There Will Be Peak Oil

Posted on September 20, 2011


In his book The Prize, Daniel Yergin showed how elegantly he can describe oil’s history. In his article in the WSJ, “There will be Oil“,Yergin has shown once again that he is a master of this discipline and this time he concentrates on M. King Hubbert and that scientist’s world famous Hubbert peak. Yergin aired elements of Hubbert’s history that are irrelevant to Peak Oil and so gave the impression that his aim was to discredit Hubbert’s character rather than to discuss Hubbert’s science and the facts behind Peak Oil. Hubbert’s amazing achievement cannot be disputed – that using his simple Hubbert model and the limited information available in 1956, he was able to define limits on future U.S. oil production and predict the year of peak U.S. oil production as 1971. That Hubbert’s prediction of a mid-1990s peak in global oil production proved incorrect was mainly related to the fact that the oil-producing countries in the Middle East closed their taps in the 1970s. (In fact, in a 1976 TV interview, Hubbert stated that the political curtailment of Middle East oil production could delay Peak Oil until the early years of this century.) Prior to the oil crises of the 1970s, the world’s oil production could be described as one large system in which production increased by 7 percent per year. Hubbert based his prediction on this simple behavior. After the 1970s other methods than a simple Hubbert model are needed to describe reality. We are currently engaged in academic research on Peak Oil and today we have progressed much further than Hubbert in terms of models that describe future production. Thus it is quite clear that Daniel Yergin does not read peer reviewed academic publications. For example, we have demonstrated that an oilfield typically reaches peak production when 40 percent of its oil has been produced and that its production after that, including through the use of the new technologies that Yergin discusses, can be described as Tail End production. This means that new oilfields constantly need to be brought online to maintain, (let alone boost), global production. Indeed, Yergin contradicted his own “There Will Be Oil” mantra by stating that discovery of new fields will be lower in future. With detailed knowledge of the world’s oil production one can actually show that part of Yergin’s discussion supports the fact that we are living in the era of Peak Oil.

In the spring of 2002 ASPO, the Association for the Study of Peak Oil & Gas, organized the world’s first International Peak Oil Conference in Uppsala, Sweden. In the press release from the conference we described how global total production of oil (crude oil, oil from oil sands and “natural gas liquids”) would reach peak production in 2010 at 85 million barrels a day. This number does not includes “processing gains” which is the volume increase that occurs as crude oil passes through a refinery, receives additives and is “cracked” into lighter molecules.

When Yergin discusses oil production he not describing actual production but rather the production volume that the oil companies consider maximally possible. Using these numbers is a clever way to lull readers into a false sense of security but the numbers are almost impossible to confirm. Actual oil production in 2010 was 82.1 Mb/d (according to the BP Statistical Review of World Energy) but Yergin gives the number 92 Mb/d and that means that he believes that the spare capacity is 10 Mb/d. Thus, the fact that Yergin describes production for 2030 at 110 Mb/d means that, in reality, actual production can be much lower.
The fact that the oil production in 2010 is 82.1 Mb/d means that the production profile that ASPO described in 2002 and that was also published by K. Aleklett and C. Campbell in the journal Minerals and Energy in 2003, was too optimistic. One essential condition that we assumed for a production level of 85 Mb/d in 2010 was that production from Iraq’s giant oilfields would increase. This increase has not materialized. When the oil industry attained a production level of 81 Mb/d in 2004 it could not increase global production further. During the six years from 1999 to 2004, world oil production increased by 9.1 Mb/d, but in the following 6 years from 2005 to 2010 it remained constant at an average of 81.5 Mb/d. Production in 2008 was above this average but in 2009 it fell below it and in 2010 it was 82.1 Mb/d. The fact that oil production is now finally starting to increase in Iraq will probably prolong this world oil production plateau for some years.

The picture of future oil production that Yergin paints is the same as his company CERA presented in February 2007 in the Journal of Petroleum Technology (JPT). In a response in the same journal we were able to show just how unrealistic CERA’s future scenario was. The amount of oil needed for that future is not only the 125 billion barrels Yergin cites as growth in existing oilfields around the world, but something far larger entirely. In the upcoming book Peeking at Peak Oil we discuss how the future total volume produced from existing fields can be as high as 500 Gb, but that even that volume will not prevent Peak Oil. The world today consumes 30 Gb a year, and Yergin’s 125 GB amounts to 4 years and 2 months of consumption. However, the time it will take to get that additional 125 Gb out of the ground is more than 10 years and probably as much as 20 years.

When Daniel Yergin discusses oil reserves, he is describing what the industry calls 1P reserves (proven reserves). The real reserves that oil companies have are 2P reserves (proven and probable), but they are not permitted to book these reserves as their official reserves if they wish to be listed on the New York Stock Exchange. By declaring only their 1P reserves it is possible to create an artificial appearance of future reserve security when, in fact, statistics show that the world has already passed the moment of peak 2P reserves. The false image of the future that Daniel Yergin described in his WSJ opinion piece can be compared to trying to steer a supertanker on a journey by only looking in the rearview mirror. Mr Yergin is continuing to propagate the opinion that we need have no great concern for oil supplies over the next 50 years but by doing this he is reducing the ability of the American people to undertake the change necessary for the wellbeing of their children and grandchildren. With Daniel Yergin as first mate to the country’s captain, we will very soon run aground.

Kjell Aleklett, president of ASPO International,
Professor at Uppsala University, Uppsala Global Energy Systems
Author of the forthcoming book Peeking at Peak Oil

Posted in: Uncategorized