Peak Oil and

Uncertainty ofClimate Change

1999 2004

James W. MurraySchool of OceanographyUniversity of Washington

with special acknowledgement to David Rutledge (Cal Tech) and Jim Hansen (Seattle)

BREST IUEM / LPO/ IRD

May 2010

IEA World Energy Outlook - Nov 2008“The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable — environmentally, economically, socially. What is needed is nothing short of an energy revolution.”

Today’s Conclusions

Evidence is strong suggesting that energy resource limitationwill be a serious issue.

Peak Oil has occurred or will occur soon.Why? existing oil fields are declining at ~5-7% per year (~5 mbd)New discoveries are not keeping up.

You will see nothing about this in the press or from the governments

Oil and Coal Reserves are much less than assumed by the IPCC.Even so production rate, not reserves, are what matter for society.

We know enough to see that Resource Limitation needs to at least be an IPCC Scenario

“geological limitation of oil, gas and coal will result in significantly less production of CO2 than assumed in the IPCC scenarios”

“uncertainty about climate change must include uncertainty about the source of CO2”

Some Definitions

IEA – International Energy Agency (International)EIA – Energy Information Agency in US Department of Energy (DOE)CERA – Cambridge Energy Research Association (Daniel Yergin)IPCC – Intergovernmental Panel on Climate ChangeSRES – Special Report on Emission SceneriosOPEC – Oil Producing and Exporting CountriesNon-OPECUSGS – US Geological SurveyMMS – US Mineral Management ServiceWEC – World Energy CouncilEWG – Energy Watch GroupANWAR – Alaska National WildlifeASPO - American Society of Peak Oil

Useful websites:www.theoildrum.comwww.aspo-us.comwww.energybulletin.netwww.peakoil.net

Production Today World Liquid Fuels = ~85 mbd (includes crude oil, lease condensates natural gas liquids, ethanol, CTL, GTL)World Crude Oil = ~74 mbd*

Recent History of Reports and Predictions2004 IEA to 121 mbd by >20302005 DOE Hirsch Report2005 IEA to 115 mbdby >20302005 EIA to 120 mbd by >20302006 IEA to 116 mbd by >20302006 EIA to 118 mbd by >20302006 CERA to 130 mbd by >20352007 GAO Report2008 EIA Projection 97 mbd2008 CERA to 112 mbd by 2017 to 118 mbd by 20302008 Price spike to $148*2008 IEA World Energy Outlook Quote “crossroads”2009 IEA Whistle Blower2009 IEA to 105 mbd2010 US Joint Operating Environment (JOE) Report2010 (Feb) UK Industry Taskforce on Peak Oil and Energy Security2010 (March) UK Peak Oil Summit with “Chatham House Rules”

Christophe de MargerieCEO Total SA2007 <100 mbd2008 <95 mbd2009 <90 mbd

May, 2005

To June 2010

The price of oil has increased almost continuously since 1999.

If oil gets too high the economy becomes unstuckIf oil gets too low new investment is halted

SRES A1 AIM scenarios expect $43 in 2020 then $73 in 2100

18.7% / yr

Ali al-Naimi – Sweet spot for oil prices ≈ $75But the price will be difficult to control.

Expect the economy to zig-zag in the future with the lows getting progressively higher

Outline

• The 4th UN IPCC Assessment Report SRES Scenarios• Oil Reserves• Hubbert’s peak

– The history of US oil production– How much oil and gas will the world produce?

