Transcript Six Major Factors in Energy Planing

Six Major Factors in Energy Planning
Robert L. Hirsch
Senior Energy Program Advisor,
SAIC
March 1, 2004
National Energy Technology Laboratory
Acknowledgements
The author wishes to thank a number of colleagues who commented on
various drafts of this report. Special appreciation is extended to Roger
Herrera, retired geologist, BP Corporation, and President, Northern
Knowledge, who provided important geological insights and who helped
focus the petroleum portion of this study. Special thanks go to Dr. Marcus
Milling, Executive Director, American Geological Institute, for his thoughtful
comments. Others whose assistance was greatly appreciated include
Rebecca Rubin, Marstel Day, Dr. David Greene, Oak Ridge National
Laboratory, Dr. Roger Bezdek, MISI, John McCaughey, veteran energy
journalist, and Prof.. William Fisher, University of Texas. Final responsibility
for the material herein is strictly the author’s.
This work was sponsored by the National Energy Technology Laboratory of
the Department of Energy, under Contract No. DE-AM26-99FT40575, Task
21006W. The author is indebted to NETL management for their
encouragement and support.
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Abstract
 Energy “crises” over the last 30 years should have been
labeled “interruptions.” Only the 1973 oil embargo resulted
in significant change. We’ve been “crying wolf.”
 Expect slow, modest, incremental attention to
 Deteriorating energy infrastructure problems.
 Growing dependence on imported oil & natural gas.
 Growing dependence on imported petroleum products.
 The timing of serious decisions on climate issues is not
predictable due to scientific uncertainties, huge costs, and
the absence of an international treaty.
 Peaking of world oil production could well be an energy
disaster, requiring heretofore unimagined change. More
understanding is needed.
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Topics
 Major Energy Changes
 Public Attitudes Towards Energy
 Some Energy History
 Current & Emerging Energy Issues
Six
Factors
 World Oil Production Peaking
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Major Energy Changes
Nation-scale changes in energy generation & conservation
are time consuming & often very expensive.
 Gigawatt power plants are billion $ class & decade-scale.
 1970s CAFE took roughly 15 years to maximum savings.
 Alaska Gas Pipeline: Estimated at $10-20 billion & a decade to
build.
 Major new electric transmission lines take 5 years - never.
 A GW of wind power requires 1000 - 1.0 MW wind turbines.
 Refineries are very expensive. None built for so long; costs
unknown.
Consumer Conditioning: Computers & electronics
are small, progressively lower in cost & fast to market.
Crash programs are possible but very expensive.
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Illustration of Time & Cost of a Major Energy
Change
Consider replacing
 33% of today’s electric generation (~ 900 GW ) by
 Building 20 new, 1.0 GW power plants each year.
 Assume a plant takes 5 years to build (no permit delays)
& costs $1 billion
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
~ 20 years &
$300 billion
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Planning Factor #1:
Major changes in the U.S. energy system require
decade time scales & can cost upwards of hundreds
of billions of dollars.
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Public Perceptions & Attitudes About Energy
 Like air & water, energy is taken for granted.
 Low cost, abundant energy is considered a right /
expected.
 Modest changes in energy prices are an outrage.
 Occasional blackouts / shortages are quickly
forgotten.
 Energy knowledge is limited & often very distorted.
 To some people energy companies are greedy
polluters.
When problems occur, quick fixes are expected.
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Energy Policymaking
 Energy is typically not a “traction” issue with the public.
[Traction issues include the economy, jobs, Iraq, prescription drug
benefits, the upcoming election, federal budget deficit, Medicare,
terrorism, crime, traffic congestion, etc.]
 Energy companies lobby & make large campaign contributions.
 Environmental groups lobby, make contributions, & are highly
vocal.
 Issues of states rights often conflict with national planning.
 Credible studies by unbiased groups rarely have large impact.
 Cost-benefit analysis are rarely a factor in decision-making.
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Dictionary Definitions
CRISIS:
An unstable condition … in which an abrupt or
decisive change is impending... a turning point.
INTERRUPTION:
A break in continuity or uniformity.
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Since the LATE 1970s, the U.S. has
experienced a number of events that were
called “Energy Crises”
 2003 N.E. Electricity Blackout
 2002 Natural Gas Price “Shock”
 2000 Calif./West Coast Blackout
 1991 Oil Price Runup
 1986 Oil Price Collapse
 1979 Oil Price Escalation
Weren’t these more like
Interruptions = “breaks in continuity”
rather than
Crises = “turning points”?
