Other Source of Energy

Ugo at Cassandras Legacy has an interesting graph (part of an article by John Laherrere at The Oil Drum) showing global oil production per capita - Peak oil? What peak oil?. Its certainly one peak of oil production that couldnt be argued with...

UPI has a report on Indonesias declining oil production - Indonesias oil output declines.

Indonesias BPMigas oil and gas regulator says that national fields are in decline.



Apparently confirming that Indonesias oil production has hit a decline as predicted by "peak oil" proponents, BPMigas spokesman Gde Pradnyana said Indonesia will have to reduce its dependency on oil.



He said the country will take steps to shift to natural gas from oil.



"Were currently just trying to maintain the current oil production so that it will not drop sharply," Gde told The Jakarta Post.



"The discovery of oil fields in the next five to seven years will be difficult, especially those that can produce as much as the Cepu Block. The future projects will be mostly gas operations."



Gde, however, said he remains upbeat however about the countrys long-term prospects.



He told the Post that Indonesia has 10 oil and gas projects with a total investment of $4.7 billion, expected to come on-stream through 2014.



"This reflects that the future of Indonesias oil and gas industry will be dominated by gas," Gde said.



The projects are expected to produce 1.75 million cubic feet of gas per day, 20,000 barrels of oil per day and 26,000 barrels per day of oil condensate, Gde said.



Indonesia, formerly a member of the Organization of Petroleum Exporting Countries, has been struggling with both declining oil output from aging oilfields, some of which date to the late 19th century, and rising demand for natural gas, which is limiting its gas export potential.

FastCompany has a look at a new axis of evil forming in Colorado, looking to exploit shale oil - Boogeymen Trifecta: Murdoch Allies With Oil Company, Cheney.

Rupert Murdoch is one of the worlds best known media barons and may or may not be a bud to Steve Jobs. But as hype swelled around his iPad digital project, The Daily, Murdoch was also investing in an Israeli-American oil shale company with ties to Dick Cheney. Can his legendary business savvy help out an upstart oil firm?

Oil shale may be the answer to worries about peak oil, but it is highly expensive to extract and has a high ecological cost.

Lord Jacob Rothschild and Murdoch just purchased a joint 5.5% stake in Genie Oil and Gas Inc., a division of the IDT Corporation. The equity stake purchase by Murdoch and Rothschild is worth approximately $11 million. Genie is a new face in the energy market; the company just launched this summer.

Murdoch is slated to join Genies advisory board. Other members include:

* American Shale Oil CTO Alan K. Burnham
* Former Vice President Dick Cheney
* Genie chairman and Midland, Texas mayor Wes Perry
* Former Exxon Mobil executive vice president Eugene A. Renna
* Allan Sass, former president and CEO of Occidental Oil Shale
* Hedge fund investor and philanthropist Michael Steinhardt
* Stephen M. Trauber of UBS Investment Bank
* Harold Vinegar, former chief scientist at Royal Dutch/Shell

American Shale Oil is a joint venture between IDT and French firm Total S.A.

Public statements by both Genie and their investors have stressed the firms American and Israeli (read: non-Arab, non-Iranian, non-Venezuelan) roots. According to a statement by Murdoch, “I believe Genie Energys technologies and vast shale oil licenses have real potential to spur a global, geo-political paradigm shift by moving a major portion of new oil production to America, Israel, and other western-oriented democracies.” Murdoch also said that “Covering and distributing news has been my lifes work […] If Genies effort to develop shale oil is successful, as I believe it will be, then the news well report in the coming decades will reflect a more prosperous, more democratic, and more secure world.”

Perry was even more explicit, stating that “Both America and Israel have significant shale oil reserves. It’s difficult to overstate their potential to improve our respective economies and national security. […] Genie Energy is developing the technologies America and Israel want to make rapid progress toward energy independence, while IDT Energy is poised for continued growth in the consumer market. I’m very excited to work with their management team to help meet the energy needs of the U.S. and Israel for decades to come.”

Genie is currently working on two oil shale exploration projects in the United States and Israel.

