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Lagniappe
Oliver L Campbell :
Peak oil production again on hold
As we have seen, the price of light oil went from $100 a barrel at the start of the year to $147 in July and is now back to around $60 at end October. Long ago, I concluded that predicting oil prices was a mug's game, and in an article published in July 2007 (Peak oil production again in the news) I said the same about predicting the peak oil date.
The leading exponents on peak oil are Colin Campbell, founder of the Association for the Study of Peak Oil and Gas , and Jean Laherrère. They are also leading lights in The Oil Depletion Analysis Centre (ODAC), a UK charity established to promote the awareness of oil depletion. At some point, they have predicted the years 2000, 2007, 2008 and 2010 for peak oil. Colin Campbell's latest prediction is now 2010 and Chris Skrebowski, also a member of ODAC and the editor of Petroleum Review, has predicted 2010 plus or minus two years. We are close to the end of 2008 and the peak will certainly not occur this year. I will not criticise these gentlemen for being wrong once, twice or even thrice since that is a risk with all predictions. However, this consistency of being wrong, and pushing the date back each time a new prediction is made, removes all confidence in their predictions
We now have a global recession in the offing with the likelihood that oil demand will fall and oil production will be shut in. Thus the peak for 2010 looks most unlikely and the date will once again have to be pushed back. These oil experts could not foresee this recession, but it is in the nature of making predictions that some unexpected event will invalidate an assumption.
However, I am in the other camp of those who believe that peak oil is further off than these experts predict. In his 1997 book, “The Coming Oil Crisis,” Dr Campbell includes a chapter called “Economists Never get it Right.” If he updates this book, perhaps he should include a chapter “Geologists Often get it Wrong.” He and his associates asserted the world had been fully explored and no more large oil provinces remained to be discovered. This mistake can be summed up in one word--Offshore. Recent oil finds include the Chinese Bay of Bohai, the African west coast, the Gulf of Mexico , the Brazilian coast, the Caribbean coast of Colombia and, just announced, the Cuban coast. Both the eastern and western seaboards of the USA could hold large oil deposits.
Two other, less important, errors were to dismiss the effect of advanced technology and to under-estimate production from the so-called “unconventional” sources. Oil can now be produced from deep sea waters, such as the Gulf of Mexico and offshore Brazil in the pre-salt rocks, and the recovery factor can be increased from both new and old oil fields. Non-conventional oil is being mined from the Athabasca tar sands and production from tar sands in Russia and the Congo is likely in the future. Extra-heavy oil is being produced in the traditional way from the huge reserves in the Orinoco Oil Belt though the only “unconventional” aspect is that it needs to be blended or upgraded to make it a viable product.
Of course, peak production depends not only on the amount of oil recoverable, i.e. the reserves, but also on the rate at which it can be extracted to keep pace with demand. As a non geologist, I have always been impressed by how oil production has increased from some 18 million barrels per day in 1958 to 86 million barrels per day in 2008 without a blip. I have confidence in our scientist and engineers to meet increasing demand for some years to come.
Dr Campbell is right in saying peak oil is a geological fact, but that does not mean that economics does not play a role. High prices both stimulate the search for oil and encourage the switch to alternatives. We are indebted to him for constantly reminding us that oil production will decline at some point, and that we should take measures now to mitigate its consequences. The difference of opinion is whether it is imminent or not--while Messrs Campbell, Laherrère and Skrebowski predict peak oil will be reached in 2010, the US Department of Energy predicts it will not occur till after 2030 . The oil companies tend to favour the longer period--but this is only to be expected--and numerous other experts are divided between one camp and the other.
The current economic downturn means oil consumption will fall temporarily before continuing its upward trend. However, it will put back the 2010 date predicted above unless the recession is shorter than most expect. One benefit is that it will give time for more capacity to be developed and so delay the peak date still further. I am not in the prediction business, so let's take the mean of the two predictions quoted and say, as a conservative guess, peak oil will not occur till after 2020.
Oliver L Campbell , MBA, DipM, FCCA, ACMA, MCIM was born in El Callao in 1931 where his father worked in the gold mining industry. He spent the WWII years in England, returning to Venezuela in 1953 to work with Shell de Venezuela (CSV), later as Finance Coordinator at Petroleos de Venezuela (PDVSA). In 1982 he returned to the UK with his family and retired early in 2002. Petroleumworld does not necessarily share these views.
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Petroleumworld News 11/03/08
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