The Looming Energy CrisisThe Looming Energy Crisis

PEAK OILPEAK OIL

J. R. WOODGEOLOGY DEPT.MICHIGAN TECHNOLOGICAL UNIVERSITY

ANNUAL PRODUCTION OF CRUDE OILACTUAL & PROJECTED

SOURCE: ASPO, 2004

U.S. energy consumption, 2001 U.S. energy consumption, 2001

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ANNUAL CRUDE OIL ANNUAL CRUDE OIL CONSUMPTIONCONSUMPTIONIN THE US & SOURCESIN THE US & SOURCES

GDP AND OIL CONSUMPTIONGDP AND OIL CONSUMPTION

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OF NATIONALGDP ON OIL CONSUMPTION:67 COUNTRIES

WORLD ENERGY CONSUMPTIONWORLD ENERGY CONSUMPTION

EXXON-MOBIL

During the 1990’s, the debate over oil During the 1990’s, the debate over oil reserves generated controversy between reserves generated controversy between the "pessimists" and the "optimists". the "pessimists" and the "optimists".

THE DEBATE OVER RESERVESTHE DEBATE OVER RESERVES: : PESSIMISTS AND OPTIMISTSPESSIMISTS AND OPTIMISTS

““Oil is so important that publishing reserve Oil is so important that publishing reserve data has become a political act. Most of the data has become a political act. Most of the dispute between the so-called pessimists dispute between the so-called pessimists (mainly retired geologists) and the optimists (mainly retired geologists) and the optimists (mainly economists) is due to their using (mainly economists) is due to their using different sources of information and different different sources of information and different definitions. The pessimists use technical definitions. The pessimists use technical (confidential) data, whereas the optimists use (confidential) data, whereas the optimists use the political (published) data. “the political (published) data. “

Jean Laherrère "Future of oil supplies” Seminar Center of Energy Conversion Zurich May 7 2003

OIL IS POLITICALOIL IS POLITICAL

• the world is finite and so are its recoverable oil resourcesthe world is finite and so are its recoverable oil resources

• all of the oil-bearing regions worth exploring have already all of the oil-bearing regions worth exploring have already been exploredbeen explored

• the big fields have already been discoveredthe big fields have already been discovered

• claim that official figures for proven reserves have been claim that official figures for proven reserves have been overestimated overestimated

• world oil production is currently at its optimum (peak) and world oil production is currently at its optimum (peak) and will decrease steadily will decrease steadily

•Geologists and physicists tend to hold this position.Geologists and physicists tend to hold this position.

PESSIMISTSPESSIMISTS

• hold a “dynamic” concept of reserves hold a “dynamic” concept of reserves

• believe that volumes of exploitable oil believe that volumes of exploitable oil and gas are closely correlated to and gas are closely correlated to technological advances, technical costs technological advances, technical costs and priceand price

• tend to be economiststend to be economists

OPTIMISTSOPTIMISTS

THE “FLAT EARTHER’S” PRODUCTION CURVETHE “FLAT EARTHER’S” PRODUCTION CURVE

http://wolf.readinglitho.co.uk/index.html

“… “… often assumed by often assumed by economists that oil economists that oil production can simply be production can simply be increased to keep pace increased to keep pace with consumption until with consumption until the wells finally and the wells finally and suddenly run dry.”suddenly run dry.”

Summary: Optimists and PessimistsSummary: Optimists and Pessimists

Will the hydrocarbon era finish soon? Oct. 2000H. Rempel, Federal Institute for Geosciences and Natural Resources, Stilleweg 2, 30655 Hannover

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WorldWorld - Regular Oil - Regular Oil

PeakPeakDiscoveryDiscovery

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High PricesHigh PricesCurb DemandCurb Demand

Ultimate : Ultimate : 1850 Gb 1850 GbTo-date 2003: 920 GbTo-date 2003: 920 Gb

DISCOVERIESDISCOVERIES

WORLD OIL DISCOVERIESWORLD OIL DISCOVERIES

Oil discoveries Oil discoveries worldwide peaked worldwide peaked at 90 Gb in 1964 at 90 Gb in 1964 (except for an (except for an exceptional, solitary exceptional, solitary peak year in 1948 of peak year in 1948 of 147 Gb. It clearly 147 Gb. It clearly shows the fall in shows the fall in discovery. Even the discovery. Even the successes such as successes such as North Sea oil in the North Sea oil in the mid-1970s do not mid-1970s do not halt the trend,. halt the trend,. Source: ASPOSource: ASPO

“You have to find it before you can produce it “

Production mirrors discovery after a time lag

3 YEAR AVERAGE

Production mirrors discovery …Production mirrors discovery …

Drilling moredoes not help

After a time lag of ~35 years for the US Lower 48.

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Past discovery by ExxonMobil

Production mirrors discovery …Production mirrors discovery …

Drilling moredoes not help

… for the world?

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Drilling moredoes not help

BUT “OFFICIAL” PROJECTIONS CONFUSE …BUT “OFFICIAL” PROJECTIONS CONFUSE …

SOURCE: EIA & USGSSOURCE: EIA & USGS

Regular OilRegular Oil

How Much has been Found?How Much has been Found?1700 Gb (rounded)1700 Gb (rounded)

When was it found?When was it found?Peak discovery was in 1964Peak discovery was in 1964

““The attached graph shows The attached graph shows 76 estimates of ultimate 76 estimates of ultimate recover estimates published recover estimates published by major oil companies and by major oil companies and serious scientific serious scientific institutions. There is a institutions. There is a consensus, ... from which consensus, ... from which only a few eccentric high only a few eccentric high estimates depart (that) ... the estimates depart (that) ... the average works out at 1930 average works out at 1930 Gb, of which 920 Gb, or Gb, of which 920 Gb, or almost half (48%), have almost half (48%), have been consumed.”been consumed.”

