Monday, April 02, 2007

World Oil Production About to Peak Out!

Fredrik Robelius of Uppsala University in Sweden theorizes in his doctoral disertation that World Oil production will go into decline some time between 2008 and 2018. He's not saying that the wells will run dry, but rather that the easily pumpable stuff won't be spewing up any more. That means that we're going to have to work harder to get at the stuff that is there, and production levels will necessarily go down.

Fredrik Robelius bases his forecasts on studies of global oil reserves, historical production, and new finds. He focuses on the very largest oil fields, so-called giant fields, which produce a total of at least 500 million barrels of oil.

Giant fields comprise only about one percent of all oil fields in the world, but they nevertheless account for more than 60 percent of total production. Unfortunately, the trend is heading downward when it comes to new giant-field discoveries, both in terms of the number of fields and the volume of the fields located. The majority of the largest giant fields are found around the Persian Gulf and are more than 50 years old.

“The dominance of giant fields in global oil production supports the thesis that they will be crucial to what future production will look like," says Fredrik Robelius.

He developed a model based on historical production, the total exploitable reserves of the giant fields, and their rate of diminution. The model assumes that oil fields have a constant rate of diminution, which Robelius has verified by studying a number of giant oilfields where production has waned. The analysis shows that an annual rate of diminution between 6 and 16 percent is reasonable.

To be sure that the future production of a field will wind up inside the interval of the model, Robelius used both pessimistic and optimistic estimates. Then he combined the results from the model with field forecasts for deep-water production, new finds, oil sand in Canada, and heavy oil in Venezuela to construct his forecasts.

“All cases studies show that global oil production will begin to drop off at roughly the same time as the giant fields. According to the most pessimistic scenario, the peak will be reached in 2008, whereas the most optimistic scenario, assumed to follow a 1.4-percent annual increase in demand, places the peak in 2018."

And just in case you thought nuclear power was the answer, think again.

Over the past 20 years, safety concerns dampened all aspects of development of nuclear energy: No new reactors were ordered and there was investment neither in new uranium mines nor in building facilities to produce fuel for existing reactors. Instead, the industry lived off commercial and government inventories, which are now nearly gone. worldwide, uranium production meets only about 65 percent of current reactor requirements.

This means we need to get serious about developing alternative and renewable energy sources, as well as step up conservation efforts and eliminating wastefull energy usage. The best way to do this is to raise prices. Keep in mind this is about to happen sooner than we had predicted: the supply is about to diminish and I see no clear sign that demand is headed in that direction. Better to start raising prices now with a stiff energy tax and us the revenue to build the altie infrastructure. I just hope this happens before it's too late. But then again, who needs to plan for the future when you've got quarterly budget targets to meet? (GRRRR!!!)

Also, if you're thinking that Fredrik Robelius is just a lone loon who's numbers don't add up, check out what Matthew Simmons, chairman of Simmons & Co. International in Houston has to say.

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