Upload
mohammad-wilder
View
44
Download
3
Embed Size (px)
DESCRIPTION
Crisis or Opportunity? How close to Peak Oil are we?. Who am I?. Chris Skrebowski has spent half his working life in the oil industry and the rest as an oil journalist Free of corporate or political pressure he brings a healthy scepticism to the problem Not pessimistic by nature, not anti-Oil - PowerPoint PPT Presentation
Citation preview
Chris Skrebowski: Trustee of the Oil Depletion Analysis Centre andEditor of Petroleum Review, Energy Institute, London
Crisis or Opportunity?How close to Peak Oil are we?
Estates in Transition, Dartington Hall 11 June 2007
Who am I?
Chris Skrebowski has spent half his working life in the oil industry and the rest as an oil journalist
Free of corporate or political pressure he brings a healthy scepticism to the problem
Not pessimistic by nature, not anti-Oil
Basic approach to Peak Oil analysis
Don’t guess, assume or hope - let the numbers talk
Observe what companies do, not what they say
Estates in Transition, Dartington Hall 11 June 2007
So what is ‘Peak Oil’?
• It is the point when further expansion of oil production becomes
impossible because:
• New production flows are fully offset by production declines (depletion)
• You never run out of oil
• You do run out of incremental flows
• The world needs oil products to support growth
Estates in Transition, Dartington Hall 11 June 2007
Latest BP statistics show Peaks are already happening
• OECD production peaked in 1997 and has now declined by just under 2 million b/d (8.8%)
• Non-Opec, non-FSU production peaked in 2002• North America/Mexico peaked in 1997• North Sea - UK/Norway/Denmark peaked in 2000
now declined by 1.2 million b/d (19.2%)• Around 25 significant producers in decline• About 35% of global production from decliners
Estates in Transition, Dartington Hall 11 June 2007
Slowing supply flows matter because oil dominates its markets
• 80-95% of all transport is fuelled by oil products• 50-75% of all oil is used for transportation• All petrochemicals are produced from oil• 99% of all lubrication is done with oil products• 95% of all goods in the shops get there using oil• 99% of our food involves oil or gas for fertilisers,
agrochemicals, tilling, cultivation and transport• Oil is the most important source of primary energy on
the planet accounting for 36.4% of all energy
Estates in Transition, Dartington Hall 11 June 2007
The practical realities
• The world needs oil production flows• Consumers need delivery flows• Reserves are only useful as flows• Peak oil is when flows can’t meet the required
demand• Worry about flows not reserves
• Many talk of reserves and forgets flows
Estates in Transition, Dartington Hall 11 June 2007
Introducing the Gator
The Oil-a-Gator
50
60
70
80
90
100
2004 2005 2006 2007 2008 2009 2010 2011
Year
Mil
lio
n b
/d Demand
Existing supply
New supply
Estates in Transition, Dartington Hall 11 June 2007
Seven key pieces of evidence suggesting we are close to Peak
• Falling discovery rate, few large discoveries
• Increasing number of countries in sustained depletion
• Companies struggling to hold production
• Non-geologic threats future oil supply
• The current lack of incremental flows
• Few countries with real growth potential
• Sustained high oil prices
Estates in Transition, Dartington Hall 11 June 2007
The Growing Gap
0
10
20
30
40
50
60
1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
bill
ion
bar
rels
Past Discovery
Future Discovery
Production
Past discovery according to ExxonMobil
The real discovery trend
Estates in Transition, Dartington Hall 11 June 2007
More countries going into decline
• 25 major and 40 minor producers already in decline • Mexico producing 3.8mn b/d went in 2005• India producing 0.8mn b/d goes in 2007/08• China producing 3.6mn b/d goes in 2007/08• Collectively 9.9mn b/d or 12.3% of production• Iran is struggling -- next to go?• When does Saudi go? As Matt Simmons says
• ‘When Saudi goes so does the world’
Estates in Transition, Dartington Hall 11 June 2007
The oil companies are already struggling to hold production(24 quoted co.’s account for 24% of global production)
• For the last 12 quarters oil production: • Has drifted down for the 5 Supermajors• Has flatlined for the 10 largest quoted companies• Has flatlined for the 24 largest quoted companies• The quoted companies share of global production
is now declining, notably for the Supermajors• Annual decline rates up to 5%, quarterly 8%• Supply shortfalls deplete existing fields faster• But, there’s always someone doing well
Estates in Transition, Dartington Hall 11 June 2007
Alaskan North Slope ProductionReserves grow -- Production falls
Estates in Transition, Dartington Hall 11 June 2007
North Sea production by field
Forties monthly production to date
Estates in Transition, Dartington Hall 11 June 2007
Non-Geologic threats to new supply
• Resource nationalism - Russia, Venezuela, Bolivia, Ecuador - more to follow?
• Tighter terms and conditions - all with oil
• Civil insurrection - Nigeria, other Africa?
• And - cost inflation, ageing infrastructure, lack of skilled people, refinery constraints
• How likely is improvement in these?
Estates in Transition, Dartington Hall 11 June 2007
21 month Plateau or Peak flows?(Latest EIA data)
Estates in Transition, Dartington Hall 11 June 2007
Opec 11 crude oil supplies (EIA)
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2001
Janu
ary
Apr
il
Ju
ly
Octo
ber
2002
Janu
ary
Apr
il
Ju
ly
Octo
ber
2003
Janu
ary
Apr
il
Ju
ly
Octo
ber
2004
Janu
ary
Apr
il
Ju
ly
Octo
ber
2005
Janu
ary
Apr
il
Ju
ly
Octo
ber
2006
Janu
ary
Apr
il
Ju
ly
Octo
ber
2007
Janu
ary
Estates in Transition, Dartington Hall 11 June 2007
A simple observation -- or why peak will be earlier than most people expect
‘Global production falls when loss of output from countries in decline exceeds gains in output from those that are expanding.’
