Peak oil in Davos: Oh yes it is, oh no it isn’t.

Posted on February 3, 2010

4


The title above was borrowed from the Financial Times. Last week the World Economic Forum in Davos celebrated its 40th anniversary and one of the sessions addressed the world’s energy security. The chairperson for the session was Daniel Yergin, the founder of CERA (Cambridge Energy Research Associates). Before his departure to Davos the Wall Street Journal (WSJ) wrote: “All the world loves a bringer of good news, so energy guru Daniel Yergin should by all rights be guaranteed a warm welcome at Davos this week”. The news that he bore with him was that “the awful day of ‘peak oil’, when the world will have depleted its finite hydrocarbon resources to the point where it can never again increase production, is still a long way off”. If, in fact, it becomes apparent that oil production actually reaches a peak then Daniel Yergin has a cop-out, “The big determinants (to global energy supply) are the above-ground risks — politics, the quality of decision-making, and costs and so on”.

It is now 9 years since Colin Campbell wrote the term “Peak Oil” for the first time in his first newsletter for ASPO (The Association for the Study of Peak Oil and Gas) but it would be May 2002 before “Peak Oil” was used for the first time by the world’s press. I am convinced that they would never have discussed “Peak Oil” at Davos if the topic was not relevant. Of course, Daniel Yergin will never admit that “Peak Oil” is a geological reality and his statement in the WSJ shows that he has now found a suitable explanation for “Peak Oil”, namely problems above ground.

The fact that nobody from ASPO was invited to discuss energy security in Davos shows that they are not interested in anyone bearing unpleasant news. The fact that the journal Energy Policy accepted our paper “Peak Of The Oil Age” for publication last November could have been a good reason for an invitation but one never came.

The bearer of unpleasant news became, instead, Thierry Desmarest, the chairperson for Total. In his speech he said that oil production would never exceed 95 million barrels per day (Mb/d) and in his press release he clarified his view by saying, “peak oil is still a problem; it will be reached in ‘about 10 years’, but not today”. Total has previously mentioned 100 Mb/d and that they are now saying 95 Mb/d shows that they are approaching the conclusion that my Ph.D. student Fredrik Robelius presented in his thesis. That scenario had a maximal production of 93 Mb/d in 2018. The requirement for that level of production was that production from 7 giant oil fields in Iraq would commence immediately. The fact that this has been delayed makes it all the more difficult to reach that production level.

For the oil industry it is important to argue against “Peak Oil” since they need risk capital for future projects. The price tag that the CEO of Shell, Peter Voster, mentioned is “$27 trillion of investment over the next 20 years to meet demand (I hope the number is right)”. At the same time the chief economist at the IEA, Fatih Birol, expressed the opinion that he was doubtful whether it was sensible for the oil industry to make these enormous long term investments since “demand for oil from industrialized nations has already peaked”. Apparently, the reason for this was “the combination of improved fuel efficiency and the increased use of renewable energy meant demand for oil from developed countries would never return to the record levels seen in 2006 and 2007”. That may be true but the demand from developing nations will increase markedly. One can see that the IEA is preparing an explanation for “Peak Oil” that does not involve “depletion” of oilfields.

The strongest statement against Peak Oil came from Saudi Aramco and its head Khalid al Falih, “There is too much rhetoric in the public domain about moving away from oil”. I assume that ASPO is one of the actors he does not like. He does not believe that the world needs to worry about Peak Oil, “We feel that the whole issue that came to the surface and created a lot of concern about peak oil is behind us.” From the report of his speech it is also revealed that he is worried that investors will direct their money elsewhere than oil.

BP’s CEO Tony Hayward pointed out that there was a “supply challenge” for the industry which would have to increase output to 100 million bpd. Of course he wants production to be 100 Mb/d so as not to lose the prestigious bet with me that oil production in 2018 will be higher than 86 Mb/d.

A collective impression from the reports that I have read are that institutions and oil companies are assembling an explanation for Peak Oil that says that the resources exist but that the will to invest is lacking. Of course the scale of investment is important for future oil production but there is nobody that believes that investments in the USA can return its production to the level it was in 1970. The same applies for other nations that have passed Peak Oil, e.g. Norway, the UK and, recently, Mexico. The world’s oil production is the sum of that of individual nations and if all nations reach Peak Oil then the world will also be at/passed its peak of oil production. The most important message is that the world cannot increase oil production significantly – we have reached the “Peak Of The Oil Age”. It is this message that should have been delivered to the world’s leading politicians. Who knows? Maybe there will be an invitation to next year’s World Economic Forum in Davos?

Below are some of the articles I have read:

Wall Street Journal
Energy Guru Brings Good News to Davos

Financial Times
Peak oil: Oh yes it is. Oh no it isn’t. Etc.

Rigzone
Aramco Chief: Plentiful Supply Trumps ‘Peak Oil’

Businessgreen
Davos energy bosses divided on “peak oil” risks

Arab News
Peak demand vs peak oil — the debate picks up in Davos

(Swedish)

World Economic Forum i Davos firade förra veckan 40-års jubileum och en av sessionerna behandlade världens energisäkerhet och rubriken på detta inlägg är lånad från Financial Times. Ordförande för sessionen om energisäkerhet var Daniel Yergin grundare av CERA (Cambridge Energy Research Associates). Inför avresan till Davos skriver Wall Street Journal (WSJ): ”All the world loves a bringer of good news, so energy guru Daniel Yergin should by all rights be guaranteed a warm welcome at Davos this week. “ Budskapet som han har med sig var att “the awful day of “peak oil,” when the world will have depleted its finite hydrocarbon resources to the point where it can never again increase production, is still a long way off”. Om det nu visar sig att oljeproduktionen faktiskt når en maximal produktion så har Daniel Yergin en helgardering: “The big determinants (to global energy supply) are the above-ground risks — politics, the quality of decision-making, and costs and so on”.

