[Peace-discuss] Future Oil Supply Cliff Approaching {article}

Wed Jun 25 00:47:58 EDT 2014

As oil becomes increasingly scarce in future years (the current oil boom hype may well be just that), will our imperial efforts to control it become more desperate?  Or just more fruitless?

-------- Original message --------
From: Ned Ford <Ned.Ford at FUSE.NET> 
Date: 2014/06/24  17:44  (GMT-06:00) 
To: ACTNET-FRAC-NEWS at LISTS.SIERRACLUB.ORG 
Subject: [ACTNET-FRAC-NEWS] Fwd: Future Oil Supply Cliff Approaching {article} 

Alan Drake is an active correspondent on the Club's Energy Forum.

I'm forwarding this message about a week late, but I thought it would be interesting to fracking activists because much of the natural gas being fracked today is actually a byproduct of oil fracking.  The point of this message is that the big boys are starting to give up.  That means that oil production will eventually stop subsidizing natural gas.  In the short term that may produce a domestic or local boom in fracking as gas prices rise, but in the long term it will force us to do what we should be doing anyways, build our buildings with proper insulation, produce our electricity with renewables, and use all our energy resources more efficiently.

- Ned

-------- Original Message --------

Alan Drake
--------------------------

Future Oil Supply Cliff Approaching

By Alan S. Drake

In the last 18 months, trends have developed that imply a coming oil
supply cliff.  We can put an approximate date on it: 2020 to 2024.
There are a number of recent trends that indicate that a severe supply
cliff is coming in a few years.

1) A record amount of money was spent on oil exploration in 2013, with
very disappointing results. The least oil found since 1995 - about one
barrel found for every three burned.  This is not quite as bad as it
sounds, but it still disconcerting.  Oil fields routinely produce more
oil than it was thought that they would when discovered. Example:
Prudhoe Bay in Alaska was expected to produce eleven billion barrels
when discovered, but is now expected to produce thirteen billion
barrels.  So finding four barrels should about balance five barrels of
production.  One barrel found in 2013 should be weighted against over
two barrels burned in 2013.  Even with this understanding, there is
far more oil being burned than discovered in new fields in 2013 and so
far in 2014.

The head of exploration for the most aggressive major oil company in
the world in 2013 exploration - StatOil (Norway) - was very
pessimistic in his assessment of the future, despite StatOil finding
two of the ten biggest new oil fields in 2013.  He believes that the
oil left to be found is small in magnitude, difficult (expensive and
time consuming) to develop, and often not profitable at today's oil
prices.

2) As a consequence, 2014 exploration budgets were cut significantly.
On the theory that "If you do not look, you will not find," the new
oil fields discovered in 2014 are likely to be as disappointing as
those of 2013; perhaps more so, as results to date (June 2014)
confirm. The only significant oil find so far in 2014 was in 7,000' of
water off-shore from the Ivory Coast.

3) It takes 5 to 12+ years from discovery to full production.  So the
weak "Class of 2013" will not be noticed at all until 2018 - and it
will not be significant till 2020 or later.  Add a year of low yields
for a weak "Class of 2014" and another for the weak "Class of 2015"
and each weak "class" following.  For example, the Ivory Coast
discovery a few months ago will be one of the more difficult new oil
fields to develop and is unlikely to go into production before 2025.

4) Past history has shown that oil exploration budgets are increased
when either the price of oil jumps up significantly, or a major new
oil province opens up.  The potential "new oil provinces" of today do
not show as much promise as new oil provinces of the past have.  Here
are some examples.

The South China Sea and the Yellow Sea around China likely have
significant oil deposits, but there is no political agreement as to
whose oil this is.  Any production from oil development in the seas
around China is likely decades away.

Kurdistan (northern Iraq) appears to be a "new" province that has not
been drilled in 30+ years. However, with modern technology, any
billion-barrel-plus oil fields in Kurdistan have probably already been
located and drilled in recent years.  It is hard to miss giant oil
fields with modern seismic technology.

Some of the most remote areas of Siberia are finally being drilled.
But, again, it is likely that modern seismic surveys would have
already located any giant oil fields and they have been drilled.

