Speaking at the IRO Jubilee (11-15-01)—”Perhaps the biggest challenge facing future oil supplies, is that almost 70% of our existing daily supply still comes from oilfields found over 30-years ago. Anchoring this old production are 10 giant OPEC oilfields whose average age now exceeds 60-years. These 10 fields, alone, still produce probably 15% of our daily oil supply. Only a few of these old fields are now clearly in a high rate of decline.
“Sooner or later, all will begin a steady descent, like all oil and gas fields consistently do at some stage in their life cycle. Sadly, there is almost no public data available on what these giant OPEC fields even produce today, let alone whether most of then have now peaked. There is zero knowledge for what the current decline rates of any of these fields are, let alone what they might later become.
“The world knows from past experience with giant fields like Prudhoe Bay, all the North Sea giants, Columbia’s Cuisiana Field and many others, that once giant fields decline, their decline rate is as steep as smaller fields. The only difference is the amount of volume lost.
“In the past two decades, only a handful of new fields generated daily production that exceeded 500,000 barrels per day. The last field whose production exceeded 1 million barrels per day was Mexico’s Cantarell field which began production twenty-five years ago. No field discovered in the past 20 years, or on today’s drawing board is expected to exceed this 1 million barrel per day production limit.
“If all, or even most, of the new oil and gas fields needed to replace the 40 million barrels per day which will be lost by a modest 5% annual decline are small, (25,000 to 100,000 barrel per day fields) this implies an exponential step up in the world’s exploration and development activities.
“Gas supplies face a similar challenge, though the world apparently is still long on vast reserves of stranded gas that have no outlet to any commercial markets. But, most of this stranded gas has also never been produced, so a timing lag and investment dollars will always stand between these gas resources and when they can be consumed. In the current global gas supply base, over 50% of the world’s currently useable gas supply comes from Russia, Canada and the U.S.A. All of these basins are now experiencing steep decline rates from most of their producing fields. To assume any of these regions are able to grow their supplies quickly within the next decade could be a risky bet.
“Every single other global energy sources faces its own challenges. The world coal reserves are abundant, but coals future will be hotly debated as long as global environmental worries stay high. Bringing back nuclear energy is another issue where the debate is already intense and will get even more heated. If oil and natural gas finally begin to face serious and real challenges on how much further their daily production could grow, not because we lack the resources, but simply due to ever- rising decline curves, then we clearly have to rely more heavily on both coal and nuclear to pick up the slack. This puts a real premium on tackling ways to get coal-generated energy processed and generated on a far cleaner basis than now exists. It forces a faster resolution of how spent nuclear fuel is handled and fast-forwards a need to build small, far less costly nuclear plants than those built in the 1970-1990 era. It also raises the heated struggle between the environmental community and the energy business to an even greater pitch than now exists. And the rhetoric is already too hot.
“The role of non-hydro alternate energy sources faces many stiff questions. Too many well-intended people simply assume that someday, an enlightened population will suddenly take wind and solar energy seriously. Then, the world will quickly develop clean, affordable and renewable energy sources. Once this happens, they imagine that the world’s energy problems will all be over.
“This notion or fantasy belies that fact that billions of dollars have been spent already on commercializing both wind and solar energy. The cost to produce both has come way down but still remains far above conventional energy. But the physical limits both sources still face to ever become more than a sliver of global energy are as tough today as they were years ago. Neither wind nor solar energy has any ability to automatically dispatch whenever they are needed. The sun still must shine and the wind must blow for either to work efficiently. And despite all the research and development to date, neither shows any sign of scaling to a size that could begin replacing the energy needs of any major metropolitan area. They both remain great energy sources for small and remote areas and replacement energy during peak needs. But, both lack the physical ability to ever become significant energy sources, let alone begin to replace the bulk of the world’s reliance on fossil energy fuel.
“Beyond wind and solar energy, other more futuristic alternatives get discussed often. Fuel cells, hydrogen energy and natural gas from hydrates are all the subjects of many futurist energy articles. But each one of these possible energy sources face great obstacles and extremely high costs before they could ever become a meaningful substitution for today’s energy sources.
“If we do face limits to how fast we can increase the globe’s current production of oil and gas. I suspect the big substitute will end up being increased use of nonconventional oil and gas in the form of coal bed methane, and heavy oils in places like Venezuela and Canada. But these heavy oils also consume a vast amount of energy just to convert them into usable energy so the parasitic energy loss could devour as much energy as some medium size countries now consume. …
“Any time you think about the future of global energy it is critical to remember that 80% of the world’s population still use only a tiny amount of energy. Two billion of these five billion people currently use no modern energy at all.
“If we ever allow these people to have access to modern energy and stop their use of charcoal, agricultural residue and animal dung, all of which are so poisonous to the atmosphere and lethal to human health, it is hard to envision where all this new energy will come from. Some of us will need to find ways to use less than we now consume. “
Matthew Simmons is one of the leading energy advisors to President George Bush and the United States Congress. In view of our fossil fuel energy crisis, Mr. Simmons’ final sentence may be one of the greatest understatements of all times.