Peak Opportunities

The Perennial Search for Perennial Grains

2012-01-08T13:18:00.000-08:00

Most would agree that there is no single solution to the challenges brought about - currently and in the future - by inexorably declining, worldwide oil production rates, or Peak Oil. As Steve Andrews, one of the co-founders of ASPO-USA likes to say - there are no Silver Bullets, only Silver BB's.

So, Silver BB's - also known as partial solutions - can likely be lumped into two categories: Substitution and Conservation. It is becoming increasingly apparent how dominant the Conservation category will be. After only a few years, it is obvious that we can't ever produce enough biodiesel and ethanol to create what Jim Kunstler would deride as "Happy Motoring As Usual". And even if we could produce enough, it is obvious from a food supply standpoint that we should not attempt to totally replace gasoline and diesel with ethanol and biodiesel. Nevertheless, even these maligned fuels have niches - they are Silver BB's. Meanwhile, cellulosic ethanol and algal oil appear to be ever on the horizon, much like fusion or better batteries. Maybe one of these will experience a true breakthrough, but once again, trying to totally replace the current consumption of gasoline and diesel with these fuels is likely the incorrect path.

This brings us to the topic at hand, a Silver BB of both Conservation and Substitution, and the focus of various research and development efforts, namely "the perennial search for perennial grains". Why perennial grains? Primarily to eliminate the fuel, fertilizer and herbicide required for planting, cultivating and growing plants which must be seeded each year - also known as annual crops. And of course there are other reasons why staying out of the pasture would be a good thing - with topsoil loss being chief among them. Essentially all of our current grain crops - wheat, corn, oats, barely, rye, millet - require seedbed preparation, weed control and fertilization in order to become established and yield a crop - all within a few months. The hope is that perennial crops, while they might yield far less, would require a lower energy investment per pound of food produced.

So, what's the status on this perennial grain effort? A substantial effort is spearheaded by The Land Institute, whose principal, Wes Jackson, recently spoke to ASPO - USA. Mr. Jackson and his group have been working this problem for decades - a dedication that deserves applause. However, he explains that the creation of perennial wheat might take another 25 years, and that creation of perennial crops in general might require an incremental ... $1.6 billion! Meanwhile, a recent success of theirs is Kernza, a relative of wheat, native to Turkey and Afghanistan. Kernza is touted as currently having yields of around 15 % of wheat. Importantly, the yield advances that have been made to date have been via selective breeding rather than genetic engineering. Nevertheless, Mr. Jackson mentions that Kernza as a commercial crop may be ten years in the future.

So, where to find some other plants that might yield better returns, faster ... and for less than billions? One might guess that plants that are already native or naturalized would be a good place to start looking for domestic solutions. But what is amazing is how little we know about our native and naturalized plants. Sure, there is a lot of information out there, but there is no central aggregation of that information such that it can be assimilated into research and development, as well as conservation, education and wise use. What is needed is a single source which documents all known uses - from prehistoric to modern.

Enter The Useful Wild Plants Project. For over 30 years, this effort has flown under the radar of most of the public. To date this group has published three archive-quality volumes, and the fourth will soon go to the printer. Much of the data is already gathered for the remainder of the volumes, however the effort must be accelerated in order to finish the 14 volume set as soon as possible.

Here's a case-in-point: Chasmathium latifolium, common name Inland Sea Oats. It is native in the shady creekbanks around Austin, and it ranges throughout much of the Southeastern US. It is already a perennial grain! And I likely wouldn't know about it if it weren't for The Useful Wild Plants Project.

Inland Sea Oats is also commonly used as a drought and shade tolerant landscape plant. Recently, I noticed a neighbor had, over several years, established two small beds of Chasmanthium latifolium. The beds are intended as a landscape accent, not food, but they made me think, here is a place we could get a semi-realistic yield number, because it is a mature stand and the plants are about as densely spaced as possible. And one of the beds is square, the other semi-triangular, so it is easy to calculate the area.

So, a month or so ago we harvested the seedheads. We had two boys use the “walk through and scrape the seeds off between your fingers into a shoulder bag” method. It took 30 minutes to harvest 148 sq. ft.

I dried the seed heads for a few weeks, and then threshed them using the “Ellison taped blender blades” method from UWP Newsletter 19. I winnowed and screened them and was conservative as I did not want to lose much seed. A few years ago I purchased a number of small framed screens. The 10/64" round hole screen worked best. It let some hulls through. The secret to minimizing this is to watch what you are doing, shake it a few times, stop when you don't see any more seeds and discard the hulls. More shakes will lead to more hulls in the product. The threshing took 15 minutes, and I spent 45 minutes on winnowing/screening. It shouldn't have taken so long - I was piddling and trying to not lose any seeds. Basically, it took about an hour for both.

We started off with 1½ gallons of seed heads, and this, by coincidence, weighed 1 lb 8 oz. The cleaned seeds occupied 6.5 oz. by volume and weighed 5 oz.

This has been a year of record heat. The owner watered to keep her oak trees alive, so the plants got some relief. Nevertheless, the seeds were half the size of those in a normal year. The yield could easily be twice this in a normal year.

So, here is a perennial grain that is ready today! Of course, the above calculates out to only about 92 pounds per acre. In the summer of 2011, in one area of North Dakota the wheat yield was 43 bushels/acre (or 2580 lb/ac at 60 lb/bu). (In 2010, the wheat yield was 65 bushels.) But, these C. latifolium yields are without fertilization or weed control and under extreme conditions. The important aspects are that this crop is already “perennialized”, it is drought tolerant and it is a native which is already accustomed to our ecosystem in general. Further, yield improvement is likely a lot simpler than turning an annual into a perennial.

How many other prospective perennial grains might there be? The completion of The Useful Wild Plants Project must be accelerated so that we can begin to discover and develop other potential perennial grains, as well as Silver BB solutions to other Peak Oil challenges.

Marcellus Shale reserves "only" 43 TCF ...

2011-09-20T18:52:00.000-07:00

On August 23, 2011, the United States Geologic Survey (USGS) submitted 84 trillion cubic feet (84 TCF) as their estimate for undiscovered, recoverable natural gas in the Marcellus Shale, located primarily in Pennsylvania, New York and West Virginia. Additionally, they believe 3.4 billion barrels of natural gas liquids will accompany that 84 TCF. (for reference, the great East Texas Field - discovered in 1930, and which helped the Allies win World War II - will produce about 5.2 billion barrels.)

The USGS pointed out that in this new analysis, they were increasing their estimates of recovery from the Marcellus, since their last report. They actually publish range of estimated recoveries, ranked by the probability or confidence in a given estimate. So, a 50 % confidence level, or N50, is similar to the mean value, or the likelyhood that half the estimates would produce more than that amount, and half less. Such is the 84 TCF number which the USGS quoted in their first paragraph.

USGS Marcellus Press Release

Curiously, there seem to be many opponents to natural gas, these days. Some of them would likely tell you they are just opposed to shale gas, not natural gas in general. But a more in-depth analysis of their positions would show that they just don't like anything except renewables. So, some of these folks were quick to spin what the USGS termed an increase in estimated recoveries for the Marcellus, into a dramatic decrease! One opponent of natural gas was quick to focus only on the very highest probability, and lowest reserve number, that being 43 TCF. Another writer smugly commented, "There may not be as much natural gas in our future as some claim."

Additionally, neither of the two articles linked above happened to mention the associated 1.6 billion to 3.4 billion barrels of natural gas liquids (N95 to N50 estimates)! That's enough liquid hydrocarbons to qualify the Marcellus as what's known as a "giant" oilfield. How could they leave out that detail if they were trying to be objective, whatsoever? The answer can only be that they were not making any attempt to be objective; rather, they were trying manipulate public opinion. One of the articles also forgot to mention that there was a N5, or 5 % probability of having 144 TCF and 6.2 billion barrels recoverable from the Marcellus. Clearly, these folks want to suggest to the casual observer that "there just isn't very much natural gas in shale plays." After all, how much could only 43 of something be???

Well, let's look at that. Some of the folks writing these articles like to use the entire domestic natural gas consumption as the dividend, in doing their comparisons. And they fail to include that multi-billion barrel NGL production that comes along with the gas. Is that a fair way to look at it? After all, this Marcellus is a relatively new discovery (2004), and as such it is incremental or additive to the reserves prior to that point.

But let's look at "only" 43 TCF: using 1 mcf = 1 mmbtu of heat energy (approximation for methane, the primary component of natural gas), 293 kwh/mcf, a combined-cycle gas turbine generation plant efficiency of 57 %, and 570 MW/coal power plant (594 coal plants in 2009, with 338,000 MW of total capacity), we find that 43 TCF could replace the average coal power plant for ... 1430 years. Or, that 43 TCF could replace ALL 594 coal power plants for ... 2.4 years. Oh, and then you still have the 1.6 BILLION barrels of natural gas liquids (ethane, propane, butane, etc.) to heat homes, make plastic, even run in vehicles - essentially to use in every application where natural gas can be used, plus a few more. (Total production from the giant Prudhoe Bay Field in Alaska, has been about 11 billion barrels to date, for reference.)

So, even 43 TCF and 1.6 billion barrels of NGL comprise an awful lot of lower carbon, comparatively clean energy. Further, those are the low estimates, not the mean, and the mean is about twice those amounts. It makes one wonder, "What is going on with all these anti-natural gas efforts?". We'll attempt to take that up in a future article.

In closing, one might wonder, "Does the Marcellus or the Eagleford or the Bakken - or all the shale gas and shale oil plays taken together - eliminate the paradigm shift of Peak Oil?" Unfortunately not. However, these plays will mitigate, to some degree, the effects of Peak Oil. They are very important in that regard; namely, they will somewhat reduce the "severe consequences" mentioned by Hirsch, the Bundeswehr and others. But they will only do so if we can quickly integrate natural gas and NGL into the transportation sector, while we simultaneously work on conservation, efficiencies, mass transit retrofits, renewables and every other partial solution.

Note: Our calculations on the original posting were incorrect - we omitted a "24 hours in a day" factor, yielding an incorrect 34,000 years, versus a more correct 1430 years, for running a single coal plant with 43 TCF (43 TCF being the USGS' N95 estimate of reserves from the Marcellus). Dividing that number by the 594 coal plants in existence in 2009 indicates that the Marcellus alone could run all of the nation's coal power plants for 2.4 years, not 57 years. We did have a third party do a quick check on the calculations before the original posting, but evidently they missed the error, as well. Many thanks to commenter Nate for correcting our miscalculation. (Nate was gracious, btw, and came up with 3 - 4 years, arriving at that answer in a slightly different, and probably more accurate method.)

We shouldn't have been off by an order of magnitude plus, but of course these calculations are not realistic, anyway. The Marcellus would never be expected to replace all the coal fired power plants, nor would that be physically or economically possible. The point is, the Marcellus has huge natural gas reserves, along with giant-class natural gas liquids (NGL) reserves. Taken together, the natural gas and NGL from the Marcellus and other developing shale gas and shale oil (not be confused with oil shale) plays cannot solve Peak Oil; however, if we use the resources from these unconventional plays wisely, these plays can help mitigate the serious transportation problems which will impact every facet of our lives, as Peak Oil becomes manifest in the United States.

Not there when you need it - Texas wind energy fails during power emergency

2011-09-20T15:06:00.000-07:00

First let us say, we are supporters of wind energy, solar pv, and solar thermal energy ... as well as fossil fuel and nuclear energy sources. We support what makes long-term and short-term economic sense, with consideration for the environment as well. And we realize that not everything makes economic sense, initially. Often, in any fledgling industry, "loss leaders" and development time are required before economic benefits are realized. However, folks who exclusively support "clean energy" or "renewables" need to realize the limitations thereof - both from an economic standpoint and from an absolute "energy availability" standpoint.

Here's a good example:

Texas has 10,135 megawatts (MW) of installed wind generating capacity, nearly three times that of any other state. On August 24, 2011, ERCOT, the state's grid operator, declared a power emergency due to the excessive electrical demands brought about by the extreme temperatures. At that time, this 10,135 MW wind generation capacity was only able to muster 880 MW, or about 8.7 % of the capacity. Since low winds are the result of high atmospheric pressure conditions, which in turn result in high temperatures, and thereby create record electrical usage ... this scenario can be expected over, and over again. This is why natural gas or other conventional fossil fuel or nuclear generation must be "paired" with wind generation, in order to call it "real" capacity.

Source of story, here, courtesy Garrett M.:

National Review, 8-29-2011: Texas Wind Energy Fails, Again.

Great headset, with mike, for your iPhone (these are hard to find in stores)

2011-06-13T20:53:00.000-07:00

Perhaps you saw where the World Health Organization said that holding a cell phone close to your head "might cause cancer". Who knows (no pun intended), but it makes sense that holding a device emitting so much microwave frequency energy right next to your head is probably not a good idea.

So you would think it would be easy to find a headset, with a mike, for your iPhone. Not so! It took us a long time to find this great product, and we have test driven it for over a year, and given away a couple of them. I have spoken with many other folks who have looked and looked on the racks in stores, for something like this. You can find Bluetooth devices (could be problematic, as well), ear buds (which tend to fall out of your ears), etc., but it is just plain difficult to find a headset with a mike, in a store. The cord is really not that difficult to get used to, and the volume goes way up on this unit. You can wear it slightly in front of your ears so you can hear what is going on around you, at the same time. Neat product, so we feature it here:

They were $50, now they are only $24.95, so we are going to stock up on a few more, in case they go away, like great products sometimes do ...

A snip from 2009, Mechanical Engineering magazine

2011-06-13T07:41:00.000-07:00

Recently, in cleaning out some articles we found this piece of clarity, from the August 2009 issue of Mechanical Engineering, the magazine of the American Society of Mechanical Engineers (ASME):

excerpts from: the Oil Age, by Frank Wicks

"Most oil producing countries have passed peak production. The United States had been an exporter until production peaked in 1970. It now relies on imports for about 60 % of the 20 million barrels per day that the country consumes."

"Another rough estimate is that the world started the Oil Age with about two trillion barrels of recoverable oil. About half of that has been extracted. The remaining trillion barrels represent about a 30 year supply at the current rate of consumption and will be much more difficult to recover." [MP Note: Unfortunately, it won't be possible to extract the last trillion barrels over 30 years, due to the physics of flow through porous media; so the rate of consumption will have to drop, each year. A good guess would be that the last trillion barrels might last around 80 years - and in order to do that, the rate of extraction will have to drop continuously, and precipitously, once again due to physical constraints, not due to man.]

"The fundamental problem is that oil is too good. It is required for most things that we do. The alternatives are mostly inferior or less acceptable. Adapting to the next half and the end of the Oil Age may be the greatest challenge our civilization has ever had to face." [emphasis is ours]

Is it any wonder everyone's confused? Saudi's boost output ...

2011-06-13T07:29:00.000-07:00

From Bloomberg, June 10, 2011:

Crude oil tumbled the most in four weeks after al-Hayat newspaper reported Saudi Arabia will raise oil production to 10 million barrels a day next month. Source: Bloomberg

Play Video

June 8 (Bloomberg) -- Fadel Gheit, an analyst at Oppenheimer & Co., talks about the outlook for Organization of Petroleum Exporting Countries' oil production. OPEC ministers were unable to reach a decision on production quotas at their meeting in Vienna today. Gheit speaks with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

Saudi Arabia signaled it’s ready to deliver on a pledge to boost the supply of oil after the collapse of OPEC talks two days ago.
The world’s largest oil exporter will increase production, though it’s too early to say by how much, a Saudi industry official with knowledge of the matter who declined to be identified said today. Al-Hayat, citing senior officials, reported earlier that the kingdom will boost output to 10 million barrels a day in July from the current 8.8 million. Oil fell as much as 3.3 percent, the most in three weeks.
Saudi Arabia “wants everyone to understand that they’re serious,” Olivier Jakob, an analyst at Petromatrix GmbH in Zug, Switzerland, said today by phone. “It’s important that the Saudis are signaling that they’re offering additional barrels.”
The June 8 meeting of the Organization of Petroleum Export Countries broke down after six nations led by Iran opposed a Saudi plan to replace lost output from Libya and aid the U.S. economic recovery, Saudi Oil Minister Ali al-Naimi said on the day. The kingdom, along with Kuwait, Qatar and the United Arab Emirates, wanted to increase production by 1.5 million barrels a day. OPEC accounts for 40 percent of global supply.

More on the Saudi's slash of oil output

2011-04-27T23:47:00.000-07:00

Soon after we posted the piece on April 18 regarding the report from the Saudi Oil Minister, Ali al-Naimi, we discovered an article we'd clipped from the Oil & Gas Journal, sourced from the Oil & Gas Journal Online, dated March 28 (two days before the President's energy speech). So, this March 28 article actually contained the news of the "output cut", which Mr. Naimi re-delivered on April 18. The article quotes Barclays Capital managing director Paul Horsnell, and he paints a far different picture of the worldwide supply, demand and capacity issues than did Mr. Naimi:

"Saudi Arabia's production is estimated at 8.2 million b/d. [which is what Mr. Naimi said they had indeed produced in March, some four weeks later] However, Horsnell said, recent data are pointing to Saudi output close to 9 million b/d in December and "and at that level in January and February." [Mr. Naimi confirmed the 9 million b/d, as to February]

"He said, "This has two main implications. First, it is the source of another downward revision of start-of-year spare capacity levels, since Saudi Arabia's output has been higher than was originally reported. The second implication is in what it suggests to us about how much Saudi Arabia needs to produce to balance the market."

In other words, Mr. Horsnell is saying that since the world previously thought that the Saudi's were producing less in December than they actually were, then the estimated worldwide "buffer" production capacity was significantly less than believed, as well. Also, his observation that the Saudi's evidently needed to produce at 9 million b/d in order to balance the market is the exact opposite of what Mr. Naimi said, four weeks later.

Mr. Horsnell went on to say:

"Even producing 9 million b/d, Saudi Arabia still has left "a significant deficit at the margin of the market with inventories falling faster than normal, even before Libyan exports came off the market. Allowing for a normal second quarter global inventory build and replacing lost volumes from elsewhere seems likely to require Saudi Arabia to move up to 10 million b/d, in connection with higher volumes from the other holders of spare capacity ..."

This doesn't sound much like a market which is oversupplied ...

Earlier in the same article, with respect to demand, Mr. Horsnell said:

"Oil demand growth in 2010 earlier was estimated at 2.57 million b/d, with 2011 growth previously forecast at 1.56 million b/d. Now 2010 demand growth is put at 2.83 million b/d-making it "the strongest year for global oil demand growth over the past 30 years."

This doesn't seem to jive with the drop in demand/oversupplied market to which Mr. Naimi referred ...

Tom Whipple, a former government analyst and current Peak Oil news aggregator came out soon after the Naimi announcement, outlining the oversupply scenario. However, on April 25, Mr. Whipple supplied some alternate explanations for the Saudi cutback. One of his explanation's revolved around the fact that Saudi oil production has finally reached the practical limits to its growth, and that the Saudi's could not sustain the 9+ million b/d rate comfortably. Stuart Staniford, a PhD physicist and analyst of Saudi production, provided some interesting graphs on April 13. Looking at one of those graphs in particular, what stands out is the substantial rate variation in the 2003-2011 period. Of course, Saudi is the ultimate swing producer. But with the exception of a period in 2005, it appears that rates never stay above 9 million b/d for very long; that is, even in face of high prices and a tight market the rates come down substantially, after a brief peak. One might worry that the "maximum reservoir contact" (MRC) wells in Ghawar and elsewhere are tending to cone water after a short run at high rates, and that some wells might be threatening to water out if these high rates are sustained. If this is the case, this would mean that the often touted "worldwide spare capacity" of 3 million b/d or so ... is just not there (as it derives primarily from the Saudi's). In turn, if the Saudi's can't really sustain even 9 million b/d, then this would have serious implications for the world in that the next, more intense manifestations of Peak Oil may be nearer than we think.

(Mr. Whipple also offered an alternate explanation in terms of "the Saudi's making a political statement" in their cutting of production. This theory would suggest that the Saudi's were upset with the flip-flops in US support for some of the other Arab regimes, and cut production as a result. This might be, but in light of the prior, substantial fluctuations shown by Staniford, it seems that some production capacity-related explanation is a better fit.)

"Saudi's slash oil output" ... or did physics?

2011-04-18T10:18:00.000-07:00

"The market is overbalanced ... Our production in February was 9.125 million barrels per day (bpd), in March it was 8.292 million bpd. In April we don't know yet, probably a little higher than March. The reason I gave you these numbers is to show you that the market is oversupplied," Naimi told reporters.
Saudi oil minister Ali al-Naimi, April 18, 2011

Does that statement make any sense? Saudi production goes down in the face of rising demand, and prices skyrocket, and that shows the market is oversupplied??? Wouldn't prices have dropped drastically during that period if the market had been oversupplied?

Once again, it seems that Saudi oil production went from 9.125 MMBO/D in February, to 8.292 MMBO/D in March. And remember (as we used to always tell the boss) February is always a "bad month" because it has fewer days. Meanwhile, oil prices increased substantially in March.

You've got to ask yourself, why would Saudi oil minister al-Naimi issue this seemingly nonsensical press release?

Realize that the Saudis are our "partners" in trying to keep the world economy out of the ditch - they know it is not in their best interests to wreck the world economy, else demand for their product (oil) will go down. So, they are not interested in $200 oil, or even $150 oil. As the King said years ago, "You need the oil, we have the oil." In exchange, we no doubt have security arrangements with them, and sell them billions in defense hardware. (According to the WSJ today, Saudi Arabia had $41.3 billion in defense spending in 2009, compared to Iran's $8.6 billion in that year.)

So, back to the question. If the "jig were up" - that is, if the onset of production rate decline was imminent, or even past tense - for the country generally believed to have the world's largest reserve capacity in terms of production rate, as well as the largest remaining reserves, then there might be one more ploy, one that might hold up for a few months (or not). That would be to suggest that you were voluntarily cutting back production rate, rather than it happening despite your best efforts to increase it. Or, put another way, that you were cutting the rate on purpose, rather than it dropping due to the inevitable decline in the production rate of a limited resource, aka Peak Oil.

One other thing: Why would President Obama, in his "energy policy speech" of March 30, 2011, suddenly say we need to do more drilling for oil in the US, embrace shale gas and natural gas vehicles? Previously President Obama only had room for renewables in his public speeches. Continued oil and gas development, utilization of natural gas for transportation, conservation (of primary importance), renewables and sensible clean coal and nuclear make up the bulk of the often touted "all-of-the-above solution". Often touted ... but not by President Obama! Why the sudden shift in "policy"? We already knew the answer, but hearing it from the President sent a chill up our spine, nonetheless. It might be as close to a Presidential Peak Oil admission as we ever get - and likely as close as we really want. It's time to stop petitioning, stop talking about why this or that won't work, and start focusing on what you can do, what your role is in the "all-of-the-above" solution.

Full press release here: Saudi's slash output

Peak Oil question and answer ...