One medium size oil field has been found off-shore from the Falkland
Islands, but the results from Greenland have been disappointing.

Today, almost the deepest depths where one might expect to find oil
can be drilled.  As noted earlier, the largest oil find so far in 2014
is in water 7,000 feet deep, off the Ivory Coast in West Africa.

So there are unlikely to be any exciting new provinces to stimulate
more oil exploration. As a glance above shows, almost every corner of
the world is now within reach of a drillbit. An increase from 2014
levels of exploration will take significantly higher oil prices - and
that may not happen until 2020 or so.

Renewed exploration at 2013 levels, or higher, may not get the results
of 2010, but the disappointing results of 2013. "Looking" does not
guarantee "Finding".

5) Saudi Arabia will finish developing their last "on-the-shelf" oil
field - Manifa - n 2017. After that, they plan to increase production
from oil fields that have been very well-managed, but in production
for 50 to 80 years.

Some are skeptical of getting much more oil from such depleted oil
fields, in part because they are extremely well-managed. Unlike Iraq,
there are no petroleum engineering "oversights" to correct in Saudi
oil fields that will increase production.

The existing oil fields of Saudi Arabia are depleting by at least 4%
per year, and domestic oil consumption in Saudi Arabia is steadily
increasing.  Without new oil fields coming on-line, it will be
difficult for Saudi Arabia to maintain their current level of oil
exports (production net of growing domestic consumption) after 2017.

The days of Saudi Arabia as the swing producer, filling interruptions
in global oil supply, are rapidly fading. Their surplus oil production
capacity is going away.

6) In a week we will know if Bakken oil production in North Dakota is
plateauing.

>From November 2013 to March 2014, the number of Bakken oil wells
increased by 6.7% but oil production increased by only 1/4 of 1%.  Bad
weather may have suppressed December, January, February and March oil
production - but not April.  April's production will be posted next
week. Bakken production is still below one million barrels/day (in a
world of 87 million barrels/day, equivalent to 1000 barrels/second, is
produced).

Taken together, there should be a significant drop in world oil supply
starting in 2020 to 2024, plus or minus. This drop will likely worsen
until at least 2026 and quite probably beyond.  If the United States
is to deal effectively with this drop in oil supply, it will be
necessary to make some significant changes in policy.

The most effective public policy responses are to use less oil and to
create an oil-free transportation system, in parallel with our
existing oil-dependent transportation system.  This policy option has
been overlooked, but it will have very positive implications for
climate, in addition to conserving oil.

More efficient new cars and trucks are already mandated, but the fleet
(average age 11+ years, implying a 22+ year turnover) will take time
to roll over.

Electrifying our freight railroads and expanding capacity will provide
an oil-free means of moving essential goods and some people
cross-country without oil.

In almost every city and town, increased bicycling can provide an oil
free alternative for some percentage of our citizens.

The French are in the midst of building 1500 km of new tram lines in
almost every town of 100,000 and larger, in a dozen years.  Already,
daily tram ridership in that country is up from just over 1 million in
2007, to 3 million today.  Multiply by 4.75 for an equivalent
percentage of the American population.

Even the French take almost 4 years to plan and build a tram line, and
almost every town is getting at least a couple of new tram lines by
2020.  The Conservatives planned to double the Paris Metro (adding 208
km and 2 million new daily riders) in twelve years (2013/4 to 2025).
The Socialists have pushed that timetable back five years, but added
other projects that will add an additional 900,000 daily riders.

Given that Americans cannot work with the speed, efficiency and
determination of French bureaucrats, we will be in a reactive mode as
our economy and "Drive Everywhere to Everything" lifestyle is
stressed.

What we can do is prepare good and useful plans for that stressed future.

Any plans should consider a much higher transit riding and bicycling
habit. The demand for Transit-Oriented Development (TOD) will
skyrocket as well, adding more transit demand.

Alan S. Drake is an energy analyst and rail consultant, based in New
Orleans.  He is currently working with veteran transit manager Ed
Tennyson to develop a plan for enhancing and expanding Washington
D.C.'s Metro Rail system in anticipation of the increased transit
ridership expected as the predicted oil supply cliff comes closer to
reality.

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