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Will Global Oil Shortages Occur in the Short-Medium Term? Bruce Robinson, Convenor Perth, 5th September 2013 Estimates of world oil production volume Five.

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Presentation on theme: "Will Global Oil Shortages Occur in the Short-Medium Term? Bruce Robinson, Convenor Perth, 5th September 2013 Estimates of world oil production volume Five."— Presentation transcript:

1 Will Global Oil Shortages Occur in the Short-Medium Term? Bruce Robinson, Convenor Perth, 5th September 2013 Estimates of world oil production volume Five years 2018 Ten years 2023 Twenty years 2033 Much higher than today Higher than today Similar to today Less than today Much less than today

2 2 Estimates of world oil production volume Five years 2018 Ten years 2023 Twenty years 2033 Much higher than today Higher than today Similar to today Less than today Much less than today

3 3 An Australia-wide network of professionals working to reduce oil vulnerability Working groups Oil & Gas industry Urban and transport planning Finance Sector Health Sector Social Services Sector Regional and city Defence and Security Conservation and Environment Remote & indigenous communities Active transport (bicycle & walking) Agriculture, Fisheries and Food Biofuels Construction Industry Public transport sector Economics Tourism Children and Peak Oil Young Professionals working group

4 4 Outline ● What is Peak Oil ? the time when global oil production stops rising and starts its final decline ● When is the most probable forecast date ? ? /- 5 years ● “Peak Exports” will arrive sooner, as exporting countries use more of their own oil internally, leaving less for export ● What psychology or mythology is stopping decision-makers considering these risks ?? 1. Serious global oil shortages are quite likely in the near term. The evidence is mounting, but so is the “no-worries” hype. 2. Planning should include serious consideration of "Peak Oil" scenarios 3. Oil vulnerability assessment of key suppliers, clients and contractors would be a valuable precaution

5 Psychological aspects of Peak Oil “ Beyond The State of Denial ” Peak Oil seminar, Perth, 2001 The Theory of Black Swan Events is a metaphor The event is a surprise (to the observer) and has a major impact. After the fact, the event is rationalized by hindsight.

6 6 Why do leaders consistently ignore looming signs of crises even when they know the consequences could be devastating? Most events that catch us by surprise are both predictable and preventable, but we consistently miss (or ignore) the warning signs Revised edition, 2008 Peak Oil is probably a "Predictable Surprise" which is being ignored

7 Optimism biasStrategic misrepresentation

8 8 Sydney Morning Herald, 10th July 2008

9 9 Doomsday warning on fuel stock Cameron Stewart February 28, 2013 AUSTRALIA would grind to a halt within three weeks with almost no deliveries of food or medicine if its overseas oil and fuel supplies were cut off. An NRMA-commissioned report on the nation's liquid fuel security released today says the government has allowed the country to become too dependent on foreign supply of liquid fuels. It says there are no coherent contingency plans to deal with the devastating impact of any cut to overseas supply because of war, economic turmoil or natural disasters, instead adopting a "she'll be right" approach. The report, written by retired RAAF Air Vice-Marshal John Blackburn, finds that 85 per cent of transport fuel comes from overseas crude oil or imported fuel..

10 10 Air Vice-Marshal John Blackburn AO retired from the Royal Australian Air Force in 2008 as the Deputy Chief of the Air Force following a career as an F/A-18 fighter pilot, test pilot and strategic planner.

11 11

12 12 Possible causes of sudden fuel shortages in Australia Trouble in the Middle East involving Iran (a)An Israeli or US attack on Iran as part of the nuclear debate or (b) Spreading of the current Syrian conflict to involve others especially Iran or Saudi Arabia 20% of the world’s oil is shipped through the Strait of Hormuz, which is some 50 km wide. Iran has threatened to close the Strait if it is attacked. The US has said it would not allow a closure, but hitting a supertanker with a land-based missile at close range is not hard. The 1973 and 1979 oil shocks resulted from the removal of some 3-7% of the world’s oil from global supplies. A reduction of 20% would be far more serious.

13 13 Dr. Sadad I. Al Husseini, ex Saudi Aramco Oil and Money Conference, London, October predicted a 10 year plateau a structural ceiling determined by geology The economic mantra is that as prices rise, production will increase. Clearly not true from these data Price $/barrel Production M b/day

14 14 Murray and King, January and “Peak Oil and Energy Independence: Myth and Reality Murray & Hansen, EOS, American Geophysical Union, July 2013

15 15

16 May 2012 Oil prices to double by 2022, IMF paper warns (West Australian May 2012) IMF study: Peak oil could do serious damage to the global economy Washington Post October 27, 2012 October 2012

17 Figure 1: US-EIA forecasts World Total Oil Supply (Mbd) The May 2012 IMF paper shows US-EIA oil supply forecasts from 2002 to 2010 The later estimates are far lower than earlier guesses

18 18 "The modelling is forecasting what can be termed ‘the 2017 drop-off’. The outlook under a base case scenario is for a long decline in oil production to begin in 2017