ESTIMATTES OF ULTIMATE RECOVERYESTIMATTES OF ULTIMATE RECOVERY

How Much has been Found? How Much has been Found? 1700 Gb (rounded)1700 Gb (rounded)

When was it found? When was it found? Peak discovery was in 1964Peak discovery was in 1964

Where is it?Where is it?Regular OilRegular Oil

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RESERVE ESTIMATESRESERVE ESTIMATES

RESERVES ARE:ORIGINAL OIL IN PLACE – PRODUCTION

RELIABLE DATA ARE HARD TO COME BY

“RESERVE GROWTH” IS REAL BUT SOMETIMES HARD TO VERIFY

PRIME DIFFERENCE BETWEEN “OPTIMISTS” AND “PESSIMISTS”

““Political” ReservesPolitical” Reserves

Companies officially under-report where they can. Stock Exchanges encourage under-reporting

Countries variously– Under-report based on company returns– Over-report, for example, for OPEC quota– Simply fail to update - 68 countries in 2003

““Reserve Growth”Reserve Growth”

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““Reserves published as “proved” by Oil & Gas Reserves published as “proved” by Oil & Gas Journal (OGJ), World Oil, BP Statistical Journal (OGJ), World Oil, BP Statistical Review, American Petroleum Institute and Review, American Petroleum Institute and OPEC, can be called “political” (or OPEC, can be called “political” (or financial).” financial).” Jean Laherrère "Future of oil supplies” Seminar Center of Energy

Conversion Zurich May 7 2003

STANDARD SOURCES OF DATASTANDARD SOURCES OF DATA

STNADARD SOURCESSTNADARD SOURCES

•OIL & GAS JOUIRNALOIL & GAS JOUIRNAL

•WORLD OILWORLD OIL

•BP STATISICAL REVIEWBP STATISICAL REVIEW

•API (DOE)API (DOE)

•OPECOPECOGJ and World Oil simply report what OGJ and World Oil simply report what governments and companies send themgovernments and companies send them

BP uses OGJ & WO data but does not filter, BP uses OGJ & WO data but does not filter, QC or apply institutional knowledgeQC or apply institutional knowledge

API and OPEC are meant to be politicalAPI and OPEC are meant to be political

World DiscoveryWorld DiscoveryThe Popular ImageThe Popular Image

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OPEC “quota war”

Reality

Flat-earth illusion

Evolution of ReportingEvolution of Reporting

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Abu Dubai Iran Iraq Kuwait Neutral Saudi VenezuelaYear Dhabi Zone Arabia1980 28.0 1.4 58.0 31.0 65 6.1 163 181981 29.0 1.4 57.5 30.0 66 6.0 165 181982 30.6 1.3 57.0 29.7 65 5.9 165 201983 30.5 1.4 55.3 41.0 64 5.7 162 221984 30.4 1.4 51.0 43.0 64 5.6 166 251985 30.5 1.4 48.5 44.5 90 5.4 169 261986 30.0 1.4 47.9 44.1 90 5.4 169 261987 31.0 1.4 48.8 47.1 92 5.3 167 251988 92.2 4.0 92.9 100 92 5.2 167 561989 92.2 4.0 92.9 100 92 5.2 170 581990 92.2 4.0 92.9 100 92 5.0 258 591991 92.2 4.0 92.9 100 95 5.0 258 591992 92.2 4.0 92.9 100 94 5.0 258 631993 92.2 4.0 92.9 100 94 5.0 259 631994 92.2 4.3 89.3 100 94 5.0 259 651995 92.2 4.3 88.2 100 94 5.0 259 651996 92.2 4.0 93.0 112.0 94 5.0 259 651997 92.2 4.0 93.0 112.5 94 5.0 259 721998 92.2 4.0 89.7 112.5 94 5.0 259 731999 92.2 4.0 89.7 112.5 94 5.0 261 732000 92.2 4.0 89.7 112.5 94 5.0 261 772001 92.2 4.0 89.7 112.5 94 5.0 261 782002 92.2 4.0 89.7 112.5 94 5.0 261 78

Spurious OPEC Reserve Revisions

OPEC PRODUCTION QUOTAS DEPEND ON STATED RESERVES

THE TEMPTATION TO EXAGGERATE PROVED IRRESISTABLE

In billions of bbls.

Misleading ReportingMisleading Reporting by BP Statistical Review by BP Statistical Review

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WORLD OIL RESERVES - BP STATISTICSWORLD OIL RESERVES - BP STATISTICS

The BP statistics for the world's proved The BP statistics for the world's proved reserves of oil are unrealistic, showing the reserves of oil are unrealistic, showing the unsupported OPEC leap in the 1980s and unsupported OPEC leap in the 1980s and a steady increase despite years when a steady increase despite years when consumption was greater than discovery. consumption was greater than discovery. Source: BPSource: BP

THE CRUDE OIL CRISISTHE CRUDE OIL CRISIS

So, what does it mean …So, what does it mean …

• if if WORLD CRUDE PRODUCTION IS WORLD CRUDE PRODUCTION IS PRESENTLY PEAKING,PRESENTLY PEAKING,

• if MOST OF THE WORLD’S OIL HAS BEEN if MOST OF THE WORLD’S OIL HAS BEEN DISCOVERED,DISCOVERED,

• and if WORLD DEMAND CONTINUES TO and if WORLD DEMAND CONTINUES TO GROW?GROW?

if WORLD CRUDE PRODUCTION IS PRESENTLY PEAKINGif WORLD CRUDE PRODUCTION IS PRESENTLY PEAKING

Just the Just the perceptionperception that oil is peaking will be that oil is peaking will be a problema problem

• Financial markets can be counted on to Financial markets can be counted on to react badlyreact badly

• Governments too; Governments too; some may even some may even consider going to warconsider going to war

• General population will bear the brunt, General population will bear the brunt, esp. in poorer, undeveloped countriesesp. in poorer, undeveloped countries

End of cheap oil

Exxon stock anyone?

Really a stretch, Dr. Wood

Population crash?

if most of the World’s oil has been discoveredif most of the World’s oil has been discovered

Oil production comparing OPEC with the Rest of the World. Oil production comparing OPEC with the Rest of the World.

Source: ASPOSource: ASPO

One consequence:One consequence:

•OPEC is expected OPEC is expected to produce more to produce more than 50% of the than 50% of the world's oil around world's oil around 2010,2010,

•How will Western How will Western economies cope?economies cope?

The OPEC/Middle East CrossovervThe OPEC/Middle East Crossoverv

•and if WORLD DEMAND CONTINUES TO GROW?and if WORLD DEMAND CONTINUES TO GROW?

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BelgiumAustraliaNetherlandsFinland Saudi ArabiaSweden

RussiaNew Zealand FranceKorea (South)Taiwan Germ anyAustriaSwitzerland JapanUKDenm arkSlovakiaIreland SpainKazakhstan ItalyGreeceTurkm enistan UkraineLithuania VenezuelaPortugalBulgaria South AfricaPolandHungaryBelarus Malaysia

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TOTAL ENERGY CONSUMPTION2003

Population Trends – Less & MorePopulation Trends – Less & More

Developed countries may squeak by IF energy alternatives can be found and put on line quickly enough.

If these population projections are at all correct, then less developed countries have no chance.

Developed countries will not let their economies crumble under the oil threat. As long as significant quantities of oil remain, the developed countries will fight to maintain share.

Less developed countries will suffer in comparison as they will be shut out of oil markets, probably even if they own the supplies.

Source: UN Population Trend Data

The Olduvai Theory of Industrial Civilization The Olduvai Theory of Industrial Civilization

The Olduvai Theory: Sliding Towards a Post-Industrial Stone Age. Richard C Duncan, Ph.D. Institute on Energy and Man, June 27, 1996

THE ANTHROPOLOGIST’S PERSPECTIVE?