2011-04-18T09:08:00.000-07:00

Back in January, an acquaintance asked some good questions about oil supply - "Why worry?" kindof stuff. Questions about Peak Oil are valuable because they indicate where the communication is breaking down, where folks are having a hard time understanding the concepts. In this case, my acquaintance is a highly-educated person who works in an alternative energy field - so one would think he would be biased towards believing the concepts, anyway. That makes his questions that much more valuable, and it shows his honesty with himself.

Questions
i was just reading your blog. i know you are convinced by the peak oil thesis and find its consequences likely to be pronounced. you are also in the industry, a generally smart guy around town, so i ask you to straighten me out on this.

i'm not a doomer on this topic. in general, i'm not a doomer on any topic. i find our current moment the best in history, and the forces to accelerate that unprecendented. most of this follows from communication tech, most specifically, the web. the positive consequences of the web for me trump all other negatives around us. i could go on and on about all the pro good forces unleashed by the democratization of knowledge and communication access, but i'll resist. still, it is the biggie. like the brain that distinguished humans from all the more powerful and more numerous beasts that contended with our forebearers for food and real estate.

so back to the point.

on peak oil, i agree we may be at it, probably already past it, but i don't find the consequences anywhere near dire. in fact, i'm sad they are so soft and so slow. energy is currently way underpriced in relation to the value we get from it, and doubling its cost wouldn't do much. we already see many countries existing with more than 2x energy costs as the us, and they do fine. the world has not collapsed in any european country with $7/gal gasoline.

this is possible because no one needs to be inefficient with energy anymore. back when we had no choice, cheap energy was important. now i find it much less so. we can use a small amount of expensive energy to get the same industrial value that we used to get by cheap energy used inefficiently. our value produced per energy unit inserted has made lots of progess since 1900s england. so i welcome the increased price signal. i don't see doom in it.

at 2x the price point, so many other options become realistic that the market will make the others happen finally. we are overwhelmed with tech choices on the energy front. a price signal is most of what is needed. some political signal would help too, but is minor in the larger calculus.

problem is i think we're not going to get this price signal for a very long time. there are too many currently "unextractable" resources that become thinkable at just slightly higher prices. the canadian tar sands and venezuelen bitumen resources seem massive to me. if we get serious about extracting those, they seem large enough to blunt much of the peak decline. add into this the tremendous amount of nat gas we have everywhere, and our ability to reform it into near anything, and i'm not seeing the pinch.

on top of this add the proven human inability to know much about complex future predictions, and to date our "extractable" resources continuing to grow vastly beyond what was considered possible just a decade previous. putting all this together, i end up a non-believer in our going into cataclysmic fossil decline in any helpful manner.

admitedly the above is all handwaving. i don't have numbers on any of this. i have not read the literature closely and critically enough to really believe my assessment. i am a news consumer on this topic, thus lack full faith in my assessment. but nonetheless, that is my assessment.

this makes me sad, as i want to run out of oil on a faster slope. i think this transition is going to do massive good on near all fronts. fossil fuels are currently one of the most distorting financial, political and environmental forces on the planet. if i could change one thing in the world, it would be to not have this massively source dense and lucrative resource available. it tends to do bad things wherever it is found or overused.

of course i am partial to giving half of the planet their own personal scale power device, and let them run it off the already distributed fuel found around them. i think a pc of personal energy can deal with most of the power and products that we worry about in peak oil.

a multi-modal gasification machine can give you electricity, heat, cooling, shaft power, liquid fuels and biochar for ag. and it can do so on the waste that is already around us, sans the distorting impacts of a highly centralized and empowered fossil energy cartel.

yeah, we all have a few problems yet to solve before we have the fuel agnostic, fully automated, multi-modal gasification machine. but still, we see the solution is accessible. as are many others on other energy fronts.

so what's the problem? why are we worrying about fossil fuels so much?

Answers
I am glad you outlined all those points, the thought process you are going through - that is helpful to all, I think. Perhaps you are just playing the "straight man", the "shill" here, and want some Peak Oil stuff for the group. Either way, my wife would have told you, "Don't ask him about Peak Oil, whatever you do!" So here goes, you asked for it!

I will segregate some of your points/questions:

Collapse/Doomer stuff
First, like you, I refuse to be a "doomer". (the link you included discusses this, as well). I am fascinated by man's ingenuity, and by the ingenuity of this group. "Our" group, I'll say, because I am proud to be a part of it, even though I have only made drawings of gasifiers, so far, and have only made a few contributions to the group. I had the blessing of meeting you, Mike L., Ron O., Bear, Jay, Markus, Ray M., Donna M. and others, in a short period of time. Then, by coincidence a couple of years ago I helped put together a coal bed methane project around the corner from where Wayne lives, so I dropped in to see him while I was over there,in November I guess it was. So, all this within a month or so. Wow. Blew me away. How many other homemade windturbine, alcohol, poor boy concentrating solar thermal, small steam, stirling, or whatever yahoo groups are there, out there??? We are a nation of tinkerers, and of course these groups transcend nationality. That gives me a lot of hope. On the other hand, we tinkerers are a bit "weird" (in a nice and important way) - we're not your normal folks. As a matter of fact, a guy told me that today, said I didn't like "normal" stuff like everyone else! (of course I was proud of that). But even though these groups now let us meet up in wonderful and synergistic ways, the fact is, there are far more consumers than there are tinkerers; we are a minority.

The reality is, most of our transportation, neighborhoods, cities, whatever were built on "cheap oil". Oil supplies 40 % of the US overall energy, and 60 % of that is imported. 70 % of the oil the US uses goes for transportation uses. Gasoline makes up 9 MMBO/D of the 20 MMBO/D (2007 high number) we use in the US. We're a lot different than Europe. And they are not necessarily smarter or even more forward-thinking - much of what they did was out of necessity or as a result of geography or politics. Europe is not exactly prospering right now, either. The unfortunate bottom-line is that neither natural gas, electric vehicles, biofuels, tar sands, coal to liquids, algae or any other fossil or renewable partial solution seen so far will replace liquid hydrocarbons in a timely enough fashion such that current lifestyles can be maintained as is; at the least, there will be disruption and hardship. As Dr. Hirsch et al put it, "you have zero chance of not getting burned by this." I would not say, either, that there is a zero chance of even an Olduvai Theory thing - anything can happen, collapse has happened before, will likely happen again. I don't have to accept it sitting down, though.

Even though we should have caught on to this a lot sooner, there is little we can do about the past. And it is so easy to lay blame, point the finger at corporations, politicians, the government, etc. But think of this - even you (until you finish reading this) don't believe there will be any problem! I estimate only about 25 % of the people have even heard of the Peak Oil concept, and only maybe 10 % (likely optimistic) understand what it is, or get the ramifications. Why? See this link: http://www.energybulletin.net/node/39308

What about the tar sands?
So, with respect to tar sands, you can't replace a large SIZE field of ancient AGE and excellent QUALITY (Middle East, US, etc) with even an enormous SIZE, new in AGE field of very poor (melt or dissolve it) QUALITY (Alberta tar sands). I call it the SAQ model, ie using SIZE, AGE and QUALITY of a field/reserve to normalize it for comparison, so to speak. See also this link, where on slide 10, "The SAQ Model - Example 1" it shows the downward revisions of earlier, rosey forecasts of increasing tar sand production rate (even in a substantially high price environment):
http://peakopps.blogspot.com/2010/06/one-more-peak-oil-explanation-and-why.html

Consumption versus Reserves:
Replacing fossil fuels, or liquid fuels in particular, is a problem of SCALE, and TIME. Namely the scale of how much oil the world consumes, versus how much we discover - both currently and even since the 60's!

So, take a look at the Annual Discovery Curve:

http://peakopps.blogspot.com/search/label/oil%20discovery%20curve

This Annual Discovery Curve is representative of the RESERVES the world discovered, in each year, collectively. Notice it peaked in the 60's. Today, even with substantial advances in technology, we discover about 10 B bbls or less, annually. At 85 MMBO/D of consumption, we burn up 10 B bbls in ... 118 days. Yes, this is the issue. Far more is being used than discovered, and it has been that way for almost 50 years now ...

And even if we could through up nuclear plants all over, which of course we can't takes TIME, it would take a long time to manufacture enough electric cars and trucks to replace any significant portion of the fleet we all depend on. (and this doesn't address the fact that there are still electrical storage issues - cost, reliability and supply of lithium). So, SCALE, and TIME.

Read the Hirsch Report when you get a chance:

http://www.netl.doe.gov/publications/others/pdf/Oil_Peaking_NETL.pdf

and read Hirsch et al's new book:

http://peakopps.blogspot.com/2010/10/dr-hirschs-new-book-impending-world.html

So, if the Peak has happened, why haven't we seen more effects?
Well, in my opinion, $147 oil provided the pin that pricked the destined to collapse consumption and housing and credit bubble, so I'd say you have seen effects. The magnitude of this recession is a SCALE issue, as well, and it is not well understood/reconciled. I used to worry about inflation. Then I finally began to understand that you couldn't reflate a maybe $500T bubble, without the same multiplying effects that you had previously. Namely, you can print up and hand out a few trillion, but that is small potatoes compared to the bubble. You can't reinflate the balloon, or even come close, without the multiplying effects of the previous goings on; you can give this money to banks, but unless you have the same funny business going on in all directions, you can't catch up to what it was. Which is not to say that we can't have some kind of "banana republic" inflation at some point, if we continue to destroy our currency. Enough on that.

Bottom line is that consumption dropped maybe 10 % from 2007 - 2009 (but not on gasoline). Doesn't seem like much, but what is also little understood is that "at the margins" is where the major commodity pricing spikes happen, ie the pricing is not stable there, not 10 %, 20 %, 30 % increases. Just a little too much supply, and if it is all marketed, the price tends to zero, in a "calculus sort of way". Likewise, not quite enough when you have to have it, and the price tends towards infinity. Oil supply is not fully elastic, anymore. And there are not elastic replacements that will work, "if we just had higher prices." (Dr. Webber at UT tells the joke about coal to liquids being priced at "oil price plus $10/barrel" forever, ie when oil prices go up, so does the cost of the CTL, it never becomes "economic". Like going to Joe's Crab Shack where there is a painted sign, "Free Crab Tomorrow", but tomorrow never comes. On the other hand, CTL will be important in an era where liquid fuels don't have to compete with oil prices, because we simply won't have enough oil and oil/gasoline/diesel will be rationed.)

The consensus at the ASPO meeting in Denver, in fall 2009 was that you'd see a series of whipsaws, where oil prices went up, shut down some portion of the economy/demand, then the economy declined as would prices, for a time. But ultimately the subsequent declines in prices would be smaller, over time, as depletion caught up, unless economic activity took on new, drastic lows.

We need to continue to develop oil and gas, or else the situation will be even worse. The deepwater hiatus is already baked in, will make matters worse. The right hand side of "Hubbert's Peak" anticipates "peddling faster for less", as we are doing with much of our oil industry efforts. If we don't then declines will be even worse, and Hubbert's Peak may become Hubbert's Cliff.. Meanwhile, we need to do more in terms of liquid fuels conservation (where we can have the biggest effect, the soonest). We really needed to get going on natural gas vehicle infrastructure and vehicles ... yesterday. And of course, for us weird mechanics, there is woodgas. I imagine we'll be less weird, everybody's friend, before long!

So there, you asked for it! My contribution, for now!

Conserve Baby Conserve,
Drill Baby Drill,
BBB

Follow-up Questions
nope, i'm not being a shill here. i really don't believe it, but don't really believe myself on this one either.

i'll go read the links with interest. you seem to see clear evidence of our discovery rate vs consumption have a meaningful collison ahead.

i have yet to be convinced here. i see discovery rate mostly a financial question. you know we've been predicting discovery depletion since 1910 or so. what we consider discoverable keeps changing profoundly. you know this. so you must see something new in these graphs that i don't yet.

the wildcards for me are.

1. tar sands
2. bitumen
3. deep sea drilling. like the entire ocean
4. natural gas
5. coal to liquids

not to say any of these are particularly good ideas. actually most of them are very bad. but they are going to get engaged when the price makes sense, which is likely soon.

now it is unfair to poo poo all the gtl tech as forever price + $10. these are not mysterious techs. used many times. we need to reinvent the industrial infrasture for current use, but the price point for this is little different than much petro tech. we'll do them just fine, but at terribly co2 cost.

the rate of infrastructure change doesn't scare me at all. when needed, we can change infrastructure radically in a few years. look at china for a recent example of what can be done in 10 years when it is imporatant. wwII. railroads, the internet. etc etc. govt command, market command, or war can do wonders fast. a decade is a near eternity when the need is clear and compelling.

any strong case peak scenario seems to me to play out over a couple decades at mininum. this is already half the life expectancy of most power infrastructure. just replacement cycle will deal with most of it. no?

08 for me showed speculation to have about doubled the "real" value of the commodity oil. that was fleeting. now we're back to a regular price rise with economic activity. the spike ramp in 08 was not the peak oil end scenario as we liked to entertain ourselves with back then. the end did not come. though it did somewhat for the speculative engines that created it. not sure how long that will last though.

the core of this is i can't answer or well understand the real flexibility we have in "discoverability". at 2x the price, i'm sure the world will do just fine without collapse. and at 2x the price in real demand, not speculative fluff, what is now reasonable to discover and extract?

isn't the claim that the tar sands and bitumen alone are each their own saudi arabia scale reserve?

nat gas costs 1/5 liquid per btu, given it is everywhere and barely worth not burning off in fields. so have so much nat gas at our disposal its depressing.

i think we're going to burn this planet to a crisp before we're anywhere near taxed on finding, buying and using fossil fuels.

thus i'm trying to get some numbers and assessements of these other resources. i'm not sure if my anecdotes have any substance.

i'll start with your paper cites tomorrow. thank you for them.

Answers to Follow-up Questions

Discovery on a small scale is a financial issue. On the worldwide scale, it is ... physics - when you have found most all the big reserves.

Take the US as a poster child. The US peaked at about 10 MMBO/D in about 1970. (there is a slide on this in one of those links). Currently the US is doing just about half of that, just over 5 MMBO/D, despite substantially higher prices, substantial "access" and lots of technological advances in 3D seismic and horizontal drilling (hint: those things find and develop fields you can't find with 2D seismic or vertical wells. Why couldn't we find them before? Because they are smaller ...). The Bakken play in North Dakota is wonderful, and important to our nation. Today it is making about 350,000 BO/D. That's a lot, but remember SCALE. It's small in the scheme of things. It will grow, but remember, one of the giants that typifies what us peak guys are worried about, ONE field, in Mexico, Cantarell, has declined from 2.1 MMBO/D in 2005 to less than 500,000 BO/D today. Repeat that across the world and try to replace those fields with tar sands or Bakken plays ... it's that SCALE thing.

Remember in school, in math, where you added curves together to get one curve? Well, do the reverse. Look at the countries that have peaked (most of them, there is a slide in that same presentation). So, take away the countries that have peaked, where it is highly unlikely that they will ever produce at a greater rate. That doesn't leave many countries. No, we will never "run out" of oil, that is a common argument, albeit not really an argument. Oil will be dripping out, we will be producing it at some rate, forever. But that's not what is important. What's important is what kind of rate can you get it out of the ground, compared to the world's demand for it. And RATE is not arbitrary. The available RATE is dependent on the given RESERVE's SIZE, AGE and QUALITY. As in one of those links.

It would be hard to find a bigger "bull" on natural gas. It is a wonderful transition fuel, and one that will be around for a long time. We should be building vehicles and manufacturing facilities and infrastructure at warp speed (while we cut down on vehicles, add mass transit retrofits, at the same time). Although the government really shouldn't be doing it in the first plaace, if we are going to spend TARP or QE money, it should be spent on infrastructure or manufacturing, thereby creating jobs, thereby having a chance at getting us out of this mess. These are the things that have multiplying effects, not just giving the money to the bankers.

See the slide on tar sands projected production rates. These are the numbers from the "Canadian tar sands board", not someone who is anti-tar sands. It's that RATE thing.

I respect those who are concerned about global warming. To what extent is it man made versus natural? It is a modeling problem that is infinitely more complex than peak oil. We know that the climate has changed dramatically, and over fairly short geologic time, prior to industrialization. I suspect our great energy source, the sun, and the wobbles and movements of Earth, Sun, and more have a great impact. Mike L. might vote for warming, about now.

Exogenous events as "game changers", things like war as accelerants for change? That will do it, all right. But that's not what you would call "smooth, gradual, painless transition". We have not really had a war that has disturbed our lifestyles on a large scale since WWII. Pick up a copy of The Fourth Turning when you get a chance.

Comments on Macondo BOP's

2011-04-18T08:39:00.000-07:00

Last month a report was issued regarding the BOP's on the ill-fated BP Macondo well. One commenter noted that BP was faulting the BOP's, and went on to liken BOP's to the "rear guard" in a war zone:

Itsy bitsy problem doomed BP's well

The war zone analogy is a decent one for the handling of a difficult well. However, if you goof up your tanks, your troops and your artillery, and wait until the enemy is 100 yards away to call the rear guard ... you can guess the outcome.

A parachute might be an analogy for a blowout preventer. Although you function test both and check them regularly, you don't want to get yourself into an emergency situation where you have to use them. That is "Job One" you might say, namely staying out of that situation. Further, if you have to use them, you need to use them early. Waiting, and attempting to close a well flowing at a high rate could be likened to trying to open your parachute at 100 feet.

So, what are the tanks, troops and artillery in drilling and completing a well? There are many, and in drilling a well, you can "pull the plug on the war" at any time if you are prepared and do it soon enough. Among other things, you design your casing/hole size such that there is enough cement sheath to create effective cement isolation, which also requires the proper cement slurry and centralizing the casing in the hole. Then after the cement job - on a difficult, high pressure well - you stay "on guard" for "gas flow after cementing", ie when gas flows in due to the setting of the cement's removal of hydrostatic pressure - before the cement has set enough to contain it. Then you test your liner top, and you take action to fix any problem. Then you make good decisions about displacing the pressure controlling mud out of the well. Then if you decide to do that, you make sure you have a way to keep track of the mud coming out, versus the seawater going in, to make sure that the well is not "coming in". If the well starts to come in, or flow, you close the blowout preventer immediately and begin circulating the mud back in, then fix the problem that allowed the well to flow. You don't wait until oil and gas are seen at the surface to shut the well in; by that time, it may be too late - you're opening your parachute at 100'. Finally, and most importantly, you have a highly experienced, sufficiently rested person (one person) in charge at all times. All of the above are "standard operating procedures" in any well control manual. These procedures were developed beginning, say, in the 1950's. (The above is just an example, and it is only coincidental if it resembles some of what might have occurred on the Macondo well.)

Climate Change: A quote from Kenneth Deffeyes

2010-12-14T12:06:00.001-08:00

"Warnings about climate change usually carry the implied message that any change is going to be disastrous. Only seventeen thousand years ago, New York City, Toronto, and Stockholm were buried under a mile of ice. (In a 4-billion-year history, 17,000 years is the day before yesterday.)"

Kenneth Deffeyes is Professor Emeritus in Geology, Princeton University, and author of Hubbert's Peak, Beyond Oil and When Oil Peaked.

Wayne Keith unofficially breaks woodgas world speed record ...

2010-11-21T11:45:00.000-08:00

Wayne Keith is a modern-day woodgas pioneer, a "deacon" of the woodgas community, if you will. Back in 2008, Wayne and crew won second place in the Escape from Berkeley alternate fuel race.

I had the pleasure of spending Friday, November 19, 2010 with Wayne Keith and family. Wayne first demonstrated his woodgas F150 experimental platform, as well as his woodgas Dakota "daily driver". Later we took the Dakota out for a spin around the backroads of St. Clair County, Alabama. Then, Wayne decided we should "stretch its legs" a little, so onto the Interstate we went. With a good head of woodgas and about 640 F coming into the headache rack heat exchanger, we topped out at about 85 MPH - but only because of traffic! We just couldn't get the cars out of the way on the stretch we were running. But since that is almost twice the current official record of 47 MPH, so we decided to call it a day. If it looks like we were going fast in the video, it's because we were! As you will see, Wayne startled me a little when he took the exit ramp like he had a little Earnhardt in him. No, we didn't roll the Dakota - I just quit videoing. What a fun and instructive day! Many thanks to Mr. Wayne and his family!

Wayne Keith's unofficial woodgas world speed record video:

More on Woodgas

Woodgas is quite simply a combination of H2 & CO, with a little CH4 or other heavies, plus the N2 that comes along for the ride from the air. Woodgas is produced when wood is pyrolyzed and the products are partially combusted and then reduced, forming the CO and H2.

The "technique" of producing woodgas has its roots dating to the early 1700's. Those early 1800's gas lights in Paris and the US were not from gas wells, but rather from producer gas - aka town gas or hydro gas - which is a cousin to woodgas, and is usually produced from coal.

Woodgas burns with a beautiful pink/purple flare, and is conducive to higher compression and advanced timing setups when used in existing internal combustion engines.

Video of the pre-startup flare from a Power Pallet, at the October 2010 All Power Labs workshop:

Woodgas falls into the partial solution category, with respect to our coming liquid fuels crisis. Woodgas burns cleaner than gasoline or diesel, but it is problematic in terms of operation, at least in terms of the expectations of today's drivers, who expect to be able to turn the key and drive without another thought as to what is going on in the engine. Operating a gasifier and the related systems currently requires mechanical experience and attention to detail. However, it may be possible to work out some of these issues. Also, the difficulties of dealing with a gasifier might be more palatable when it is your only choice for getting from point A to point B in your vehicle.

As an example of this line of reasoning, the Department of Energy thought enough of woodgas as an emergency fuel that in 1989 their FEMA arm sponsored the Oak Ridge National Laboratory to design a makeshift woodgas generator which could be constructed out of commonly available materials - in this case metal trash cans and a stainless salad collander, and a few other parts! The resulting design was problematic in terms of tar production (not desirable for engines) so it is shunned in woodgas circles. However, the fact that the DOE was interested in the technique as a potential, partial solution to a severe petroleum shortage - should be instructive. Gasifiers were used to power approximately one million cars, buses, trucks, trains, boats and generators during WWII, in Europe (Egloff 1943).

We have referred to woodgas in a few prior posts:

The coming liquid fuels crisis: the natural gas partial solution.

Oilpatch engineer replies to peak oil activist.

Last month I attended a wonderfully interesting three day workshop on gasification at Jim Mason's All Power Labs in Berkeley, California. Jim has unselfishly created an open source project to further the development of woodgas, and All Power Labs now has several products available for developers. The Gasifier Experimenters Kit, or GEK, is available for purchase, as is the Power Pallet - a pallet-sized package consisting of a GEK supplying a 10 KW Kubota genset with woodgas. During the workshop, with the assistance of Jim's friendly and motivated young staff, I was able to help construct a GEK and a Power Pallet. We also witnessed an extended run of the Power Pallet - it is amazing to watch ordinary woodchips be converted into electricity on a small scale! I intend to "write up" the workshop - the people, the experience and the education - but have not yet had a chance to put the notes in final form. In the meantime, details of the workshop and some pictures and videos can be found on All Power's website:
http://www.gekgasifier.com/

Dr. Hirsch's new book: The Impending World Energy Mess

2010-10-15T10:26:00.000-07:00

Several folks have asked, "What's up with Peak Oil?".