19 19 BITRE 117 David Gargett

20 20 Tuesday 13 July 2010

21 'Peak Oil' and the German Government Military Study Warns of a Potentially Drastic Oil Crisis 1st September 2010 US military warns oil output may dip causing massive shortages by 2015 April 11th 2010

22 22

23 23

24 24 US EIA Field Production of Crude Oil MCRFPUS1 US oil peak 1970 ? mb/d Now 48% self-sufficient 2012 US Oil Production 1910 – 2012 (EIA) million barrels / day

25 US Shale Oil Bonanza or Hype or both ?? US Oil Rig Count Baker Hughes 1995-June 2013 US monthly oil production EIA 1995-March 2013 Sevenfold increase in rigs Only 37% increase in production US monthly oil production EIA 1995-March 2013

26 You can see (via the black line) that there's about a two year offset between the start of the drilling boom and the start of the production surge. If the levelling off in the drilling boom is similar, we might expect production to level off some time in (Stuart Staniford, 2013)

27 US shale oil production is limited by (a) The decline rate of wells is very high, so continual drilling is needed just to maintain production (b) Only the “sweet spots” are really good (c) Most “sweet spots” are highly drilled already Source “Drill, Baby, Drill”, Hughes 2013 postcarbon.org/reports/DBD-report-FINAL.pdf

28 28 Australian Shale Oil Bonanza or Hype ?? Linc Energy Share price to 21st June 2013 Announcement 23 rd January 2013 Arckaringa Basin Coober Pedy May 2012 August NovemberFebruary June 2013 Shale Oil “as big as Saudi Arabia” ( billion barrels)

29 29 Big fields are found first, and as they decline, they are replaced by smaller and smaller fields soon the additional small fields can not match the decline of the large fields, so the overall production begins its final decline

30 21 st August 2013 Oil & Gas UK said it now expected average output to fall to between 1.2m and 1.4m barrels of oil and gas per day (boepd) this year, down from 1.54m boepd in In 2003, production stood at almost 4m boepd, but has fallen every year since

31 August 11 th 2013

32 32 World Discovery Peaked in 1964 Billion barrels of oil per year Discovery revisions backdated 3-year moving average Campbell 2012 After Longwell, 2002

33 33 The IEA estimates that the average production-weighted observed decline rate worldwide is currently 6.7% pa for fields that have passed their production peak”. The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production, a leading energy economist has warned. (IEA’s Fatih Birol) IEA November 2008

34 34 Even if oil demand were to remain flat to 2030, 45 m barrels/day of gross capacity -roughly four times the capacity of Saudi Arabia - would be needed just to offset the decline from existing fields 2008

35 35 A simple observation -- or why peak will be earlier than most people expect ‘Global production falls when loss of output from countries in decline exceeds gains in output from those that are expanding.’ Chris Skrebowski Petroleum Review London

36

37 Australia uses 59,000,000,000 litres of oil each year a cube of 390 metres in size (2012) Perth’s Central Park building is 249 m high, to top of tower 70% of Australia’s oil usage is in transport If Australia’s 20 M tpa wheat crop → ethanol = ~10%

38 ChinaUnited States 1 km l l Australia 38 Million barrels/ day 2012 BP Statistical Review, 2013 Australia uses 1.0 China10.2 US18.6 World86.2 US 1 cubic km oil / year

39 39 China – Motor Vehicle Production

40 kb/day China Oil consumption and production Consumption Production From BP Statistical Review 2013 Imports

41 kb/day UK Oil consumption and production Consumption Production From BP Statistical Review 2013 Imports

42 42 Indonesia Oil consumption and production From BP Statistical Review 2013 kb/day Production Consumption Indonesia left OPEC in 2009 Imports

43 43 From BP Statistical Review 2013 Consumption Production kb/d Saudi Arabia Oil Consumption and Production Exports

44 44 USA Oil consumption and production Consumption Production From BP Statistical Review 2013 kb/d Imports

45 45 Egypt Oil consumption and production Consumption Production Egypt imports 40% of its food, and 60% of its wheat (2010) In the past, oil exports paid for its food imports

46 46 Australia Oil consumption and production From BP Statistical Review 2013 Consumption kb/d Production Imports

47 47 World Oil Production Forecast ASPO-2013 (Dr Colin Campbell) Billion Barrels / year 2012 Gas plant NGL Polar Deepwater (>500m) Heavy and frac. Regular conventional

48 48 Kenneth E. Boulding, economist "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist." IEA US-EIA "The only function of economic forecasting is to make astrology look respectable" John Kenneth Galbraith

49 We all face serious oil vulnerability risks, both short-term and long-term, but there are some oil industry upsides as well. Failure to plan now may prove incredibly costly: a “predictable surprise” An oil vulnerability assessment and risk management plan is an essential first step ASPO-Australia can assist, if needed Hint: Check your superannuation is not being invested into urban toll-roads, tunnels and airports. Try to separate the hype and mythology from the actual evidence of oil vulnerability risks Estimates of world oil production volume Five years 2018 Ten years 2023 Twenty years 2033 Much higher than today Higher than today Similar to todayX Less than todayX Much less than today X XX


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