View
219
Download
1
Tags:
Embed Size (px)
Citation preview
Outline
1. Geological Reality“You have to find it first”
2. Discovery & Production starts & ends – growth is followed by decline
3. Explanation of Confusion
4. Consequences
5. Reactions
Extreme Global Warminggave excessive Algal Growths
Organic debris
90 & 150 million years ago
Rifts formed as the Continents moved apart
Chemical reactions converted
organic debris into oil when
buried & heated
Rifts filled by sediment washed in
from borderlands
And then came the rains
8
Oil
Gas
Water
Geology of an Oilfield
SandstoneReservoir Migrating Oil
Seal
CriticalTemperature
60-120 0C
Water well
Depletion is Easy to GraspAs every beer drinker knows:
“Glass starts full, and ends empty”– The quicker you drink it, the sooner it is gone
• The same principle applies to oil and gasHow has this self-evident reality been concealed ?• It is so obvious yet it is a DEVASTATING REALISATION
A Fixed Quantity
Oil was formed in the geological past– We can’t “grow” more
Are we Running Out? – We started running out with the first barrel– The last barrel is far in the future
But production begins to decline when half is gone - THAT IS THE ISSUE
Why we need to know
Oil & Gas now dominate our lives40% of traded energy is oil>90% transport fuel is oil
• Trade depends on transport
Much electricity is made from gas
Critical for agriculture - people eat– Fuels the tractor, transports the produce– Gives synthetic nutrients and pesticides
Why were n’t we told?Oil companies reported Commercial Reserves to meet
strict Stock Exchange rules
They under-reported discovery & revised upwards– A comforting but misleading image of steady growth
– No conspiracy - just simple commercial prudence
OPEC over-reported
PUBLIC NUMBERS ARE VERY UNRELIABLE• and difficult to decode
What the oil companies say
Denial gives way to Confession
Exxon-Mobil publishes the true position
Chevron-Texaco speaks of “inflection”
Shell’s admission causes financial furore– Failed to obscure reality by merger
But Lord Browne of BP deliberately misleads– Reserve/Production ratio
Reality and Illusion
0
500
1000
1500
2000
2500
1930 1950 1970 1990 2010 2030Cumulative Discovery, Gb
Inflexion due tofalling Discovery
Illusion
As ReportedActual
Reality
US-48
0
5
10
15
20
25
30
1930 1950 1970 1990 2010 2030 2050
Discovery Gb
0
2000
4000
6000
8000
10000
Production kb/d
Peak to Peak 40 years
Peak Discovery
Egypt
00.20.40.60.8
11.21.41.61.8
1930 1950 1970 1990 2010 2030 2050
Discovery Gb
0
200
400
600
800
1000
Production kb/d
Peak to Peak 30 years
Indonesia
0
1
2
3
4
5
6
1930 1950 1970 1990 2010 2030 2050
Discovery Gb
020040060080010001200140016001800
Production kb/d
Peak to Peak 32 years
Russia
0
5
10
15
20
25
30
35
1930 1950 1970 1990 2010 2030 2050
Discovery Gb
0
2000
4000
6000
8000
10000
12000
14000
Production kb/d
Peak to Peak 27 years
China
0
2
4
6
8
10
12
14
16
1930 1950 1970 1990 2010 2030 2050
Discovery Gb
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Production kb/d
Peak to Peak 44 years
United Kingdom
0
1
2
3
4
5
1930 1950 1970 1990 2010 2030 2050
Discovery Gb
0
500
1000
1500
2000
2500
3000
Production kb/d
Peak to Peak 25 years
Real Discovery Trend
Past discovery by ExxonMobil
0
10
20
30
40
50
60
1930 1950 1970 1990 2010 2030 2050
Gb
0
10
20
30
40
50
60
Past
Future
Production
Past after
ExxonMobil
“Draining the tanks”
145 Yet-to-Find
945 Produced1705 DISCOVERED
760 Remaining
?Filling at 5 p.a
Emptying at 25 p.a.