Well, largely, the "coming energy mess" is masked by the "current economic mess". Namely, when you reduce growth in oil demand - as the world has done over the last several years - you don't notice the fact that the oil production rate really can't grow too much, anyway. At some point, though, the decline in oil production rate and/or the growth in demand ... meet. Or collide, we should say. When? Maybe 6 months, maybe a couple of years. It really depends on oil consumption, which in turn depends on the poor economic conditions that most of the world continues to experience. However, when demand does meet falling supply - look out. Another price shock will occur, then the economy will retract again, and demand will fall - a little, perhaps. But at some point we are down to bare bones - we've cut all discretionary demand, or at least all semi-comfortable, discretionary demand.

You may recall previous posts discussing Dr. Robert L. Hirsch, or the report which bears his name - the "Hirsch Report" - which was completed in 2005. This carefully written, non-sensational, 92 page pdf was entitled "Peaking of World Oil Production: Impacts, Mitigation, & Risk Managment". The Hirsch Report became semi-famous due to its quality, its content and also due to "who wrote it for whom". Namely, Dr. Hirsch, Dr. Bezdek and Mr. Wendling wrote the report for SAIC, who in turn was fulfilling a contract with the U.S. Department of Energy (DOE). (SAIC is a government contractor who some call "the biggest company you've never heard of". A few years ago SAIC went public; they have around 40,000 employees.) Initially the report was kept a "secret" to some extent. That is to say, initially the Hirsch Report could only be found on the website of a California high school! I would suspect that the DOE, etc. felt like it would send out shockwaves when folks read it. What they didn't understand was that since it wasn't a reality TV show, a lot of folks would never hear of it. Namely, a lot of folks just don't read. Further, there is a substantial amount of "thought inertia" out there - people have a hard time wrapping their minds around something so transformative. The Hirsch Report was ultimately placed on the DOE website, and it is currently linked on this blog (as is an interview with Dr. Hirsch, regarding the report).

Dr. Hirsch has been a speaker at the last several conferences held by the Association for Study of Peak Oil, or ASPO-USA. As an attendee at those conferences in 2007-2009, I listened intently to Dr. Hirsch's talks. I also had a few chances to chat with him. Last year I was able to ask him a question from the floor regarding the potential for natural gas vehicles to serve as a partial solution to the coming liquid fuels crisis (Peak Oil).

In observing his mannerisms over the last 3 years, and from his total focus on Peak Oil, it is my belief that the Hirsch Report had a profound effect on Dr. Hirsch himself. And realize that Dr. Hirsch has "done it all" - almost - in the energy business. He has a doctorate in engineering and physics, and has 40 years of experience, 15 patents and 50 technical publications. Dr. Hirsch was director of fusion research at the Atomic Energy Commission (AEC), Manager of Petroleum Exploratory Research at Exxon's Production Research, Manager of Exxon's synethetic fuels lab, VP and Manager for oil and gas research at ARCO, and then a senior staff member at RAND and SAIC.

The key takeaway from the Hirsch Report was that Peak Oil should be "prepared for", not "reacted to". Namely, the Hirsch Report posited that our nation could effectively deal with Peak Oil, given 20 years of intense transition efforts; that is, if we initiated efforts 20 years in advance of the peak. However, if only ten years of transition time are available, the Report predicted a painful transition process. And finally, according to the Report, if serious transitioning is not begun until after the Peak then "serious consequences" will result.

Dr. Hirsch, Dr. Bezdek and Mr. Wendling have now written The Impending World Energy Mess, which was released around October 1, 2010.

The book includes a forward by Dr. James R. Schlesinger, the first U. S. Secretary of Energy, former Chairman of the Atomic Energy Commission, former Director of the Central Intelligence Agency and former Secretary of Defense.

The book doesn't plow a lot of new ground for those of us that have been familiar with Peak Oil. However, the book is an important "signpost" or "threshold" - the first book regarding Peak Oil from a very sophisticated, highly respected, former government analyst. The book is well-written, side-barred and highlighted. It is easy to read, and easy to refer to. The book also goes into substantial detail on various "partial solutions", as well as those which have been "ruled out". Included are excellent discussions on fusion, biomass, ethanol, and coal and gas-to-liquids.

Some of the most valuable content is that of the discussion of possible rationing plans - for gasoline and diesel. Not voluntary rationing - mandatory rationing. Given the circles in which the authors travel, I would imagine that what they have written is similar to what the government might invoke. Some might wonder why a Prius might be better to have than a Corolla, given that the economics never seem to catch up at say, $3 gasoline. However, in addition to being a means to contribute to conservation, an excellent piece of overall fuel efficiency engineering and a highly drivable vehicle, the Prius will go a lot further on a gallon of gas than will a Corolla. This may equalize the economics, somewhat, when it means another ten trips to the grocery store or school, or perhaps an additional 100 miles per ten gallon tankful, vis-a-vis the Corolla.

The Impending World Energy Mess should create additional awareness of Peak Oil - we will see what the reaction/consequences are.

Shown below are a two interviews with Dr. Hirsch, regarding the book, and a book review:

Steve Andrews of ASPO-USA interviews Dr. Hirsch regarding his book

Matthew Auzanneau interviews Dr. Hirsch regarding his book

Tom Whipple reviews Dr. Hirsch's book

Blowout Prevention Act of 2010

2010-07-25T18:33:00.000-07:00

According to the Wall Street Journal (7/22/2010, Son of Cap and Tax) last week the House Energy Committee unanimously (Republicans and Democrats) approved the Blowout Prevention Act of 2010 (link to Discussion Draft):

http://energycommerce.house.gov/documents/20100625/Discussion.Draft.Blowout.Prevention.Act.2010.pdf

As always, the devil is in the details. This Act will not only apply to deepwater and Federal fee, but will also apply to any onshore drilling operation - on any property, public or private - that the Federal officials determine could "in the event of a blowout, ... lead to substantial harm to public health or safety or to the environment."

While this may not sound unreasonable, the problem is that under this language the Federal bureaucracy is expanded and can potentially control any and perhaps all drilling operations. Accordingly, drilling could come to a standstill until the Feds promulgate "how to decide" and "who gets to decide", set up more agencies, etc. Once they determine what applies - and what the process for determination and approval is - the typical inertia of the Federal government could throw a wrench in permitting wells. There is a provision to allow delegation of the task to the states, where said states are capable of making the determination and managing the risk. This would be the best option for all, as opposed to setting up additional, overlapping Federal bureaucracy.

Additionally, wells for which the Act applies ("High-Risk Wells", subjectively defined in this Act) will require "two sets of shear rams and two sets of casing shear rams". It would not be hard to imagine that only a few, if any, current land-based drilling rigs have enough substructure space for such a BOP stack. So, if no such rigs exist, many deep wells (and even some relatively shallow ones) could be delayed indefinitely until/unless new, very expensive drilling rigs are built - depending on the interpretations of the Federal government.

Oilpatch engineer replies to peak oil activist

2010-07-25T18:31:00.000-07:00

As posted on Energy Bulletin's site:

One of the pleasures of editing Energy Bulletin is publishing a wide variety of views. Sometimes they clash, and the results can be fascinating.
This time, the clash is between two regular contributors, oilpatch engineer Martin B. Payne and long-time peak oil activist and writer, Jan Lundberg, publisher of Culture Change. On July 4, we published Martin's article "Take this opportunity to unite our country, not divide it". Jan wrote some comments to me (as EB editor) and I asked his permission to post them at the bottom of that article. They are as follows:

I see the author is basically an oil man and in good standing with API. But just because such a person acknowledges peak oil, does that make his statements worthy when they have no ecological sense or concern for the climate? He's also close-minded to life-style change.
I know that it's foolish to believe people cannot go car-free overnight. Also, if fossil fuels are "part of what we are," then we deserve to drown in a BP blowout. The blurb you put on the home page for the article looked intriguing, although the title of his piece obviously pegged him as someone not subscribing to collapse likelihood. He doesn't get Hirsch. Hirsch did not say we have 20 years for a transition (Payne says "during the transition"). Hirsch said that we had 20 years before peak.
In the following article, Martin Payne steps back and gives full voice to "the enlightened fossil fuel professional."
Interestingly, the dividing line between activist and oilman is not as sharp as first appears. Before turning to activism, Jan worked for many years in the family business, Lundberg Survey, which reports on the US petroleum marketing industry.
And as you will read below, oilman Payne betrays shocking patches of green.
(The iniitial article is posted here.)
-BA

Thanks for the comments, Mr. Lundgren. ... There is a lot of emotion out there. If we could bottle it up, use it for positive purposes, we’d have the “free energy” Tesla evidently took to his grave!
So, to get started - to find that common ground that Bart referred to in order to solve these problems - we need to start by avoiding the use of stereotypes. I don’t know Mr. Lundgren, and any stereotype I might choose for him would be an unfair, simplistic description for someone who is likely one of those folks who “proudly defies classification”. Being stereotyped really didn’t upset me; in fact, it reminded me, once again, how stereotypes often prevent us from building bridges and making progress on really important issues.
On Climate Change
I believe it was Dr. Hirsch, at one of the ASPO-USA conferences, who said that yes, climate change may be a problem, but the problem of Peak Oil is much more pressing, and will impact the world sooner than the problems of climate change. Further, the solutions for Peak Oil - and Peak Oil itself - will tend to reduce carbon emissions. Even if we ramp up our exploration efforts (which is essential), my belief is that - based on the work of Dr. Campbell and Dr. Hirsch - we will be using 3 – 5 % less oil each year, within a few years. This reduction in oil production/consumption will add up in a hurry (one of the key points of the Hirsch Report timeline).
Without opening the debate on whether man has caused or exacerbated climate change, it should be pointed out that 13,000 years ago, sea levels were about 250 feet lower. In other words, sea level has risen about 250 feet in 13,000 years. Further, about 79 million years prior to that, where I now sit was covered with about 150 feet of seawater. The Earth Chamber of Commerce website should include the bullet point: “climate subject to significant, periodic change”.
On Lifestyle Change
As I pointed out in the article, I believe that we should be “transitioning how we live, work and eat.” I don’t know how else to suggest lifestyle change. One of my near term goals is to work more towards providing good examples and paths for these “changes”. The good news is that although we have a long way to go, progress is being made.
On Current Dependence on Fossil Fuels
If we’re not addicted to fossil fuels, if they are not ingrained in everything – then Peak Oil is a non-issue.
We had the oil, we used the oil. It allowed quantum leaps in quality of life, life span, medicine and materials, among other things. With the benefit of 20/20 hindsight we can say we “wasted” a lot of oil, as well, depending on your frame of reference. The abundance of concentrated energy led to a dependence on same – it would be hard to debate otherwise. This abundance also led to some lifestyles – like suburbia – which were unsustainable. I don’t think anyone planned suburbia in a malicious fashion, nor is anyone even culpable by omission. Suburbia is just a result of using what we had. Currently, suburban sprawl is working its way towards the history books. Rather than wasting time beating ourselves up as to “how stupid we were”, we need to look forward, not backward. We need to figure out how to wisely use what we have to transition to the next lifestyles, the next economy. To get there, we need oil, gas and coal. So take a roughneck or a coal miner to lunch!
So, you ride a bike or walk? Sure, you use far less energy. But the bike is made of coal (smelted aluminum and iron) and oil (tires, seat, plastic), then it is painted with oil. It’s a Gary Fisher, you say? OK, clear-coated with oil, or anodized with coal. Your Nikes or Chacos are pure oil, plus some coal (Chinese electricity) toted over on a smoky, Bunker No. 6-burning container ship. Your PV system (and mine): oil (plastic) and coal (aluminum), in combination with coal (electricity to make the smelt the silicon, refine the cadmium and tellurium), plus some more coal (electricity) to run the plant. And those coal plants which make the electricity to make these “clean energy” solar cells (of yours and mine) are over in China, where they can’t be protested. They’re out of sight and out of mind, unless you’re Chinese and breathing the effluent of a plant which no doubt has far fewer scrubbers and precipitators than those required in the US.
The point is, currently and for the foreseeable future, we are all dependent on these extractive industries, and fossil fuels. So we all need to work together - and not demonize industries that we need - even as we transition to lifestyles with far lower energy usage and local energy production using alternatives.
On the Hirsh Report
I have been a follower of the Hirsch Report since 2004-2005 when it was located exclusively on the “Hilltop Lancers” high school website (I think I found it there due to the Energy Bulletin). I have been familiar with Hubbert’s Peak and a student of oil supply since the mid-1980’s. Even so, when I read the Hirsch Report for the first time - saw who wrote it, who commissioned it - it really sent a chill up my spine. I have had the pleasure of hearing Dr. Hirsch on several occasions – both times at ASPO-USA conferences – in Sacramento and Denver. Observing how his report has no doubt affected him, personally – sent another chill up my spine.
In this most recent posting, I paraphrased the time periods stated in the Hirsch Report, for simplicity. Frankly, yesterday’s gone, and it’s what we do today and tomorrow that counts. None of us knows the timing exactly. We do know that we best “get going”. Recently I have tried to “tone it down” a bit: I think the “imminent crisis” theme turns off certain groups of folks. Regardless, there are lots of writers already making the “crisis case”, so it would seem that another approach might reach incremental people. Namely, it’s easy, fun and fashionable to use less oil, and less energy in general. Anyway, a long-winded explanation for why I simplified the Hirsch Report conclusions.
For the record, I have published the Hirsch Report conclusions in detail, previously, in “The coming liquid fuels crisis: The natural gas (partial) solution”, as excerpted here:

Many of us in the "Peak Oil community" believe that in 2008, the worldwide rate of oil production likely reached a level which, for all practical purposes, will never again be exceeded. In other words, we believe Peak Oil likely occurred in 2008. Dr. Hirsch, in the 2005 report he co-authored for the Department of Energy, said the following:
"Initiating a mitigation crash program 20 years before peaking appears to offer the possibility of avoiding a world liquid fuels shortfall for the forecast period."
"Initiating a mitigation crash program 10 years before world oil peaking helps considerably but still leaves a liquid fuels shortfall roughly a decade after the time that oil would have peaked."
"Waiting until world oil production peaks before taking crash program action leaves the world with a significant fuel deficit for more than two decades." (emphasis added) Additionally, he went on to say, "Late initiation of mitigation may result in severe consequences."
Perhaps we could say that some of the actions taken over the last several years - due to oil price signals - would count for a year or two of preparation; essentially, though, we are set up for Dr. Hirsch's "severe consequences" scenario.

On Collapse
I am against it. I have read all the books and blogs, from Jared Diamond to the Olduvai Theory to Jay Hanson, and on. The Rainwater Prophecy is linked on the blog. But so long as we are not yet “collapsed”, there is the potential for the great ingenuity of the people of our country and the world to ultimately prevail. I won’t give up hope or effort, and I trust that a lot of others won’t, either. I’m just not a fatalist; I believe we can make a difference. That doesn’t mean, of course, that we won’t have “severe consequences” to deal with.
The reality is - although there is a long ways to go, there is also “a lot going on”, much of it over the last five years. None of these steps, taken alone, will “save the world”. Symbolically, however, they represent changes in behavior and belief that if continued and extended, will have meaningful effects:

Vegetable gardening – interest has blossomed in the last few years (just ask the folks in the garden department of Home Depot).
Local food movement – on fire in various cities, all over the country; Farmer’s Markets are popping up everywhere.
Grassfed beef, pastured poultry, pork – healthier, less energy intensive; can provide scalable starting places for new family farms.
Backyard chicken movement – growing everywhere, it seems; keeping chickens is “cool”, now.
Vehicle choices – change is ongoing; there are fewer trucks and large SUV's, more small cars.
Reusable grocery bags – a small but important and symbolic step; usage is trending upwards.
Smaller, more efficient houses – witness the plethora of news coverage and books about smaller or “tiny” houses; the McMansion is no longer cool.
Small energy production – innovators continue to advance small wind, PV, solar thermal, woodgas, alcohol, algae, biodiesel, and more.

~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~

UPDATED (July 17): Added full text of Jan's comments at at the beginning. -BA
Martin Payne is an Energy Bulletin contributor.
Mr. Payne is an "upstream oil and gas professional with over 25 years of experience. Past Chairman, Houston Chapter of the American Petroleum Institute (API). Member of American Society of Mechanical Engineers (ASME), Society of Petroleum Engineers (SPE), American Solar Energy Society (ASES)."
His blog is Peak Opportunities.
-BA

BP - Macondo Incident Summary & Data: Congressional Committee on Energy and Commerce Link

2010-07-03T10:55:00.000-07:00

From the link shown below, choose the "Letter to Tony Hayward" link for the results of the Congressional investigation, and a good summary of the causes of the Macondo incident:

http://www.energycommerce.house.gov/index.php?option=com_content&view=article&id=2043:chairmen-send-letter-to-bp-ceo-prior-to-hearing&catid=122:media-advisories&Itemid=55

Take this opportunity to unite our country, not divide it!

2010-06-28T22:59:00.000-07:00

Energy Solutions
Nothing - no one energy source - is a "panacea" in itself. Can't we all agree on that? Nevertheless, we seem to continue to publish commentaries and papers that insist on attacking a premise that no one asserts! Namely, I'm not familiar with anyone, not even Boone Pickens, who says that natural gas will solve all our energy challenges. Yet, the first premise attacked by most critics is that someone has said that natural gas is a panacea, or that natural gas can make us energy independent. Likewise about additional drilling - it's not a panacea, and it won't ever make us energy independent, but we need to do it!

We need to develop every sensible energy option we have - even fossil fuel ones - while we work on ramping conservation, researching and developing alternatives and transitioning our how we live, work and eat. It will take a while - Dr. Hirsch said 10 to 20 years. Why must we continue to develop fossil fuels, and even deploy natural gas in vehicles in the meantime, during the transition? Because vehicles and fossil fuels are too ingrained in every thing we are, and in every thing we do. We just can't change that overnight - we can't stop using them one day, and shift to alternatives the next. In the meantime we've got to develop oil and gas reserves faster in order to compensate for the smaller discoveries that characterize the right hand side of Hubbert's Curve. "Saving" the reserves for a rainy day is noble thought, but not realistic with the serious situation we face. So if we choose to marginalize and destroy our oil and gas infrastructure - we will see what "Hubbert's Cliff" looks like, due to accelerating depletion. I suspect that the accompanying scenario would make Mr. Kunstler's novel look like a walk in the park.

Let's take this opportunity to unite our country, not divide it with a "fossil fuels bad, only alternative energy good" mentality. We'll be more "postcarbon" with every passing year - but we need to get on with the transition, quit bickering and pointing fingers while we continue to wisely develop and use the resources we have to get there as soon as possible.

MIT gas paper
http://web.mit.edu/mitei/research/studies/naturalgas.html

Video of the BP relief well effort
Currently there are a bunch of fine men and women working real hard, using billions of dollars of state-of-the-art equipment and techniques to control this blowout. Take a look at this video regarding the drilling of the relief well:

http://bp.concerts.com/gom/kwellsreliefwells062710.htm

How to Use Less Oil (and why we must keep drilling)

2010-06-05T07:59:00.001-07:00

As we have learned recently, oil can make quite a mess. Nevertheless, oil is a wonderful substance. The world's endowment of oil is/was largely responsible for sponsoring many of the advancements that have brought sufficient food and longer, easier lives to many in the world. Yes, oil has also sponsored "excess", but that is in the process of correction. Oil's highest and best use is not in burning it as a fuel. As Kenneth Deffeyes said in Hubbert's Peak, someday our grandchildren will ask/exclaim, "You burned all those wonderful molecules?!"

Since about 70 percent of the oil consumed in the USA is used for transportation, "Peak Oil" is really a transportation issue (initially, at least). It would be wonderful to be able to snap our fingers and have electric car or PHEV replacements (where applicable), but the electrical storage issues are still not resolved (lithium supplies for batteries, or a new technology), so production and replacement can't yet take place on a large scale.

The bottom-line is that we must have sufficient fossil fuels as we transition. And we will have to maintain a substantial level of oil and gas exploration and development activity - in fact an increased level of activity - as the law of diminishing returns takes over on the right hand side of Hubbert's Curve. If we continue to follow what seems like the vogue path of seeking to marginalize our fossil fuels industry, Hubbert's Curve will transform into Hubbert's Cliff, with even more catastrophic results at all levels of society and the economy. Such talk and action also drives a divisive stake into the heart of our nation. Fossil fuels or "clean", alternative energy? The reality is, as we transition over the next 20 years or so we will need substantial quantities of fossil fuels AND ramped-up conservation and alternative energy sources. In 40 years we will still need fossil fuels, but far less will be available. So, we must preserve and even enhance our fossil fuel infrastructure even as we ramp up alternative energy sources and implement substantial conservation.

Currently our nation and the world have a substantial endowment of recoverable natural gas. Natural gas emits half the carbon of coal, when burned. Further, natural gas can be used directly in vehicles, with fairly easy conversions using existing technology. Natural gas can also be a carbon-neutral, renewable fuel when it is produced from waste biomass (manure, landfills, etc.). So, given the impending oil shortage (currently masked by the economic downturn), and while we wait on electrical storage advances, it makes sense to convert a portion of our truck fleet, bus fleet and our passenger cars - to natural gas. If you want to see a lot of natural gas vehicles in action, just go to Italy, or Bolivia.

In an effort to continue to try to explain "Peak Oil", and also to make the case that natural gas is a suitable transition fuel for vehicles, the following presentation was developed for and delivered to the Gulf Coast Association of Geologic Societies, at their annual convention on September 27, 2009:

Statistics and Shale Plays ...

2010-06-05T07:48:00.000-07:00

“There are three kinds of lies: lies, damn lies and statistics.”

Mark Twain

Recently it was noted that there are over ten times more bacterial and fungal cells on or in the average human - than there are human cells! (http://en.wikipedia.org/wiki/Human_flora)

Along comes a statistician, let’s call him Bob. Now Bob went to a good school, he’s a good public speaker, and he keeps his shoes shiny. All-in-all, Bob is a pretty credible guy. Bob works with a fellow named Billy Red. Billy’s a good guy too, but he’s in the kangaroo business and frankly, he’s a little miffed that humans are getting all the attention these days! Nevertheless, Bob is able to maintain his objectivity. Bob looks at the above discovery, does the math again himself, and states his conclusion, “Humans are not humans at all - they are bugs and mold!” “Why do you say that?”, someone asks. “Well, over half the cells on the subjects analyzed are bugs and mold, so therefore humans must be … bugs and mold!”, Bob replies.

Bob goes on to say, “Look, I wish it weren’t so. All I do is look at the FACTS. I’d be happy to go over this with anyone. I truly wish I was wrong.” What could be more reasonable?

Along comes Sam. Sam is a noted biologist with a long, distinguished career. In fact, Sam is currently director of the biological survey for his adopted state. Sam’s state mainly has birds, not humans. Over the years though, Sam has known a few humans and he’s found them, well … a little weird! Sam’s impressed with Bob, and believes he’s telling the truth. Sam recommends Bob and Bob’s work, and he goes on to exclaim, “Y’all better pay attention to what Bob has to say.” And so it goes that Bob’s credibility grows, and it’s not looking good for humans remaining to be classified as humans …

Who’s telling the truth here? What are the facts? Are humans, humans? Or are they bugs and mold?

