British Industry Group Examines Peak OilA British industry group has issued a forecast for world oil production that is significantly below that declared by the International Energy Agency.
The group's report predicts that no more than 92 million barrels of oil a day can be pumped from the earth's reserves. At present, the world is producing about 87 million barrels per day (mbd), but the report asserts that a variety of factors will constrain the growth of that production to the 92 mbd level within about five years. By constrast, the International Energy Agency, in its 2009 World Energy Outlook report, projects that the world will be consuming 105 mbd by 2030.
The group, the Industry Task Force on Peak Oil and Energy Security, said that the era of readily available, cheap oil has past, and that there is a very small likelihood of plentiful new supplies that are easy to recover. It points out that even though 70,000 oil fields are in operation, half of the world's oil comes from only 120. One, the Ghawar field in eastern Saudi Arabia, contributes five percent of the world's output. Thus, the report argues, the big and easy-to-access fields have long been online. Even if vast fields of easily pumped oil are discovered (and there are no candidates), the lead time to develop those fields would extend well beyond the five years of the time frame studied by the task force and they would not contribute the supply needed to moderate price.
The concern of the task force is that the world is entering a peak oil phase. Peak oil is a phrase used to describe the maximum output capabilities of an oil field, just before the productive capacity of the oil field begins to decline. Peak oil typically occurs in an oil field when 25 % to 30% of the oil has been pumped; the remaining oil (especially the last 25%) becomes increasingly difficult to extract. The term was extrapolated to larger areas in 1956 when Dr. King Hubbert, a Shell Oil geologist, predicted that US oil production would peak in the early 1970s. His forecast was accurate, and since then many have viewed worldwide production capabilities through his framework. The report notes that it is generally agreed that the UK reached its peak production in 1999.
The task force had issued a previous report in 2008 that also warned of worldwide peak oil. At the time, it said a major economic downturn could affect the timing and magnitude of its projections. The new report, which reaffirms many of the original findings, was produced in the wake of the financial crisis that ensued just after the release of the prior report.
The report also analyzed the wide price swings of the last two years and suggested that the conditions that caused the volatility still exist. In a section written by Chris Skrebowski, the report noted that oil hit $147 a barrel in July 2008, fell to $32 by the end of that year. The price of oil started climbing again until the financial collapse, when its rise ended and oil began and continues to hover around the $75 per barrel mark.
Skrebowski reasons that there are not enough industry leaders to keep the price of oil stable, as had been the case several decades ago. OPEC certainly has the power to respond to price changes, holding oil off the market to keep prices at a minimum target, but it does not have the capacity to ramp up production proportionately when demand climbs very rapidly. Such periods have occurred when emerging economic powerhouses such as China and India have boosted imports of oil to grow their economies at historically high rates.
However, Skrebowski's firm, Peak Oil Consulting, said in the report that the productive capacity of existing oil fields will be depleted at about 4 million barrels per day. For several years, new discoveries and techniques will offset that, resulting in greater capacity for a number of years. But, (according to a chart on page 19 of the report), in 2015 fewer projects will come on line, and total capacity will fall, according to Peak Oil Consulting's analysis.
Natural gas could compete with oil as a transport fuel, the report continues. Unconventional sources, such as natural gas deposits found in shale, have boosted US reserve figures, and discoveries in Canada have added to the potential supply. However, shale natural gas has been subject to a number of environmental and regulatory concerns. New York State, for instance, has placed portions of the Marcellus shale formation off-limits to drilling because of the hazards posed to water supplies.
The task force report also includes a section with descriptions of nine other projections.