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Only One Energy Event Was Arguably
a Real Crisis --A Turning Point:
The 1973 Oil Embargo
Some of What Happened in the U.S.:
 Oil prices increased ~ 4.5 x (Saudi crude)
 Gasoline rationed (Even/Odd days)
 Gasoline lines & spot shortages.
 GDP dropped two years in a row (recession).
 Interest rates spiked dramatically upward.
 Inflation increased sharply.
 There was a huge wealth transfer to OPEC.
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U.S. Actions Resulting From the 1973 Oil
Embargo
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Price controls enacted.
CAFE implemented.
Higher efficiency mandated in a variety of sectors.
National speed limit (55 mph) enacted.
Domestic oil & gas exploration & production spiked up.
Federal energy R & D dramatically increased.
A major effort in synthetic fuels initiated.
Windfall profit taxes levied.
U.S. government reorganized to form ERDA, FEA & FERC.
IEA formed.
Strategic Petroleum Reserve established.
Formulation of a coherent national energy policy initiated.
Foreign policy adjusted to new realities.
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Today’s Often Mentioned Energy Concerns
 Local air pollution due to energy use.
 National Security (oil import vulnerabilities).
 Global climate impacts of energy use.
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Commentary on Today’s Primary Public
Energy Concerns
Concern
Actions-to-Date
Energy-related
AIR POLLUTION
- Major progress over
recent decades
Current Situation
- Most regions doing well but
some merit more effort
- Midwest coal an issue
OIL IMPORTS
- Synfuels Corp. failed
- Defacto it’s easiest to
(National Security) - Decades of talk
use the military
but no action
- Hydrogen a distant option
More on Global Climate later
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Planning Factor #2:
Energy policymaking will continue to be
slow, modest & incremental, absent a
major new energy crisis.
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Global Climate Change
 CO2 is a greenhouse gas & is increasing in the atmosphere.
 Fossil fuel burning is a contributor.
 95% of the greenhouse effect is due to water vapor for
which there is no long-term historical data & little real
understanding.
 Climate is incredibly complex / many unknowns, so
legitimate scientific differences are likely to persist for
sometime.
 For some, the potential is so dire they want significant action
now.
 For others, expensive action now would be irresponsible.
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The World CO2 Situation
 Every country emits CO2.
 Small U.S. reductions might be symbolic but not physically
significant.
 Major, unilateral U.S. cuts would be costly, disadvantaging the
U.S. economically.
 If major unilateral U.S. action, the self-interest of others
would be delay.
 Kyoto is effectively dead. In new international treaty
negotiations, countries will vie for strategic advantage.
 Underdeveloped countries will want others to pay.
 Renewed treaty negotiations will be difficult & time
consuming.
 U.S. targets are undefined: 25%? 50%? 75%? By when?
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Planning Factor #3:
The timing & magnitude of major U.S. climate change
actions are not now predictable.
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Emerging Energy Concerns
 Worsening condition of the U.S. Energy
infrastructure.
 Growing dependence on natural gas imports (lng).
 Growing dependence on petroleum product
imports
 Peaking of world oil production.
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Energy Concerns Outlook
Concern
U.S. Energy
Infrastructure
Deterioration
Natural Gas Use
& LNG Imports
Petroleum Product
Imports (Gasoline, Diesel,
etc.)
Outlook
• Breakdowns / shortages likely.
• Fixes will be made as needed.
• Costs will be spread over time.
• Shortages possible.
• High prices almost certain.
• Large price volatility likely.
• Less-than-projected gas use.
• PRODUCT QUALITY?
• Shortages possible.
• Higher prices possible.
Peaking of world oil production discussed later.
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Planning Factor #4:
Energy Infrastructure problems will be addressed as
needed, & we will muddle through.
Planning Factor #5:
Growing natural gas & petroleum product imports will
be accepted & allowed to grow.
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Peaking of World Oil Production
 Oil is the lifeblood of modern civilization.
 Oil is found in reservoirs of all sizes, depths, &
Production
characteristics in a limited number of places in the world.
 Super-Giant fields (the very largest) are generally the
easiest to find & least expensive to produce.
 Most geologists agree that at some future date, world old
production will reach a maximum -- it will peak.
 Peaking is not “running out;” it’s roughly half-way to
depletion.
Notional Production from
a Typical Oil Reservoir
Time - Decades
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Peaking of World Oil Production (Cont.)