As you can see, statistics don’t always tell the whole story. In fact, in this complicated world we can get badly misled if we limit our analyses to simple, reductionist statistics. Statistics can be quite helpful – but only if they are used in parallel with a full and correct understanding of all the available objective and subjective data.

Unfortunately, in this complicated world none of us has time to become “expert” on all things. As a result, we are forced to rely on simplifications or summaries done by others. Problems can ensure if those we are relying on have not gathered and correctly analyzed the requisite data, but instead have made statistical observations based on incomplete data or analyses. Further, in some cases it may not even be possible to come to a correct conclusion – even with all of the available data and the best analysis! The danger of statistics lies (pun intended) in the fact that statistics ALWAYS yield a numerical answer – an answer which may be premature, convoluted or just plain wrong.

So, statistics are not facts at all; rather, statistics are just numbers that may - or may not - represent a realistic analysis of a situation.

The Complexity of Shale Plays
Various rock parameters are required in order for a geographical portion of a given of a shale play to “work”. Just like the rock you see on the side of the road, these parameters vary across an area. We humans tend to subdivide things into convenient, already-existing “buckets”. In the case of land areas, counties are already defined, so we might say Blah County is “good”, and Blah Blah County is “not good”. The fact is, even in a play where 40 counties are “good”, there are always the “edges” - with “edges” representing the transitions between “good” and “not good”.

The noted Marcellus Shale expert, Dr. Terry Engelder of Penn State, has come up with the useful analogy of “toast” to explain the important shale gas geochemical parameter known as thermal maturity (sometimes referred to as Ro or Tm). In his slide show, Dr. Engelder shows partially cooked toast, charred toast, and toast that looks like it was cooked “just right”. The genius of this analogy is that we can all relate to properly cooked toast!

As it turns out, rock parameters don’t necessarily honor the county lines we have drawn. So, on the “edges” of a play part of a county may be perfectly cooked toast, and part of it may be burned toast! How do we find these edges? Sometimes data exists, but often it is spotty or undependable for whatever reason. Sometimes two analysts can look at the same data and come up with two different answers. Sometimes two analysts can come up with … five different answers! Also, rock parameters don’t follow straight lines on a map; they curve around – in here, out there.

So, often we have to find the edges the hard, expensive way - we have to drill multi-million dollar wells. And sometimes even when Company X thinks they know where the edge is, Company Y doesn’t have that same data. So, Company Y may wind up drilling a non-commercial well in an area that Company X had already condemned as “not good”. In this case, Company Y is viewed with disfavor. Given the full alphabet of companies out there, and given the infinitely curvy lines of rock parameters, there can be a lot of failed efforts along an “edge”. All these failed efforts can go into a statistical exercise that views a given portion of a given shale play in a simplistic way. Should the play in general, and Company X in particular, be condemned for the actions of Company Y and its alphabet brethren?

On the other hand, sometimes Company Y may have the same data as Company X, but Company Y thinks the data is suspect, or incomplete, or just has a different interpretation. So, in this case, Company Y takes the risk and drills a successful, multi-million dollar well. Company Y becomes a hero and in fact by extending the play in this direction, Companies Z, A, B - and even Company X - may benefit! Meanwhile, the royalty owners in this new area and the schoolchildren of that state (who sometimes get the benefits from the production taxes paid by Company Y and its royalty owners) become major beneficiaries of Company Y’s “guts”. Such is the nature of the oil and gas exploration business in unconventional shale plays!

Changing Our Hearts

2010-01-20T19:23:00.000-08:00

Changing - the change or changes we'd all like to see ... begin with us.
Our - inclusive; we're all in this together - "our" hearts means our own, individual hearts, our Austin, our Texas, our USA, our World hearts ...
Hearts - most folks are familiar with the phrase "what's in your heart"; heart is essentially synonymous with love, which is fundamental to the Greatest Commandment.

Note: A new year is a time of renewal, so it should be with a "blog". The above is actually my entry to a "vision statement contest" at church. I accidentally published it here on the Peak Opportunities blog, when I thought I was submitting it to the church blog. I was about to remove it when I thought, no, it belongs here as well.

Most of us in the "Peak Oil Community" believe that "Peak Oil" is essentially old news, by now. This despite the fact that probably 75 % of folks have never heard of it, by my crude estimates (little pun problem I seem to have). Of that 25 % who have heard of Peak Oil, maybe only half of those understand it and believe it. Nevertheless, from here on we'll try to focus more on the Peak Opportunities - the action items - and less on "proving up Peak Oil".

Sure, we'll have the occasional news on the Cantarell declines, and a few statistics here and there. However, we'll try to focus more on what we can do, what we can change. Not that we haven't had some big picture ideas before (see our The Coming Liquid Fuels Crisis: The Natural Gas Partial Solution.) But from Peak Oil we'll drill down (can't seem to help it) as we can - and we'll "drill up" (philosophize) a little, too.

Cantarell Update, September 2009: The Peak Oil PosterChild Continues To Plummet

2009-09-22T14:31:00.000-07:00

As we last reported, in May 2009, Cantarell Field's April 2009 production averaged 713,000 barrels per day, down from 862,060 barrels per day in late 2008.

Now, according to a September 9, 2009 article in the Wall Street Journal, Cantarell is down to 500,000 barrels per day. (presumably for August 2009, and not yet plotted on the above graph). This represents a 30 % drop over only 4 months, which far exceeds the last calculated decline rate of 35 % PER YEAR.

A subsequent article in the Oil and Gas Journal, dated September 14, 2009, quoted PEMEX's recent prediction that total production will average 2.5 MMBO/D in 2010 (Mexico's total oil production averaged 3.4 MMBO/D in 2004). The article notes that this rate is down 4 % from the first half of 2009, and down 5.7 % from previous estimates. According to PEMEX, actual production was 2.561 MMBO/D in July 2009, so it is difficult for us to imagine that production could average 2.5 MMBO/D in 2010, given the precipitous decline of Cantarell and small increases seen in the KMZ and Chicontepec fields.

The OGJ article went on to state that exports were 1.2 MMBO/D in the first half of 2009, down 14.8 % from that period in 2008.

Background: Cantarell Field was producing 2,100,000 barrels per day in late 2004. Cantarell, at that time, supplied around 2.5 % of the world's liquid hydrocarbons (not just crude, but also condensate and natural gas liquids). So, here is a substantial portion of the world's oil production that is declining at a rate MUCH greater than 5 % per year ...

Oil exports supply 40 % of the Mexican government's annual budget. (This figure was reported in the recent WSJ article, but it has been quoted since 2007, or thereabouts.)

A few important questions:

What will replace oil exports in Mexico's revenue budget - in a couple of years or less - when they have no oil to export?
Mexico will need to import oil shortly after the exports stop - where will they get the oil, and what will they use to pay for it?
Where will the US obtain the 1.3 MMBO/D that Mexico has supplied, in recent years?

For more information, please see our previous postings at:

http://peakopps.blogspot.com/search/label/Cantarell%20Field

Demand and more - 7/13/09

2009-07-14T14:14:00.000-07:00

From Tom Whipple, 7/13/09:

China is the only economy that *claims* to be making progress, this despite a 21 % drop in exports ...

Chinese passenger vehicle sales rose 48 % in June 2009 ... full year sales for 2009 estimated to be 11 million. (MP Note: Some Chinese-released stats have, in the past, been "less than perfect".)

Vehicles on the road in U.S.: 250 million, 142,000 powered by natural gas ...

IMF forecast says world economy will expand 2.5 % next year ... (MP Note: ???)

IEA says demand for oil will increase 1.4 MMBO/D next year, or 1.7 % ... (MP Note: same as above.)

NGV incentives: Are we making some progress here?

2009-07-14T14:08:00.001-07:00

From Tom Whipple, 7/13/09 update:

"A bill to increase tax incentives for buying vehicles fueled by natural gas is making its way through Congress."

FIT's, ART's, RPS', RES', Net Metering, more - Important New Renewable Energy Terminology

2009-07-14T13:55:00.000-07:00

Below is an excellent outline, dated June 2009, which works towards explaining the basics of Feed-In Tariffs, Advanced Renewable Tariffs, Renewable Portfolio Standards, Renewable Energy Standards and Net Metering:

Feed-in Tariffs: A Mechanism, Not a Goal
June 2009

News Flash: City of Gainesville FL, Vermont and Ontario Canada Passed FITs in 2009
What are Feed-in Tariffs (FITs)?
• A FIT is a per kilowatt-hour (kWh) payment for electricity produced by a renewable resource.
• The amount paid differs by technology; for example, rooftop solar PV gets a much higher payment than larger-scale wind, which is already cost-competitive. Technologies we want to develop further, such as building-integrated thin-film solar, get a higher payment to encourage installation and innovation.
• The amount paid also varies by geographic location (to encourage the development of all locations, not just the prime locations); and by size (to encourage smaller-scale projects).
Various Names for Feed-in Tariffs
• “Feed-in tariff” is a literal translation from Germany’s 1991 Stromeinspeisungsgesetz (StrEG), the law on feeding electricity into the grid, and is the term used in Germany, France and Spain.
• North Americans have used the term “payments” rather than “tariffs” because many people associate the term “tariff” with “tax.”
• Other terms include Renewable Energy Payments and Renewable Energy Producer Payments.
• FIT advocates in Ontario, Canada are using the term Advanced Renewable Tariffs (ARTs), which uses different payments that vary by technology, size, application, and resource intensity; term “ART” is also used in U.S.
What are FITs in North America and the U.S. called?
• Like FITs, ARTs are differentiated by technology, project size, and application.
• Vermont and Ontario Canada just passed FIT laws in May 2009 (see below).
• California is currently considering a number of FIT bills.
How Do Feed-in Tariffs Enable Distributed Generation?
• FITs encourage development of renewable projects of all sizes, types and locations, from residential rooftop solar systems to farms of large wind turbines. When well designed, these differentiated tariffs result in the geographical distribution of various kinds of renewable energy. While FITS can be used to develop centralized renewable sources of generation, they are best known for increasing the role of distributed generation (DG).
• FITs also provide long-term investor security and replace imported fossil fuel with domestic jobs – even if more expensive in the short term.
What Renewable Energy Sources Are Included?
• FITs can be used only for solar, or only for wind. Germany, France, and Spain’s FITs are for many different technologies, including onshore and offshore wind, rooftop and ground-mounted solar, hydro, biomass and biogas, geothermal, and concentrating solar power.
How Are the Tariffs Calculated?
• By a transparent political process with input from industry, independent consultants, and users.
• In Advanced Renewable Tariffs, prices based on the cost of generation (from a specific source such as offshore wind) plus a reasonable profit.
• Tariffs are designed to be high enough to spur development but not create excessive profits.
Do Feed-in Tariffs Eliminate Environmental Review?
• No. Projects using feed-in tariffs must comply with the same laws and environment requirements as any other projects. Feed-in tariffs typically only apply to the mechanism for getting access to the grid, for selling electricity to the grid, and for setting the price that is paid for the electricity.
What Are the Key Elements of Advanced Renewable Tariffs?
• Simple, comprehensible and transparent,
• Simplified interconnection,
• Sufficient price per kilowatt-hour to drive development,
• Long contract length to reward investment, and
• Tariffs differentiated by technology, size, and resource intensity.
• NO credits, NO monitoring, NO penalties and NO caps.
FITs and the Public Utilities Regulatory Act (PURPA)
• Under PURPA, the price for long-term power contracts = utilities avoided cost of fuels.
• German FITs decrease every year; so acts to spur immediate investment.
• PURPA does not prohibit FITs, only regulates qualified facilities, or QFs. States retain jurisdiction to regulate electricity rates and special programs for developing RE.
Other Reasons to Embrace FITs
• Money spent locally re-circulates 300-600% more than money sent out-of-state for fuel etc.
• Arizona sends about 60% of its electricity and heating dollars out of state.
• FITs encourage local renewable energy projects in diverse locations, so that generation can be truly distributed.
Solar in U.S Much Better than Germay: 20% Efficient in U.S. v. 11% in Germany
• RPS = goals; FITs = mechanism. Think long-term, building manufacturing and skillset and long-term value v. short-term cheap fossil fuels.
Why Should We Use Feed-in Tariffs?
• FITs have been successful at developing large amounts of geographically dispersed Renewable Energy (RE) quickly, at low cost and with minimal administration.
• Because FITs are not dependent upon the tax status of the owner – in other words, only valuable for the tax credit -- they are available to everyone.
• FITs promote Distributed Generation (DG).
Where are FITs being used right now?
• FITs helped Germany achieve 53% of the world’s total installed solar PV; and are used in Spain, France and Switzerland as well; Germany also one of the top wind markets in the world.
• Many European countries are implementing FITs, where a vigorous debate is taking place.
• Ontario Canada and California have implemented FITs.
• Since 2007, FITs are being increasingly considered in various states: HA, IL, MI, MN, OR, RI, WA, WI.
• Gainesville FL implemented a FIT in February 2009; is similar to Germany’s FIT
• - pays 32 cents/kWh for solar PV with a 20 year contract
• - program hit its 4 MW goal for 2009 before it even started; 4 MW for 2010 also sold out;
• - However, state of FL failed to pass a RES despite plea from Governor Charlie Crist;
• Washington state (WA) has a special net metering program that pays up to 54 cents/kWh for electricity from solar PV components that were assembled in-state.
• State of Texas has also killed a RES; since legislature only meets every two years, can’t reconsider until 2011.

What is the relationship between Net Metering, FITs and Renewable Portfolio Standards?
• Net-metering allows ratepayers to produce electricity on-site – for example, with rooftop solar – and run the kilowatt-hour meter backwards. Net metering allows a customer to offset their own electricity use or a slightly larger amount.
• In Arizona 125% of use can be net metered.
• FITs, unlike net metering, have no cap – in other words, a customer can put up as many solar panels or wind turbines as he/she wishes, and get paid for electricity produced.
• FITs pay for electricity delivered to the grid. To use FITs, you need a kilowatt-hour meter that measures the electricity delivered for sale to the grid.
• There are “hybrids” being introduced, such as a program in Florida that would allow a customer to offset his/her own use through net metering; but also pay that customer XX cents/kWh for solar electricity fed into the grid in excess of the customer’s own use.
• FITs can be implemented alongside net metering.
What’s the difference between a Renewable Portfolio Standard (RPS) and FITs?
• An RPS is a target, while FITs are a mechanism.
• For example, Arizona’s RPS requires regulated utilities to get 15% of electricity from RE by 2025, with an eventual 30% of that electricity to come from Distributed Generation (DG). The FIT will make it easier to get to the DG goal, because it will spur smaller-scale, local DG.
• Currently, about 26 states have mandatory RPSs; and six states have voluntary RPSs.
Can Feed-in Tariffs Work in Parallel with Net Metering and RPSs?
• Yes, the feed-in tariff programs proposed in North America have all been designed to work alongside and in parallel with net metering and renewable energy standards.
Will Feed-in Tariffs Allow “Double Dipping” into State Rebate or Subsidy Programs?
• Feed-in tariffs are designed to provide sufficient financial incentives without capital grants, rebates, or other capital subsidies. Thus, in most states or provinces where they have been proposed, those who opt for feed-in tariffs cannot also use capital grants or rebates.
• However, in the United States the federal Investment Tax Credit (ITC) for solar systems and small wind turbines has been extended for eight years. Most U.S. feed-in tariff programs will allow the federal ITC alongside the feed-in tariff.
FITs in the U.S.
• In 2006, several states were looking at FIT-like policies; by 2008, about a half dozen states had introduced FIT bills, another eight states are considering; while WA, OR and WI enacted utility-based FITs that are different than Germany’s or Vermont’s FIT law.
Vermont’s New FIT Law
• Passed May 2009, is the first true FIT passed in the U.S., mirrors Germany’s FIT;
• Would implement a pilot FIT policy:
• - costs are borne by ratepayers, not taxpayers
• - program cap is 50 MW; project size cap is 2.2 MW
• - Wind tariff: less than 15 kW is 20 cents/kWh; over 15 kW is 14 cents/kWh
• - Landfill and biogass tariff: 12 cents/kWh
• - solar tariff is 30 cents/kWh
• - tariffs are differentiated by size, technology
• - tariffs are based on cost of RE technology, plus profit
• - Profit based on Rate of Return for VT utilities
• - regular review of tariffs by Public Service Commission

Washington, Wisconsin and Oregon Have FITs
• WA state and WI have tariffs that pay more than the PURPA-defined “wholesale” rate.
• WA has a special net-metering program that pays up to $0.54/kWh for five years for generation with solar photovoltaics (PV) components that were assembled in the state. This tariff is well above the wholesale cost in the Pacific Northwest.
• Several utilities in Wisconsin also pay special incentive rates above wholesale for small solar, wind, and biomass generators.
Six States with FIT Legislation Introduced: CA, MI, MN, IL, HI, RI
• Relevant features include: capacity limits (for example, capped at 1.5 MW); contract terms of 10-20 years; similar to net metering in that generators can either sell 100% or just sell excess electricity; pricing based on time-of-use rather than individual technology; see table below for general information from the six states. Highlights from each state below:
• California: initial cap of 1.5 MW increased to 20 MW; 250 MW total statewide cap increased to 478 MW. California’s peak summer rate is 31 cents/kWh so payment by time-of-use makes sense. California Energy Commission holding workshops, and concluded that state RPS (Renewable Portfolio Standard) needs more transparency, less complexity, and full valuation of RE.
• Michigan: Introduced by State Rep. Kathleen Law in 2007 (HB5218), similar to Ontario FIT; 20 year, technology-specific payments that start at 10.5 cents/kWh for larger wind up to 25 cents/kWh for small wind.
• Illinois: initial FIT bill met with significant opposition, then amended to replace FITs with net metering that would compensate generators for excess solar PV generation at 200% of the retail rate (14 cents/kWh).
• Minnesota: Rep. David Bly introduced HF3537; similar to Michigan proposal. MN addition: generators must be majority-owned by Minnesotans. MN has history of cooperative ownership; bill is built on existing law: Community-Based Energy Development (C-BED); C-BED task force looking at how to improve and whether it can be structured like FITs. Any actions taken by MN will affect Nebraska, South Dakota, Iowa and Ohio since these states are also considering C-BED legislation.
• Rhode Island: Rep. Ray Sullivan introduced H7616 in 2008; based on Michigan model but with key differences; PV payments are significantly lower than other bills; resources without specific rates are guaranteed a payment that’s 1.15 times greater than avoided cost.
• Hawaii: several FIT bills introduced in 2006-2007 (HB 1748-Kaiki; SB1223-Menor; SB1609-Hannabusa). All bills included 20 year, 0.70 cents/kWh FIT for solar PV up to 20 MW. FIT rates apply only to excess electricity from net metered systems. FIT capped at 5% of peak demand; rate for solar PV is 0.45 cents/kWh. Bills did not pass in 2007 but will be re-introduced.
States that are considering FITs:
• Florida: a number of FL organizations have endorsed FITs; Florida’s clean energy plan supposed to be good, according to Hunter Lovins.
• Maine: MidCoast Green Collaborative calling for FITs;
• Massachusetts: considering; Governor Deval Patrick announced target of 250 MW of solar electricity by 2017.
• New Jersey: one of the first states to have a solar set-aside target; Board of Public Utilities analysis determined that FITs would increase investor security and comparatively low ratepayer impacts.
• New York: considering.
• Vermont: SB209 (Lyons) introduced, includes 15 year contract and directed Vermont Public Service Board to set cost at levels “adequate to promote” renewable energy; Vermont allows environmental externalities to be taken into account.
• Oregon: Oregon Department of Energy’s Wind Working Group recommended looking into FITs.
• Wisconsin: Governor set up Global Warming Task Force, which is considering a FIT.
General Terms and Prices for FITs in Various States
• Contract term: 20 years
• Caps: 20 MW common; 1.5 MW per system in IL; 51% ownership by MN residents in MN;
• Costs: wind has a lot of variation, depending on location and size, from 10.5 to 25 cents/kWh; solar PV: from 48 to 71 cents/kWh, depending on type (ground-mounted gets lowest tariff, while building-integrated PV gets the highest); biomass 10.5 to 14 cents/kWh; landfill gas 8.5 to 10 cents/kWh.
• IL innovation: all excess kWh generated through net metering pay 200% of retail rate.
Federal FIT: proposed by Congressman Jay Inslee from Seattle (WA-1st CD); includes:
(1) guaranteed interconnection and uniform minimum standards;
(2) mandatory purchase through 20-year fixed rate contracts; and
(3) rate recovery through regional national systems benefits charge.
Concerns with Federal FIT:
• States are protective of ratemaking authority; precedent goes back to 1935 Federal Power Act; in 1978 Congress passed PURPA, and Section 210 requires all utilities to connect non-utility power producers and to purchase electricity at the “avoided cost” rate; but implementation of “avoided cost” rate left to individual states.
• Expansion of FERC’s power over states a problem;
• National benefits charge would be a line item on customer bills;
• Conventional industry doesn’t like bill, but solar industry isn’t necessarily united behind Inslee.
Canada and FITs: Ontario Passed Law May 2009
• Province of Ontario Canada passed FIT law May 2009; the Green Energy and Economy Act
• Bill was introduced in November 2008; 87% of people polled support
• Estimate it will create 90,000 jobs per year in conservation, RE and grid upgrades
• Specifics:
• - provides clear, transparent path for approval of RE projects
• - domestic content requirements for RE projects to jump-start manufacturing
• - allow local communities and tribes to build, own and operate RE projects
• - specific rates for different technologies
• - right to connect to the grid
• - make EE (energy efficiency) a key purpose of Ontario’s building code
• - require home energy audits before sales
• - set conservation targets for local utilities
• - paying 42 cents/kWh for solar PV guaranteed for 20 years
• Ontario already has about 1,000 MW of RE online since October 2003; will bring 1,200 more RE MW online in 2009; RE investments total $4 billion so far.
• The Ontario Power Authority (OPA) did a survey to determine interest in building RE, and received bids from 150 developers for 15,000 MW of RE (13,000 wind and 1,200 solar PV).
• Builds on Ontario’s initiative to eliminate coal from power supply.
Who can benefit from FITs?
• Anyone, not just utilities. They are more equitable than Renewable Portfolio Standards (RPSs) because homeowners, farmers, small and large businesses and cooperatives can all participate.
• Anyone who installs Renewable Energy (RE) can profit, spreading out the value among citizens and not just owners of large-scale power stations.
• The cost of Renewable Energy (RE) has come down 80% over the past twenty years. Just twenty years ago wind was expensive – now it’s usually cheaper than natural gas and sometimes as cheap as coal.
Feed-in Tariffs and Tax Credits
• No. Feed-in tariffs are simply payments for generation – not taxes or subsidies. Thus, FITs are more egalitarian because they allow everyone to be paid for generating electricity, even those who do not pay a lot in taxes.
• FITs: no credits, no monitoring, no penalties and no caps; so easier to administer.
Are Feed-in Tariffs Just Another Subsidy?
• Feed-in tariffs are not subsidies. They do not subsidize the cost of the equipment used to produce renewably-generated electricity, like solar panels or wind turbines, nor do the payments come from taxpayers.
• Instead, feed-in tariffs are simply payment for the generation of electricity.
• The idea behind FITs is that there’s a benefit to all citizens to invest in and build renewable energy. The payment for Renewable Energy (RE) – small or large wind, or solar PV, biogas, landfill gas, geothermal etc. – is determined by the cost of production, plus a small profit.
• If FITs had the same payment for all types of RE, then the U.S. would only build wind, because wind is always cheaper than solar. Solar payment is higher to spur innovation and reduce costs.
Are Tariffs Taxes?
• No. Tariffs are the rate paid for commodities like electricity. An electricity tariff is the price paid per kilowatt-hour of electricity generated.
Who Pays for Feed-in Tariffs?
• Ratepayers pay for FITs through charges on their electric bills.
• There are also programs in most states and provinces that protect low-income consumers from paying high prices for their electricity, especially during the winter months.
How Much Do Feed-in Tariffs Cost Consumers?
• In Germany in 2007, the average household paid less than $50 per year for the world’s largest concentration of wind turbines, solar panels, and biomass plants, and the 250,000 new jobs these industries have created; 40,000 people were employed in PV manufacturing.
• FITs added 0.6 cents/kWh to retail rates.
• In Germany and Spain, the additional cost of renewable energy is modest because the costs are spread fairly across all consumers.
• The German government estimates that the actual cost is near zero, because the benefits of reducing carbon emissions and other air pollutants, as well as reducing the cost of expensive fossil-fired generation offsets the cost of the renewable energy.
Do Feed-in Tariffs Allow You to Sell “Back” to the Grid?
• No. Feed-in tariffs allow you to “sell” to the grid, not “sell back” to the grid. Selling “back” to the grid implies that you are already buying from the grid; that is, that you are a customer and already have a kilowatt-hour meter. Feed-in tariffs allow you to generate electricity and sell it to the grid even if you are not presently a customer.
• Feed-in tariffs allow the development of green-field sites, such as the installation of wind turbines that are owned by groups of neighborhood investors, cooperatives, or traditional business.
How Do We Know That Feed-in Tariffs Will Work?
• Like any policy mechanism, feed-in tariffs can be misapplied. The most common problem is setting the prices, or tariffs, too low and not attracting the desired amount of development.
• Another common problem is setting a limit on project size. However, where there was serious political commitment for the programs to succeed, they have done so. This is seen especially in Germany, France, and Spain.
• Germany reduced CO2 emissions 18.5% by 2006;
• Germany on target to get 25% of electricity from RE by 2025;
• 400,000 German households have installed solar PV.
Germany – Renewable Energy and FITs
• Largest wind project in Germany is about 100 MW and owned by dozens of entities;
• Farmers in Germany are working with “middlemen” like John Deere to put up community wind;
• Original Germany goal of 12% RE by 2010 was at 14.2% in late 2007;
• Increase in RE in Germany: was ~6% in 2000; 14.2% by 2008;
• In Germany, PV market is: 10% ground-mounted field systems; 40% residential; 50% commercial.
• TWO percent of all of Bavaria’s electricity comes from solar but on sunny days up to 20% from solar PV; and no problems from this short-term high penetration.
• German wind is so-so but has over 20,000 MW of wind (compared to total wind in U.S: 28,000 MW; Germany as sunny as southern Alaska.
• German RE industry: $40 billion in revenue 2007; up 10% from 2006 and four times 2000.
Utilities in Germany v. U.S.
• All German utilities are regulated; with full retail competition and applies to both publicly owned and privately owned utilities; both types own generation and buy wholesale markets;
• German wholesale and retail prices higher: 15-20 cents/kWh wholesale; 25-40 cents/kWh retail.
• Vast majority of distribution (and some transmission) lines are buried in Germany;
• German residential meters read only once/year, but bills are sent monthly (with year-end true-up).
Why were Germans so supportive of the FIT?
• Citizens were supportive because they could participate in, and profit from, FITs.
• With RPSs, only large-scale utilities can participate;
• Net metering focuses on “avoided generation” cost which does not reflect the true value of distributed solar feeding into the grid at peak times;
• Germany placed a premium on building its RE manufacturing base and accompanying jobs and skillsets. Germany sees traditional industries such as steel, chemicals and automobiles moving to lower cost regions, growing slowly or not growing at all.
Cost of FITs in Germany
• FITs add 0.06 cents Euro to a retail rate around 0.19 cents Euro per Craig Morris, author and journalist (Energy Switch: Proven Solutions for a Renewable Future).
• Per municipal utility Badenova located in Frieburg Germany, in 2007 the FIT cost US$52.00 for a three person family for a year – less than 5% of total electricity costs.
External Benefits of RE Estimated at $4.3 billion Euros Annually
• Most “external” costs due to pollution from coal and lignite (cheapest and dirtiest form of coal).
Germany and FITs: Key Data on Electricity from RE and Employees in RE