EXAGGERATED?

PERHAPS, BUT THE OIL AGE WILL BE REMEMBERED AS A TIME WHEN MANKIND WENT THROUGH 100’S OF MILLIONS OF YEARS OF HYDROCARBON RESOURCES IN LESS THAN 200 YEARS.

Saudi Arabia has over 300 Saudi Arabia has over 300 recognized reservoirs but recognized reservoirs but 90% 90% of its oil comes from the five of its oil comes from the five super giant fieldssuper giant fields discovered discovered between 1940 and 1965. Since between 1940 and 1965. Since the 1970s there haven't been the 1970s there haven't been new discoveries of giant fields. new discoveries of giant fields. IAGS, 2004, “IAGS, 2004, “New study raises doubts about Saudi oil reserves “

THE CRITICAL IMPORTANCE OF GIANT FIELDS

AAPG EXPLORER, JAN., 2005

1860 1880 1900 1920 1940 1960 1980 2000 2020 2040 2060

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GIANT OIL FIELDSGIANT OIL FIELDS**

• HISTOGRAM HISTOGRAM CONTAINS 876 FIELDS CONTAINS 876 FIELDS WORLDWIDEWORLDWIDE

• RATE OF DISCOVERY RATE OF DISCOVERY CLEARLY IN DECLINECLEARLY IN DECLINE

• DISCOVERY PEAKED DISCOVERY PEAKED IN 1966IN 1966

* >500 MILLION BBLS

Fit Results

Fit 1: NormalNumber of data

points used = 876Average X = 1966.26Standard Deviation =

21.5462

Saudi Arabia's Ghawar Field

Discovered in 1948, Ghawar Discovered in 1948, Ghawar is the world's biggest oil is the world's biggest oil field, 174 miles in length and field, 174 miles in length and 16 miles across and 16 miles across and encompasses 1.3 million encompasses 1.3 million acres.Current estimates, for acres.Current estimates, for cumulative oil production are cumulative oil production are 55 billion barrels. Average 55 billion barrels. Average production for the last 10 production for the last 10 years is five million barrels years is five million barrels per day. Ghawar accounts for per day. Ghawar accounts for more than one-half of all oil more than one-half of all oil production in Saudi Arabiaproduction in Saudi Arabia

ANNUAL PRODUCTION OF CRUDE OIL

SOURCE: ASPO, 2004

WORLD OIL & THE HUBBERT WORLD OIL & THE HUBBERT CURVECURVE

Peak Discovery 1964

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The yellow line in the graph is the Hubbert curve and shows how oil production would have expanded and then contracted if it had been governed solely by physical constraints.

The red line shows the amount of oil actually produced up to 2003 and what is likely to be produced in the future.

The actual curve followed the theoretical curve very closely until the early 1970s when five OPEC producers gained control of more than 30% of the world market. This pushed up prices, limiting demand.

High oil prices can be expected to cause world oil demand to stay on a plateau until around 2010. After that, output will fall whatever the price because fields will be becoming exhausted.

World - Regular OilWorld - Regular Oil Ultimate :1850 Gb Ultimate :1850 Gb To-date 2003 : 920 Gb To-date 2003 : 920 Gb

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All Oil & GasAll Oil & Gas

1 BARREL OF OIL 1 BARREL OF OIL = 6.1 GJ= 6.1 GJ= 5.8 X 10= 5.8 X 10 6 6 BTU BTU= 1,700 kilo-watt-hr (kWh)= 1,700 kilo-watt-hr (kWh)= 42 gallons (U. S)= 42 gallons (U. S)

7.2 BARRELS OF OIL = 1 ton of oil (= 42-45 GJ)7.2 BARRELS OF OIL = 1 ton of oil (= 42-45 GJ)

ENERGY CONVERSIONSENERGY CONVERSIONS

““Reserve Growth” misleadsReserve Growth” misleads

“Reserve Growth” misleads.It is widely attributed to technology,

market forces or good management, but is simply a reporting phenomenon.

Proved Reserves grow by definitionProved & Probable Reserves do notRevisions have to be backdated to

obtain a valid discovery trend.

Data SourcesData Sources

Two trade journals Oil & Gas Journal and World Oil compile data given to them by governments but do not assess validity

BP reproduces the Oil & Gas Journal– But does not reveal its own knowledge

Industry databases give the best available data but is too expensive for most analysts to access

ConclusionConclusion

Most of the confusion and controversy derives from the unreliable reporting of production and reserves.

It is not primarily a technical problem, but a political one.

There are vested interests with good reasons to conceal and confuse

Hyperbolic Creaming CurveHyperbolic Creaming Curve

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All the larger provinces with All the larger provinces with RegularRegular oil oil have already been found.have already been found.

The largest found in 50 years was the The largest found in 50 years was the North Sea with about 70 Gb. It is North Sea with about 70 Gb. It is inconceivable that anything near as large inconceivable that anything near as large has been missed.has been missed.

There may be small new areas. But the There may be small new areas. But the discovery trend of a country based on its discovery trend of a country based on its major productive provinces will not be major productive provinces will not be much affected any small new ones. much affected any small new ones.

WAS IT ALL ABOUT OIL AFTER ALL?WAS IT ALL ABOUT OIL AFTER ALL?

• Shell along with Chevron, BP and seven other oil giants, have won contracts to buy Iraq's new oil production of Basra Light crude. The contracts cover production from the Mina Al-Bakr port in southern Iraq from August to December of this year.

• The sales contrast sharply with contracts signed by the previous regime of Saddam Hussein with Russia and France. "Unfortunately, not a single Russian company managed to clinch a contract, as we went for the best price," says acting oil minister Thamer Ghadhban.

EXCERPTS FROM: “To the Victors Go the Spoils of War” EXCERPTS FROM: “To the Victors Go the Spoils of War” CORPWATCH, 2004 CORPWATCH, 2004

WAS IT ALL ABOUT OIL AFTER ALL?WAS IT ALL ABOUT OIL AFTER ALL?

FROM: “To the Victors Go the Spoils of War” FROM: “To the Victors Go the Spoils of War” CORPWATCH, 2004CORPWATCH, 2004

• “ “Executive order number 13303 states "any attachment, Executive order number 13303 states "any attachment, judgment, decree, lien, execution, garnishment, or other judgment, decree, lien, execution, garnishment, or other judicial process is prohibited, and shall be deemed null judicial process is prohibited, and shall be deemed null and void", with respect to "all Iraqi petroleum and and void", with respect to "all Iraqi petroleum and petroleum products, and interests therein.”petroleum products, and interests therein.”