In Colorado, Genie is involved in American Shale Oils extraction testing project in Colorados Green River Formation. The Green River Formation is the largest oil shale deposit in the world and is believed to contain anywhere between 1.2 and 1.8 trillion barrels of oil. Much of the oil is currently inaccessible; however, even the currently accessible amount of 800 billion barrels in Green River exceeds Saudi Arabias explored oil reserves. American Shale Oil is one of four companies that was given a tender to develop the Green River Formation; the firms portion of Green River is believed to contain 10 billion barrels of oil.

I mostly try to ignore George Monbiots erratic twists and turns of opinion nowadays - the doomerish eco-socialism I can mostly tolerate but the flip flops on nuclear power and now peak oil are simply annoying - for someone who appears to be incredibly intelligent he doesnt appear to need much in the way of new information to change his tune - False Summit

Peak oil hasn’t happened, and it’s unlikely to happen for a very long time. A report by the oil executive Leonardo Maugeri, published by Harvard University, provides compelling evidence that a new oil boom has begun(9). The constraints on oil supply over the past ten years appear to have had more to do with money than geology. The low prices before 2003 had discouraged investors from developing difficult fields. The high prices of the past few years have changed that.

Maugeri’s analysis of projects in 23 countries suggests that global oil supplies are likely to rise by a net 17m barrels per day (to 110m) by 2020. This, he says, is “the largest potential addition to the world’s oil supply capacity since the 1980s.” The investments required to make this boom happen depend on a long-term price of $70 a barrel. The current cost of Brent crude is $95(10). Money is now flooding into new oil: a trillion dollars was spent over the past two years, a record $600bn is lined up for 2012(11).

The country in which production is likely to rise furthest is Iraq, into which multinational companies are now sinking their money, and their claws. The bigger surprise is that the other great boom is likely to happen in the US. Hubbert’s Peak, the famous bell-shaped graph depicting the rise and fall of US oil, is set to become Hubbert’s Rollercoaster.

Investment there will concentrate on unconventional oil, especially shale oil (which, confusingly, is not the same as oil shale). Shale oil is high-quality crude trapped in rocks through which it doesn’t flow naturally. There are, we now know, monstrous deposits in the United States: one estimate suggests that the Bakken shales in North Dakota contain almost as much oil as Saudi Arabia (though less of it is extractable)(12). And this is one of 20 such formations in the US. Extracting shale oil requires horizontal drilling and fracking: a combination of high prices and technological refinements has made them economically viable. Already production in North Dakota has risen from 100,000 barrels a day in 2005 to 550,000 this January (13).

So this is where we are. The automatic correction – resource depletion destroying the machine that was driving it – that many environmentalists foresaw is not going to happen. The problem we face is not that there is too little oil, but that there is too much.

We have confused threats to the living planet with threats to industrial civilisation. They are not, in the first instance, the same thing. Industry and consumer capitalism, powered by abundant oil supplies, are more resilient than many of the natural systems they threaten. The great profusion of life in the past – fossilised in the form of flammable carbon – now jeopardises the great profusion of life in the present.

There is enough oil in the ground to deepfry the lot of us, and no obvious means by which we might prevail upon governments and industry to leave it in the ground. Twenty years of efforts to prevent climate breakdown through moral persuasion have failed, with the collapse of the multilateral process at Rio de Janeiro last month. The world’s most powerful nation is once again becoming an oil state, and if the political transformation of its northern neighbour is anything to go by(14,15), the results will not be pretty.

Maugeris article referenced by Monbiot has garnered a lot of attention lately but it didnt appear to say anything new. The shale oil boom does exist but the volumes are still trifling compared to US oil consumption, let alone global oil consumption and this is exactly what youd expect to see - using technology to exploit (expensive and dirty) unconventional oil reserves as production of conventional oil sources peaks.

The other big potential jump in oil production comes from Iraq which isnt exactly news - its been obvious to anyone who has researched the history of the country that this is the one massive source of conventional oil which hasnt really been tapped - however this is not enough to invalidate peak oil theory nor will it make decades of difference to the global peak point.

The brouhaha over this reminds me a bit of an earlier episode this year, started by a report from Citibank and fanned by the likes of Alan Kohler, predicting "the death of peak oil" which was notable for its confusing of gas with oil and a complete absence of numbers (not to mention claiming large reserves of shale gas in places like Poland where it has been proven to not be the case).