• The Coal Question• Discussion

– Future carbon-dioxide levels and temperatures– Summary

The UN Panel on Climate Change (IPCC)

• The UN Intergovernmental Panel on Climate Change publishes assessment reports that reflect the scientific consensus on climate change

• The 4th report was released in 2007 – Over one thousand authors– Over one thousand reviewers– Nobel Prize

• Report discusses climate simulations for fossil-fuel carbon-emission scenarios

• There are 40 scenarios, each considered to be equally valid, with story lines and different government policies, population projections, and economic models

AR5 will only have 3 scenarios

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A1G Message A1G Minicam

A1V1 Minicam A1V2 Minicam

A1T AIM A1T Message

A1T Maria A2 ASF

A2 AIM A2G Image

A2 Message A2 Minicam

A2-A1 Minicam B1 Image

B1 AIM B1 ASF

B1 Message B1 Maria

B1 Minicam B1T Message

B1High Message B1High Minicam

B2 Message B2 AIM

B2 ASF B2 Image

B2 Maria B2 Minicam

B2High Minicam B2C Maria

Oil Production in the IPCC Scenarios

• Gb = billions of barrels 1 barrel = 42 gallons = 159 liters = GJ• In 13 scenarios, oil production is still rising in 2100• In none of the scenarios did oil production decrease because of

resource limitation• Today’s Crude Oil Production is 28 Gb y-1

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182 mbd

Based on Rogner , 1997

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CO2 emission Scenarios

From ∑ Oil + Gas + CoalThese scenarios drive almost all climate change researchA2 = BAU

What is Peak Oil?

It’s not about Reserves!

It’s all about the Production Rate!

We are not close to running out of oil

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OPEC Oil “Proven” Reserves!

• Accurate reserve estimates for OPEC countries are closely guarded state secrets• Values for 1983 are probably accurate (for 1983)• 430Gb rise in reserves, no adjustment for 193Gb produced since 1980• These questionable reserves are 45% of world oil reserves used by IPCC!• Kuwait Example: A recent leak of Kuwait Petroleum Company documents showed the actual reserves

are only 48Gb (official reserves are 102Gb). 1980 Kuwait reserves adjusted for production since then are 55Gb

From BP Statistical Review

Not provenby anybody!

Gb = billions of barrels

M. King Hubbert

• Geophysicist at the Shell lab in Houston

• In 1956, he presented a paper with predictions for the peak year of US oil production

Oil Wells and Fields Peak --- Regions Peak --- The World will peak

Everyone agrees that world oil will peak – controversy on the date

A modellogisticdistribution

Examples: Rapid Depletion is Normal

MexicoWas the #2 supplier of oil to the USNow is #4

Cantarell from >2,000 in 2005to 860,000 in Jan 2009to 588,000 in July 2009

Both Mexico and the USare in trouble. Mexico:Sale of oil = 40% of federal budget

US:Net exports are decreasing fast

Mexico Net Oil Export

US Oil Consumption today is about 21 million barrels of oil/dayANWAR will not save us! US Production today is 5.5 mbd.

Hubbert’s Peak

• From Hubbert’s 1956 paper• Hubbert drew bell-shaped curves by hand, and added up barrels by

counting squares• For the larger estimate, he predicted a peak in 1970• Hubbert has been much criticized there is no consideration of

supply and demand curves, prices, or policy, and new technologies

Case Study:

Apply the Principals of Hubbert’s Modelto the US to see how this works

US Crude-Oil Production

• Production is bell-shaped, like the curves Hubbert drew• Average price after the peak is 2.6 times higher than before

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Price

Production

The model fit to the real data is not bad. The model predicts 1973. The real maximum occurred in 1970

Hubbert’s Model - US Case Study

P/Q = mQ + aQ for which P/Q = 0 is 198 gigabarrels of oil. Also called Qt (maximum cumulative production)Half of this is 99 which occurred in 1973

A model for exponential growth in a finite system

The Logistic Curve or Rate Plot

Lower 48

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Another Approach: Cumulative Oil Production

• EIA data from 1859• Fit for cumulative normal gives the ultimate production and the time for 90% exhaustion

90% exhausted in 2011

225Gb ultimate

31Gb remaining

Includes48+Alaska

USGS/MMS assessment 189Gb

Historical Projections for US Oil

The power of Hubbert’s Linearization is that it uses past behavior of a system to indicate possible future performance

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Hubbert

USGSMcKelvey

Can we apply this approach to estimate ultimate global oil production?