• "Effectively Bush has unilaterally declared Iraqi oil to be "Effectively Bush has unilaterally declared Iraqi oil to be the unassailable province of US oil corporations." the unassailable province of US oil corporations." Jim Jim

Vallette, Sustainable Energy & Economy Network of the Institute for Policy Vallette, Sustainable Energy & Economy Network of the Institute for Policy Studies, Washington DC.Studies, Washington DC.

““According to BP, reserves increased dramatically in the 1980s and According to BP, reserves increased dramatically in the 1980s and 1990s, from 670 billions barrels at the end of 1960 to 1147 billion 1990s, from 670 billions barrels at the end of 1960 to 1147 billion barrels at the end of 2003. But most of the increase occurred in OPEC barrels at the end of 2003. But most of the increase occurred in OPEC countries, mainly in the Middle East, in the second half of the 1980s. countries, mainly in the Middle East, in the second half of the 1980s. Saudi Arabia and Kuwait revised their reserves upward by 50%, while Saudi Arabia and Kuwait revised their reserves upward by 50%, while Venezuelan reserves were boosted 57%Venezuelan reserves were boosted 57% by the inclusion of heavy oil in by the inclusion of heavy oil in 1988. The United Arab Emirates and Iraq also recorded large upward 1988. The United Arab Emirates and Iraq also recorded large upward revisions in that period. Total OPEC reserves jumped from 538 billion revisions in that period. Total OPEC reserves jumped from 538 billion barrels in 1985 to 766 billion barrels in 1990. As a result, world oil barrels in 1985 to 766 billion barrels in 1990. As a result, world oil reserves increased by more that 30%. This hike in OPEC countries’ reserves increased by more that 30%. This hike in OPEC countries’ estimates of their reserves was driven by negotiations at that time over estimates of their reserves was driven by negotiations at that time over production quotas, and had little to do with the actual discovery of new production quotas, and had little to do with the actual discovery of new reserves. reserves. In fact, very little exploration activity was carried out in those In fact, very little exploration activity was carried out in those countries at that time.countries at that time. Total reserves have hardly changed since the Total reserves have hardly changed since the end of the 1980s.”end of the 1980s.”

The Outlook, 2004

CRTITQUE OF OFFICIAL RESERVE ESTIMATESCRTITQUE OF OFFICIAL RESERVE ESTIMATES

“The peak-oil debate is getting more polarized and more rancorous—and, especially noteworthy, more politicized. So here's an immodest prediction: The peak-oil debate will be the Next Big Thing. The story with legs. The overarching theme that will resonate throughout the oil and gas industry for decades to come. It will be propelled forward in the public consciousness not only by serious debate within the industry itself but also on the political hustings and by antioil forces who can't seem to pry Americans out of their sport utility vehicles even as war rages in the Middle East and Chicken Little lies sacrificed on the Kyoto altar.

Iraq and Saudi Arabia will figure largely in that debate. So will Russia and the Caspian. And Orinoco oil and Athabasca tar sands. And reserves accounting and transparency. And alternate energy viability. “ Bob Williams: Oil and Gas Journal, 2004

NEXT BIG THING: PEAK OILNEXT BIG THING: PEAK OIL

NEXT BIG THING: PEAK OILNEXT BIG THING: PEAK OIL

“The USGSUSGS commenced its study of world oil following the shocks of the 1970s, and for many years issued sound evaluations at successive meetings of the World Petroleum Congress. But a departure came with the study of 2000, under the project’s new director, claiming a Mean estimate of the total discovery to 2025 of 3.3 trillion barrels3.3 trillion barrels. The following Figure illustrates the record of some 65 past estimates by major oil companies, serious institutions and the USGS itself, which average 1.931.93 trillion barrels, indicating that the latest USGS estimate is far from the consensus.”

CRITIQUE OF USGS RESERVE ESTIMATESCRITIQUE OF USGS RESERVE ESTIMATES

Examples of Depletion

Evidence for peak and decline as Evidence for peak and decline as demonstrated by examples of countries demonstrated by examples of countries at different stages of depletionat different stages of depletion

US-48US-48

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Regular Oil Tarsand etc

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ASPO

Main PointMain Point

The data used in preparing the slides The data used in preparing the slides comes from many sources, but shows comes from many sources, but shows a general pattern of growth, peak and a general pattern of growth, peak and decline of discovery followed by decline of discovery followed by productionproduction

World PopulationWorld Population

““It has been estimated that, It has been estimated that, without hydrocarbons to without hydrocarbons to provide energy, fertilizers and provide energy, fertilizers and pesticides, agriculture pesticides, agriculture could not could not support a population greater support a population greater than than two billiontwo billion. .

This reduction would take us back This reduction would take us back to pre-20th century levels but to pre-20th century levels but the disruption to society and its the disruption to society and its infrastructure would probably infrastructure would probably mean a reversion to pre-mean a reversion to pre-industrial revolution.” industrial revolution.” Paul Thompson Reading, England August 2004

Prices and Production over a complete Hubbert Cycle: the Case of the American Whale Fisheries in 19th Century

Bardi : Sept. 2004, ASPO - The Association for the Study of Peak Oil and Gas, and The Dipartimento di Chimica - U. Firenze, Italy

Saudi Arabia's Ghawar Field

Discovered in 1948, Ghawar Discovered in 1948, Ghawar is the world's biggest oil is the world's biggest oil field, 174 miles in length and field, 174 miles in length and 16 miles across and 16 miles across and encompasses 1.3 million encompasses 1.3 million acres. Current estimates, for acres. Current estimates, for cumulative oil production are cumulative oil production are 55 (??) billion barrels. 55 (??) billion barrels. Average production for the Average production for the last 10 years is five million last 10 years is five million barrels per day. Ghawar barrels per day. Ghawar accounts for more than one-accounts for more than one-half of all oil production in half of all oil production in Saudi Arabia. Saudi Arabia. (AAPG EXPLORER (AAPG EXPLORER JAN. 2005)JAN. 2005)

Hubbert’s Model: constraints

Hubbert’s modelling technique has been variously Hubbert’s modelling technique has been variously applauded and criticised, but the constraints to its applauded and criticised, but the constraints to its application have not been widely appreciated. It works well application have not been widely appreciated. It works well only: only:

•where applied to a natural domain, unaffected by where applied to a natural domain, unaffected by political or significant economic interference; political or significant economic interference;

•to areas having a large number of fields; and to areas to areas having a large number of fields; and to areas of unfettered activity. of unfettered activity.