 Oil is hard to find because it’s normally buried deep in the
earth & normally doesn’t show at the surface.
 Once found by an exploratory well, many more wells are
required to achieve optimum production and enable a good
estimate of reserves.
 When natural forces diminish, water flooding, and Enhanced
Oil Recovery (EOR) can extend production for years.
 Two oil classifications are “Conventional” &
“Unconventional.”
MOST OIL NOW PRODUCED IS “CONVENTIONAL”.
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Peaking of World Oil Production (Cont.)
 World petroleum demand is huge and growing.
 Past peaking predictions:
“It’s coming in 10 - 20 years” - WRONG!
 What’s different today?
 Extensive drilling worldwide.
 Modern geology & seismic technology is very advanced.
 Reserves / well have been dropping for ~ decade.
 Many more credentialled specialists are pessimistic.
 World oil peaking could be economically disastrous.
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The Worldwide Ultimate Recoverable Resource For
Many “Hard” Minerals Is a Function of Market Price
TOTAL AMOUNT
RECOVERABLE-(Tons)
The total resource
increases because the
mineral exists in
varying concentrations
& can be
economically
extracted from lower
grade ores at higher
prices.
Current
Twice
Current
Triple
Current
Price per Ton
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Worldwide Resources of CONVENTIONAL OIL
in the Earth is Geologically Different
Than Resources of Many Minerals
TOTAL AMOUNT
RECOVERABLE
CONVENTIONAL OILBillions of Barrels
Maximum
Recoverable
Advanced Technologies
Total recoverable
reaches a
maximum,
independent of
price, because oil is
a finite resource
found in discrete
packages.
Massive EOR
PRICE PER BARREL
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Production
Production from an Oil Reservoir
- Three Cases
A. Notional Production Constant Price
Time - Decades
B. Production When Price
Increases After 5 Years
C. Production When Price
Increases After 10 Years
Hirsch 3_04
World Oil Production = Output of All Reservoirs
Thought Exercise: Sum Just Three at Different Stages of Production
Assume
this
individual
reservoir
profile
2
3
B.
Assumed
stages of
production
Time - Decades
Production
A.
Production
1
1
C.
Sum of three profiles
2
3
Time - Decades
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World Oil Production = Outputs of All Reservoirs
Total World Oil ProductionWhen is the peak ????
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As noted, conventional oil has been the mainstay of modern civilization, because it is most
easily brought to the surface from deep underground reservoirs, and, additionally, it is most
easily refined into finished fuels. The U.S. was endowed with huge quantities of petroleum,
which fueled our economic growth in the early and mid twentieth century. However, our
resources are finite, and growing demand resulted in the peaking of Lower 48 U.S. oil
production in the early 1970s. It has been in decline ever since. Because demand for
petroleum products continued to rise, the U.S. became an oil importer. Today, we depend on
foreign sources for almost 60% of our needs, and future U.S. imports are projected to to rise
to 70% of demand by 2025[11].
Exploration for and production of petroleum resources has been on-going since the mid
1800s and in the last 50 years has been an increasingly more technological enterprise,
benefiting from increasingly more sophisticated engineering capabilities, geological
understanding, instrumentation, computing power, materials, etc. Today’s technology allows
oil reservoirs to be more readily understood sooner than heretofore. Accordingly, reservoirs
can be produced more rapidly, which has significant economic advantages to the operators
but also hastens peaking and depletion.
Oil production in the world today can be viewed according to operating approach: 1) Oil
reservoirs that are produced at their maximum economic rate -- essentially “flat out” -- and 2)
reservoirs whose production is limited by operator choice to less than than the maximum
possible. These later reservoirs -- called “swing capacity” -- are primarily managed by the
OPEC countries, which self-limit their production in order to maintain world oil prices near
their target levels.____________________________________
[11] EIA. Early Release AEO 2004. December 16, 2003.
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Billion barrels
World Oil Finding / Consumption Balance
50
40
30
20
10
0
-10
-20
1940 1950 1960 1970 1980 1990 2000
“With the world now finding less than one barrel for every
four it consumes, the pressure on capacity can only increase
in the future. The gap is growing wider.”
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Unconventional Oil - The Two Biggest
Resource Size
Est. Recoverable
(Trillion Barrels)
(Billion Barrels)
Canadian Heavy Oil
1.7-2.5
315
Venezuela Heavy Oil
1.2
270
3-4
600
Approx. Totals
100+ MM bbls / day total world demand
40 billion bbls / year
Canada +
Venezuela
Unconventional
Oil Production
How long will 600 billion bbls last?