Chris Nelder had a good critique of this episode - Energy independence, or impending oil shocks? (Matt Mushalik also weighed in with a relatively restrained - for him - piece - No number crunching in Alan Kohler opinion piece on premature peak oil death).

James Hamilton at Econbrowser has a look at Leonardo Maugeris paper on peak oil - Maugeri on peak oil

Carpe Diem, Reuters, FTalphaville, and WhaleOil are among those calling attention to a new paper by Leonardo Maugeri, senior manager for the Italian oil company Eni, and Senior Fellow at Harvard University, which concluded:

Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption. This could lead to a glut of overproduction and a steep dip in oil prices.

Based on original, bottom-up, field-by-field analysis of most oil exploration and development projects in the world, this paper suggests that an unrestricted, additional production (the level of production targeted by each single project, according to its schedule, unadjusted for risk) of more than 49 million barrels per day of oil (crude oil and natural gas liquids, or NGLs) is targeted for 2020, the equivalent of more than half the current world production capacity of 93 mbd. [After factoring in risk factors and depletion rates of currently producing oilfields], the net additional production capacity by 2020 could be 17.6 mbd, yielding a world oil production capacity of 110.6 mbd by that date.

Here I take a look at some of the details of Maugeris analysis.

About half of Maugeris calculated 17.6 mb/d in net additional production capacity comes from two countries-- the United States and Iraq (see his Table 2). I have earlier discussed the situation for the United States. To briefly recap, more than half of the increase in total U.S. oil production since 2005 has come from biofuels and natural gas liquids, neither of which should be added to conventional crude production for purposes of calculating the available supply. Another important contribution to recent U.S. production gains has come from shale/tight oil. I agree with Maugeri that this will be an important factor in the future, but it is not cheap, and there are some big uncertainties in extrapolating recent gains, about which I will have more to say below.

But first lets take a look at Iraq, which by itself accounts for 5.1 mb/d, or 29% of the net combined global gains that Maugeri is anticipating. His starting point for these calculations (see his Table 1) is the "production target" associated with a dozen oil fields for which the Iraqi government has signed contracts with oil companies. These targets call for these fields to reach maximum levels of production which, when added together, come to 11.6 mb/d. To win a contract, oil companies had to specify two key parameters: a "target" level of production and a remuneration per barrel, with awards going to the companies that specified the highest target and lowest remuneration. Some have characterized the announced targets simply as propaganda. Once awarded, there seems to be a separate process in which the production targets get renegotiated. Maugeri acknowledges the logistic and security challenges in meeting the targets, and accordingly cuts the official estimates in half. Doing so would still be a stunning achievement, requiring an Iraq that would be substantially more stable and successful over the next decade than it has been over the last three.

A separate issue is that new production from places like the U.S. and Iraq are needed in part to replace declining production flows coming from mature fields. A key question in any study like this is the assumed magnitude of that decline. As Stephen Sorrell notes, Maugeri does not state his assumed rate, and confuses the issue by mixing discussions of the depletion of an existing reservoir (for which purposes Maugeri is correct to raise the offsetting factor of additions to reserves) with the declining production flow rate from a given field (the relevant number for purposes of calculating the net addition that new fields bring to annual production). Sorrell suggests we can infer the implicit assumed decline rate from Maugeris Table 2, which reports a difference between his adjusted gross additions and adjusted net additions of 11 mb/d. That seems to imply that Maugeri is assuming that the total decline in production from existing fields between now and 2020 will be 11 mb/d, which I calculate to correspond to a 1.4% annual decline rate (ln(82/93)/9 = -0.014). As Sorrell notes, this compares for example with the IEAs (2008) substantially less optimistic numbers:

Based on data for 580 of the worlds largest fields that have passed their production peak, the observed decline rate-- averaged across all fields and weighted by their production over their whole lives-- is 5.1%. Decline rates are lowest for the biggest fields: they average 3.4% for super-giant fields, 6.5% for giant fields and 10.4% for large fields. The average rate of observed post-plateau decline, based on our data sub-set of 479 fields, is 5.8%.

... I agree with Maugeri that new production from places like the United States and Iraq is going to be very helpful. But I think he substantially overstates the case for optimism. If we are counting on sources such as shale/tight oil, oil sands, and deepwater to replace production lost from mature conventional oil fields, the days of cheap oil are never going to return.