Det är nu 9 år sedan som Colin Campbell för första gången skrev ”Peak Oil” i sitt första nyhetsbrev för ASPO (The Association for Peak Oil and Gas), men det skulle dröja till maj 2002 innan ”Peak Oil” användes för första gången av världspressen. Jag är övertygad om att man aldrig skulle ha diskuterat ”Peak Oil” i Davos om det inte fanns en relevans för frågan. Självklart kommer Daniel Yergin aldrig att erkänna att ”Peak Oil” är en geologisk verklighet och hans uttalande i WSJ visar att han nu hittat en bra förklaring till ”Peak Oil” och det är problem ovan mark. CERA som är beroende av aktörerna för sin existens kan ju inte såga av den ”Reserv” gren som man sitter på.

Det faktum att ingen från ASPO var inbjuden att diskutera energisäkerhet i Davos visar att man inte var så intresserad av någon som skulle kunna komma med dystra budskap. Det faktum att Energy Policy i november accepterade vår ”Peak of the Oil Age” för publicering kunde ha varit en motivering till inbjudan, men så blev det inte.

Den som kom med de dystra budskapen blev istället Thierry Desmarest, ordförande för Total. I sitt tal sa han att produktionen aldrig kommer att överskrida 95 miljoner fat om dagen, Mb/d, och i ett pressmeddelande förtydligade han sin åsikt genom att säga ”peak oil is still a problem; it will be reached in “about 10 years”, but not today”. Tidigare har Total nämnt 100 Mb/d och att man nu säger 95 Mb/d visar att man närmar sig den slutsats som min doktorand Fredrik Robelius redovisade i sin avhandling. Det scenario som hade maximal produktion hade en produktion av 93 Mb/d år 2018. Kravet för den produktionen var att man direkt skulle komma igång med produktion från 7 gigantfält i Irak. Det faktum att det dröjer gör att det blir allt svårare att uppnå denna produktion.

För oljeindustrin är det viktigt att argumentera mot “Peak Oil” eftersom man behöver riskkapital för framtida projekt. Den prislapp som VD för Shell Peter Voster nämnde är ”$27 trillion of investment over the next 20 years to meet demand”. Samtidigt framförde Fatih Birol, IEA:s chefsekonom, åsikten att han var tveksam till att det var så klokt av oljeindustrin att göra dessa enorma långsiktiga investeringar eftersom ”demand for oil from industrialized nations has already peaked”. Anledningen skulle vara att ”the combination of improved fuel efficiency and the increased use of renewable energy meant demand for oil from developed countries would never return to the record levels seen in 2006 and 2007”. Det må vara sant men efterfrågan från utvecklingsländerna kommer att öka markant. Man anar att IEA förbereder en förklaring till ”Peak Oil” som inte är ”depletion” av oljefält.

Det kraftigaste uttalandet mot Peak Oil kom från Saudi Aramco och dess chef Khalid al Falih: “There is too much rhetoric in the public domain about moving away from oil,” Jag antar att ASPO är en av de aktörer som han inte gillar. Han menade att världen inte behövde vara oroliga för Peak Oil: “We feel that the whole issue that came to the surface and created a lot of concern about peak oil is behind us.” Från referat av hans tal framkommer det också att han är orolig för att investerare skall satsa sina pengar på annat än olja.

BP:s VD Tony Hayward poängterade att ”there was a “supply challenge” for the industry which would have to increase output to 100 million bpd”. Självfallet vill han att produktionen skall bli 100 Mb/d för att inte förlora det prestigefulla vadet med mig om att oljeproduktionen år 2018 skall vara högre än 86 Mb/d.

Ett samlat intryck från de referat som jag läst är att institutioner och oljebolag är på väg att bygga upp en förklaring till ”Peak Oil” som går ut på att resurserna finns men viljan att investerar saknas. Visst har investeringsvolymen betydelse för den framtida produktionen men det finns ingen som tror att investeringar i USA kan få tillbaka den produktion man hade 1970. Det samma gäller för andra länder som passerat ”Peak Oil”, till exempel Norge, Storbritannien och nu senast Mexiko. Världens oljeproduktion är summan av individuella länders produktion och om alla länder når ”Peak Oil” kommer världen också att nå ”Peak Oil”. Det viktigaste budskapet är att världen inte kan öka oljeproduktionen markant, vi har nått ”Peak of the Oil Age” Det är detta budskap som skulle ha levererats till världens ledande politiker. Vem vet, det kanske kommer en inbjudan till nästa års World Economic Forum i Davos

Det här är några av de artiklar som jag läst:

Wall Street Journal
Energy Guru Brings Good News to Davos

Financial Times
Peak oil: Oh yes it is. Oh no it isn’t. Etc.

Rigzone
Aramco Chief: Plentiful Supply Trumps ‘Peak Oil’

Businessgreen
Davos energy bosses divided on “peak oil” risks

Arab News
Peak demand vs peak oil — the debate picks up in Davos

Advertisements
Posted in: Dagsaktuellt