The Trouble with Oil

As oil prices hit yet another record of over $146 per barrel the good folks at The Oil Drum blog have published a timely update of the Wikipedia Oil Project Database.  It makes frightening reading. 

What they do is compile stats on all the oil megaprojects in the pipeline to estimate when and how much additional oil will come to market. 

 The big dark blue area is production already established before the project started.  The coloured stripes represent the contribution from fields brought into production since then, organized by year of first oil while the small red diamonds represent actual production as estimated by the EIA (Energy Information Administration).

It is clear we have a problem, a monster problem; the scenario illustrated in the graph shows some increase up to 2010 then a precipate decline.  And remember, this includes all projects in the pipeline.  Any new discoveries (and there are precious few of those thesedays) will come onstream too late to change this picture even if there are no political, technical, climatic or other delays (which there will be almost by definition since any significant new discoveries will be in frontier areas like the high Arctic or ultra-deep water).  In fact, even the identified oil projects have already shown an alarming tendency to accumulate delays.

The ‘bottom up’ approach adopted by the project team can be difficult and sometimes controversial.  The oil industry is plagued by dreadful statistics and the rate of decline of existing fields (the big dark blue area of the graph) is very uncertain.  This scenario graphed above assumes a decline of -4.5% pa.  However, there are reasons to suspect that it could soon become a much steeper decline.  (Just to take one example: there are persistent rumours that Saudi Arabia’s monster Ghawar oil field – easily the World’s largest and single-handedly responsible for over half of Saudi production) is beginning to suck dry although this is denied by the Saudis).  If this is the case then this graph represents a very optimistic scenario indeed.

Actually, it doesn’t matter how bad the statistics are, or how much oil is or isn’t left in the Ghawar field.  These uncertaities only shift the timescale and then only slightly and most of the uncertainties are downside.   This is the inevitable result of geometric demand growth coming up against the constraint of a finite resource.

This is by far the greatest crisis we have faced since World War 2 and there is precious little time to devise and implement a transition to a post-oil economy.  Where is Churchill?

 

 

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2 responses to this post.

  1. […] is basically why, as I reported in an earlier posting, there are relatively few of the megaprojects that can make a difference in the development […]

    Reply

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