Decline
Expansion
Estates in Transition, Dartington Hall 11 June 2007
World non-Opec Oil Supply Growth(2006 - 2007 - 2008)
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
An
go
la
US
Bra
zil
Aze
rba
ijan
Ka
za
kh
sta
n
Ca
na
da
Ru
ss
ia
Su
da
n
Ind
ia
Vie
tna
m
Ec
ua
do
r
Ch
ina
Ga
bo
n
Tu
nis
ia
Syri
a
Ma
lays
ia
Co
lom
bia
Eg
yp
t
Om
an
Au
str
alia
Oth
er
No
rth
Se
a
Me
xic
o
UK
No
rwa
y
Million barrelsper day
2008
2007
2006
Non-OPEC
55
OPEC Crude
29
World Liquids Production 2006
Estates in Transition, Dartington Hall 11 June 2007
New Opec capacity 2007 & 2008 (IEA)
-100
0
100
200
300
400
500
600
700
800
tho
usa
nd
b/d
2008
2007
Estates in Transition, Dartington Hall 11 June 2007
The hole in the bucket -- How big and how fast is depletion?
• Around 5%-8% for areas in decline• Net depletion 2-3% or up to 2.6mn b/d/yr• Net now double demand growth• How do we know? Oil companies, BP stats• Is depletion accelerating? – Yes as more
countries start net depletion and it speeds up• Can it be ameliorated? – Yes, slow
production down
Estates in Transition, Dartington Hall 11 June 2007
The world’s biggest oilfields are old, tired and fading
• Of the 120 largest fields, 50 are in decline, 44 not in decline, 12 unclear and 7 are undeveloped
• Average age of the giants is 42 years• But, the 120 largest fields give 50% of total
production and contain two-thirds of reserves• 70% of production from fields 30+ years old• Few large recent discoveries
• We’re dependent on the oil equivalent of ‘Old men and young boys’
Estates in Transition, Dartington Hall 11 June 2007
The oil depletion balance sheet at end 2006 and by 2008/9
• In decline 35% but rising to 45% by 2008/9
• In danger 12% but declining to 10% by 2008/9
• Growing 41% but declining to 33% by 2008/9
• Russia 12% and steady at 12% by 2008/9
• The scales appear ‘balanced’ by 2008/9
• So does President Putin decide when decline starts?
• Or does Saudi geology?
• Or can we drive it out to 2010 to 2011?
Estates in Transition, Dartington Hall 11 June 2007
This is the real new capacity to 2012 (Peak in mid 2011)
-2000
-1000
0
1000
2000
3000
4000
5000
6000
2004 2005 2006 2007 2008 2009 2010 2011 2012
annual increment
thou
sand
bar
rels
/day
total 20% Slip 90% Depletion Net
Estates in Transition, Dartington Hall 11 June 2007
Where are oil prices going?Oil Prices 2000-2010
0.0
20.0
40.0
60.0
80.0
100.0
120.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Year
$/b
arr
el
WTI Price Range Low Range High WTI projection (CIBC)
Estates in Transition, Dartington Hall 11 June 2007
Post-peak we are going to need other energy sources – Opportunity
• How fast will supply decline post-peak?
• Possibly around 2-3%/year like the US onshore but initially at just 1-2%
• But,it could be much faster
• Suppliers could anticipate, ration out supplies, delay peak and force adaptation
• Some might use military strength to commandeer supplies
Estates in Transition, Dartington Hall 11 June 2007
Are there realistic substitutesfor the main oil products?
• Petrochemicals – naphtha, coal derived chemicals, sugar derived, some gas/LPG. (Few alternatives)
• Aircraft fuel – jet kerosene, some Avgas, alcohols as extenders, kerosene from coal. (Few realistic alternatives)
• Road vehicle fuels – Gasoline and Diesel dominant. (Alternatives - Electric. Large Investments/capital write-offs)
• Ships and boats – marine diesel and fuel oil. (No realistic alternatives - Coal? Sails? Nuclear?)
• Lubricants and greases – (very limited alternatives)• Power generation – (little oil now used - 9% globally)• Heating – (increasingly substituted by gas)
Estates in Transition, Dartington Hall 11 June 2007
0 5 10 15
5
0
15
25
Years After Crash Program Initiation
Impact (MM bpd)
20
35EOR
Coal Liquids
Heavy Oil
GTL
Efficient Vehicles
Worldwide Crash Program Mitigation of Conventional Oil Production Peaking
A Study for DOE NETL
Delay / Rapid growth.
Roughly 35 MM bpd at year 20.
2005
Study
Estates in Transition, Dartington Hall 11 June 2007
My conclusions at very best
• Supply will remain tight and prices high barring a major economic setback
• Oil supply will peak in 2011/12 at around 92-94 million barrels/day
• There will supply shortfalls in winter before Peak• Oil supply in international trade may peak earlier
than the oil production peak• Aided by CERA’s optimism we are still in denial • There are huge challenges and huge opportunities
Chris Skrebowski: Trustee of the Oil Depletion Analysis Centre andEditor of Petroleum Review, Energy Institute, London
Contact: Chris SkrebowskiEditor, Petroleum [email protected]+ 44 (0)20 7467 7117