Key Data on German Renewable Energies 2006 – 2007
www.petiteplanete.org and the German Environmental Ministry

2006 2007 % change
Share of RE in total gross electricity consumption 11.7% 14.2% +21.4%
Share of RE in total final energy consumption for heating 5.8% 6.6% +13.8%
Employees in RE sector 236,000 249,000 +5.5%

• Germany Exported More Goods from 2003 to 2007 than the U.S., China, France and Japan: www.countryreports.org
What about integrating RE into the grid? Aren’t there problems?
• Research shows that even with high grid integration of 20-30% solar into the grid, there aren’t integration problems.
• Utilities are finding solar provides grid stability.
What are Degression Rates?
Degression rates = declining tariff due to expected lower future cost of RE; however, sometimes the cost doesn’t always decline – cost of wind energy from 2006 to 2008 increased.
Is Legislation Required to Implement Feed-in Tariffs?
In some states FITs can be implemented administratively; most municipal utilities can implement directly.

Where Can I Find More Information on Feed-in Tariffs?
There are several web sites that feature news and articles about feed-in tariffs. The most comprehensive site can be found at http://www.wind-works.org/articles/feed_laws.html. On this page there are links to more detailed information on the following subjects.

Books on Feed-in Tariffs
There several books with detailed information on feed-in tariffs and renewable tariff policy. You can find information about these books at the links below.
• Feed-in Tariffs by Miguel Mendonca--a Review
• Energy Switch: Proven Solutions for a Renewable Future
• Switching to Renewable Power by Volkmar Lauber
Research Sources:
Solar Fact Finding Mission to Germany for Utility Decision Makers; Summary Report, June 9-13, 2008, Solar Electric Power Association: http://www.allianceforrenewableenergy.org/2008/07/solar-fact-find.html;
Feed-in Tariffs and Renewable Energy in the USA – a Policy Update, by Wilson Rickerson, Florian Bennhold and James Bradbury, May 2008: http://www.wind-works.org/FeedLaws/USA/Feed-in_Tariffs_and_Renewable_Energy_in_the_USA_-_a_Policy_Update.pdf
Craig Morris, cm@petiteplanete.org, author of Energy Switch: Proven Solutions for Renewable Future, a book about FITs www.petiteplanete.org

Oil Demand

2009-06-25T20:03:00.000-07:00

As someone who seeks to determine what is "really" going on - oil supply and demand-wise - this author finds the constant barrage of varying petroleum statistics to be confusing and essentially useless. Most useless are the inventory stats that show "gasoline inventories up", "distillate inventories down", "crude up", etc. - and usually by only a few percentage points. However, these are often picked up by the media to explain some minor movement in oil prices.

We are constructing a "reported demand matrix" which summarizes reported demand drops over the last few years, across a number of categories. However, this "demand matrix" currently remains a "confusion matrix".

In the meantime, here are some stats from Tom Whipple of ASPO-USA and the Falls-Church News-Press, from June 25, 2009:

Total demand for petroleum products in the US: down 6.6 % YOY

Distillate demand (which is mostly diesel at this time of year): down 9.3 % YOY

Jet fuel demand: down 13.9 percent, YOY

Gasoline consumption: up slightly (prices $1.40 less than last year)

Many of us believe liquid production peaked in 2008, and that initial declines should be in the 4-5 % per year range. So it looks like, on a gross estimate basis, demand destruction is outrunning Peak Oil, for now. On the other hand, Mexico, Venezuela and Nigeria - the third, fourth and fifth largest suppliers of imported crude to the US (not necessarily in that order) are experiencing catastrophic declines or loss of production for other reasons. More on that in the future.

Raymond James reports on Mexico's Oil Production Decline

2009-06-17T07:05:00.000-07:00

On June 15, 2009, the highly-regarded energy investment banking firm of Raymond James published a brief discussion of Mexico's oil exports, and of Cantarell Field. Their Raymond James Energy "Stat of the Week" paper was titled "Aye Carubma! Mexico's Oil Production Continues to Slide".

As previously noted on this blog, the Wall Street Journal picked up on the significance of this issue in early 2006. Nevertheless, most folks have never heard of Cantarell Field, and don't understand the significance of the near term loss of 1.4 million barrels of oil per day (MMBO/D) of oil imports into the United States, from Mexico. Nor do most folks realize that oil revenue provides some 40% of the total revenue for Mexico, the country! What happens when most of this goes away, in a year or two?

Highlights from this article:

Mexico's crude production currently accounts for about 7% of Non-OPEC production, and roughly 4 % of the world's.

"The falling output is the result of steep decline rates from maturing oil fields (mainly Cantarell Field), a lack of foreign investment, and a high tax burden on Pemex." (MP Note: Their deepwater needs to be developed, and they need help from US and other foreign companies in order to do so. And "living off PEMEX" needs to be stopped. Unfortunately, neither will make up for the decline of the huge, unique, now elderly field known as Cantarell.)

"These declines are so bad that Mexico may become an oil importer within the next five years." (MP Note: emphasis is theirs, and it understates the problem. What will they use to pay for the oil? What will they use to pay for the things that their oil revenue currently pays for?)

As we have mentioned in the past ,Cantarell Field in particular, and Mexico in general, are "Poster Children" for why some of us are really concerned about what is sometimes called "Peak Oil". Namely, we're not finding any more of these wonderful, easy to develop and produce, supergiant oil fields (Tupi doesn't compare), and production from the ones currently producing in the world can go away very, very quickly - as we see with Cantarell.

It is interesting to note that the RJ article doesn't relate the Mexico/Cantarell Field decline to "Peak Oil"; this despite the fact that their last article even focused on the fact that "Peak Oil" likely occurred in 2008! Also, they fail to point out where the US will obtain the oil it currently imports from Mexico. There may be a little surplus in the world, currently, due to the economic activity-based decline in demand, but that will likely be gone due to further depletion, within a year or two. Our guess is that it will be far sooner than five years when Mexico stops exporting.

Cantarell Update, May 2009

2009-05-22T21:53:00.000-07:00

Cantarell Field, the world's second or third largest field, produced at a rate of 713,000 barrels per day in April, 2009. In late 2008 (perhaps December) it was producing at a rate of 862,060 barrels per day. This is an annual decline rate of around 35 %, which is not unusual for a solution gas drive field. Most projections of worldwide decline quote overall decline rates of around 5 % per year. Cantarell was producing 2,100,000 barrels per day in late 2004, or around 2.5 % of the world's liquids (not just crude, but also condensate and natural gas liquids). So, here is a substantial portion of the world's oil production that is declining at a rate MUCH faster than 5 % ...

For more information, please see our previous postings.

From: www.upstreamonline.com, May 21, 2009:

Mexico oil exports plummet
By Upstream staff

Mexican oil exports plunged 18.2% in April to levels unseen since 1990 outside hurricane seasons, in more grim news for a key economic motor relied on for a major chunk of government revenues.

Crude export volumes tumbled to 1.177 million barrels per day as yields at Mexico's aging Cantarell field continued to plummet, state oil monopoly Pemex said today.

Oil production declined 4.2% year-on-year to 2.642 million bpd in April, the fourth month in a row that it has been below a targeted level of 2.7 million bpd, according to a Reuters report.

Oil revenues are a key plank of Mexico's economy and the slide in exports was the latest gloomy data for a country already knocked into recession by a drop in US demand for its factory exports.

Tourism revenues have also been dented this year by the H1N1 flu outbreak.

The government depends on oil earnings to fund more than a third of its budget.

The head of the central bank warned this week that a plan to wean Mexico off of its dependence on oil was urgently needed given the dim prospects for boosting output in the medium term.

Mexico is a top three oil supplier to the United States but production has declined steadily since 2004 as the country struggles to replace capacity lost at Cantarell.

The United States risks becoming more dependent on less politically stable sources of oil as Mexico's output dwindles.

Cantarell, which was pumping more than 2 million bpd in 2004, yielded only 713,000 bpd in April, down more than 35% from a year ago, according to energy ministry data.

The latest fall at Cantarell was partially offset by increased output at the nearby Ku Maloob Zaap offshore heavy oil field.

Ku Maloob Zaap, which recently overtook Cantarell as Mexico's biggest producer, yielded a record 814,000 bpd in April, near the maximum 820,000 bpd Pemex thinks it can produce.

Output at Ku Maloob Zaap is expected to begin to decline to 810,000 next year, however.

Pemex has vowed to end this year with oil output at 2.7 million bpd.

Executives say meaningful increases in production from the Chicontepec onshore project starting in July should reverse the trend of declining output in the first half of the year.

Analysts remain skeptical that Pemex will be able to achieve its production goals at Chicontepec, where billions of barrels of crude oil are tightly locked in isolated geological formations, making oil production costly and challenging.

Mexico's deep economic recession has cut at least temporarily Mexico's need for costly gasoline imports.

Pemex said gasoline imports dropped 4.6% to average 302,700 bpd over the first four months of the year.

Mexico depends on imports for approximately 40% of its gasoline supplies due to a shortage of domestic refining capacity.

Construction on a new 300,000 bpd refinery is due to start next year although the plant will not be finished before 2015.

The Coming Liquid Fuels Crisis: the Natural Gas (partial) Solution

2009-03-03T15:47:00.000-08:00

Recently, Dr. Robert Hirsch wrote an article titled "Peak oil - what do we do now?". This brief but content-laden article opined that Peak Oil was essentially past tense, and it correctly implied that little mitigation has taken place, to date. The last paragraph included some mitigation action ideas, but notably missing was any mention of natural gas. Perhaps it was simply an oversight; but with a future liquid fuels/transportation fuels crisis in the works due to Peak Oil, citizens of the United States of America - and their leaders - need clarification.

The truth is, current natural gas prices confirm that there is a substantial surplus of natural gas deliverability in the United States. This surplus is largely due to a rapid development of several huge gas fields which were only discovered in the last several years. These new fields are often referred to as "resource plays", or "shale gas", or "unconventional gas". They are termed "unconventional" because they produce from rock that was formerly not believed capable of being a reservoir, and also due to the fact that this rock forms both the source and the trap for the natural gas.

The two largest of these plays are the Haynesville Shale, located in East Texas and Northwest Louisiana, and the Marcellus Shale, located primarily in Pennsylvania, New York, Ohio and West Virginia. The Haynesville might cover around 3.8 million acres and, according to Chesapeake Energy's Aubrey McClendon, it might become the world's largest gas field, with 1500 trillion cubic feet (TCF) of reserves in place. The Marcellus, according to Penn State's Terry Engelder, encompasses 31 million acres, and contain 363 TCF of gas in place. These two plays are only about 2 years old - essentially old enough to have a rough idea of their potential, but brand new from a depletion standpoint. Both of these plays are excellent from both the deliverability and reserves standpoint.

To put that combined 1863 TCF into perspective, the total annual consumption in the US is under 25 TCF. So, with a recovery factor of 50 %, these two fields alone could supply the US with gas at the current rate, for about 40 years. But wait, there are lots of other fields in the US, both conventional and unconventional. And, there are even two more large shale plays, the Fayetteville Shale and the Barnett Shale. In addition to these "Big 4" shale plays there are others which are in the early phases of exploration and development.

So now you are starting to understand why this author is perplexed when folks say that natural gas may be in short supply.

Many of us in the "Peak Oil community" believe that in 2008, the worldwide rate of oil production likely reached a level which, for all practical purposes, will never again be exceeded. In other words, we believe Peak Oil likely occurred in 2008. Dr. Hirsch, in the 2005 report he co-authored for the Department of Energy, said the following:

* "Initiating a mitigation crash program 20 years before peaking appears to offer the possibility of avoiding a world liquid fuels shortfall for the forecast period."

* "Initiating a mitigation crash program 10 years before world oil peaking helps considerably but still leaves a liquid fuels shortfall roughly a decade after the time that oil would have peaked."

* "Waiting until world oil production peaks before taking crash program action leaves the world with a significant fuel deficit for more than two decades." (emphasis added) Additionally, he went on to say, "Late initiation of mitigation may result in severe consequences."

Perhaps we could say that some of the actions taken over the last several years - due to oil price signals - would count for a year or two of preparation; essentially, though, we are set up for Dr. Hirsch's "severe consequences" scenario.

So, given:

* our status regarding preparation for/mitigation of Peak Oil (or
lack thereof).
* the current and near term surplus of natural gas, and the
intermediate and longer term "sufficient" supplies.
* the ease of converting existing vehicles to natural gas.
* the ease of delivering new, dual fuel NG/gasoline vehicles.
(aftermarket conversions, if necessary)
* the existing natural gas infrastructure in terms of transmission
and distribution lines.
* the current availability of small gas compressors for home use.
(yes, they are expensive for one user, but there could be
work-arounds)
* the immediate "commuter solution" (fuel at home, drive 40 miles, return) provided by natural gas vehicles using current, off-the-shelf parts versus the still-being-developed vehicular electrical storage solutions.
* the carbon advantage of natural gas versus coal. (half our
electrical production is from coal, and natural gas produces half
the carbon when burned, in comparison to coal)
* the efficiency losses of converting coal to electricity and
delivering it for use as a car fuel.
* the badly needed jobs provided by the exploration for and the production of natural gas, the conversion of existing vehicles, the production of new dual fuel vehicles and the construction of fueling infrastructure.

... this author doesn't understand why our "policy" does not include natural gas vehicles (NGV's), as at least a partial mitigation to the coming liquid fuels crisis?

One idea, in order to solve the commercial fueling station/NGV availability "Catch-22", would be to subsidize fleets - such as school districts - to immediately incorporate NGV's into some portion of their fleet, while making the resulting fueling infrastructure available to the public. In other words, don't do a full conversion of all gasoline and diesel fleet vehicles to natural gas; rather, let's hedge our bets and get some infrastructure going by converting some of our fleet vehicles to NGV's.

In summary, given the abundance of low carbon emitting, domestic natural gas, the likelyhood for future oil supply shortages and the easy conversion technology and the need for domestic jobs, it is difficult to understand why action is not being taken to promote NGV's as a partial solution.

Endnote: Natural gas should not be counted on for a total replacement of liquid fuels. As James Kunstler would say, we need to re-think "Happy Motoring". With respect to transportation, we need to implement conservation, carpooling and mass transit retrofits, and we need to re-design where/how we work and live. In addition, we need to push the development of algal and biomass fuels, but with consideration of their total environmental costs. We should be accelerating research on electrical storage devices for vehicles so that the plug-in hybrid and full electric car can become reality. In all of the above there are wonderful opportunities for good jobs and a great economy. Natural gas can serve as a clean, convenient, low carbon transition fuel while all of the above are being rapidly implemented. Finally, a natural gas vehicle can become a renewable fuel vehicle. Yes, the same engine that runs on methane produced from a gas well will also run on methane produced from cow manure or sewage sludge, or gas that is pyrolyzed from wood or biomass (1800's technology).

My belief is not that natural gas vehicles will reduce oil imports; rather, oil imports will be reduced by physics, namely "Peak Oil". Natural gas vehicles are simply a very effective tool to help mitigate the effects of the coming liquid fuels crisis - to help get our kids get to school, to help keep our country running - while we develop alternative transportation methods and lifestyles over a twenty year period.

We need to get rid of the divisiveness of, "fossil fuels bad, alternate energy good". Likewise, we need to avoid the reverse. For the next twenty years, we need BOTH fossil fuels and alternate energy.

Putting Liquid Fuels in Perspective: A visit to Perdido

2009-01-20T23:14:00.000-08:00

A few weeks ago, in the name of Peak Oil and … fishing … we traveled to Shell’s Perdido Project in the Gulf of Mexico. Perdido is a floating spar platform in 7800’ of water. Despite the fact that the spar was put in place last summer, it has already created a mini-ecosystem that favors all marine life. Don’t tell anyone, but the fishing was great! Of course, getting there is a bit of an adventure, since Perdido is about 150 miles off the Texas coast!

Much like the engineer in the “girl and the bicycle” joke, I spent the first 30 minutes taking pictures of the spar, while everyone else was catching fish! Currently, the project is fairly unremarkable at the surface, as the topside deck has not yet been set. So, it looks much like a big floating tank, only it doesn’t move with the ocean since it is pulled tight against the seafloor with huge chains and ropes. (Yes, high-tech polyester ropes.) The spar itself is about the same height as the Eiffel Tower, but only the top 75’ or so is visible above the ocean. In the distance, Noble Drilling’s Clyde Boudreaux semi-submersible drilling rig is drilling some of the first wells, which will feature subsea controls and will be connected by flexible pipe to the Perdido spar. The Perdido project includes a number of subsea innovations.

Now, some math. When Perdido is put on production it is designed to produce a maximum of about 100,000 barrels of oil per day. That’s a lot of oil, right? And, it is domestic oil. It won’t contribute to our trade imbalance, and it won’t be subject to geopolitical problems. Perdido has created a lot of good jobs for steelmakers, welders, pipefitters, designers, engineers, roughnecks and a whole bunch of others. Overall, it is a great project for all of us - diatoms and fish included - and hats off to the folks at Shell Offshore, Inc. for getting it done.

But hold on, let’s put this $3 billion, state-of-the-art, deepwater project into Peak Oil perspective.

Cantarell Field, the world’s second or third largest field, is located in “shallow water” a few hundred miles to the south of Perdido, offshore Mexico. It is one of the “giant” oilfields on which the world has been unconsciously relying; in the case of Cantarell, since 1979. Unfortunately, Cantarell’s reserves and production make Perdido look like what we call a “stripper” project in the industry, by comparison. Cantarell had a peak production rate of 2,100,000 barrels of oil per day, as recently as the end of 2004. In 2005 it began to decline. And it had never declined, before. By the end of 2008, Cantarell was producing “just” 862,060 barrels per day.

That’s a decline of over 1,200,000 barrels, in just 4 years. And Perdido will produce at a maximum rate (before it begins to decline) of “just” 100,000 barrels per day. And it has taken 13 years to get the Perdido to the production stage, from the initial leasing!

So, you are beginning to see the picture. The old “giant” oilfields are going away (all have peaked like Cantarell, except maybe Ghawar), and our new, incredibly expensive, state-of-the-art projects that can take a decade or more - can’t begin to replace the declining “giants”. That’s Peak Oil.