Rate Plot from 2005:Maximum Cumulative Production (Qt) = 2165 Gigabarrels

½ Qt = 1083 Gb

Cumulative production of SRES A1 family = ~3400Gb at 100 to 126 mbd A2 family = ~2900 Gb and B family = 2790 Gb

World Crude Oil Production Peaked in May 2005non-OPEC Peaked in 2004Saudi Arabia peaked in 2005, Russia appears to have peaked

IEA stillpredicts an increase(May 19, 2009)

MBD

Year

From US EIA 2009

How will the shortfall called “unidentified projects” be met?

Who are the experts that IPCC turn to?Energy Information Agency (EIA) - DOEInternational Energy Agency (IEA) – ParisUS Geological Survey (USGS) - Washington

Their economic models for future emissions are driven by demand (not supply).

The EIA forecasts in 2008 projects a 30% increase in oil production between now and 2030 (from 85 to 97 mb/d) ( = +12 mbd).

The hard truth is that increasing energy supply at all will be difficult.

To have growth we need to balance decline of exisiting fields with discovery of new oil

Existing oil fields are declining at - 6.7% per year (IEA 2008)

For 2005 to 2030 the world needs 45 mbd of new production – just to maintain flat production

The projected growth requires discovery of 45 + 12 = 57 mbd of new oil!

Existing Oil Fields are in Decline

57 mbd ÷ 9 mbd = ~6+ new Saudi Arabias

The red box shows the average amount estimated to be discovered by the USGS each year between 1995 and 2025.

Urban Legend – we can drill more to get more oilOil discoveries have been declining since 1964

The world’s oil provinces have been well explored. Future discoveries will be limited to smaller structures and deeper formations

US

MiddleEast

Canadian Tar Sands

1.2 mbd in 2008; projected 2.4 mbd in 20204 barrels of water for each barrel of oil2 tons tar sands = 1 barrelBig energy demandEROI = ~6:1 gold (natural gas) to lead (oil)

surface mining (~20%)in-situ (~80%)

Hugh resource = 1.7 trillion barrels

Neither scaleable nor timely

What about coal?

There are supposed to be hundreds of years of supply of coal!

Big 3 Reserves:US (27%)Russia (17%)China (13%)thenIndia, Australia, South Africa

Remarkably the data-quality is very poor globallybut especially for China (last update 1992) and SE Asia and FSU

See World Energy Council (WEC) Reports

We have a big problem with coal.The reserves may not be as large as We’ve been led to believe.

"Present estimates of coal reserves are based upon methods that have not been reviewed or revised since their inception in 1974, and much of the input data were compiled in the early 1970s. Recent programs to assess reserves in limited areas using updated methods indicate that only a small fraction of previously estimated reserves are actually minable reserves."

from the National Academy of Sciences Report on Coal, June, 2007

The world’s proven reserves of coal are decreasing fast!

Whenever coal reserves are updated the reserve estimates are revised downward (significantly).

Not due to production, but rather more thorough geological surveys.

Example: World Reserves by WEC decreased from 10 trillion tons to 4.2 trillion tons in 2005

Example: Gillette in Wyoming from 20.9 billion tons to 9.2 billion tons (2009)

The energy content of coal mined is decreasing.

Types of coal (four types – different energy content)Anthracite (30 MJ/kg)Bituminous (19 – 29 MJ/kg)Sub-bituminous (8-25 MJ/kg)Lignite (5-14 MJ/kg)

The high energy coal is running out

US passed peak anthracite in 1950 peak bituminous in 1990

Total energy content of US coal peaked in 1998Total energy content of world coal should peak in 2025

Another Problem is Energy ContentIPCC reports energy units (ZJ)

42 GJ = ton of oil equivalent6.12 GJ = one barrel of oil

Energy Watch Group (2007) Coal: Resources and Future production

ReservesSo-called proven reserves are anything but.

