some “condensates”) and from different types of reservoirs. But it’s still oil.

And to make it more confusing there are different definitions for condensate. Some folks use a rather arbitrary cut off of 40 API. Nothing wrong with that if everyone used it. But consider Texas and what the Rail Road Commission reports as oil and condensate: it his not determined by the oil’s gravity. Any liquid hydrocarbon produced from a well designates as a gas well is reported as condensate regardless of the gravity. I have 30 API liquid being produced from a gas well in Matagorda County: it’s reported as condensate. An oil well producing 42 API liquid has its production reported as oil…not condensate. This has led to some confusion with Eagle Ford Shale production stats. How those liquids are reported depends on each well’s designation: some EFS production is reported as oil even though it may be a higher gravity than that reported as condensate from another EFS well.

The well designation in Texas is determined by the GOR…gas/oil ratio. And even that isn’t as straight forward as it sounds: an EFS well, producing from the same perforations, may show X bbls of condensate produced during the first half of its life and Y bbls of oil produced during the rest of its life. And the gravity has never changed...just the well designation from gas to oil. The designation of a well in Texas as an oil well vs. a gas well has huge implications to the oil companies I won’t try to explain right now. Designating the production as oil vs. condensate is unimportant to the companies. The price I get for my oil is based upon a detailed chemical analysis and not whether it’s been classified as oil or condensate.

OTOH predicting future liquid hydrocarbon production trends is another matter.

[Pops]

I agree ROCK, there are many moving parts and absolute peak is not the main criteria. I was happy to see a little bump last year from Iraq and US but the optimist in me has been disappointed by Iraq and Brazil especially, I thought they'd be doing better by now.

But the absolute production number is secondary to the price and how consumers read it as a signal to adjust their behavior. To me that's the biggest variable, how and when the public realizes there is more than a conspiracy of scarcity on the part of the oil companies keeping prices high.

In fact becoming accustomed to a high price that enables greater production of difficult oil is probably the scariest scenario IMO since all the while we are tooling along thinking another 80's "glut" is around the corner we're draining the old giant's and old strippers alike. At the point then that we're no longer able to afford the next higher price not only does the more expensive oil stop but the cheap oil has continued to deplete.

The result would not be Hubbert's nice bell curve with the soft roll over from the plateau slowly initiating decline with the steepest rate some years later. Instead would be an extended plateau leading to a sharper decline "cliff". High prices pull forward production via economic inertia, profit leftover from the cheap oil days. This would look more like a cresting wave and of course the steepest declines would be early.

[Graeme]

Here are my reactions to ROCKMAN's posts. I know that he is highly regarded in the oil and gas community. His professionalism shows in the content of his posts above - factual and no ad homs. However, it is what he has left out that is disturbing. Actually I disagree; the date is critical because the industry is trying to assure us not to worry. We will use fancy new techniques to find more oil! They even project into the future higher production than what we see today. Murray and King state that we have reached a ceiling of 75 MMbbls/day. But worse than that, the industry has become a kind of monster like the tobacco industry who lied to the public about the effects of smoking. It doesn't kill. In fact, the comparison is apt because the oil industry is using the same techniques to finance lies to the public about global warming. Global warming can kill. We can only tolerate a certain maximum temperature. Most normal human beings want to live (they especially want to see their children and grandchildren survive) so the industry has to be stopped.

[ROCKMAN]

Actually I think Graeme and I see the situation from a very similar perspective. The immediate variation may be more semantic than substantial. What’s critical IMHO is the combined effort of the energy industry and the politicians to convince the public that PO, whatever the actual date, isn’t a concern. IOW the PO date is more a proxy of the existence of PO than the timing. By pushing the date of PO far into the future it essentially tries to nullify its existence in the public’s mind. In the words of Joe6pack: If it ain’t my problem then it ain’t a problem at all. Much like his attitude towards climate change. Though I have been out in this hood for a while I’ve never missed an opportunity to confront their hypocrisy elsewhere. For some unexplained reason I particular enjoy teasing Chevron for their cutesy little TV spots.

Some know what I’ve done for a living for 38 years. But for those that don’t I’ve heard managers and directors of public company boards constantly worry about PO from the very beginning. Such conversations are very frank and would warm the cockles of the most diehard doomer. There are the insider discussions and the output from the PR machine...two very different universies. More than 30 years ago Mobil management literally beat the fear of PO (reserve replacement problem) into us on a regular basis. The one bonus I got during my short time with Mobil was convincing outside auditors we had increased our proven reserve bases when in reality we had only increased a smaller amount.

As a career development/production geologist that skill only improved over time. Fortunately today I work for a family owned company where accuracy of our reserves is demanded by the man who signs my paycheck. Which is why we’ve never drilled nor ever will drill the fractured shale plays. While some profitability may be possible in some portions of some plays it isn’t attractive enough for my owner: we don’t have a stock to promote nor managers more focused on the value of their options when they cash out than the long term viability of the company. As someone said in a movie longer ago: if you want to expose a cheater find someone who’s even better at cheating and knows all the tricks. That's pretty much how I see my role in these discussions.

Also nothing wrong with trying to map out the peak timing of any metric under discussion.

[ralfy]

The problem is not only production rate but the ability of that to meet demand. And when one considers oil production per capita (which is more logical) then the tipping point took place back in 1979:

http://earlywarn.blogspot.com/2011/09/p ... apita.html

[ROCKMAN]

Ralfy - I agree. That was the main point of my long winded post above . Just like Yogi’s old line: It’s like déjà vu all over again. Everything happening now (that POD…Peal Oil Dynamic) happened back in the 70’s to some degree more or less. There were some who saw hints of the POD developing before 1979 and began to respond. One example is the Texas Rail Road Commission that regulates oil/NG activity. Monthly they set the state allowable system: what percentage of the production capability of all oil wells in the state are allowed to produce. Yes…the law still exists...they meet every month and set the allowable. The TRRC functioned as OPEC had always wished it could: limit oil production rates in order to stabilize prices. Prior to the 70’s the TRRC did limit how much Texas oil reached the market place. But as they saw the POD developing they set the allowable at 100% where it has been ever since.

And just as the 70’s POD led to a recession so has the current POD. The 80’s recession drove down demand giving the impression (to some) that we had ample energy going forward. The 70’s POD eventually resulted in US oil imports decreasing almost 50%...another déjà vu moment for cornucopians sighting our recent import reduction as a sign that PO is dead. As painful and obvious as the 70’s POD was it led to no meaningful changes in our attitudes towards energy consumption IMHO. Thus I’m not optimistic the current POD will improve those attitudes. The current chatter about “US energy independence” only reinforces that pessimism.

[Tanada]

How much difference does Technology actually make? For example KSA closed their first oil field, Dammam, decades ago because production had fallen to uneconomic levels. A few years ago they decided to rework the field using new techniques like horizontal drilling to get more of the OIP (original oil in place) out because technology and higher price make doing so a paying proposition.

But how much more oil will they ultimately recover from the field? How much could they have recovered using the old techniques if they had simply decided to convert the field over to a stripper well system like so many USA fields and kept just pumping it out slowly as OIP migrated through the reservoir rocks to the well bores?