Hubbert himself worked primarily on the US-48, which Hubbert himself worked primarily on the US-48, which had the necessary characteristics to be well modelled by a had the necessary characteristics to be well modelled by a single cycle.single cycle.

from““THE HUBBERT CURVE : ITS STRENGTHS AND WEAKNESSES” by J.H. Laherrère, Oil and Gas Journal ms, Feb 18 2000 (http://www.dieoff.com/page191.htm)

PEAK OIL: SOME CONSEQUENCESPEAK OIL: SOME CONSEQUENCES

The world is not about to run out of oil, but production is about to The world is not about to run out of oil, but production is about to peak. The sky does not fall in at peak, but the perception of the peak. The sky does not fall in at peak, but the perception of the future changes. It is likely to lead tofuture changes. It is likely to lead to

•severe political and economic tensions, including economic severe political and economic tensions, including economic recession,recession,

•a stock-market crash, a stock-market crash,

•and, financial instability from the huge flows to the Middle and, financial instability from the huge flows to the Middle EastEast. .

There are obvious dangers of misguided military intervention as There are obvious dangers of misguided military intervention as the United States, Europe and the East vie for access to Middle the United States, Europe and the East vie for access to Middle East oil. The inequality between rich and poor nations will be more East oil. The inequality between rich and poor nations will be more severe. Agriculture is at risk because it is now heavily dependent on severe. Agriculture is at risk because it is now heavily dependent on synthetic nutrients and irrigation, both directly and indirectly synthetic nutrients and irrigation, both directly and indirectly dependent on petroleum. The global market may wither from high dependent on petroleum. The global market may wither from high transport costs.transport costs.

from the Feasta conferencemoney, energy and growth’ March 2000. from the Feasta conferencemoney, energy and growth’ March 2000. the imminent peak ofthe imminent peak ofglobal oil productionglobal oil productionCOLIN CAMPBELLCOLIN CAMPBELL

FLAT EARTH PRODUCTION CURVEFLAT EARTH PRODUCTION CURVE

http://wolf.readinglitho.co.uk/index.html

Other experts, notably Other experts, notably economists, assume that oil economists, assume that oil production follows this type production follows this type of curve. As demand of curve. As demand increases, the oil fields increases, the oil fields simply increase production, simply increase production, the two lines rising and the two lines rising and falling together. Those who falling together. Those who admit that oil is finite (and admit that oil is finite (and not all do) expect that the not all do) expect that the end will come suddenly as end will come suddenly as the oil fields simply run out. the oil fields simply run out. This is often known This is often known disparagingly as 'flat-earth disparagingly as 'flat-earth economics'economics'

FUEL ENERGY DENSITYFUEL ENERGY DENSITY

SOURCE: INTERNET ENCYCLOPEDIA

US-48US-48

COLIN CAMPBELL

Oil Production Curve (actual and adjusted)Oil Production Curve (actual and adjusted)

The symmetrical Hubbert The symmetrical Hubbert curve is often skewed as curve is often skewed as shown. For an individual shown. For an individual area, it often turns out to area, it often turns out to be cheaper to buy oil be cheaper to buy oil elsewhere rather than elsewhere rather than extract the difficult extract the difficult remaining oil after the remaining oil after the peak, thus reducing the peak, thus reducing the downslope angle. downslope angle.

In the case of world In the case of world production, there will be production, there will be nowhere else to go and it nowhere else to go and it will be declining will be declining prosperity after the peak prosperity after the peak that will reduce demand.that will reduce demand.

Oil Production (USA lower-48) 1930-2002Oil Production (USA lower-48) 1930-2002

Because the USA has been Because the USA has been producing longer than anyone producing longer than anyone else, largely unaffected by else, largely unaffected by external matters, it shows the external matters, it shows the Hubbert Curve better than Hubbert Curve better than anywhere else. anywhere else.

Production has been declining Production has been declining since the 1970s and, despite the since the 1970s and, despite the efforts of the richest, most efforts of the richest, most technologically advanced society technologically advanced society in the world, has not been in the world, has not been stopped. stopped. Source: ASPOSource: ASPO

Oil Discovery minus Consumption (world)Oil Discovery minus Consumption (world)

The really important The really important statistic is the difference statistic is the difference between discoveries and between discoveries and consumption. Until 1980 consumption. Until 1980 (with the exception of (with the exception of 1972), discoveries 1972), discoveries exceeded production exceeded production worldwide. Since then, the worldwide. Since then, the trend has been negative trend has been negative and we consume more oil and we consume more oil than we produce. As than we produce. As discoveries continue to fall discoveries continue to fall and consumption rises, it and consumption rises, it can only get worse. can only get worse. Source: ASPOSource: ASPO

Proved World Oil Reserves - J. LaherrèreProved World Oil Reserves - J. Laherrère

Compared to BP's chart Compared to BP's chart of the world's oil of the world's oil reserves, Jean reserves, Jean Laherrère's version, Laherrère's version, produced from produced from creaming curves, seems creaming curves, seems much more realistic. As much more realistic. As consumption outgrew consumption outgrew discovery in the early discovery in the early 1980s, reserves fell as 1980s, reserves fell as one would expect.one would expect.Source: Jean LaherrèreSource: Jean Laherrère

OIL PRODUCTION: ASSUMING R/P (FLAT OIL PRODUCTION: ASSUMING R/P (FLAT EARTH) MODELEARTH) MODEL

Many people (including Many people (including some 'experts') assume some 'experts') assume that oil produced from that oil produced from a field follows the R/P a field follows the R/P ratio model: there is a ratio model: there is a fairly constant flow fairly constant flow until near complete until near complete depletion when it depletion when it suddenly drops. suddenly drops.

Actually, a single well is Actually, a single well is not unlike this and not unlike this and natural gas flow is natural gas flow is somewhat similar. somewhat similar.

But it is nothing like But it is nothing like most actual oil fields or most actual oil fields or oil provinces.oil provinces.

SINGLE WELL PRODUCTION CURVE

This chart shows how an individual oil well acts differently from the Hubbert Curve, with a long, fairly stable plateau rather than a peak.

HUBBERT 4-WELL CURVEHUBBERT 4-WELL CURVE

four individual oil four individual oil wells when totaled wells when totaled begin to create the begin to create the Hubbert CurveHubbert Curve

Hubbert Curve (8 wells)Hubbert Curve (8 wells)

eight individual oil eight individual oil wells when totaled wells when totaled begin to resemble the begin to resemble the Hubbert Curve. Given Hubbert Curve. Given enough wells, a smooth enough wells, a smooth curve will result.curve will result.

PEAK PRODUCTION AND RESERVE GROWTHPEAK PRODUCTION AND RESERVE GROWTH

The growth of reserves The growth of reserves has little impact on has little impact on peak production, as peak production, as illustrated by the illustrated by the example of the example of the Prudhoe Bay field in Prudhoe Bay field in Alaska. The growth in Alaska. The growth in reported reserves reported reserves normally coincides normally coincides with the onset of with the onset of decline, prolonging the decline, prolonging the field’s life by extending field’s life by extending the tail end of the tail end of production.production.Aleklett, Uppsala Hydrocarbon Depletion Study Group, Uppsala University, Sweden

Prudhoe BayPrudhoe Bay

Cumulative Discovery against Production (World) Cumulative Discovery against Production (World)

Discovery and Discovery and production curves for production curves for the World compared. the World compared.