Major new discoveries are unlikely

China (largest producer)55 yrs from 1992 at 1992 rates (now >3x faster)

EWG states that China will peak in ~10 yrs

China’s reliance on coal means growth will end!

USA (“the Saudi Arabia of coal”)Large Reserves but many are of low qualityand high sulfur

Volume will increase for another 10 to 15 yearsbut net energy will decrease Global Picture

Six countries hold 90% of reservesRarely is coal exported

The world coal energy peak will occur ~2025

Compare with IEA WEO scenarios Reference scenario is unrealistic Alternative scenario is feasible

Höök et al (2008)

Can we apply Hubbert’s approach to coal?

UK

Germany

Japan

Rate Plot for British Coal

Historical Projections for UK Coal

• Reserve numbers are available before projections stabilize• Produced 18% of the 1871 Royal Commission reserves + cumulative• Criteria were too optimistic ― 1-ft seams, 4,000-ft depth (Deffeyes’ law)

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Projections vs Reserves for World Coal

• UN IPCC scenarios assume 18Tboe is available for production

Region Projection Gt Reserves Gt

Eastern US 37 96

Western US w/o Montana 33 79

Montana 68

Central and South America 16

China 88 189

South Asia 68

Australia and New Zealand 50 77

Former Soviet Union 36 226

Europe 21 44

Africa 16 30

World (at 3.6boe/t) 435 (1.6Tboe) 903

from D. Rutledge

From Aleklett

Many independent groups are coming to the same conclusion

David Rutledge – Cal Tech

Uppsala – Kjell Aleklett Peak Coal in 2030 (examples follow)http://www.tsl.uu.se/uhdsg/Publications/Coalarticle.pdf

Energy Watch Group (EWG-Germany) Peak Coal in 2025http://www.energywatchgroup.org/files/Coalreport.pdf

Institute of Energy (IFE)Kavakov and Peteves (2007) The Future of Coalhttp://ie.jrc.ec.europa.eu/

Richard Heinberg Post Carbon Institute (2009)“Blackout : Coal. Climate and the Last Energy Crisis”New Society Publishers

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1.6Tboe coal remaining

4.7Tboe fossil fuels remaining

Future Fossil-Fuels Production

50% in 2022

D. Rutledge

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Comparing with the IPCC Scenarios

• This projection has lower emissions than any of the 40 IPCC scenarios

• This is still true even with full coal reserves

Projection

D. Rutledge

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Carbon-Dioxide Levels

• Simulations with the program MAGICC from Tom Wigley at the National Center for Atmospheric Research (NCAR) in Boulder

• This program was used in the earlier UN IPCC Assessment Reports• profiles that come with the program are modified to use our projection for

fossil-fuel emissions• profiles are business-as-usual for other greenhouse gases

Projection

50% Stretch-out for Fossil Fuel Burning

460ppm

440ppm

1) Supply Limitation will be serious and soon!Existing scenarios and energy policies are based on emissions - not supplyProduction rate matters not size of reserves

2) Coal is thought of as a solution to energy needs – This will be a disaster for climate change without CO2 sequestration. Is CO2 sequestration realistic?

3) Energy will pass climate change as the hot button issueWe have to get our energy plan in order before we can move forwardon climate change

4) Energy Supply Limitation will Buffer Economic Recovery.

5) Security Issue:Seven nations control 75% of world’s oil exports. There will be shiftsin global power and wealth

Once it is clear that oil production has peaked is there are reason to believe that exports will not be limited?

Conclusions: A slow-motion train wreck

We have built a world economy on the premise of endless, cheap fuel.

But we have reached the point where its production can no longer be increased.

By the end of the century, nearly everything will have to be powered byrenewably-generated electricity, not liquids or gases.