What to do about it? Well, this doesn’t mean that we shouldn’t encourage projects like Perdido. Perdido is a win-win-win for mankind, the environment and the United States of America. Believe me, the fish are having a great time at Perdido! So, we should facilitate drilling and production offshore Florida and the East and West Coasts. Furthermore, in most of these areas the water is much shallower, so the projects will be simpler.

At the same time, we need to keep it all in perspective. No, offshore drilling won’t solve all of our problems. But alternatives won’t either. We need both, along with significant conservation! We need what has increasingly become known as the “all of the above solution”:

• energy conservation (this is where we can have the greatest effect, the soonest)
• mass transportation retrofits (likely optimized and marketed bus and carpool efforts)
• natural gas vehicles and stations (start with fleets to solve the Catch-22)
• expanded natural gas drilling (solve infrastructure & supply problems)
• wind energy (stop the tax credit hocus pocus - fix it for a reasonable time period)
• vehicular electrical storage research (cost effective and reliable batteries or other devices)
• design & production of more efficient cars (lighter, smaller EV's, plug-in hybrids and diesels)
• offshore drilling (offshore West Coast, East Coast, Florida Coast)
• biofuels research (enzyme & pyrolysis-based cellulosic ethanol, algae-based oil production)
• biomass (use grasses and waste products, but be cognizant of soil needs)
• nuclear plants (fast-track & standardize the design, licensing and construction, use breeders and reprocessing to minimize waste)
• coal plants (use best available, cost-effective clean up technology)
• coal-to-liquids (limited by rate, but part of the solution)
• solar thermal innovations & implementations
• geothermal and waste heat recovery installations

So, you offshore guys, don’t be tempted to scoff at the solar guys. And conservation guys, stop pointing your fingers at the “oil companies”. We need all of the above. In 2009 let’s get past the finger-pointing, and get on with good jobs leading to energy solutions! And quickly!

Endnote: For the record, given where we are now, we can’t keep liquid fuel supply flat, let alone grow it, even if we do all of the above. But, going this route could make the coming tough transition a more manageable process.

Cantarell Field at 862,060 barrels per day

2008-12-25T09:55:00.000-08:00

NOTE: See our postings of March 19, June 21 and August 31, 2008.

Cantarell Field,which first produced in 1979, is the second or third largest oil field in the world.
Cantarell's production rate was 2,100,000 barrels per day in 2004.
In 2005, production began to decline, for the first time.
As shown in the title, production has declined from 2,100,000 barrels per day to 862,060 barrels per day, in just 4 years.

This is why we call Cantarell Field the "Peak Oil Poster Child".

Pemex Oil Production Drops 6.5% on Cantarell Field (Update2)
By Andres R. Martinez

Dec. 22 (Bloomberg) -- Petroleos Mexicanos, the state-owned oil company, said crude oil output fell 6.5 percent in November from the year-earlier period as production at its Cantarell field declined at a faster-than-expected rate.

Production dropped to 2.711 million barrels a day, from 2.901 million barrels a day a year earlier, the company known as Pemex said today on its Web site. In an e-mail, Pemex cited Cantarell, its largest field, as the reason for the drop.

The Mexico City-based company in October lowered its 2008 output forecast by 3.6 percent to as low as 2.7 million barrels a day after interruptions from hurricanes. It was the third time Pemex reduced its forecast this year, after a faster-than- expected decline at Cantarell, the world’s third-largest field.

Cantarell’s output fell 33 percent, more than twice as fast as government estimates, to 862,060 barrels a day from a year earlier. Declining pressure at Cantarell has made it more expensive and harder to continue pumping oil from the offshore deposit.

Cantarell accounted for 32 percent of Pemex’s total output, half of the 65 percent it once represented at its peak.

Oil exports fell 20 percent to 1.511 million barrels a day, according to a chart on Pemex’s Web site.

Mexico is the third-largest supplier of crude to the U.S. Canada and Saudi Arabia are the first- and second-largest suppliers.

Crude oil for February delivery fell $2.45, or 5.8 percent, to settle at $39.91 a barrel at 2:43 p.m. on the New York Mercantile Exchange. Oil has tumbled about 72 percent from a record $147.27 a barrel on July 11.

Natural-gas production jumped 19 percent to a record high of 7.239 billion cubic feet a day in November.

To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28@bloomberg.net

Temperature of Planet Earth

2008-11-23T13:39:00.000-08:00

From: http://en.wikipedia.org/wiki/Geologic_temperature_record

Selected slides from the 2008 ASPO-USA Conference

2008-10-15T19:38:00.000-07:00

The 2008 ASPO-USA Conference held September 21-23, 2008, in Sacramento, California, featured excellent speakers and significant content. Several nice versions of notes from the Conference have now been published. Further, essentially all of the presentations from the Conference are available in PDF form on the ASPO-USA site at:

http://www.aspo-usa.org/aspousa4/proceedings/

However, if you are like many of us, you may feel as though you don't have the time to download and view all of these presentations, as good as they may be. So, in an effort demonstrate the quality of the content in these presentations, and also as a convenient reference, a selection of slides from a number of the presentations is posted below. The captions shown above each slide indicate this author's comments; the author of the presentation is shown in parentheses, if not on the slide.

Specifically, below you'll find a map showing the locations of that offshore oil which we all keep talking about; the location of ANWR and the relative size of the portion they wish to develop in comparison to the wilderness area; a neat graphic which makes each country's geography proportional to its oil endowment; interesting insights into China's oil and coal consumption; coal reserve info; coal plant efficiency, clean coal and sequestration efficiencies; carbon emissions of coal v. natural gas and much more.

Note: Only a portion of the presentations are represented here; by no means is that reflective of the quality of the presentations not represented here. It is well worth viewing each of the presentations at the ASPO link shown above.

Clean bar graphs showing world importers, and exporters.

Graphical explanation of how much needs to be found, just to "break even".

Big map of N Alaska - where ANWAR, Prudehoe are located.
(Gill Mull)

The "1002 Area", less than 10% of ANWR, where the oil is.
(Gill Mull)

Estimates of "undiscovered" oil in each of the N. Alaska areas.
(Gill Mull)

Simple graph showing US oil production decline, and that of Alaska.
(Gill Mull)

But: diminishing returns from areas added in Alaska, to date.
(Gill Mull)

A startling conclusion.
(Gill Mull)

Neat graphic showing oil producing countries, with their geography proportionately scaled to reflect their oil endowment.
(Jeremy Gilbert)

Excellent - here is how much oil is theoretically available
in each of the prohibited access, offshore areas.
(Jeremy Gilbert)

Ranking of world's largest oilfields.
(Jim Buckee)

Composite map identifying major fields in the Middle East.
(Jim Buckee)

Various named portions of Ghawar, the world's largest oilfield.
Note: Best quality reservoir is in the North, quality gets progressively poorer going South.
(Jim Buckee)

Macro diagram of Middle East deposition and "goodosity".
(Jim Buckee)

Ghawar basics. Has produced 59 - 66 % of what it will ultimately produce.
Note: "Peak Oil" peak rate usually occurs near 50 % depletion, due to physics.
(Jim Buckee)

Mexico's Cantarell - the significant decline is a relatively new phenomenon.
(Jim Buckee)

World Ethanol & "XTL" production and forecast.
Yes, we need it. No, it won't get us out of bind, alone.
(Jim Buckee)

Who, really, is "Big Oil". Hint: Not ExxonMobil, BP or Chevron.
(Jim Buckee)

Lots of estimates on the total endowment of recoverable oil,
but they seem to average around 2 trillion barrels; we've produced about 1 trillion.
(Jim Buckee)

Energy Conservation is first!
(Andy Weissman)

Plan is needed, use the "ripest" options, must begin immediately!
(Andy Weissman)

Thinks gas demand is being underestimated, with grave consequences.
In the end, gas & electricity will likely trade near BTU par with oil.
(Andy Weissman)

Not just an oil/liquid fuels problem - electricity & gas, too.
(Andy Weissman)

Economic effects of natural gas price parity.
Note: this conference was about 3 weeks ago; since that time
our economy has already become crippled! Wow.
(Andy Weissman)

But oil dependence is still the biggest issue. Mr. Weissman seems to understand the seriousness of the situation.
(Andy Weissman)

Potential economic effects.
Note: This conference was about 3 weeks ago; since
that time, California has gone into crisis again - to the tune
of $7 billion.
(Andy Weissman)

This was fresh information for me. But not surprising.
LNG near parity with oil in some markets.
(Andy Weissman)

Five Essential Steps (1-3 shown)
(Andy Weissman)

Five Essential Steps (4-5 shown)
(Andy Weissman)

New approach is needed.
(Andy Weissman)

Action needed now!
(Andy Weissman)

Differences in product costs due to shipping, with higher oil prices.
(Jim Puplava)

Where China get's it electricity. Coal.
(David Fridley)

China's oil is largely for "non-discretionary" uses. In other words,
it is more painful for them to do without. Think about it.
(David Fridley)

Trouble: They will even have a problem with coal.
Exports are going down, imports are going up.
Imports only started a few years ago ...
(David Fridley)

Energy used by the world, by region and by fuel.
(David Hughes)

How many more years of coal do we have in the US?
(David Hughes)

Type of hydrocarbons used by world, versus left in the world.
(David Hughes)

When coal production may "peak", and each country's contribution.
(David Hughes)

How clean can you get "clean coal", what does it do to the plant efficiency?
(David Hughes)

Comparison of Carbon Capture and Storage systems (CCS),
efficiencies of various plant technologies, with and without CCS.
(David Hughes)

Comparison of Carbon Capture and Storage systems (CCS),
capital costs of various plant technologies, with and without CCS.
(David Hughes)

Efficiencies: Heat Capture v. IGCC with CCS
(David Hughes)

An important, big picture message from Mr. Hughes.
Conservation should be first and foremost.
Further plant complexity is only a stopgap.
(David Hughes)

Complexity v. Simplicity: Sustainability is found at the balance point.
(David Hughes)

A bigger, big picture.
(David Hughes)

Power Down - or Collapse. That is the question.
Note: Mr. Hughes is quite cognizant of the other forms
or alternate and conventional energy.
(David Hughes)

Coal reserves by country.
(Michael Webber)

How much coal is left in the US?
(Michael Webber)

Coal plant efficiencies.
(Michael Webber)

Coal to liquids (CTL) economics.
(Michael Webber)

How do coal, oil and natural gas compare, carbon-emission wise?
(Michael Webber)

Diagram of carbon capture at a coal plant.
(Michael Webber)

US Air Force is the world's largest energy consumer! Wow!
They are evidently concerned about their liquid fuel sources.
(Michael Webber)

Truth about Brazil's reported energy independence!
Hint: It takes a lot of oil for them to be independent.
(Robert Rapier)

Brazil v. US - oil consumption & production, per capita.
(Robert Rapier)

Proposed solutions.
(Robert Rapier)

Additional recommendations.
(Robert Rapier)

Fix energy, fix the economy

2008-10-07T21:28:00.000-07:00

Recently there has been much discussion as to the outlook for oil and gas prices, given the credit crisis. Hundreds of millions have been invested in new drilling rigs, leases, personnel and other infrastructure. The concern in the oilpatch is that the increased shale gas deliverability and the credit crisis-induced demand destruction may create a sharp, disruptive, price decline. At the same time, Fortune recently published Matt Simmons' "$500 per barrel" article.

So, what's the answer? Is it going to be $50 oil, or $500 oil? As usual, there is no simple answer. There's just a lot going on. The following is an attempt to lay out some of the key factors.

Overarching theme: As previously published (and as paraphrased from the wise words of Tom Whipple of ASPO-USA), "Worldwide oil depletion is in a race with demand destruction." Curent oil prices would indicate that the credit crisis-induced demand destruction is currently winning. The recently published EIA demand data shows a 6.4% drop in July 2008 demand, versus that of July 2007.

What could affect/interrupt demand destruction over the next few years?

some sort of military event, which you can probably imagine, which could close the Straits of Hormuz or damage other key chokepoints or installations. This scenario is likely the only one (save hyperinflation) which could deliver Matt Simmons' $500 pricing, over the next few years.
Venezuela, Nigeria and Mexico are the 3rd, 4th and 5th largest suppliers of crude oil to the US. In late September, Chavez was in talks with the Chinese to ramp up exports from a current 250,000 BO/D to 1 MMBO/D by 2012. The US currently imports about 1.2 MMBO/D from Venezuela, so presumably the Chinese increase would come at the expense of the US. Meanwhile, Nigeria appears about to blow, literally, at any time. And Mexico is reeling from "Peak Oil Posterchild", Cantarell, which has recently declined 30 % year-over-year. My guess is that Mexico will have to cease all exports by about 2010!
the BTC pipeline in/near Georgia is scheduled to transport some 840,000 BO/D for the rest of 2008, then 1 MMBO/D in 2009. Obviously, it is subject to further Russian mischief. This oil primarily supplies the EU.
the "groupthink" at the recently held ASPO-USA conference seems to have been that natural gas may be in short supply within the next few years. Two reasons. First, it seems that due to the delay/retraction of proposed coal plants (due to all the protests), utilities are being forced to "pencil in" simple, combined cycle natural gas plants as their near term solution to meeting demand. Andy Weissmann and others believe that they all may be counting on the same gas, which may not be there. Secondly, others believe that production from shale gas is not sustainable in the near term. (This author believes that shale gas as well as other unconventional and conventional natural gas sources can, in fact, supply enough gas for incremental power generation as well as for the replacement of some portion of gasoline and diesel fuels in vehicles - over, say, a 10 to 20 year term.) Also realize that other groups believe that there may be a near term glut of natural gas, due to substantial shale gas drilling and new LNG landings.

In summary, it appears that demand destruction may mask the reality of Peak Oil for a time, perhaps for a few years. This "stay of execution" is an important opportunity that should not be wasted. Namely, the next 24 months should be utilized to rapidly implement:

energy conservation (this is where we can have the greatest effect, the soonest)
mass transportation retrofits (likely optimized and marketed bus and carpool efforts)
natural gas vehicles and stations (start with fleets to solve the Catch-22)
expanded natural gas drilling (solve infrastructure & supply problems)
wind energy (stop the tax credit hocus pocus - fix it for a reasonable time period)
vehicular electrical storage research (cost effective and reliable batteries or other devices)
design & production of more efficient cars (lighter, smaller EV's, plug-in hybrids and diesels)
offshore drilling (offshore West Coast, East Coast, Florida Coast)
biofuels research (enzyme & pyrolysis-based cellulosic ethanol, algae-based oil production)
nuclear plants (fast-track & standardize the design, licensing and construction, use breeders and reprocessing to minimize waste)
coal plants (use best available, cost-effective clean up technology)
solar thermal innovations & implementations
geothermal and waste heat recovery installations

The good news? It appears that both Presidential candidates agree on most of the above; in fact, one group refers to their energy solution as the "all of the above" solution.

Furthermore, at least one group has advanced, albeit not very articulately, that "energy is the solution to the economy".

What is meant by this?

Well, despite my personal aversion to additional government involvement, the fact of the matter is that we face both an economic abyss, and an energy abyss. Time is short, both for the economy and for oil. Rather than spending a trillion dollars on buying toxic derivatives, or on a war, these funds would be better spent in helping private enterprise jump-start the above referenced conservation techniques and alternate energy research and implementation. The use of our hard-earned tax dollars to help accelerate these initiatives would create jobs and new businesses. The bottom-line is that solving the energy problem - which must be dealt with anyway, and soon - is the perfect solution to solving the consumption- and credit-induced economic dislocation we are now beginning to experience. There would be a third, important benefit. Energy conservation, increased natural gas use and alternate energy implementation all help lower CO2 emissions.

Putting Cantarell's continued decline into perspective

2008-08-31T08:53:00.000-07:00

PEMEX recently announced that Cantarell Field produced just 1,010,000 barrels of oil per day in July, versus 1,050,000 barrels per day in June. That's a drop of 40,000 barrels per day, in just one month. Now, an oilfield's production does fluctuate month-to-month, but to put this into perspective, a loss of 40,000 barrels per day is equal to 30% of the estimated peak production rate from Shell's Perdido project, which is being constructed in 8000' of water near the international boundary with Mexico!

The Perdido project (http://www.shell.com/home/content/aboutshell/our_strategy/major_projects_2/perdido/perdido_13032008.html) is a multi-billion dollar, multi-year project using state-of-the-art technology. Yet the world's second largest oilfield is capable of dropping 30% of the ultimate, maximum rate of this project - in just one month!

What will we do when Mexico, the 5th (was 4th) largest exporter of oil to the U.S., has no more oil for us? Good question. Unfortunately, we'll find out the answer before long.

This is what Peak Oil is all about. World-wide, there are many oil and gas projects that need to be pursued. But they just can't keep up with the depletion from the "Giant" oilfields that we've unconsciously relied upon for years!

So, what do we need to be doing? We need to increase the rate of implementation of the following efforts:

energy conservation (this is where we can have the greatest effect, the soonest)
mass transportation retrofits (likely optimized and marketed bus and carpool efforts)
natural gas vehicles and stations (start with fleets to solve the Catch-22)
expanded natural gas drilling (solve infrastructure & supply problems)
wind energy (stop the tax credit hocus pocus - fix it for a reasonable time period)
vehicular electrical storage research (cost effective and reliable batteries or other devices)
design & production of more efficient cars (lighter, smaller EV's, plug-in hybrids and diesels)
offshore drilling (offshore West Coast, East Coast, Florida Coast)
biofuels research (enzyme & pyrolysis-based cellulosic ethanol, algae-based oil production)
nuclear plants (fast-track & standardize the design, licensing and construction)
coal plants (use best available, cost-effective clean up technology)
solar thermal innovations & implementations

Oil Prices Versus Contracting Economies

2008-08-31T08:23:00.001-07:00

Here is something to keep in mind as you try to make sense of what is going on in the world, in terms of geopolitics, oil prices and macroeconomics:

"There is a world wide race going to between contracting economies and world oil production, the score of which will be kept in the price of oil."

Tom Whipple, 8/28/08

Tom Whipple is the editor of the Falls Church News-Press, in Falls Church, Virginia

Whipple goes on to say that a wildcard could exist in terms of OPEC's willingness to accept less than "X" dollars for a barrel of oil. In other words, if and when demand destruction and economic contraction drop overall demand and thus the price for oil, OPEC could once again begin restricting production to increase prices.

In summary, a short term drop in oil prices (6 months? 2 years?) does not mean that the effects of worldwide giant oilfield depletion (aka Peak Oil) are over, only that other macroeconomic events have taken precedence, for a bit. Let's hope that the efforts being slowly set in motion (conservation, mass transportation retrofits, natural gas vehicles, expanded natural gas drilling, wind energy, battery/electrical storage research, design/production of more efficient cars, offshore drilling, biofuels research, nuclear plants, coal plants, solar thermal innovations) are not slowed as we enter a possible "eye" of the Peak Oil hurricane.

Mexican Production/Cantarell Update

2008-08-07T07:56:00.000-07:00

From Oil & Gas Journal, July 28, 2008:

Total Mexican production, June 2008: 2.9 MMBO/D
June 2007: 3.21 MMBO/D
Average, first 6 months of 2008: 2.86 MMBO/D, decline of 9.7% from year earlier
Cantarell production, June 2008: 1.05 MMBO/D (MP note: See the February 2008 post on this blog - included is a production schedule which was "reverse engineered" from Pemex's statements at that time. Based on this Feb 2008 schedule, the rate wouldn't be down to 1.05 MMBO/D until the end of 2009. And, if declines continue as they are, production may well finish 2008 at the rates projected for the end of 2010! And this projection was done only 6 months ago. This is indicative of the overwhelming and surprisingly large declines experienced late in the "life" of a depletion drive oil field.)
"producing more gas at Cantarell, where gas is moving into wells that formerly produced oil" (MP note: not good in an oil field)

Update on Mexican Production, Exports

2008-06-21T21:58:00.000-07:00

The May 5, 2008 issue of the Oil & Gas Journal included the following articles:

Mexico imports more gasoline as oil production drops

Gasoline imports rose to 367,000 bbls per day in March 2008 (6.5 % increase from February).
Oil production declined in the first quarter of 2008 to 2.91 MMBO/D.
And this shocker: "Mexico's premier Cantarell field produced 1.15 MMBO/D in March 2008 ..." Note that this is below the year end rate we projected in our last post, shown below.

Mexico to reduce oil exports to US in 2008

(Didn't take long for our March "prophecy" to be manifest.)

"Mexico will reduce its crude exports to the US by an average of 184,000 BO/D throughout 2008, a situation that could continue for 2 years longer ..." The latter, quite an understatement!
"... original plan for exports in 2008 envisioned some 1.678 MMBO/D ..."
"... US EIA earlier this month predicted a 13.2 % shortfall of imports from Mexico during the current fiscal year. According to EIA figures, Mexico exported 1.533 MMBO/D to the US in 2007."
"Based on its December 2007 Short-Term Energy Outlook, EIA forecast Mexico would produce 3.52 MMBO/D in 2007 and 3.32 MMBO/D in 2008." It looks like the EIA's forecast for 2008, done in December 2007, is off by some 410,000 BO/D - for the first quarter of 2008! You'd think they could get a little closer than that!

To refresh your memory, Mexico nationalized oil in 1938. A Constitutional provision was created that prohibited ownership of oil and gas reserves by anyone other than the Mexican government. Mexico and Mexicans take great pride in their nationalism regarding their oil resources. Pemex is the national oil company which are operates Mexico's oil and gas projects.

Unfortunately, some of Mexico's largest remaining reserves likely exist in a "deepwater" (water depths greater than 1300') area in the Gulf of Mexico. And despite the fact that Pemex employs some very intelligent folks, they don't have the years of experience in research, development, engineering and construction of deepwater drilling and production projects.

Previously, it was believed that Pemex could rely on the world's largest, most capable service companies - Schlumberger and Halliburton - in order to provide everything needed for deepwater exploration and production. However, Schlumberger and Halliburton cannot even do this. Deepwater exploration and production is the realm of Shell Offshore, ExxonMobil, ChevronTexaco, BP and just a few others. To give one an idea of what is required, a deepwater project can cost several billion dollars, and each well can cost $20 - $50 million. And ExxonMobil invests $200 million dollars per year in just researching deepwater technologies.

Now, none of the the companies listed above desire to risk billions of dollars if they don't get a share of the oil and gas that might be found. Their shareholders insist on this! But the current Mexican Constitution won't allow it. Talks have been held, followed by intense protests, led by the former mayor of Mexico City and defeated Presidential candidate, Andres Manuel Lopez Obrador. It doesn't look good for the development of Mexican deepwater areas - but anything could happen.

On the other hand, to give you an idea of the scope of the problem with the dwindling giant oilfields like Cantarell, take a look at Shell's Perdido project, which was in the news in early June. Perdido will be anchored not far from Mexican deepwater areas, in 8000' of water. It is costing billions, has taken years to construct and when in place, it will produce 130,000 barrels of oil per day.

