Reposted from Cultivate Magazine.
Colin Campbell
It stands to reason that oil has to be found before it can be produced, which means in turn that production has to mirror discovery after a time lag. So what is the discovery record? You would think that could be easily answered from various official sources, but it turns out that there is a state of great confusion and disinformation. Oil companies reported less than they found to comply with strict Stock Exchange rules, while several Middle East countries exaggerated as they vied with each other for opec production quotas. In addition, there is confusion over the definitions of the several categories of oil, each depleting differently. But fortunately an executive of the world’s largest oil company has published valid industry data with reserve revisions properly backdated to discovery (Longwell H, 2002, Energy World 3/2).
It shows that discovery has been in relentless decline for 40 years, despite a worldwide search always aimed at the biggest and best prospects, despite all the remarkable technological achievements and advances in geological knowledge and despite a happy economic environment whereby most of the cost of exploration was written off against taxable income.
Oil was formed only under rare geological conditions. In fact, the bulk of today’s production comes from just two brief epochs of extreme global warming, 90 and 150 million years ago, which caused excessive flowerings of algae. The resulting organic matter was converted to oil on burial in rifts that formed as the continents moved apart. A glance at the oil map shows that oilfields are clustered together where the geological conditions were right and are separated one from another by vast barren tracts. All the large provinces have now been found, such that most future discovery will have to come from ever smaller fields in the established producing areas.
So-called ‘regular conventional oil’ has supplied most to date and will dominate all supply far into the future. Approximately 945gb (billion barrels) have been produced, 775gb remain in known fields and extrapolating the discovery trend suggests that about 130gb remain to be found.
Production in every country and in the world as a whole clearly has to start and end mirroring earlier discovery, passing one or more peaks in between. The above estimates show that the world is very close to the midpoint of depletion when production begins to decline to eventual exhaustion. The other categories, comprising heavy oils and tar, deepwater and polar oil and liquids from gas plants, will ameliorate the decline but will not have much impact on peak itself.
Gas is derived from plant remains and the breakdown of ordinary oil where it has been over-heated on deep burial. It was formed more widely than oil but more has escaped from geological traps over time simply because it is a gas and not a liquid. Production is normally capped by the capacity of the pipeline system to deliver a long plateau rather than a peak. The plateau tends to come to an abrupt end when the inbuilt capacity has been drawn down, as the United States and Britain now discover.
Oil prices have been rising over the past few years, now reaching record levels. The simple explanation is that the world passes the midpoint when production heads into long-term decline. Accordingly, demand begins to exceed supply capacity. Even the Middle East with its large reserves is producing flatout, doing its best to offset the natural decline of its ageing giant fields.
In short, we come to the end of the First Half of the Age of Oil. It lasted 150 years and saw the rapid expansion of industry, transport, trade and agriculture, allowing the population to expand six-fold, exactly in parallel with oil. It also saw the expansion of ‘financial capital’ as banks lent more than they had on deposit confident that tomorrow’s expansion was collateral for today’s debt. People came to think that it was money that made the world go round when in fact it was the underlying supply of cheap, mainly oil-based, energy. The Second Half of the Oil Age now dawns. It will be marked by the decline of oil and all that depends on it, including financial capital.
This is an unprecedented discontinuity, for never before in the history of mankind has a resource as critical as oil begun to decline without sight of a better substitute. Accordingly, the transition stands to be a time of great tension, possibly accompanied by a stock market crash and raging inflation to remove the surplus financial capital that has lost its collateral. The economic and related political structures appropriate to the First Half of the Oil Age will have to be replaced by new ones fitting the conditions to be imposed by Nature.
It is easy to envisage a successful national policy to include the following elements:
Mount a programme of public education;
Cut oil imports to match world depletion rate (2-3% a year);
Reduce waste, now running at monumental levels;
Introduce renewable energies from wave, tide, wind, solar, hydro and biomass to the extent possible;
Regionalise markets and encourage the development of local communities;
Encourage a return to sustainability with new housing and agricultural arrangements.
In short, there is a need to restructure society, finding new objectives, mind-sets and attitudes.
Ireland will not be spared the pressures of the transition yet it has certain advantages. The bubble of the Celtic Tiger will likely burst in the financial crash. Electricity supply is particularly threatened. As much as 40% is generated from gas, relying largely on imports from Britain, which herself becomes a net importer next year on a steeply rising trend. Ireland’s oil needs are modest on a world scale, although excessive on a per capita basis, and could be secured by enterprising companies with government support. The population is not excessive and the fact that Ireland is an island gives it natural frontiers. Its green fields, nourished by the Atlantic winds and waves, provide a sustainable future for a naturally co-operative and self-confident society. That said, the challenges facing the Government in implementing sound new policies are not to be underestimated.
Dr. Colin Campbell is the founder of ASPO, the Association for the Study of Peak Oil. ASPO Ireland is a not-for-profit organisation with the charitable aim of advancing education around the subject of ‘peak oil’.