Now
I
Conv.
Oil Peak
II
III
Unconv.
Oil Peak
Time
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National World Production of Conventional
& Unconventional Oil
Total World Oil
Production
Total
Unconventional Oil
Conventional
Oil
Time
Hirsch 3_04
Various Views on the Timing
of World Oil Peaking
2000
Simmons: Peaking is at hand: 3-5 years
Skrebowski: Conventional oil peak after 2007
Campbell: Conventional oil peak around 2010
2010
Laherrère: All H/C liquids peak during the 2010s
2020
EIA: Nominal Case ~ 2030
2030
Hirsch 3_04
It’s a Complex Array of Rates of Change!
???
Alternate Liquid Fuel Production
More Tar/Heavy Oil Production
Increased Enhanced Oil Recovery
More Development Drilling
HUNDREDS OF
MAJOR DECISIONMAKERS WORLD
WIDE
Conventional Oil Production
Price Driven Consumption Reduction
Government Policy Changes / Rationing
Economic Growths or Recessions
Changing End-Use Technologies
???
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Likely Trends Around the Resource-Limited
Peaking of World Oil Production
3. Prices
2. Demand
1. Production
For many years after
peaking, it will be a LIQUID
FUELS PROBLEM, not an
“energy problem” in the
usual sense of the term.
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Planning Factor #6:
World oil production peaking is unavoidable, but
its timing is uncertain. It might well mute other
planning factors.
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Six Important Factors in Energy Planning
1. Major changes in the U.S. energy system require decade time
scales & can cost upwards of hundreds of billions of dollars.
2. Energy policymaking will continue to be slow, modest &
incremental, absent a major new energy crisis.
3. The timing & magnitude of major U.S. climate change actions
are not now predictable.
4. Energy infrastructure problems will get fixed as needed, & we
will muddle through.
5. Growing natural gas & petroleum product imports will be
accepted and allowed to grow.
6. World oil production peaking unavoidable, but its timing is
uncertain. It might well mute other planning factors.
Hirsch 3_04
Appendices
I.
Energy Policy Commentary
II.
Note on Global Climate Change
III.
Statements on World Oil Production
Peaking
IV.
Aspects of Oil Production Peaking
Hirsch 3_04
Sample “Crisis” Commentary - 2002 Natural
Gas Price Spike
Secretary Abraham:
There are no quick fixes to the (natural gas) price spikes and
witnessed in recent years.
volatility ...
IPAA:
The government... not ... listening to important warning signs.
“…policymakers have not yet enacted previous
recommendations..”
Alliance to Save Energy:
Given our nation’s long history of short memories when it comes to energy
crises… (commends the NPC study).
Wilderness Society:
Environmentalists are not opposed to drilling. We just want to see more
energy efficiency and conservation.”
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Appendix II-1
Commentary on Global Climate by a Long Standing Environmentalist [16]
“Some 20-plus years ago, ... a House Science Committee (heard from) Harvard environmental guru, the
late Roger Revelle, and the distinguished Carnegie Mellon University environmental economist Lester
Lave. ….the committee had asked the academics to advise the legislators on what to do if global
warming is real….
“Both Revelle and Lave, from two very different disciplines and of two different political inclinations,
agreed: adaptation is the only practical policy option. Climate warming, they said, was a slow-moving
problem, if real. But it was also huge, and its implications were so diverse that it would be impossible to
mount a global consensus on significant reductions in carbon emissions.
“The under-reported truth of Kyoto is that the highly-touted treaty would have virtually no impact on
worldwide CO2 emissions. Everyone who has studied the subject in any depth, including those who
continue to advocate the treaty, acknowledge this. Those who support Kyoto upon principled grounds ...
argue that it is only a first step, and that much more will be needed by way of carbon reductions. They
are wrong and dangerous.
“To deal with climate change,” says Kendra Okonski, editor of Adapt or Die and director of the
sustainable development project at the London-based International Policy Network, “we should adopt
policies that promote human well being, both today and in the future. We could do this today by
eliminating disease and poverty, developing new technologies, and reducing humanity’s vulnerability to
climate change. In contrast, the Kyoto Protocol requires huge expenditures today for negligible benefits
in the far future.”
“Attempts to control the climate through restrictions on greenhouse gas emissions would have little effect
on the earth’s climate,” says Okonski, “but would harm our ability to adapt to climate change by slowing
economic growth and diverting resources into inappropriate uses.”