That is about one-third of what Cantarell LOST in only 3 months, from December 2007 through March 2008! Getting the picture about Peak Oil?

Mexican Oil Exports: Start Saying Adios!

2008-03-19T10:48:00.000-07:00

Most folks are surprised to learn that the world’s second largest oil field is not located in Saudi Arabia. Nor even in the Middle East. In fact, it is located offshore Mexico, in the Bay of Campeche, Gulf of Mexico. This “giant” field, with an ultimate recovery which may reach 20 billion barrels, was discovered in 1976 by Rudesindo Cantarell. Sr. Cantarell was not a geologist, nor a geophysicist, but rather ... a fisherman. It seems that the natural oil seeps were playing havoc with his nets! PEMEX, the national oil company of Mexico, finally investigated it and the rest, as they say, is history.

Cantarell Field, as it turns out, is a real freak of geology. The porosity - or holes in the rock where the oil is located - is believed to be the result of a rubble pile from an asteroid strike which took place some 65 million years ago! And not just any asteroid strike: The asteroid which caused what has become known as the Chicxulub Crater, on the Yucatan Peninsula, is thought to have been 6 miles in diameter, and many scientists attribute this particular asteroid strike as being the “extinction event” that took out the dinosaurs! The impact energy from that strike is believed to have been some 2 million times that of the largest man-made explosion, that of the Tsar Bomba, a 50 megaton hydrogen device set off by Russia in 1961. Interesting stuff!

Cantarell was put on production in 1979. Production was 1.16 million barrels per day (1.16 MMBO/D) in 1981, and in 1995 production was still 1 MMBO/D. In 2000, PEMEX installed the world’s largest nitrogen injection project on Cantarell. In this process, nitrogen is stripped from air and injected into the upper parts of the reservoir in order to maintain reservoir pressure, and thus to increase or maintain production. Production increased to 1.6 MMBO/D in 2001, then to 1.9 MMBO/D in 2002, and then to 2.1 MMBO/D in 2003. By the end of 2005, however, production had returned to 1.9 MMBO/D. In January, 2006, a PEMEX press release unveiled their conclusion that Cantarell had peaked, and would decline down to a rate between 1.5 MMBO/D and 0.5 MMBO/D by the end of 2008. The attentive folks at the Wall Street Journal must have sensed the significance of this event, as they first ran this story on 2/9/06, and they published an update in August of 2006. Since this time it appears they have been revisiting the story about every February, with stories on 1/27/07, and most recently on 2/15/08.

As of the end of 2007, Cantarell was said to be producing 1.4 MMBO/D, or down some 600,000 BO/D (or 29 %) from its peak rate in 2004!

Why is this important? Well, Mexico is the 3^rd largest exporter of oil to the United States. Out of about 20 MMBO/D of total consumption (maybe closer to 21 MMBO/D now), we import some 60 %, or around 12 MMBO/D. Mexico makes up some 1.4 MMBO/D of that 12 MMBO/D, or about 10 % of our total imports.

So, if Mexico can’t supply that oil - just get it somewhere else, right? Well it appears that there is little or no “spare” capacity in oil production RATE, worldwide. So, if we need 1.4 MMBO/D from Mexico but they can’t supply it, we either have to get that oil instead of someone else, or do without. The oil pricing or geopolitical implications of this scenario should speak for themselves.

To put the ultimate loss of 1.5 MMBO/D out of Cantarell into perspective, consider the massive tar sands in Canada. Even though these tar sand RESERVES are huge, their production RATE is limited by the QUALITY of these deposits. Namely, one has to shovel, melt or dissolve this tar out of the ground. Today’s total production RATE from these tar sands, after huge efforts and investments of billions of dollars, only totals about 1.1 MMBO/D. And, with billions more invested, by 2015 they believe the rate can be increased by an additional 1.9 MMBO/D. So, if there weren’t any other RATE declines going on around the world, and if demand was not increasing, then the Canadian tar sands might be able to compensate for the loss of Cantarell.

Put another way, if other declines ARE present around the world, and if there are not many provinces where the RATE is significantly increasing (such as with the Canadian tar sands), and if the increases from the tar sands can barely make up for Cantarell declines, then what significant capacity increases are available to make up for the other declines?

So, Cantarell Field is a "poster child" for Peak Oil concerns.

Most recently we wondered, “If Cantarell is down significantly, and other Mexican production is up some, but not enough to compensate, what must be making up the balance?” Namely, if production is down and Mexican domestic consumption is flat or up (as is normal in a developing country), then imports must go up, or exports must go down, in order to compensate. In other words, something’s got to give.

After a little investigation, we were troubled by the conclusions.

First, using a decline profile we derived from the Oil and Gas Journal/El Financero/Sener data, we projected Cantarell to be down to 1.204 MMBO/D by the end of 2008.

Next, we arrived at the projected 2008 oil production by adjusting the 2007 figure of 2.925 MMBO/D (average of 11/2007 & 12/2007, from Reuter’s, 1/21/08, UPDATE 3-Mexico oil output, exports wane in 2007) for the projected 2008 Cantarell decline. (In doing so, we are assuming little if any increase in production from other Mexican fields for 2008. Since 2004, those other fields have only been able to increase production and make up for about 100,000 BO/D of the 600,000 BO/D drop in Cantarell production.)

We are still using the Mexican oil import number (that is, imports of oil into Mexico) of 309,000 BO/D, from the world factbook estimate from 2004. It seems likely that imports of oil into Mexico over that period have dropped, as imports elsewhere typically have done.

Additionally, for 2008 we use the Mexican domestic consumption figure of 2.078 MMBO/D (also from the 2004 world factbook estimate). This seems too conservative, and unlikely. Namely, oil consumption increased in most developing countries over the 2004 – 2008 timeframe.

As to exports, the world factbook shows 2.268 MMBO/D was exported from Mexico in 2004. And the Reuter’s article lists 1.684 MMBO/D as the amount exported on an average basis, in 2007. That’s a drop of 584,000 BO/D, from 2004 though 2007! Where was this oil going, and what are those folks doing to replace about 600,000 BO/D over that interval?

In summary, the projected 2008 Mexican oil balance of -730,000 BO/D doesn’t appear to be too far out of line with past “balances” shown by our rough calculations, but the concerns are:

One would think that consumption in Mexico would be up, over the last 4 years.
It is unlikely Mexico is still importing as much oil as in 2004.
Exports show to be down 26 % since 2004! This is a significant trend!
The “balance item” is substantial enough in relation to US imports of Mexican oil that it could materially impact that US import figure.

Once again - conservation, alternative energy efforts and domestic exploration all must be significantly increased as it appears that the days are numbered as to getting a significant amount of oil from Mexico. More specific recommendations to follow in the next report.

Footnotes for chart:

Prior to 2005, Cantarell produced at a flat rate of 2 MMBO/D for a short period of time. During this time the field was being injected with huge volumes of nitrogen for pressure maintenance.
Mexican oil production has been widely quoted as 3.4 MMBO/D in 2004 – 2005, same figure also recently used in a Wall Street Journal (2-15-08) article.
The Sener study, referenced in the recent El Financero newspaper article, in turn quoted by Oil and Gas Journal (2-7-08), listed specific declines for Cantarell for 2005, 2006, 2007.
Cantarell 2008 ending rate based on the production projection derived based on decline rates quoted in El Financero article.
Declines from Cantarell applied to total, initial rate in 2005, so we are assuming the other production in Mexico remains flat.
same
Imports from world factbook page, assumed flat.
Exports from world factbook page, assumed flat until new data for 2007.
Consumption from world factbook page, assumed flat. But usually consumption increases over time.
Balance should be zero, represents errors in one or more estimates.
Imports from Mexico into the US, from EIA page.
Same as (11), but average for 11 months in 2007.
From Reuter’s (1/21/08), “UPDATE 3 – Mexico oil output, exports wane in 2007”.

US Oil Imports, By Country

2008-03-09T18:08:00.000-07:00

Although easily found on the Energy Information Administration's (EIA's) website, here for convenience are the monthly volumes of oil imported into the US from the top 20 suppliers, sorted from greatest to lowest monthly volume. We have also calculated the average daily rate of oil imported in December 2007, as well as each country's percentage of the total US imports during that month.

Note that in December 2007, Mexico fell behind Venezula and became the 4th largest exporter of oil to the US, rather than the 3rd largest. Watch the next post for more details.

Remember, the US imports about 60 % of the liquid hydrocarbons/petroleum that it consumes.

Global Warming: Clovis Man could have used help.

2008-03-08T05:23:00.000-08:00

Clovis Man lived about 13,000 years ago, when the sea levels were about 250 feet lower than they are today. Where were the coal plant protesters, the "cap and trade carbon credits" and the Kyoto Treaty when he needed them?

Source: http://en.wikipedia.org/wiki/Image:Post-Glacial_Sea_Level.png

According to the above link, this figure was prepared by Robert A. Rohde from published data, and is incorporated into the Global Warming Art project. It is used here under the GNU Free Documentation License or other permission.

Cantarell Update & Production Projection

2008-02-10T19:46:00.000-08:00

On February 7, 2008 the respected oil and gas industry trade magazine Oil and Gas Journal published an update on the production from Mexico's largest oil fields. Ironically, this comes two years and a day from the original Wall Street Journal article (2/6/06) heralding the pending decline of the world's second largest oil field - Cantarell, located in Mexico.

The data for the Oil and Gas Journal article was reportedly sourced from El Financero newspaper. Although the discussion in the article hops back and forth between big Mexican oil fields, the bottom-line is that the article contains many useful "numbers", including some new information on the expected decline characteristics of Cantarell.

Quoting the article, "According to Sener, the 2007 - 16 Crude Oil Market Outlook prepared by the Energy Information System of the Energy Secretariat, in any scenario - high or low - Cantarell's production will average 917,000 - 921,000 b/d during 2006-16, with an average annual decline of 14.1 %."

This is the first I've seen of a quoted, long-term decline rate estimate for Cantarell, and given the initial production rate, one can use that decline rate to derive a production projection. I was encouraged to do so given the quoted "average rate" for an 11 year period (an average rate being non-sensical in this case, and thus a tip off for further study needed). Also, just yesterday I gave one of my sons the classic book, "How to Lie with Statistics" (for defensive purposes only, I might add), so the dangers in "averages" were fresh on my mind.

So, given the quoted 14.1% annual decline rate and using an initial production rate of 1.9 million barrels per day going into 2006, the following production projection was derived:

Cantarell Field - Mexico
Initial Rate (BO/D, beginning of 2006):		1900000	Note 1
Decline Rate:		14.1%	Note 2
Avg Production Rate, 2006 - 2016:		923,026	Note 2

	Oil Flowrate	Oil Flowrate	Oil Production
YEAR	(beginning of year)	(end of year)	(annual)
	(BO/D)	(BO/D)	(BO)


2006	1,900,000	1,632,100	643,440,753
2007	1,632,100	1,401,974	552,715,607
2008	1,401,974	1,204,296	474,782,706
2009	1,204,296	1,034,490	407,838,345
2010	1,034,490	888,627	350,333,138
2011	888,627	763,330	300,936,166
2012	763,330	655,701	258,504,166
2013	655,701	563,247	222,055,079
2014	563,247	483,829	190,745,313
2015	483,829	415,609	163,850,224
2016	415,609	357,008	140,747,342

Note 1: Cantarell said to be producing "about 2 MMBO/D" at EOY
2005; later production said to have declined by 100,000 BO/D
in 2005. Cantarell had been limited for years at rate of
2 MMBO/D (by the production facilities) so a 1.9 MMBO/D
initial rate going into 2006 appears to make sense, and when the
quoted decline rate is applied, the stated "average" is obtained.
Note 2: Decline rate (14.1 %) and avg. of "917 - 921,000 BO/D from
2006 - 2016" obtained from OGJ 2/7/08 article, in turn
quoting Sener & El Financero newspaper.

A couple of observations:

The production projection appears valid as it tends to agree (within reason) with the quoted "average" production rate from 2006 - 2016 of 917,000 - 921,000, namely the cumulative production over that time, divided by eleven years and by 365 days per year - yields 923,026 BO/D. As previously mentioned, an "average" is a fairly useless statistic in this case, except for validation purposes.
Note that by the end of 2009, the production rate is down to HALF of what it was in the beginning of 2005! This is not abnormal; it is simply the effect of continuous production decline, which is common in all oil fields, eventually.
Apparently Cantarell's production will only be about 350,000 barrels per day by the end of 2016, thus it will have dropped 1,650,000 barrels per day from 2005 (an overall 82.5 % decline). This is the kind of decline that has some of us concerned about Peak Oil, and how quickly we need to initiate conservation efforts and develop alternatives, while we continue to wisely and rapidly develop fossil hydrocarbon and nuclear resources.

Peak Oil: Why is it so difficult to explain/understand?

2008-01-10T23:03:00.000-08:00

After several years of partial success in explaining the physics-based phenomenon sometimes known as “Peak Oil”, this author has come to one conclusion: Peak Oil is difficult to explain, and it is difficult for most people to understand.

Now, some folks make the conscious choice to avoid considering a concept like Peak Oil because it might imply future hardship or a change in lifestyle, and they’d rather dwell on “positive” matters. Others would consider the acceptance of Peak Oil to be defeatist – ie, a surrender of man’s great ingenuity and/or his ability control his own destiny. Make no mistake about it, this author has a high regard for the power of positive thinking, for man’s ingenuity and for his ability to help influence his destiny.

For others, the difficulty with Peak Oil might be a subconscious one. Theories such as “cognitive dissonance” and “consensus trance” have been advanced, and these are likely manifestations of what is sometimes referred to as “crowd behavior”.

But for this exercise, let’s set aside these willful and subconscious roadblocks.

So, why do rational, intelligent, objective people have a hard time with this concept?

Well, a good guess might be that we are barraged - on a daily basis - with volumes of commentaries, data and unintelligible statistics:

“Oil inventories are down this week.”
“OPEC is increasing production by 500,000 barrels per day.”
“There are trillions of barrels of tar sands around the world.”
“They just found a new, 8 billion barrel field in Brazil.”

Who has the necessary time to sort through it all, and have any chance of understanding? Who has the time to continually determine what's good data, what's bad data, or what's skewed data? Or, what's "big" (important) and what's "little" (not important) in terms of scale? What's the maximum rate that can be produced from a new discovery? How long will it take to drill all the wells and get the infrastructure in place? Then how quickly can the field be depleted?

Without continuous study, it all becomes a fog. And sometimes even WITH continuous study, it is still foggy! As a result, most of us resort to: “Just tell me the answer! And tell me something good!”

The term “Peak Oil” is really a shorthand. It is an abbreviation for “peak production rate” or “maximum worldwide production rate”. Peak Oil is a manifestation of the physics of the depletion of a finite resource. And physics indicates that over the life of a group of all the fields in a country - or in the world - there is a maximum rate that can be achieved, and that rate occurs when roughly half of the RESERVES are depleted.

Currently, the average rate of oil consumption/production is around 85 million barrels per day, and many believe that there is little current "surplus capacity". Some believe that Peak Oil may be 80 – 85 million barrels per day, ie we are “already there”. Others believe that the world may be able to achieve 100 million barrels per day by 2011 or so. And the IEA has forecasts that indicate that it will be possible to produce as much as 120 million barrels per day in 2030!

But what if the world population grows, developing nations develop, and 2.4 billion Chinese and Indians just want to use a little more oil? Well, if the demand is 110 million barrels per day, and the world can only produce 100 million barrels per day, then the price will go up until the demand abates. And if worldwide economic growth is proportional to the rate of growth in energy consumption (as it has been since the beginning of the Industrial Revolution), then if we can’t grow energy consumption, we’ve got a problem with growing the economy!

To make matters worse, after the maximum oil production rate (Peak Oil) is reached, then the rate begins to decline - at least within a few years! (Hirsch's recent work with respect to "plateaus" is not encouraging.) So, post-Peak Oil, the economy not only can't continue to grow, but it must contract – IF economic growth is proportional to growth in energy usage (as it has been in the past).

So far we’ve talked about production RATE. Now let’s cover one other concept: RESERVES. RESERVES are "how much oil that there is left in the ground, which can be gotten out".

Once again, understanding RATE and RESERVES are the keys to understanding Peak Oil:

RATE (in our context) is the maximum rate of oil production for a group of fields, or for the world.
RESERVES are how much oil that is in the ground that can be ultimately be produced (for this analysis we won’t even differentiate between oil types, ie tar sands v. light oil, or different categories of reserves, based on risk).

So, many folks believe that the world was endowed with around 2 trillion barrels of conventional, recoverable oil. So the RESERVES for the world were 2 trillion barrels before any oil was produced. Most folks think we have produced about 1 trillion barrels of oil. So, that would leave current RESERVES of 1 trillion barrels.

Now, that’s a lot of oil! Why all the fuss? Well, here’s the punchline, and it has as much to do with the lack of cognition of Peak Oil as anything:

The maximum production RATE for a given field or group of fields in not arbitrary! In other words, it can’t just be anything you want it to be! For instance, if a field has RESERVES of say 10 million barrels, the maximum RATE might be several thousand barrels per day, but it could never be 1 million barrels per day.

Why? OK, here is the key take-away:

Due to the physics of the flow of oil through rock, a field’s (or a country’s, or the world’s) maximum oil production RATE is not arbitrary but is dependent on the RESERVES’:

SIZE (how big is the field in terms of area and thickness?)
AGE (is the field newly discovered/produced, or is has it been producing for 40 years?)
QUALITY (how well does the oil flow through the rock?)

Examples:

All of the world’s largest oil fields – Ghawar, Cantarell, Burgan and Daquing - have excellent SIZE and excellent QUALITY ... but their AGE is old! Hence, all of these (except possibly Ghawar) are in decline (their RATE is declining each day).
The Athabasca tar sands, on the other hand, have excellent SIZE, they are essentially “new” in AGE (relatively little compared to the RESERVES has been produced so far), but they have the very poorest QUALITY – the oil is so thick it won’t flow and must be melted with heat, dissolved with solvents or mined.

Most who take the “no Peak Oil” (or no Peak Oil until 2030 and then an “undulating plateau”) side of the debate speak of RESERVES. They don’t often address the difficult topic of trying to explain where the RATE will come from.

Recently this author attended a trade conference concerning “unconventional resources”. “Unconventional resources” is another way of saying “difficult to produce at a high rate, but prevalent in a given area”. For the most part, it’s what we’re left with, especially in the United States. So, a representative from IHS (who owns CERA) gave a talk and presented, among other things, maps showing trillions of barrels – worldwide – of bitumen, tar sands and heavy oil. Afterwards he smugly said, “WELL, I guess there are no supporters of PEAK OIL in this room!”

With respect to oil production RATE (which is what Peak Oil is all about), he may as well have been showing a map of coal resources.

What he didn’t explain was the fact that Canada, despite having huge tar sands RESERVES of 188 billion barrels (or call it a trillion barrels, it really doesn’t matter), is currently producing oil from those tar sands at a RATE of about 1.1 million barrels per day. And this after a Herculean effort and tens of billions of dollars invested!

The Canadian tar sands producers have a roadmap for increasing the production RATE from those huge RESERVES to a total of ... 3 million barrels per day, by 2015! That’s an increase of only another 1.9 million barrels per day, but over 7 years, and with additional tens of billions of dollars injected!

So, that huge amount of RESERVES is limited in RATE because it is of the poorest QUALITY.

To put this in perspective and show why it is important - why Peak Oil is important - take a look at the second largest field in the world, Cantarell, in Mexico. In early 2006, PEMEX announced that Cantarell Field was about to go into decline, for the first time ever. In fact, they projected that this field that produced 2 million barrels per day of Mexico’s total 3.4 million barrels per day (end of 2005) would be down to between 1.5 and 0.5 million barrels per day by the end of 2008! Now, at the end of 2007, it is already down to 1.3 – 1.5 million barrel per day! So, if it finishes 2008 at 800,000 barrels per day, that is a loss of 1.2 million barrels per day, over just 2 years.

Compare this with the Canadian tar sands production increase of only 1.9 million barrels per day over 7 years - after a huge incremental effort. Factor in the depletion going on in most every field around the world – and you have an idea of the problem at hand, and a better understanding of Peak Oil. Among other things, huge RESERVES of poor QUALITY oil are not going to be able to provide the RATE of production necessary to stem the declines from the giant high QUALITY fields that are now old in AGE, much less continue to increase our total RATE.

In summary, Peak Oil is about RATE. And RATE is dependent on the SIZE, AGE and QUALITY of the RESERVES.

Oil Discoveries by Year

2007-11-27T17:55:00.000-08:00

Shown above is a bar chart displaying how "many" oil reserves (in billion barrels or gigabarrels) were discovered/booked on an annual basis, from 1930 until 2005. This simple graph is really what drives "Peak Oil". Namely, the amount of new oil that we discover each year "peaked" in the 1960's. Or put another way, we are not finding nearly as much oil now as we were in the 1960's. This despite major technological advances such as 3D seismic, horizontal drilling, etc. Interesting note: both 3D seismic and horizontal drilling are technologies that help us find or develop things that we couldn't find or develop otherwise - there's a message there.

Now realize that when we talk about the amount of oil discovered each year, we are talking about RESERVES. "Peak Oil" is really about the worldwide, maximum production RATE. But the maximum production RATE is reached ("Peak Oil") sometime in the future, following the peak in the discoveries. In other words, when you discover a field, it takes a years before you get it producing its first oil, then fully develop it, etc. Then at some point you have drilled all the infill and stepout wells you can in that field - and then the production begins to decline.

Note that the world currently consumes about 85 million barrels of oil per day. So, if we found 5 billion barrels in 2005, that would last an incremental ... 60 days. Now you are getting the picture. 5 billion barrels seems like a lot of oil - but not when you consume 85 million barrels per day. The recent 8 billion barrel, deepwater discovery in Brazil is wonderful, but we use that much oil in 94 days. It's that "SCALE" thing.

ASPO 10/07 - MP's Comments

2007-11-19T21:50:00.000-08:00

Folks:

I guess I first started sending out these missives about two years ago, in late 2005. Some of you no doubt thought that I had fallen off my rocker. Well, that is probably true, but another reality is that the oil situation continues to unfold about as expected. Unfortunately.

Waxing a bit nostalgic, I have been studying oil and gas supply since the price plunge of the mid-1980's, when we started having "supply side" speakers at the API-Houston Chapter. I remember when Enserch found some arcane legal code with which to petition Reagan, which would absolutely force him to "do something." And when Lloyd Bentsen said 50% imports was a "peril point" and we'd "do something" if it ever got that high. (was about 35% imports then, around 65% now) Earlier, in the 1960's or 1970's a partner of mine witnessed one of the last really knowledgeable RRC Commissioners, Bill Murray, say, "You get a chance to manage a surplus, or you will have to manage a shortage." Really profound words. And of course, prophetic.