Discovery peaked in Discovery peaked in 1964 when the 1964 when the discovery curve discovery curve changed from a concave changed from a concave (growing) to convex (growing) to convex (declining) slope. (declining) slope.

At this time, the At this time, the production curve is at a production curve is at a similar position. The similar position. The production curve will production curve will mirror the discovery mirror the discovery curve with a time lag of curve with a time lag of about 36 years.about 36 years.

FUTURE VIEWSFUTURE VIEWS

““My view of the near future then is My view of the near future then is pessimistic, a view that the oil crisis will hit pessimistic, a view that the oil crisis will hit us hard with wars, famines and the us hard with wars, famines and the environment drastically devastating the environment drastically devastating the population. Assuming that we can avoid a population. Assuming that we can avoid a nuclear war, I believe that the world would nuclear war, I believe that the world would eventually settle down. It has been estimated eventually settle down. It has been estimated that, without hydrocarbons to provide that, without hydrocarbons to provide energy, fertilizers and pesticides, agriculture energy, fertilizers and pesticides, agriculture could not support a population greater than could not support a population greater than two billiontwo billion. This reduction would take us . This reduction would take us back to pre-20th century levels but the back to pre-20th century levels but the disruption to society and its infrastructure disruption to society and its infrastructure would probably mean a reversion to pre-would probably mean a reversion to pre-industrial revolution.”industrial revolution.” Paul Thompson Reading, England

August 2004

Coal fields of the United States.Coal fields of the United States.

Oil shale in Green River Formation Oil shale in Green River Formation

Jean Laherrère "Future of oil supplies” Seminar Center of Jean Laherrère "Future of oil supplies” Seminar Center of Energy Conversion Zurich May 7 2003Energy Conversion Zurich May 7 2003

““New “technology”, which in fact is not new being New “technology”, which in fact is not new being as much as thirty years old for horizontal wells and as much as thirty years old for horizontal wells and 3D seismic, is being used already in most producing 3D seismic, is being used already in most producing fields. fields. It allows cheaper and faster production but It allows cheaper and faster production but does not add to the reserves themselves in does not add to the reserves themselves in conventional fieldsconventional fields.”.”

WILL TECHNOLOGY SAVE US?WILL TECHNOLOGY SAVE US?

Transport EfficiencyTransport Efficiency

This chart shows the relative efficiencies of different forms of transport taking into account the number of passengers carried and the energy needed to move each kilometer). If we are to deal with the energy crisis to come, we will have to alter our way of life to use more energy-efficient forms of transport. Source: "Energy: A

Guidebook" by Janet Ramage 1997

The point at which the supply begins to diminish is much more important economically than when the wells run completely dry. M Lawton and Tacildayus Andrews

www.almc.army.mil/alog/ issues/JulAug99/MS406.htm

The “production peak” is therefore the main event in the future history of oil extraction, a point which will mark the epochal change from cheap oil to expensive oil. Ugo Bardi to appear in Energy PolicyDipartimento di

Chimica — Università di Firenze, Polo Scientifico di Sesto Fiorentino, 50019 Sesto Fiorentino (FI), Italy

EUGENE ISLAND - EUGENE ISLAND - AN “ODD RESERVOIR”AN “ODD RESERVOIR”

Odd Reservoir Off Louisiana Prods Experts to Seek a Deeper MeaningOdd Reservoir Off Louisiana Prods Experts to Seek a Deeper Meaning

By CHRISTOPHER COOPER By CHRISTOPHER COOPER Staff Reporter of THE WALL STREET JOURNALStaff Reporter of THE WALL STREET JOURNAL

HOUSTON -- Something mysterious is going on at Eugene Island 330.HOUSTON -- Something mysterious is going on at Eugene Island 330.

Production at the oil field, deep in the Gulf of Mexico off the coast of Louisiana, Production at the oil field, deep in the Gulf of Mexico off the coast of Louisiana, was supposed to have declined years ago. And for a while, it behaved like any was supposed to have declined years ago. And for a while, it behaved like any normal field: Following its 1973 discovery, Eugene Island 330's output peaked at normal field: Following its 1973 discovery, Eugene Island 330's output peaked at about 15,000 barrels a day. By 1989, production had slowed to about 4,000 barrels a about 15,000 barrels a day. By 1989, production had slowed to about 4,000 barrels a day.day.

Then suddenly -- some say almost inexplicably -- Eugene Island's fortunes reversed. Then suddenly -- some say almost inexplicably -- Eugene Island's fortunes reversed. The field, operated by PennzEnergy Co., is now producing 13,000 barrels a day, and The field, operated by PennzEnergy Co., is now producing 13,000 barrels a day, and probable reserves have rocketed to more than 400 million barrels from 60 million. probable reserves have rocketed to more than 400 million barrels from 60 million. Stranger still, scientists studying the field say the crude coming out of the pipe is of Stranger still, scientists studying the field say the crude coming out of the pipe is of a geological age quite different from the oil that gushed 10 years ago.a geological age quite different from the oil that gushed 10 years ago.

Peak oil is a turning point for Mankind. The economic Peak oil is a turning point for Mankind. The economic prosperity of the 20th Century was driven by cheap, oil-prosperity of the 20th Century was driven by cheap, oil-based energy. Everyone had the equivalent of several unpaid based energy. Everyone had the equivalent of several unpaid and unfed slaves to do his work for him, but now these and unfed slaves to do his work for him, but now these slaves are getting old and won't work much longer. We have slaves are getting old and won't work much longer. We have an urgent need to find how to live without them. an urgent need to find how to live without them. - C.J.Campbell - Peak Oil: an Outlook on Crude Oil Depletion Revised February 2002

DATADATA SOURCES - GAS & OIL

There are two main sources of public data: the There are two main sources of public data: the Oil & Gas Oil & Gas Journal and World OilJournal and World Oil, which are trade journals that compile , which are trade journals that compile information given to them by governments and others. They information given to them by governments and others. They are not in a position to assess the validity of the information are not in a position to assess the validity of the information supplied to them. Another widely used source is the supplied to them. Another widely used source is the BP BP Statistical Review of World EnergyStatistical Review of World Energy. BP is in a position to . BP is in a position to evaluate the data, but prefers to reproduce the Oil and Gas evaluate the data, but prefers to reproduce the Oil and Gas Journal numbers, understandably not wanting to involve itself Journal numbers, understandably not wanting to involve itself with sensitive issues that might affect its relationship with the with sensitive issues that might affect its relationship with the host governments of the countries where it works. Lastly is the host governments of the countries where it works. Lastly is the industry databaseindustry database, which is relatively reliable, but too , which is relatively reliable, but too expensive for most analysts to access. expensive for most analysts to access. All these sources provide All these sources provide different numbers.different numbers.

