Assessing Energy Futures 3

PEAKING OF WORLD OIL PRODUCTION The Problem & Its Mitigation

Robert L. Hirsch, Ph.D. Senior Energy Program Advisor, SAIC 6th National Conference on Science, Policy and the Environment January 27, 2006. 11/18/08

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THIS PRESENTATION •

THE PEAK OIL PROBLEM

•

MITIGATION OPTIONS

•

THREE SCENARIOS

•

TIMING & RISK

11/18/08

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Why will conventional oil production peak? Regions Peak (Many oil fields)

Production

Production

Oil Fields Peak

U.S Lower 48 States 1945

Time - Decades

Year

2000

The world will peak (All regions) 11/18/08

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World Additions to Oil Reserves Have Been Lagging Consumption for Decades.

40

Annual Additions 20 Minus Consumption 0 (Billions of Barrels)

-20 1940

Year

2000

We now consume 3 barrels for each new barrel added. 11/18/08

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What Might Happen at Peaking? Oil demand grows in a healthy world economy

Supply cannot meet demand

• PRICES ESCALATE • SHORTAGES DEVELOP

Production reaches a maximum & then declines - PEAKS 11/18/08

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When? No one knows for certain Forecast

Source

2006-2007

Bakhitari (Iran)

2007-2009

Simmons (U.S.)

After 2007

Skrebowski (U.K.)

2010

Campbell (Ireland)

Before 2009

Deffeyes (U.S.)

Before 2010

Goodstein (U.S.)

After 2010

World Energy Council

2012

Weng (China)

2016

Doug-Westwood (U.K.)

After 2020

CERA (U.S.)

2030 or later

EIA (U.S) / Exxon Mobil

5 years

5-15 years

> 20 years 11/18/08

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Forecasting Oil & Gas Supply Is Difficult! DOE EIA Forecasts of N. American Natural Gas Supply to U.S.

34.0

Looks good

’02

33.0

’03

32.0 31.0

Tcf/Year

30.0 29.0

4 years

28.0

’04

27.0 26.0 25.0

’05

24.0 23.0

’06E

22.0

Trouble!

21.0 20.0 2002

2004 2006

2008

2010

2012 2014

2016

2018

2020 2022

2024

2026

2028 2030

EIA, Annual Energy Outlook 2002, 2003, 2004, 2005 and 2006E

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Why worry now? •

World oil demand is huge & growing.

•

World consumption outstripping discoveries.

•

Oil production in decline in 33 of the 48 of the world’s largest oil producing countries.

Many experts are deeply concerned. Mitigation requires time. The risks are enormous. 11/18/08

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Fundamentals Peaking is maximum production, not running out. It’s a liquid fuels problem, not “energy.”

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Mitigation Study Scenario I -

No action until peaking occurs

Scenario II -

Mitigation started 10 years before peaking

Scenario III -

Mitigation started 20 years before peaking

ASSUMED CRASH PROGRAM IMPLEMENTATION: THE MOST OPTIMISTIC, LIMITING CASE 11/18/08

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Mitigation Options Considered - Vehicle

fuel Efficiency

- Heavy oil / oil sands - Coal Liquefaction - Gas-To-Liquids (GTL) - Enhanced Oil Recovery (EOR) Why these? There’re ready for

Implementation 11/18/08

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Options Not Included in Our Analysis Option

Reasoning

– Nuclear – Wind

………... Electric

– Solar

LIQUID FUELS needed

– Hydrogen……………Neither ready nor economic – Biomass……………. Not economic – Shale Oil……………. Not commercial

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Sum of Contributions 30

Impact in Millions of barrels of oil per day (MM bpd)

EOR

20

Coal Liquids Heavy Oil

10

GTL Eff. Vehicles

0 0

5 10 15 Years After Crash Program Initiation

Delay, then rapid growth. Roughly 25

MM bpd 15 years after crash program start. 11/18/08

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Q: Why can’t we do more conservation faster? A: Fleets of vehicles are huge & median life is long.

Autos

Light Trucks

Heavy Trucks

Fleet size - Millions

130

80

7

Median life - Years

17

16

28

Airplanes

Small 22

U.S. Transportation - 2003

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A Pattern for World Oil Demand Date for peaking left open Extrapolated Demand -Growing World Economy 120

Shortage

100

(60 MM bpd @ year 20)

80 PRODUCTION 60 (MM bpd)

U.S. Lower 48 production pattern

40 20 0

-20

-10

0

+10

+20

YEARS BEFORE / AFTER OIL PEAK 11/18/08

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SCENARIO I: MITIGATION @ PEAKING

120

Mitigation

100

Shortage

80 PRODUCTION 60 (MM bpd) 40 20 0

-20

-10

0

+10

+20

YEARS BEFORE / AFTER OIL PEAK

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SCENARIO II: MITIGATION 10 YEARS BEFORE

120

Mitigation

100

Shortage

80 PRODUCTION 60 (MM bpd) 40

Start

Oil Decline Delayed

20 0

-20

-10

0

+10

+20

YEARS BEFORE / AFTER OIL PEAK

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SCENARIO II: MITIGATION 20 YEARS BEFORE

120

Mitigation

100 80 PRODUCTION 60 (MM bpd) 40

Start

20 0

Oil Peaking Further Delayed

-20

-10

0

+10

+20

YEARS BEFORE / AFTER OIL PEAK

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Summary Crash Program Implementation

I. Wait for peaking

BIG TROUBLE!

II. Start 10 years early

SERIOUS TROUBLE!

III. Start 20 years early

NO PROBLEM?

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Forecasts of World Conventional Oil Production Peaking Forecast

Now

Now + 10 years Now + 20 years

Source

2006-2007

Bakhitari (Iran)

2007-2009

Simmons (U.S.)

After 2007

Skrebowski (U.K.)

2010

Campbell (Ireland)

Before 2009

Deffeyes (U.S.)

Before 2010

Goodstein (U.S.)

After 2010

World Energy Council

2012

Weng (China)

2016

Doug.-Westwood

After 2020

CERA (U.S.)

2030 or later

EIA (U.S) / Exxon Mobil

Scenario III

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A Chinese View on Peak Oil Gb/year 50

50 40

40 30

Demand Growth

WORLD OIL

GAP

30

Past Production

20

Forecast Production

20

10 10

0 1930 0

2006

1950

1970

1990

2010

2030

2050

Peak ~ 2012

China has been taking aggressive action to secure oil supply. 11/18/08

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Past / Future? • Oil interruptions in 1973 & 1979 caused recessions & inflation. • Both events were brief. • World oil peaking impacts could last for decades. • We have never faced a problem like world oil peaking.

The world’s first forced energy transition. 11/18/08

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Conclusions • Oil peaking timing is uncertain. • It may be soon. • Soon is less that 20 years hence. • It’s a world liquid fuels problem. • Peaking = World’s first forced energy transition. • The risks of over optimism are enormous! • Mitigation technologies ready; Implementation the challenge. • With timely mitigation, economic damage minimized. 11/18/08

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