Scaling up renewables to take over fossil fuels, and transitioning all the infrastructure, is going to be mind-boggling expensive, difficult and slow.

There are three main issues that are usually underappreciated.

Energy Costenergy consumption = roughly 20-30% of the gross starting energy in the coal. One “carbon wedge” .TimingOnly 3 or 4 small scale carbon storage demonstration projects exist.

ScaleA storage volume of 30,000 km3/yr required. Niagara Falls = 50 km3/yr. We need to store 600 Niagara Fallsof liquid CO2.

Is geological CO2 sequestration (CCS) a realistic strategy?

See Science, September 25, 2009 issue of Science.

“Clean Coal” is an idea whose time will never come

Nobody can predict oil prices, but the pattern will be something like this.Demand surges will result in oil price shocksOil price shocks cause recessions and force reductions in demandThe average price of oil goes up over time

Demand destruction keeps the supply-demand in balance

James Hamilton (UCSD) – Recessions generally correlate with the price of oil.If energy expenditures rise faster than income, then the share of income for otherthings must decline

Oil Expendituresas a % of GDP

Energy as a buffer on economic growth

5.7% is the key

The Price Elasticity of Demand has become virtually zero. It’s a supply limited market.

from Kenneth Deffeyes

Natural Gas – Shale Gas is overhyped!Shale Gas is the big news – in the US the Barnett, Haynesville, Fayetteville and Marcellus formations get the big news.

But while the initial production rates are very high the first year decline rates are extremely steep. Example below from the Barnett Fm. in Texas

Environmental issues (ground water contamination) associated with hydraulic fracturing (fracking) are a major issue. An exemption from the Clean Water Act is required.

Arthur BermanAt $7.00/Bcfrequires 1.5 Bcf.Avg Barnett = 0.95

Producers claim2.2 to 2.3 Bcf/well

Hydrofracing

Can there be economic growth without growth in energy?

David Fridley - LBNL

There is a connection between debt, oil prices and personal income

Regional Fits vs Reserves, Gt

Region Fits for Ultimate

WEC Reserves plus cumulative

Europe 155 195

US and Canada 141 316

China (with Japan, South Korea) 115 159

South Asia and Middle East 78 78

Russia 74 219

Australia and New Zealand 59 86

Africa 22 57

Latin America 19 19

World 663 1,129

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850 left to be mined

IPCC range is355 to 3500 in 2100

“We are all extraordinary skeptical of the "peak oil" stuff. We know of no reliable information that suggests that we're going to be running significantly short of any fossil fuel in this century…It certainly won't happen with any significant price on carbon.”

“We've done a few 300-year scenarios that have some shortages in them, but even that may not be realistic. This is especially so with coal!”

“The Chinese say they have enough coal for centuries…The idea that we're only going to reach 450 ppm is not defensible, especially when we're already around 385 ppm. Do we really think there is only another 60 years of fossil fuel left? I don't think so.”

PNNL Climate Modelers

…but, see my figures!

“The scenarios are intended to exclude catastrophic futures that involve large scale environmental or economic collapses. In such scenarios GHG emissions might be low because of negative economic growth, but it seems unlikely they would receive much attention in the light of more immediate problems. Hence, this report does not analyze such futures.”

IPCC

Mad Max Excluded

The UK government is starting to get “Peak Oil”It is light years ahead of the US

Findings from UKERC report (Feb 2010)

1.Global oil depletion is well understood and well advanced2.Peak oil is inevitable. The timing is uncertain but the window is Rapidly narrowing and the range of possibilities is narrowing3. The quality of the reserves data is appalling, especially for the large OPEC producers4. The risks presented by oil depletion deserve serious attention. Prices will inevitably be higher

Energy Watch Group (2007) Coal: Resources and Future production

ReservesKey message is how fast they have been revised downward – 55% in last 25 yrsGermany (23 Bt to 0.18 Bt) and UK down by 90%

