1.Will world oil production peak this year, 2005?
On the 28th of April 1999, 8.30 a.m. I presented a website with the title: "Where is our planet Earth heading for in the next century?". It is now more that six years later, that I felt the urge to update my article. I counted over 6600 visitors of my website from all over the world. It is remarkable that especially this year I got more visitors than in all the other years. Well, this is not really astonishing, because lot of predictions in my article six years ago has become reality.
2.The myth of the world oil reserves
To start with the main topic of last year in the oil industry: the overstates reserves ("paper" or "political"reserves). I published in my article in 1999 that the total amount of these political reserves were 371,81 billion barrels . There was an unexpected rise of reserves between 1988 and 1990, without visible discoveries.. An expert said: "Virtual reserves - and other measures to confuse the investing public".
Figure 1.
Sudden rise of reserves in 1988
and 1990. Political reserves?
(Egoproject April 1999)
Colin Campbell *) claimed that 30% of the reserves are spurious. He offered substantial evidence, that OPEC reserve estimates were politically motivated. Kuwait is an excellent example of what is wrong with the way OPEC countries report reserves. The country reported a gradual decline in its reserve base from 1980 to 1984. This should be expected from a mature producing country. However, in 1985 the country reported a 50% increase in reserves with no corresponding discovery. The Kuwaiti government increased its reserve estimate following the implementation of an OPEC production quota system that set country production levels based on country reserves. Kuwait was not alone in increasing its reserves for political reasons. In 1988, Abu Dubai, Iran and Iraq all significantly increased their reported reserves for political reasons. Even OPEC heavyweight Saudi Arabia followed suit and reported a massive increase in reserves in 1990. OPEC is not alone in its overstatement of reserves. In January 2004, Royal Dutch/Shell announced a huge write down of reserves. The company wrote off 20% of its reserves or 4 billion barrels! Shell overrated its oil reserves in Oman by as much as 40 %.
*) Dr Colin J Campbell, born in 1931 Oxford, Ph.D.Geology Oxford.. Dr.Campbell joined the oil industry as an exploration geologist. His career took him to Borneo, Trinidad, Colombia, Australia, Papua New Guinea, the USA, Ecuador, United Kingdom, Ireland, and Norway. He is now a Trustee of the Oil Depletion Analysis Centre ("ODAC".)He was chief geologist for Amoco, a vice-president of Fina, and has worked for BP, Texaco, Shell, Chevron, Texaco and Exxon in a dozen different countries
3.Will the Midpoint of World Oil Production be reached this year?
In October 2000 published Campbell a dramatic curve, with the prediction that the famous mid-point of the world oil production will be reached in the year 2005.
Figure 2: The Midpoint of the world oil production will be reached in 2005, according Colin Campbell
The big question of the oil industry is." When we will hit the Oil Peak of production?" Note, there will be still a great amount of oil and gas in the earth, but will we get it above the ground and will we be able to deliver is at the gas station, refineries etc, in time. Oil will not just "run out" because all oil production follows a bell curve.(The famous Hubbert curve). This is true whether we're talking about an individual field, a country, or on the planet as a whole. Oil is increasingly plentiful on the upslope of the bell curve, increasingly scarce and expensive on the down slope. The peak of the curve coincides with the point at which the endowment of oil has been 50 percent depleted. Once the peak is passed, oil production begins to go down while cost begins to go up. But are we able to keep up with the steadily growing demand (see: the explosive growth of the Asian continent)?
In my article I wrote in 1999:
"World
oil production is 98.4 % in 41 countries, whereas production in the remaining
countries 149 only 1.6%. In the year 1997, world production was 25 billion
barrels. Estimates are that in 2005 29 billion will be produced worldwide. From
then on we will see a declining production,
in 2040 not more than 11 billion barrels!
In practical and considerably oversimplified terms, this means that if 2000 was the year of global Peak Oil, worldwide oil production in the year 2020 will be the same as it was in 1980. However, the world’s population in 2020 will be both much larger (approximately twice) and much more industrialized (oil-dependent) than it was in 1980. Consequently, worldwide demand for oil will outpace world-wide production of oil by a significant margin. As a result, the price will skyrocket, oil-dependant economies will crumble, and resource wars will explode.
Figure 3: The 2004 scenario. The world oil and gas peak will be reached in 2005? (Campbell, 2004)
Richard Heinberg wrote a book The Party's over. Oil, War and the Fate of industrial Societies:
"If the US continues with its current policies, the next decades will be marked by war, economic collapse, and environmental catastrophe. Resource depletion and population pressures are about to catch up with us, and no one is prepared. The political elite's, especially in the US, are incapable of dealing with the situation and have in mind a punishing game of "Last One Standing". "The oil peak will also impact international relations. Resource conflicts are nothing new: pre-state societies often fought over agricultural land, fishing or hunting grounds, horses, cattle, waterways, and other resources. Most of the wars of the twentieth century were also fought over resources - in many cases, oil. But those wars took place during a period of expanding resource extraction; the coming decades of heightened competition for fading energy resources will likely see even more frequent and deadly conflicts. The US - as the world's largest energy consumer, the center of global industrial empire, and the holder of the most powerful store of weaponry in world history - will play a pivotal role in shaping the geopolitics of the new century. To many observers, it appears that oil interests are already at the heart of the present administration's geopolitical strategy"
Robert Hirsch, Roger Bezdek and Robert Wendling published recently a report: Impacts, Mitigation and Risk Management. The report is a result of a request by the US Department of Energy (DoE) National Energy Technology Laboratory. I will cite some of their statements: " World oil peaking is going to happen, only the timing is uncertain. The power of the markets cannot solve any oil peak. Despite arguments from the major oil companies and producer nations, new finds of oil are not replacing oil consumed each year. The world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions were gradual and evolutionary. Oil peaking will be abrupt and revolutionary.
Petroleum geologist Kenneth Deffeyes, author of the breakthrough book "Hubbert's Peak," predicts the peak will fall on Thanksgiving Day in 2005.
The following graphs illustrate the dramatic rise in consumption of oil in world most populated areas, like China, India and Indonesia. These three countries have a population of 2.6 billion, that is 40% of the total world population. Their economic growth in the following years to come is staggering and also will be their oil consumption. How will satisfy their thirst of the black gold?
Figure 4, 5 and 6. The consumption of oil (red curve) exceeds the production of oil (black curve) in China and India. Indonesia has become last February a net importer of crude oil (Hubbert Peak)