_____________________________
[16] Maize, K. Adaptation - The Right Greenhouse Stuff. The Electricity Daily. December 15, 2003.
Kennedy Maize is the founder and editor of Electricity Daily. Previously, he worked for the Associated Press, Congressional Quarterly, The Energy Daily, the
Union of Concerned Scientists, and Friends of the Earth. He lives in a passive solar home in northern Maryland.
Hirsch 3_04
Simmons Highlights
 Over the period 1996-1999, $410 billion spent by 145 E & P
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companies to keep production flat.
$150 billion spent by big five to barely grow production 1999-2002.
North Sea: U.K. sector peaked in 1999 / Norwegian sector in 2002.
Early 1990’s: Caspian Sea was thought to be the next Middle East.
20 dry holes out of 25 wells were drilled in 2001. BP & Statoil then
sold out.
Saudi Arabia: No major exploration successes since the1960s.
Almost all fields have high & rising water cuts.
“Proved reserves” dropped 37% after the sixth well in Canada’s
Sable Island oil field.
All the great Middle East finds happened years ago.
Forecasting next year’s declines is an art form.
Peaking is at hand, not years away. The world has no “Plan B.”
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World Oil Mega Projects Decline
Skrebowski, C. Oil Field Mega Projects - 2004. Petroleum Review. January 2004
•
Approach: Detailed tabulation of actual oil projects worldwide.
+ Considered 54 approved mega projects
- Over 500 million boe.
- Over 100,000 b/d potential.
+ Mega projects provide ~80% of world oil supply.
•
•
25-33% of world oil production now in decline.
After 2007 new capacity likely falls short of demand and
depletion.
The world may be entering an era of permanently declining
(conventional) oil supplies in the coming decade.
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Laherrère Highlights.
 Data quality impacted by definitions, sources,
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confidentiality, politics, & physical uncertainties.
Pessimists use confidential technical data, optimists
use political data.
OPEC production quotas are based on “reserves.”
From 1986 to 1990 “reserves” increased by ~300
Gb, while only ~10 Gb were actually discovered.
US reserves are conservative / FSU based on
maximum theoretical.
World oil discovery peaked during the 1960s.
Production of all hydrocarbon liquids
could peak during the 2010s.
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Recent New York Times: Forecast of Rising
Oil Demand Challenges Tired Saudi Fields.
 Serious doubts Saudi Arabia can increase oil production.
 Former Saudi oil executive: Increased oil production is possible,
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but global markets will be short by 2015.
Saudi Aramco official: Attempts to increase output would wreak
reservoir havoc.
Another Saudi executive: “(Production) declines are real & must be
replaced.”
ExxonMobil: More than 50 percent of oil in 2010 must come from
new fields worldwide. The problem is much larger now because
the world’s demands are so high.
Saudi Aramco: The decline rate for its mature fields “is in the range
of 8% per year.” Additional investment might slow that decay rate
(but not increase peak production).
Every oil field is unique, and experts cannot predict how long each
might last.
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What DOE Fossil Energy Says
 Oil a finite resource / production will eventually
peak.
 Some analysts: conventional oil might peak in
2015.
 If resource twice as large, peak about 20 years
later.
 Alternates are needed.
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EIA WORLD OIL PRODUCTION PEAK
PROJECTION
2030
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Shell Adjusts Reserves Downward
 Shell announced January 9, 2004, a downward recategorization
of reserves: 3.9 billion barrels of oil equivalent or 20% of its
worldwide total.
 Of the recategorization two thirds (2.7 billion barrels) relates to
crude oil (and natural gas liquids) and one third natural gas.
 Shell did not expect the recategorization to have a material
impact on near-term production.
 Shell expects production to be broadly flat for 2003 – 2005.
 Shell said proved reserves were equivalent to 13.3 years of
production.
 Finally, they expected 2003 reserve replacement to be 7090%.
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Other Statements
 Shell Oil: “We think oil supplies, including unconventional
sources and natural gas liquids, will not peak before 2025 and
could be later.”
 Campbell: “The precise date of peak depends very much on
demand…and in any case is unlikely to be delayed much
beyond 2010.”
 Bakhtiari: “Middle East (oil) production should …peak early in
the next (decade).”
 Bentley: “The last (oil) shocks were no more than minor
tremors, but they tipped the world into recession. (The coming)
shock is very different; it is driven by resource constraints, not
politics; it is permanent.”