One in - Five out
Surprise
Billion barrels
Total would fill
Lake Geneva
Where is it?Regular Conventional Oil
-245
-191
-193
-110
-83
-47
-44
-27
380
146
30
71
65
22
23
14
-250 -150 -50 50 150 250 350 450
ME Gulf
Eurasia
N. America
L. America
Africa
W. Europe
East
ME.Other
Billion Barrels
Produced
Reserves
Yet-to-Find
All Oil & Gas
0
10
20
30
40
50
1930 1950 1970 1990 2010 2030 2050
Production, Gboe/a
Non-con Gas
Gas
NGLs
Polar Oil
Deep Water
Heavy
Regular
All boundaries fuzzy
The Illusion of new Technology
Oil industry uses very advanced technology– No major breakthrough in sight
Technology holds production higher for longer– increasing profit– accelerating depletion
• Does not add Reserves – save in special cases
Prudhoe Bay
0
100
200
300
400
500
600
700
0 1 2 3 4 6 7 8 8 9 10 10 12
Cum Prod. Gb
Ann. Prod. Gb
1977 Internal Estimate : 12.5-15 Gb
Reported : 9 Gb
Technology added nothing
1977
1989
First Half of Oil AgeOil Age is a Single CycleFirst half lasted 150 years, stimulating great
expansion of :– Industry– Transport & trade– Agriculture– Population– Financial Capital
GE = GE
Growing Energy
equals
Growing Economy
Financial Capital
Banks created money out of thin air– by lending more than they had on deposit
• Collateral was confidence in expansion– fuelled by cheap oil-based energy
Prime benefit of Empire was financial rent
Previously British £ : now US $
Cause of wars
Population
0
1
2
3
4
5
6
0 500 1000 1500 2000 2500
Anno Domini
Billions of People
First Oil Well ?
Equally depicts “Financial Capital” from oil-based energy
Dawn of Second Half of Oil Age
World enters Uncharted Waters– Oil Price Shocks & Economic Recessions
Destruction of Capital to match energy supply
We face the “End of Economics”– Resource limits anathema to classical flat-
earth economists living in past– But new economic thinking emerges– The banks begin to understand
Price Shocks - the first signs
0
10
20
30
40
50
60
70
1996 1998 2000 2002 2004 2006 2008 2010
Brent Crude US $ But prices crash with recessions
Shocks as production capacity limits breached
Five times whatit costs to produce
The Second Great Depression
Past debt losing its collateral– heralding an unprecedented collapse of the
Financial System
• USA - technically bankrupt
CE = CE
Contracting Energy
equals
Contracting Economy
Survival Strategies. 1- InformStop giving false advice
– The IEA has been a political curtain behind which its member governments hid
– But is now forced to change its tune
Provide valid public information“Put your trust in the People” said Winston Churchill
2- Depletion ProtocolCut oil imports to match world Depletion Rate.
– World price would moderate• allowing poor countries to buy minimal needs
• avoiding profiteering by oil companies & M.East• Force consumers to face reality
Proposal gaining momentum : to be discussed– in Lisbon in May by senior politicians and – in Rimini in October by “World Leaders”
Let this be the prime message from this conference
3- Stop waste: many easy steps • Domestic & commercial Energy Audits
Variable charges to reward savings & penalise waste A new “energy currency” (Proposed by Prof. Slessor)
– Better insulation & industrial heat recovery – Heat pumps & modern light bulbs
Disallow energy costs as a charge against tax– Stop tax-free aviation fuel
More public transport : car pooling, hitch-hiking
New behaviour & attitude
4- Turn to Renewables
A solar collector on every roof
Capture massive tidal and wave energy
Wind-power and hydro-power
Fuel crops (supplies 30% in Brasil)
Geothermal
Re-assess nuclear energyNew small fail-safe plants
But………..
Economic Recession suppresses oil demand
Oil prices sensitive to small imbalances– may crash too
Unconventional Oil and Renewable Energy do not compete with cheap oil
An added argument for the Protocol to make sure they are competitive
Silver Linings
A new regionalism with local marketsNew attitudes : non-consumeristic societyPeople learn to live in better harmony with
• themselves• each other• the Environment in which Nature has
ordained them to live
But the transition will be tough