Peak Oil News: 12/01/2008 - 01/01/2009

Tuesday, December 30, 2008

The Risk of Misjudging Peak Oil: A Real Physical Crisis

321energy


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Sunday, December 28, 2008

Cheap gas today, but 'peak oil' crisis near

canada.com


By Dan Gardner

In Greek mythology, the enchanting songs of the Sirens lured unwary sailors to shipwreck and death. Today's Sirens are the roadside signs singing sweetly, "Cheap gas! Drink deeply and be at ease, weary traveller!"

After suffering record-high oil and gas prices earlier this year, it's understandable that we see cheap gas as anything but a danger. We're in a recession.

But before we drink deeply and relax, let's look through the telescope at what lies ahead.

In November, the International Energy Agency -- an intergovernmental organization that advises 28 member countries -- released its latest forecast. Between 2006 and 2030, the IEA predicts, worldwide energy consumption will grow 45 per cent.

"Current trends in energy supply and consumption are patently unsustainable," said Nobuo Tanaka, executive director of the IEA. "Rising imports of oil and gas into OECD regions and developing Asia, together with the growing concentration of production in a small number of countries, would increase our susceptibility to supply disruptions and sharp price hikes. At the same time, greenhouse-gas emissions would be driven up inexorably, putting the world on track for an eventual global temperature increase of up to 6 C."

Think 1973. That year, an oil embargo imposed by the Organization of Petroleum Exporting Countries hammered the developed world.

Oil shocks will become more common and more severe. The triggers could be anything. A terrorist attack in the Strait of Hormuz, maybe. A coup in Saudi Arabia. The collapse of Nigeria. Whatever it is, it will cause oil prices to explode and economies to fall to their knees.

Canada and every other developed nation runs on oil. It is the foundation of our economy. But with most of the world's oil coming from unstable regions far away -- and the proportion that comes from places such as the Middle East is growing rapidly -- that foundation is not reliable.

In preparation for its 2008 report, the IEA conducted a detailed study of depletion rates in 800 of the world's largest oil fields. Nobody had ever done such work before and what the IEA found caused the agency to revise its understanding of the world's energy future in a profound way.

The change has to do with "peak oil" -- the point at which global oil production can no longer keep up with global oil demand. It's actually a nightmare scenario: Imagine the oil shock of 1973 as a permanent reality.

The IEA always insisted peak oil was decades off. But then the IEA conducted its survey of oil fields and got spooked. "Although global oil production in total is not expected to peak before 2030," the IEA's 2008 report states, "production of conventional oil ... is projected to level off towards the end of the projection period."

British journalist George Monbiot asked the IEA's chief economist, Fatih Birol, to elaborate. The really bad news lies in oil-producing countries that are not OPEC members, Birol said. "We are expecting that in three, four years' time the production of conventional oil will come to a plateau, and start to decline."

And worldwide? "In terms of the global picture, assuming that OPEC will invest in a timely manner, global conventional oil can still continue, but we still expect that it will come around 2020 to a plateau as well, which is of course not good news from a global oil supply point of view."

That's the nightmare scenario of peak oil. And it starts in 2020, 11 years from now.

As Monbiot notes, the U.S. Department of Energy commissioned a report by oil analyst Robert L. Hirsch. He concluded that even a worldwide emergency response launched 10 years before the crisis hit would still result in "a liquid fuels shortfall roughly a decade after the time that oil would have peaked."

In order to avoid this disaster, Hirsch advised, a massive mitigation program must begin at least 20 years before peak.

If a chill didn't run up your spine, you need to read that again.

Fortunately, one of the few politicians who seems to understand the urgency of the situation is the president-elect of the United States.

In announcing his energy team, Barack Obama noted that presidents since Richard Nixon have recognized that oil addiction is a dangerous vulnerability but have failed to make real change. "This time we cannot fail," he said. "Nor can we be lulled into complacency just because, for now, the price of gas has fallen below $4 a gallon."

Obama backed his rhetoric with a daring choice for energy secretary, Steven Chu, a physicist and Nobel laureate who has been leading research into cutting-edge energy technology.

We must have a "global energy revolution," Birol told Monbiot. "I think time is not on our side here."

Don't listen to the Sirens, weary travellers.


Saturday, December 27, 2008

Our Oil Reserves Are Depleted; It's Time for Utopia

huffingtonpost.com


By Jim Schumacher and Debbie Bookchin

Last week at a Christmas party in the hills of Umbria, we were part of a captive audience listening to an American businessman holding forth on an ever-popular expat subject - the dismal exchange rate of dollars to euros. He informed his listeners that they needn't worry: In just a couple of years, he said, America will have pulled out of the recession and the economy will be growing strong; Europe, on the other hand will still be facing the ripple effects of the global meltdown - and will be suffering.