Counter to conventional wisdom

China (largest producer)55 yrs at current rates – but reserves not updated since 1992! So now 40 yrs but

at 1992 production rates *China is now a net coal importer.*

EWG states that China will peak in next 5 - 15 yrs

USA (“the Saudi Arabia of coal”)200 yrs of proven reserves! But many are of low qualityand high sulfur

Volume will increase for another 10 to 15 yearsbut net energy will decrease – due to transport and CCS

Global PictureSix countries hold 90% of reservesRarely is coal exported

The world coal energy peak will occur ~2025

Compare with IEA WEO scenarios Reference scenario is unrealistic Alternative scenario is feasible

*Key finding is that data quality is very bad.*

Net Export Production - Mexico

“It has been estimated that there are over 984 billion tonnes of proven coal reserves worldwide…This means that there is enough coal to last us over 190 years.” The Coal resource, World Coal Institute, 2005

Future Supplies are often discussed in terms of the reserves-to-production(R/P) ratio.

Sounds sensible but supply forecasts of nonrenewable resources based onR/P ratios are always wrong!

Three main reasons..1. Rates of consumption of energy are never constant - they increase2. It is physically impossible to maintain a constant rate of extraction until theresource is exhausted3. Reserves are not static, but can increase as a result of new discoveries andnew technologies or decrease due to better data.

Five independent groups have attempted an to determine when peak coal will occur.

Energy Watch Group (EWG), Institute for Energy, Aleklett (Uppsala University), Rutledge (Cal Tech)

The reserves to production ratio (R/P)

China – Coal Consumption Rates

+7% per year means double in 10 years

China: Exporter to Importer

150 Mt in 2010

• Mt = millions of metric tons• Production is now 16 times less than the peak, while the average

price after the peak is 2.4 times higher than before• In 1913, Britain exported 27% of its production, now it imports

74% of the coal it burns

UK Coal Production

• The scenario report SRES (2000) references the 1995 and 1998 WEC surveys• Downward trend in proved recoverable reserves• The IPCC chose to use additional recoverable reserves and they also chose 1998

(3,368Gt) instead of 1995 (680Gt) — additional recoverable reserves are now 19 times smaller than in 1998

Where Does the IPCC Get Its Coal Numbers?World Energy Council survey

Proved recoverable reserves, Gt

Additional recoverable reserves, Gt

1992 1,039 702

1995 1,032 680

1998 984 3,368

2001 984 409

2004 909 449

2007 847 180

Changing Perceptions of Peak Oil

During 2009 the most significant story about peak oil was published by The Guardian (UK) on November 9th

Whistleblower #1, still with the IEA, said "The IEA in 2005 was predicting oil supplies could rise as high as 120 million barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year [2008]. The 120m figure always was nonsense but even today's number is much higher than can be justified and the IEA knows this. Many inside the organization believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further.” Such honesty isn’t tolerated by IEA member state USA, which apparently leaned hard on the Agency to bury this hard truth for years.

There was a similarly strong warning from a heavy-weight within the oil industry. Christophe de Margerie, CEO of oil super-major Total SA, had previously issued warnings about world oil supply constraints. In 2007, he stated that “production of 100 million barrels a day will be difficult.” He upped the ante during 2008, claiming that “world oil production would peak at or below 95 million barrels per day.” On February 10th, 2009, the CEO’s statement could have been issued by ASPO-USA: “world oil production may plateau below 90 million barrels per day.”

Oil optimists like Daniel Yergin and Michael Lynch pushed back against the peak oil story on op-ed pages of several major US newspapers. Reporters wrongfully continued to link peak oil to “running out of oil,” and to confuse reserves with production rate.

A fog of sorts still plagues the issue in the media.

Exponential growth in wind energy over the past 15 years has boosted energy from renewables to near 50 million tonnes oil equivalent per annum.

This shows the scale of the problem