IMPACT OF TECHNOLOGYIMPACT OF TECHNOLOGY

“Great advances in seismic technology make it possible to see the smallest and most subtle trap. In general, this better knowledge has reduced the perceived potential, because it shows a dearth of large prospects. In other words, we can find a needle in a haystack, but it is still a needle. We did not need the resolution to find the giant fields of the past holding most of the world's oil. It means we have a much better knowledge of the endowment in Nature than we used to have.” (C.J.Campbell

Peak Oil: an Outlook on Crude Oil Depletion - - Revised February 2002)

USGS GAS& OIL ESTIMATESUSGS GAS& OIL ESTIMATES

The US Geological Survey has failed to live up to its scientific reputation. It has assessed the Undiscovered Potential of each basin with a range of subjective probabilities. It has a Low Case for the most sure and a High Case for the least sure. The High Case itself has little meaning, being little more than a wild guess. The Low Case is consistent with the discovery trend, but The Mean value, which is the one publicized is meaningless because it is influenced by the High Case. This has been confirmed by experience in the real world because the Mean estimate is already 100 Gb short, five years into the study period. Its notion of "reserve growth" is also flawed. It is depicted as a technological dynamic when it is simply an artifact of reporting practice, not to be extrapolated into the future. (C.J.Campbell Peak Oil: an Outlook on Crude Oil Depletion - - Feb 2002)

Over the past few years I have often been amazed by the degree to which the American public remains willingly uninformed, and despite my skepticism, I sometimes wonder about the validity of this statement:

"The CIA owns everyone of any significance in the major media.“ --former CIA Director William Colby

Revisited - The Real Reasons for the Upcoming War With Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken Truth

by William Clark wrc92@aol.com

Original Essay January 2003 -Revised March 2003

-Post-war Commentary January 2004

CONSEQUENCES - AN “EXPANDING CONSEQUENCES - AN “EXPANDING EARTH”EARTH”

In May 2004, Simmons explained that in order for demand to be In May 2004, Simmons explained that in order for demand to be appropriately controlled, the price of oil would have to reach appropriately controlled, the price of oil would have to reach $182 per barrel. With oil prices at $182 per barrel, gas prices $182 per barrel. With oil prices at $182 per barrel, gas prices would likely rise to $7.00 per gallon. would likely rise to $7.00 per gallon.

OIL COMPANY ENLIGHTENMENTOIL COMPANY ENLIGHTENMENT

Nobody knows or can know how much oil exists under the earth's surface or how much it will be possible to produce in the future

BP STATISTICAL REVIEW 2004

Proved oil reserves at the end of 2003 are estimated to have been 1147.7 billion barrels. That represented an increase of around 12% over the end-1993 figure of 1023.6 billion barrels, despite estimated cumulative production of almost 264 billion barrels during the intervening ten years, ie reserves replacement amounted to almost 400 billion barrels between end-1993 and end-2003.

BP STATISTICAL REVIEW 2004

THE CRUDE OIL CRISISTHE CRUDE OIL CRISIS

MAIN POINTS (CONT.)MAIN POINTS (CONT.)

•CRISIS IS POLITICAL AND TECHNICALCRISIS IS POLITICAL AND TECHNICAL

• GOVERNMENT VERSION DIFFERS GOVERNMENT VERSION DIFFERS CONSIDERABLY FROM PROFESSIONAL CONSIDERABLY FROM PROFESSIONAL OPINIONOPINION

• WORLD POPULATION GROWTH IS PART OF WORLD POPULATION GROWTH IS PART OF PROBLEMPROBLEM

ELECTRICITY AND OIL ELECTRICITY AND OIL CONSUMPTIONCONSUMPTION

EL

EC

TR

ICIT

Y

CO

NS

UM

PT

ION

OIL CONSUMPTION

EACH MAN WOMAN AND CHILD IN U.S. EACH MAN WOMAN AND CHILD IN U.S. USES ABOUT 8 TONS OF ENERGY (boe) / YRUSES ABOUT 8 TONS OF ENERGY (boe) / YR

This is about 2,352 gallons of gas/oil /yrThis is about 2,352 gallons of gas/oil /yr

Enough to drive around the world twice.Enough to drive around the world twice.

The average citizen of Bangladesh uses less than The average citizen of Bangladesh uses less than 1/100 that amount in a (good) year.1/100 that amount in a (good) year.

GLOBAL ENERGY CONSUMPTIONGLOBAL ENERGY CONSUMPTION

WORLD OIL CONSUMPTIONWORLD OIL CONSUMPTION

The growth in the The growth in the world's oil world's oil consumption consumption doubles in about doubles in about thirty years. thirty years.

Valleys and plateaus Valleys and plateaus tend to be caused by tend to be caused by recessions as in the recessions as in the 1970s and 1980s. 1970s and 1980s.

The change in the The change in the previous year was a previous year was a 2.1% rise.2.1% rise.

Source: BPSource: BP

WORLD CRUDE OIL

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/a

PRODUCED

DISCOVERED

NOTES:NOTES:

1. Discoveries precede 1. Discoveries precede production. Difference production. Difference is reserves.is reserves.

2. Trend is for 2. Trend is for discoveries to taper discoveries to taper off.off.

3. Exponential 3. Exponential increase in pre-1970’s increase in pre-1970’s production.production.

4. Area under both 4. Area under both curves will be same at curves will be same at depletion. Lights out.depletion. Lights out.

WORLD CRUDE OIL: DISCOVERIES & PRODUCTIONWORLD CRUDE OIL: DISCOVERIES & PRODUCTION

PRODUCTIONPRODUCTION

“The official forecast from the IEA/USDOE of 120 Mb/d in 2020 or 2030 seems too optimistic in front ofthe currently indicated poor economic performance, and seems almost impossible in term of supply.”

Jean Laherrère "Future of oil supplies” Seminar Center of Energy Conversion Zurich May 7 2003

CREAMING CURVECREAMING CURVE

This is an example This is an example of a creaming of a creaming curve where the curve where the actual values actual values (yellow) are (yellow) are compared to a compared to a hyperbolic curve hyperbolic curve (red). Where the (red). Where the curve becomes curve becomes horizontal will horizontal will show the total oil show the total oil in the field.in the field.