 CERA: “We anticipate that global liquids capacity will... be
sufficient to meet projected demand through at least 2020.”
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Quotations from a Recent World Oil
Modeling Study from ORNL
 … risk analyses … are dependent on a number of critical
assumptions, nearly all of which are debatable.
 … a timely signal to markets (may not happen).
 … short-term fluctuations in oil prices could very well
obscure the long-term signal.
 … short-run disruptions could be very expensive.
 … it is not too soon to begin analyzing potential transitions
Hirsch 3_04
Duration of Very High Priced Hydrocarbon
Liquid Fuels
No one knows. It will likely be more than a decade
& will depend on many factors:
Alternate Liquid Fuel Production
More Tar/Heavy Oil Production
Scaled Up Enhance Oil Recovery
More Development Drilling
Conventional Oil Production
Price Driven Consumption Reduction
HUNDREDS OF
MAJOR DECISIONMAKERS WORLD
WIDE
Government Policy Changes / Rationing
Economic Growths or Recessions
New End-Use Technology Implementation
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Recent Commentary on the Current, Non-Crisis Oil Market Illuminate Some of the Connections & Variables
That May Come Into Play at the Time of World Oil Peaking
by Economist Irwin Stelzer [33]
 (Oil) is so crucial to the functioning of industrial economies … past price jumps have thrown America and, in some cases, the
world, into protracted periods of subpar growth.
 The economic recovery in America is stimulating demand as more trucks deliver more goods to factories, warehouses and
stores, while a cold snap drives up the demand for heating oil. Add in low inventories, and you have a prescription for higher
prices.
 China’s thirst for oil seems to know no slaking. Imports are running 30% above last year’s level, according to the latest report
from the International Energy Agency, and China has displaced Japan as the world’s second largest consumer of oil, behind
the US. China now accounts for about one-third of the annual increase in worldwide demand for oil. …Forecasters at the
Development Research Centre, a Chinese think tank, are guessing that the number of cars in China will quintuple to 100
million (about half the US total) in the next ten years. The International Energy Agency expects China to be importing 10 million
barrels per day by 2030, which is about what America currently buys from the world’s producers.
 More important in the long run is the fact that the damage to (Iraq’s) oil fields from years of neglect during the Saddam
regime is more serious than at first thought, and will take billions of dollars and a good long while to repair before Iraq can add
substantially to world supplies.
 Nor will relief come from Venezuela, where a Castro-loving president has reduced the industry’s productive capacity by
slotting his political cronies into top executive positions.
 Which leaves Russia, the world’s largest producer behind Saudi Arabia. ….Still, renewed political uncertainty following the
jailing of Mikhail Khodorkovsky, former chairman of oil giant Yukos, and infrastructure constraints will prevent Russian
production from growing sufficiently to dampen the price impact of rising demand.
 In short, world demand for oil is likely to increase steadily, while supplies lag.
______
[33] Stelzer, I. Economic News Update. December 14, 2003. A version of this Update appeared in The Sunday Times (London)
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Likely Production Options to Make Up for
World Oil Production Shortages
Production
Action
Likely Impacts
Increased Development Drilling.………....Production kick/more rapid depletion
Increased Exploration……………...……..Small / prospects already slim
Increased EOR…………………………….Moderate added production
Various Improved Technologies………….Moderate added production
GTL………………………………………...Likely modest due to LNG demands
Shale Oil……………………………………Likely small. Water/Env. issues
Coal Liquefaction………………………….Likely very large. Water/Env. issues
Hirsch 3_04
Possible Impacts Approaching Peak World
Oil Production
Approaching the peak
Production
Oil price escalation worldwide
Voluntary consumer reductions where possible
Inflation & recession in developed counties
Government rationing & allocations
Relaxation of drilling & environmental restrictions
Depression in undeveloped counties
Dramatic political upheavals / wars?
Hirsch 3_04
Costs of Action or Inaction
?
Cost of
Error
?
Time
Peak of
World Oil
Production
Is it better to be premature or to wait until after the fact?
Hirsch 3_04
Bottom Line on World Oil Peaking:
No One Knows When!
What Might We Do Now?
 Improve understanding:
 Summarize & publish production / reserve data &
opinions.
 Workshops, roundtables, Academies studies, etc.
 Determination of likely early warning signals.
 Economic analysis of approach to & after peaking.
 Understand the costs of timing errors.
 Develop alternatives & mitigation options.
 Stimulate thoughtful policy discussions.
 Rethink federal energy R & D.
Hirsch 3_04