Well, no one wanted to manage the temporary surplus of the 1980's, so a huge number of rigs were cut-up or shipped away or rusted down (we had 4500 at one time; now after Herculean efforts, only slightly over 2000). The smart people became lawyers and MBA's. If I remember correctly, well over 500,000 jobs were lost in our industry. No one really cared, as John Q. Public generally loves to hate "oil companies" and anyone involved in them. Cheap gasoline was what everyone wanted, and that is what they got - for a while. Anything else (like restraining production just a little, an oil import fee, etc.) would have been price-fixing or "pandering to big oil". To wit, the recent attack on Aubrey McClendon and Chesapeake over their shutting in just a bit of production.

Interestingly, I remember my father (38 years at Shell Oil) mentioning King Hubbert one time. As a teenager, though, I didn't pay much attention. Hubbert worked in the same facility as my dad, in the 1950's. My brother (16 years older than I am) swears he remembers Hubbert coming over for dinner once or twice, probably before I was born. Dad was chairman of the API-Houston Chapter at that time, and I have his bound monograph of the papers given in 1956, including the original Hubbert article. He obviously was interested in it, as he took the time to update the curve - in pencil - sometime in the 1970's.

It has been a busy couple of years, and the last few months have been exceptionally busy for me. I've been doing my level best to try to stem the tide of Peak Oil by trying to find more of the stuff! (Well, gas anyway.) Meanwhile I serve on the board of a non-profit which is documenting "wild plants" in Texas and the surrounding areas ( www.usefulwildplants.org ). We are currently trying to raise additional funds to accelerate the project, which will serve as a catalyst for sustainable energy, food, chemical and fiber efforts, via utilization of "wild" plants. Now, as it turns out, just in time for Peak Oil. (Hopefully.)

A few weeks ago, Oct 17 - 19, I attended the Association for the Study of Peak Oil's (ASPO's) USA convention, held at the Hilton of the Americas in downtown Houston. This group was founded a number of years ago by Colin Campbell, among others. Campbell was one of the first "Paul Reveres" in the recent iteration of concern over Peak Oil. He wrote the book The Coming Oil Crisis ... in 1988. During that time of oil and gas surpluses this type of talk was regarded by many as lunacy. Even in the 2000 - 2003, Peak Oil was thought by most in the industry (who had even heard of it - which were few) to be the domain of the "lunatic fringe", pessimists, Chicken Little's. The prevailing wisdom was that the Saudis had vast, shut-in, 10,000 BO/D wells that they could crank on any time, and huge, wonderful areas to explore. Most of the misunderstanding arose (and still does) over "big versus little" (ie, scale), and RATE versus RESERVES.

Peak Oil being far from the lunatic fringe realm any more, the following groups had speakers at the ASPO conference:

City of Houston: Sponsor, and Mayor Bill White spoke at lunch.

University of Houston - sponsored and supplied a futurist

Merrill Lynch - Tom Petrie, Vice Chairman - spoke

Jeffries, Randall & Dewey - spoke

Colorado Geologic Survey - excellent presentation on India, China, mineral supply and demand by Vince Matthews, director (ex - UPRC)

SAIC - Bob Hirsch - spoke

Canadian Geologic Survey - spoke - excellent graphs

Dept of Homeland Security - Scott Pugh, ret. Navy sub commander - spoke

Tom Whipple - ex-CIA analyst and editor of the Falls Church News Press (Virginia)

Department of Energy - Oregon - spoke

Austin Energy

Toyota Motor Sales USA

T. Boone Pickens

Henry Groppe - Groppe, Long, Littell

Bob Hirsch, who, in 2005, authored the landmark, revelatory study for the DOE, was one of the speakers I was looking forward to hear at the ASPO conference. He didn't disappoint - but only made my stomach grumble a bit more. Overall, there were quite a number of really excellent presentations. All are available on the ASPO website:

http://www.aspousa.org/proceedings/houston/

I highly recommend you download and view the presentations by:

Bob Hirsch

Vince Matthews - Director of the Colorado Geological Survey

Tom Petrie

Stuart Staniford/Euan Mearns - www.oildrum.com - study of Ghawar

The "Key Take-Aways" from my notes are attached. Included in those notes are some of Hirsch's slides.

My observations and comments:

The peak in oil production might have occurred in late 2005, and most in this group believe it will certainly happen prior to 2011 - 2012. If it hasn't occurred, my bet would be 2008, as I have believed since 2001 or so.
It sure looks like Saudi has produced about half of its recoverable oil, meaning it is at or near peak, in turn meaning the world is at or near peak.
Cantarell (second largest field in the world, in Mexico) peaked in 2004 as I previously communicated to you, and is down from 2 MMBO/D (late 2005) to 1.6 MMBO/D today. It is on a trajectory near to the "worst case" scenario, as described by Pemex in early 2005, and later confirmed by the WSJ.
Oil Export Withholding (Hirsch) seems quite likely, and was a new one to me. Means things will happen even faster.
Jeffrey Brown's "Export Land Model" is similar, but is a “physics” rather than an economic/geopolitical phenomenon. Namely, when consumption in exporting nations is increasing in a low, but compounding fashion (as it is), and production begins decreasing in a compounding fashion, then those nations soon have NONE to export - much sooner than if they hadn't been growing their consumption. To wit: Indonesia, UK - both exporters until very recently.
GDP will drop about like the oil rate will decline - and continuously, year over year. (Hirsch)
Rationing of gas and diesel are in our near (0 - 3 years) future.
Inflation is far understated, and will rear its head soon. And at a time when the economy is deteriorating.
There could be a series of "head fakes", ie prices drop for a time, due to new Rockies Express pipeline, LNG, Independence Hub online - or due to a rapid run-up in price causing demand destruction (for a short while) (Petrie)
There is no simplistic "smoking gun, no reason" for Peak Oil, hence the public and the media can't "get it". So, the politicians won’t get it. (Whipple)
Not yet a critical mass to move people and politicians.(Whipple)
Behavior is not likely to change until there is a pronounced shortage at the pumps, hoarding.(Whipple)
Politicians, in general have a "Don't have enough? Well, just get more." attitude.
Although not related to Peak Oil, many minerals are now in short supply, controlled by foreign govts, either in our country or theirs. (Matthews)
Still no battery or electricity storage solution for plug-in hybrids or pure electric vehicles.

Meanwhile:

a huge real estate bust (and all that it entails) is in the early stages, due to a massive overextension of credit
many of our financial institutions are being shaken to the core (Merrill, Citi, Countrywide, WaMu)
oil ironically broke $90 the Thursday evening of the conference, now it is nearing $100.
gold has been spiking, the dollar has been plummetting
$250/bbl strike price calls are now available in 2010, $200 calls evidently have active trading in 12/08.
the IEA just issued a really gloomy forecast, two weeks ago.

On the brighter side, though, is that old adage about the Chinese word for "chaos" being the same as for "opportunity".

More later,

ASPO 10/07 - MP's Notes - Key Take-Aways

2007-11-19T21:12:00.000-08:00

ASPO (Association for the Study of Peak Oil)
Annual USA Meeting, 10/17-10/19, Hilton of the Americas, Houston, TX
Sponsored by City of Houston, U of H

MP’s Notes - Key Take-Aways

Bob Hirsch, SAIC

MP: Author of landmark study for DOE/NETL in 2004, which started being found in odd places on the internet in early 2005.
MP: Gist of Bob’s objective, 92 page paper from 2004 is that peak oil will occur, and it may be occur-ing, and that efforts to transition primarily transportation (but other things, as well, like the economy) take a finite amount of time, are not instantaneous. For instance, in 20 years, can convert fairly painlessly, in 5 years much pain to world economy. If wait (to take SERIOUS, pro-active actions) until AFTER peak - severe problems, dislocations!
MP: Initially, in 2/05, and for a good while thereafter, the paper was only found on a high school website in Chula Vista, CA
MP: Later that year World Oil (a very conservative trade journal) ran two Hirsch articles, subsets of his study.
Has been working on extending his study, updating effects, peaking profile. (MP: the few pundits to Peak Oil (CERA) seem to always site an “undulating plateau” – sounds so nice, and you often see those two words together. Jim Kunstler told me when I asked that they are “mellifluous” together.)
Found that the % drop in world GDP divided by the % drop in oil supply are about “1”, at least order of magnitude. Say ½ to 2. 10 is too high, 0.1 is too low. So, when world oil takes on a decline after the “plateau”, however wide, then the GDP drop in the world will likely mirror the oil decline rate.
Used 73 embargo and 79 crisis as models, among other things.
From USG’s “Oilshockwave” Scenario (Robert Gates), a 4% shortfall in oil led to $160/bbl, and led to a 4% drop in GDP.
Giant oilfield decline rates
Prudhoe produced at pipeline max of 1.5 – 1.6 MMBO/D beginning in 1982, started declining in 1988.
See 8 – 16 % initial decline (just past peak) in major field (MP: wow)
US production had very little plateau (MP: remember 10MMBO/D in 1970, only doing about half that now. All the new technology (3D, horizontal drilling, etc) didn’t do much for even the decline rate.
Europe had a 6 yr plateau (but that plateau included 3% variations – “remember the impact of a 3% drop/lack of supply”
NA had a sharp break then 3 % initial decline for 5 years. Remember, 3% for 5 years is 15% (he meant, think GDP drop)
Campbell – 2010 - 11 peak, 4 years to 4% decline, then 2% decline
Laherrerre – 2018 peak, 8 years to 4 % decline, then 2 % decline.
Most all analysts come up with 2 – 5 % annual decline for some period of time, just after peaking. (MP: implications for GDP again)
OEWS – something else he is studying
In 1950, 85% of reserves controlled by major oil cos., 15 % NOC controlled
Now: 10 % reserves control by majors, 90 % by NOC’s!
Thesis: Oil exporters WILL reduce exports due to windfall! (Putin did a thesis on this, interestingly)
Dwindling resource (MP: being exchanged for paper money of diminishing value)
Consumption rising (MP: most exporting nations subsidize/insulate their populace so as to ameliorate them, stay in power)
So, likelyhood of Oil Exporting Withholding”, or OEWS.
So, the REALITY is even worse – “effective peaking” will occur prior to peaking due to physics. (MP: and this is without major geopolitical problems, just the normal ones that lead to OEWS)
IEA watershed comments:
“unsustainable”
“doomed to failure”
“peaking in 2012”
but blame NOC’s – and have to wade through huge paper.
Plateau analysis
Best Case: 2-15 years, then 2- 5 % decline.
Middle Case: sharp peak, then 2 – 5 % decline
Worst Case: OEWS – early peak & worse than 2 – 5 %

Bottom-line: Need an immediate, crash program of conservation, demand mitigation.

Comments & answers to questions by Hirsch after Skrebowski spoke:

“Don’t see how we can do without rationing of transportation fuels.”
“Oil Shockwave exercise included supplies dropping 4 % for several years.”
“Non-equilibrium economics (MP: are scary as hell) – Markets/Demand can’t change as fast as decline takes place.”
“Futures market is looking to the past to determine the future – can be problematic at inflection points.”
“Not good at predicting the future, less good at doing something about about it.”

Chris Skrebowski, Editor, Petroleum Review, London - “How close are we?”

Best guess: 93 MMBO/D (v. 84 MMBO/D now) Peak in 2011/2012.
Assumption changes give a bit higher peak RATE, but don’t shift DATE/Curve that much!

Tom Petrie (formerly Petrie Parkman, now Vice Chairman of Merrill Lynch)

What does it take to offset natural declines?
At 2 % decline, 8 MMBO/D
At 5 %, 16 MMBO/D
At 8 %, 24 MMBO/D
Mentioned Putin’s papers on national patrimony
Will price signals work? “OEWS” may be worse than expected.
China about to exceed in total emissions.
Russia-China have oil & gas linkages.
Iran – Russia – helping Iran go nuclear
China – Iran – crude oil deal
India-Iran-Pakistan – gas pipeline
Book: The Black Swan – The Impact of the Highly Improbable
“Capital Markets and Energy M&A are in “remarkable denial” – still view Peak Oil as improbable.”
“2nd, 3rd order consequences”
Turkey analogy – had a great life, lots of good food, got fat – until the day before Thanksgiving. Using as an analogy.
“Markets are beginning to embrace Peak Oil.”
“May get a “head fake” in 6 -12 month when Rockies Express, LNG, Independence Hub bring major gas to market – BS, FS at risk.
“Series of Petro-Driven “Black Swan” events.”
“Will have been perceived as highly improbable, but in retrospect they were highly predictable.”
10 of 14 LNG producers are OPEC countries.
“Don’t think historical economic behavior patterns will have predictive utility.”
“Inflation is FAR UNDERSTATED.”
“Problem with government/politicians – This is too real a problem to try to address!”
“Our system is designed to dumb-down things like this.”
CNBC asks: “What price to change behavior?”
“$30 - $88 is creating “cumulative drag” on the economyZ”
“$90 - $120/BBL will start to see change.”
“Europe less susceptible to adjustments because they have been taxing oil, seeing higher prices for a long time, increase will be smaller, percentage-wise.”
“Too much noise in financial systems to know what needs to be done strategically.” (MP: ie need to figure out what needs to be done with something other than price movements alone.)
“Abandoning economic growth?” POSSIBLE! (MP: wow, same Hubbert conclusion, but once again startling, coming from Petrie & Merrill Lynch)
“We are at a major historical inflection point.” “For many – pain. For the anticipatory – an opportunity.”
“If we jump to $120 quickly, demand elasticity will likely be triggered and price may drop to $45 for a short period.”

Tom Whipple - “Peak Oil and the Media”

Ex-CIA analyst, is often quoted in the Falls Church, VA paper, is Editor of Peak Oil News and Peak Oil Review. His summaries are found on www.energybulletin.net (a site I frequent), weekly.
Why is Peak Oil not in the Mainstream Media (MSM)?
“Never heard about it.”
“Nonsense – there is plenty.”
“No gloomy news – people don’t like that.”

His take:

There is no “smoking gun, no reason”. (MP: IMO, this is unfortunate but is also a reflection of the populace and TV-induced non-thought. This is an issue that requires pro-activity and lead time to prevent catastrophy. It appears that it is unlikely that major action will be taken before it is too late (and it may already be, but any time we wait only worsens the impact).
GAO, NPC studies which came out got close to zero MSM attention – but they were thick, seemingly confusing studies with nothing spectacular in their conclusions.
“Only MSM can bring widespread attention.”
Coverage is indeed changing/increasing slowly, scattered stories.
Not yet a critical mass to move people and the government.
10/17/07 article about $88 oil in NYT – had EVERYTHING BUT Peak Oil as a possible explanation. Some hints – spare capacity, harder to bring oil to market.
He thinks we are 80% there in terms of MSM getting it.
However, “only a pronounced shortage at the pumps may help explain it, price alone won’t do it.”

Vince Matthews, Director, Colorado Geological Survey (ex-UPR)
Oil, Minerals and The China Syndrome

Nuclear/Uranium
In US, last nuclear plant built in 1996 (and it was started in the 1970’s)
World using 180 MM# of Uranium per year.
World only producing 100 – 110 MM# of Uranium per year.
Uranium was $10 in 2003.
Uranium increased to $130 in 2007!!! (below $100 now)
US using 60 MM# Uranium per year
US only producing 2 MM# of Uranium per year.
Many of the US extraction industries ARE now foreign-owned.

Bottom-Lines:

“Huge inflationary pressures are now built into the pipeline.”
“Increasing shortages.”
“Worry of a “Mine the West” mentality.”
“Allegiance of the multi-nationals to the US?”

Stuart Staniford/Euan Mearns – Ghawar Field/Saudi Arabia
(Stuart and Euan are “editors” on The Oil Drum, frequent posters. Stuart has a Phd in Physics, MS in CS. Both have taken on the “reverse engineering” of Ghawar and other Saudi fields on a voluntary basis, due to their concern. Their work can be found on www.oildrum.com)

Saudi produced 8.25 MMBO/D in 03 – 04, then increased that to 9 – 9.5, until early 2006, then the rate has been decreasing linearly (interesting) since then to 8.5, leading many to wonder if this is voluntary or forced due to decline. However, there have been several flat months recently. It will be interesting to see if they can substantially increase production, and hold it there. Should know by summer 2008.
Ghawar produced 5 MMBO/D of the total, up through 2003 at least. It accounts for 1/3 of Saudi reserves, and 6% of global supply. Hence the focus on Ghawar.
5 major areas, from N to S: Ain Dar, Shedgum, Uthmaniyah, Hawiyah, Haradh.
The perm and porosity decrease from N to S, 19%, 640 md in N, to 14%, 52 md in South.
Hawiyah not developed until 70’s, 80’s, and Haradh not until 2006.

Bottom-Lines:

Pre-nationalization EUR was 211 GB with 91 GB remaining.
Saudi EUR jumped from 170 B to 260 B in 1987. Some of this was probably warranted, as a result of better information, reserve growth, new technology.
Hubbert linearization of Crude + Condensate (with new production areas) shows about 200 GB EUR.
Mearns: C + C + NGL: EUR 240 GB, can get rate to 11 MMBO/D, but still peak rate still occurs in 2011.
Colin Campbell has said EUR 275 GB
KSA has said OOIP around 700 GB. May be correct. KSA says 60 % RF, Stuart calculates 52% RF.
Given cumulative production is 120 MMBO, and EUR is around 240 GB, then they are about half depleted. According to the physics, a rate decline could begin at any time, and likely on or before 2011.

Investing in Unconventional Fuels – M/C by Leslie Haines with Oil & Gas Investor mag.

Gentleman with Raymond James

At $80 oil, $3.70 bushel corn (note, we sold our 3000 bu. in June at $2.75), ethanol still works.
PV Solar become breakeven at $150/bbl
PV has .05% of power market here, less than 1% in Germany (the world leader)
Wind, Geothermal, Ethanol, Biodiesel – all economic now!
PV had 23 % CAGR, last 10 yrs!
MP note: Not a word on SC based ethanol!

Dick Vodra, CFP – Spire Investment Planners, McLean, VA

Two decision levels (relevant to Peak Oil):

Investment decisions
Life decisions

“PO will likely cause disruption at all levels and new rules at all levels” (wow, nothing new to us, but strange from a mainstream CFP)
Reduce personal debt
Reduce risk exposure generally
“... likely to create a world where transportation of all kinds is much more expensive ...”
Support farmer’s markets
Support local retail production
Participate in community organizations
Know your neighbors
Support alternative transportation.

“... likely to affect availability of products and services. Repairing and reusing will become common again. Self-reliance will be more important.
Become and stay healthy
Learn new skills

Keith Behrens – Energy Capital Solutions (Dallas)

Panda - $90 MM ethanol near Hereford, TX
It quickly became evident that ethanol is currently underwater, reeling substantially, probably due to a rush to market with so many plants, lack of distribution, marketing, increase in corn prices (notwithstanding the controversial economics/proposition in the first place)
132 ethanol facilities now, 27 more under construction.
Much supply, not much infrastructure.
Ethanol price dropped 33% last yr, corn increased in price
$0.50 /gal tax break with ethanol, so usually ethanol should be $0.50 above gas prices – not so now.
Not a WORD on SC ethanol!

George Baker – Mexico Energy Intelligence

Big Mexican fields:

KMZ
Cantarell
Chicontepec

Cantarell:

Flat at 1 MMBO/D for 10 years
Then in 2000 began injecting 1 BCF/D of N2, increased rate to 2 MMBO/D in 2005. (MP: Mexico total then 3.4 MMBO/D)
In 2007: 1.5 – 1.6 MMBO/D
In 2008: 0.8 MMBO/D
In 2009: 0.6 MMBO/D

KMZ:

$7 Billion, 10 years, 100 wells, H2S, CO2, heavy oil, FPSO used for production when infrastructure was already in place???

Chicontepec:

Plan is from 2007 – 2016, to drill 10,692 development wells that each come on at around 150 BO/D, then decline to 50 BO/D!!! Impossible.
Claiming deepwater, 400 MMCF/D, 2012 – but that is just the gas, oil will take much longer.

Bottom-Lines:

Mexico Peaked in 2004.
Acting like “business as usual.”
KMZ, Chicontepec are suspect.
Deepwater on Mexican side, need 80 companies working on it, not one.
Cross-border fields may change government policy, or not? (MP: Draining them?)

David Hughes – Canadian Geological Survey – “Natural Gas and Coal: Some challenging facts.”
A series of nice, colorful graphs. In presentation available at link.

Bottom-line: Unfortunately, not much help from Natural Gas, nor even coal.

Scott Pugh – “Nuclear Power: Pros, Cons, and the Efficiency Card”

2005 retired from Navy as a sub commander, joined Amory Lovins at the Rocky Mountain Institute as “Military Principal”, now works for Science and Technology Dept. of Homeland Security
It would take 1000 – 2MW nuclear plants to run all our vehicles, cost $3-4 Billion, at 10/yr take 100 years, and we’d run out of fuel before we were finished.
12 companies are “talking about” applying for 27 plants, now.
Utilities have small market caps compared to the cost of just one nuclear plant.
Would take 7 – 10 years to build a plant today.

Roger Bezder – Co-Author, Hirsch Report, NETL

DC to West Coast, recent discount ticket for $150. If fuel prices double, ticket would only have to got to $190, that is still a good deal.
“Peak Oil ECONOMIC EFFECTS will have a larger impact (and a significant one) on aviation industry, rather than the cost of fuel relating to continuing to operate.” (MP: also supply shortfall, shortages, rationing he implies later, rather than price per se.)
“Air traffic grows faster than GDP, and air traffic will SLOW faster than GDP.”
“Model: Assume peaking in 2008, then oil declines 2 %.”
Chronic excess capacity – chaos in industry and beyond.
100’s of billions of $ of stranded investment.
Tourism, cities that depend on travel will suffer.
AG, Healthcare, MFG, Emergency Services will have priority when fuel is in short supply.

Justin Ward – Toyota Motor Sales, USA – “Plug-in Hybrid Technology Update”

Bottom-line/stumbling block: Batteries not ready for EV, PHEV
Current Prius conversion batteries cost $15,000
Don’t warranty that long
Possible thermal management problems
Diesels: “Post 2007 rules require thousand of dollars of tailpipe cleaunup to meet CARB (CA) specs – which are no longer just CA but many states.” (Mercedes-Benz)

John Kaufmann, Oregon Dept. of Energy – “Summary from the Portland Peak Oil Task Force”

Sanctioned by the City Council
Major tenets of their group:
Peak Oil will happen – probably sooner rather than later.
It will be a “Long Emergency”, not sudden, not over quickly.
No Magic Bullet alternate supply alternatives.
Good presentation, is available on link.

Roger Duncan, Deputy Director, Austin Energy – “The View from a Municipal Utility”

Austin – no rate increase for 13 years – one is coming soon.
Takes 20 years to replace a 500 MW coal plant with solar.
Even with all the things they are doing in terms of conservation and alt energy in Austin, are not meeting load growth. Need new plants, costs are staggering.

Peter Bishop – Professor, U of H, “Houston after Peak Oil”, presentation online

“Puncutated equilibrium” – one era after another.
“Complexity of societyis a function of the energy it has.”
“Up to now, had an increasing energy density.”
“Transitions inevitably create problems.”
Houston – 50 % energy/chemical economy today, was 85% in 1983
Bottom-line (among other things):
Society that goes fewer places.
No internal combustion engines.
Biodiesel trucks.