Source: ASPOSource: ASPO

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0 1000 2000 3000 4000 5000 6000 Cum. wildcats (Shell operated)

Actual Hyperbolic projection

ShellHyperbolic Discovery Trend

1950

1998

““We may conclude that the International Energy We may conclude that the International Energy Agency (IEA) has delivered a forecast designed to Agency (IEA) has delivered a forecast designed to fulfill the Agency’s political agenda, but between fulfill the Agency’s political agenda, but between the lines it clearly sets out enough evidence to the lines it clearly sets out enough evidence to show that it is indeed no more than a political show that it is indeed no more than a political statement, far removed from what is attainable in statement, far removed from what is attainable in the real world. The critically important message the real world. The critically important message that emerges is that that emerges is that peak oil will come in the near peak oil will come in the near futurefuture, and that a peak in 2030 is nothing more , and that a peak in 2030 is nothing more than a political posture. “than a political posture. “

CRITIQUE OF INTERNATIONAL ENERGY AGENCYCRITIQUE OF INTERNATIONAL ENERGY AGENCY

Kjell Aleklett, professor in PhysicsUppsala Hydrocarbon Depletion Study Group Uppsala University, Sweden

OPEC (The Organization of Petroleum Exporting Countries), is an international organization of eleven countries that rely heavily on oil revenues as their main source of income. OPEC was formed in 1960, and its current members are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

Its stated objective is to ”co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.”

OPECOPEC

“The IEAIEA was established in November 1974 in response to this oil crisis as an autonomous inter-governmental entity within the Organization for Economic Organization for Economic Cooperation and DevelopmentCooperation and Development (OECD)(OECD) to study energy supply and security, and advise the member nations accordingly. In general, OPEC is accepted as a political organization with its statements being coloured accordingly. What many do not realize is that the IEA is What many do not realize is that the IEA is also a political organizationalso a political organization and that its reports are highly coloured by the perceived best interest of its members. “

INTERNATIONAL ENERGY ORGANIZATIONINTERNATIONAL ENERGY ORGANIZATION

Kjell Aleklett, professor in PhysicsUppsala Hydrocarbon Depletion Study Group Uppsala University, Sweden

AUSTRALIA AUSTRIABELGIUMCANADACZECH REPUBLIC:

DENMARKFINLANDFRANCE GERMANYGREECEHUNGARYICELANDIRELAND: ITALY: JAPAN: KOREA: LUXEMBOURG: MEXICO NETHERLANDS NEW ZEALANDNORWAYPOLAND: PORTUGALSLOVAK REPUBLICSPAINSWEDENSWITZERLANDTURKEYUNITED KINGDOMUNITED STATES

OECDOECD

““The US energy crisis is just beginning, and is very dangerous. It The US energy crisis is just beginning, and is very dangerous. It may easily lead to a global disruption of the energy supply may easily lead to a global disruption of the energy supply system.”system.”

ASPO NEWSLETTER #2, FEB. 2001ASPO NEWSLETTER #2, FEB. 2001

“ “ . . . the commercial value of oil and gas discovered by the 10 largest . . . the commercial value of oil and gas discovered by the 10 largest energy groups over the last three years is well below the sums spent to energy groups over the last three years is well below the sums spent to find them. In 2003, the top 10 oil groups spent about $8 billion hunting find them. In 2003, the top 10 oil groups spent about $8 billion hunting for oil, but only found about $4 billion worth of the stuff. Development for oil, but only found about $4 billion worth of the stuff. Development spending on existing oil and gas properties has jumped from about $35 spending on existing oil and gas properties has jumped from about $35 billion in 1998 to a record $50 billion in 2003. During the same time billion in 1998 to a record $50 billion in 2003. During the same time frame, exploration spending has fallen from $11 billion to $8 billion. frame, exploration spending has fallen from $11 billion to $8 billion.

ASPO NEWSLETTER #48, DEC. 2004ASPO NEWSLETTER #48, DEC. 2004

COMMENTS FROM ABROADCOMMENTS FROM ABROAD

““The US energy crisis is just beginning, and is very dangerous. It The US energy crisis is just beginning, and is very dangerous. It may easily lead to a global disruption of the energy supply may easily lead to a global disruption of the energy supply system.”system.”

ASPO NEWSLETTER #2, FEB. 2001ASPO NEWSLETTER #2, FEB. 2001

Even the U.S. government agrees that the amount of oil that can Even the U.S. government agrees that the amount of oil that can be pulled from the planet is finite. But it estimates that global be pulled from the planet is finite. But it estimates that global oil production will likely peak in 2037, rather than in 2008. "All oil production will likely peak in 2037, rather than in 2008. "All or nearly all of the largest oil fields have already been or nearly all of the largest oil fields have already been discovered and are being produced. Production is indeed clearly discovered and are being produced. Production is indeed clearly past its peak in some of the most prolific basins," the federal past its peak in some of the most prolific basins," the federal Energy Information Administration (EIA) said in a recent Energy Information Administration (EIA) said in a recent report on peak oil. report on peak oil.

ASPO NEWSLETTER #48, DEC. 2004ASPO NEWSLETTER #48, DEC. 2004

COMMENTS FROM ABROADCOMMENTS FROM ABROAD

Basic Energy Units 1 joule (J) = 0.2388 cal 1 calorie (cal) = 4.1868 J (1 British thermal unit [Btu] = 1.055 kJ = 0.252 kcal) 1 tonne of oil equivalent (toe) = 42 GJ (net calorific value) = 10 034 Mcal 1 tonne of coal equivalent (tce) = 29.3 GJ (net calorific value) = 7 000 Mcal

Volumetric Equivalents 1 barrel = 42 US gallons = approx. 159 litres 1 cubic metre = 35.315 cubic feet = 6.2898 barrels

CONVERSION FACTORS AND ENERGY EQUIVALENTSCONVERSION FACTORS AND ENERGY EQUIVALENTS

Electricity 1 kWh of electricity output = 3.6 MJ = approx. 860 kcal

Representative Average Conversion Factors 1 tonne of crude oil = approx. 7.3 barrels 1 tonne of natural gas liquids = 45 GJ (net calorific value) 1 000 standard cubic metres of natural gas = 36 GJ (net calorific value) 1 tonne of uranium(light-water reactors, open cycle) = 10 000 – 16 000 toe 1 tonne of peat = 0.2275 toe 1 tonne of fuelwood = 0.3215 toe 1 kWh (primary energy equivalent) = 9.36 MJ = approx. 2 236 Mcal

OIL PRICEOIL PRICE

The long-term price of oil in 2003 dollars through 2003 The long-term price of oil in 2003 dollars through 2003 is shown in the attached graph. ... the volatility imposed is shown in the attached graph. ... the volatility imposed by the difficult swing role of OPEC is over, and prices by the difficult swing role of OPEC is over, and prices are set to rise to reflect the underlying supply are set to rise to reflect the underlying supply constraints. The remarkable stability before the foreign constraints. The remarkable stability before the foreign companies were expropriated in the main producing companies were expropriated in the main producing countries stands out, and a future rise into the $40-60 countries stands out, and a future rise into the $40-60 range does not look altogether out-of place, still being range does not look altogether out-of place, still being below the 1980 spike. - below the 1980 spike. - James Dow, ASPO Economics Correspondent, Sept. 2004