"You'll see," he said blithely, "the dollar and the euro will be at par."

Although the conversation took place in Italy, it could have as easily occurred in a Wall Street boardroom. Despite the ongoing economic meltdown, the dominant, "business as usual" wisdom is that the ascendancy of the American model of global capitalism can only continue. It's just a matter of time before the good ship USS Free Enterprise rights itself and we have smooth sailing ahead.

But exactly what resources will the U.S. call upon to fuel the economic recovery that our American businessman and millions of others like him continue to believe in? Our longtime economic paradigm - growth fueled by cheap oil - has no future. Even when it did, it was a flawed concept because the constant growth required under the "grow or die" capitalist paradigm demands that we relentlessly exploit natural resources - how else to increase profit margins and pay investors their ever-greater dividends?

This paradigm has brought us to the brink of ecological disaster, with a planet so over-heated that even the most optimistic climate experts are doubtful whether we will be able to prevent cataclysmic disruptions unless worldwide carbon emissions are drastically reduced in the coming years - an unlikely scenario given the unwillingness of most governments to enact tough standards and regulations.

Not only has the planet been brought to its knees as a result of this capitalist ethos, but we humans haven't fared so well either. Can we really say we're succeeding as a human race when half of the world's population is starving, or lacks adequate access to potable water, or is suffering from preventable diseases? Even in the U.S., our "high standard of living" leaves much to be desired, not only for the 45 million people who have no health insurance but for the tens of millions who work 40-80 hours a week and find themselves with little time to socialize, go for a walk, prepare and enjoy a meal with friends, or read a book - in short, have less free time and a lower standard of living than their parents did.

With oil virtually at an end, what better time to re-examine the economic paradigm that allowed us to think we could use up finite resources and just "grow" forever? Isn't it time to rethink our blind embrace of the "grow or die" philosophy that led us down this self-destructive path?

In her recent post, "Laissez-Faire Capitalism Should Be as Dead as Soviet Communism," Arianna Huffington suggests that the collapse of our financial system as a result of deregulation proves that this form of deregulated capitalism should be relegated to the dust bin of history. But is it just deregulation, or is it capitalism itself that needs to be junked? Inherent in the capitalist ethos is the endless exploitation of natural resources. Indeed, not only the exploitation of nature, but the exploitation of individuals by individuals is a guiding principle of modern capitalist society. You needn't travel to 19th century England to understand this; it's not just the exploitation of workers in factories anymore. As capitalism colonizes the realm of interpersonal relations, we've ceased to become human to each other and instead become "resources" (think "networking") to be exploited for one type of gain or another.

Considering the tremendous advances in labor-saving technology in the last century, isn't it time for a new form of social organization? One that prizes mutual aid over competition, collective stewardship of nature over its rapacious exploitation, and recognition that "life, liberty and the pursuit of happiness" must include the provision of basic necessities for all, regardless of status: shelter, food, free healthcare. Even better, imagine if we could recognize that ultimately human beings are capable of much more than just earning money? It's time to use our immense powers of reason to ask ourselves: What does it mean to build a truly civilized world? History has shown us that Leninist Communism - itself a form of state-sanctioned exploitation of nature and human beings - wasn't the answer. But neither has capitalism allowed us to fully realize our potential as free, creative beings.

We stand on a threshold. Will we use our extraordinary technology, science and rationality to create a just, humane and truly free society? Or will we continue down the path of domination - of each other and of the natural world - destroying our environment and ourselves?

The great utopian, Murray Bookchin, said: "If we do not do the impossible, we shall be faced with the unthinkable." When he said those words, more than a quarter of a century ago, the notion that capitalism could bring the world to the brink of destruction was ridiculed by almost every mainstream intellectual. Yet here we are on the precipice, confronted with the unthinkable. The only course left to us, is to do the impossible - to abandon the paradigm of capitalism that has defined our cultural, political and economic life for the past 250 years, and whose supremacy has led inexorably to the despoilation of our planet and demeaning of human existence.

Let us choose to end the domination of each other and the unthinking exploitation of nature, and find a more human, decent form of social organization, one that prizes true, decentralized democracy, basic decency and the common good.

The oil is almost gone. The hourglass is about to run out. It's time to create a utopia.


Friday, December 26, 2008

The Peak Oil Crisis: Confusion In the Markets

Falls Church News-Press


By Tom Whipple

If you don't understand what is going on with the price of gasoline and demand for the world's oil supply, then join the club.

Analysts, pundits, government officials, oil ministers, oil executives, and oil traders are all over the board in trying to explain what is happening and more importantly what is going to happen. Some are saying that $30 oil will be with us until the economy recovers while others are talking of a spike to $200 in 2009.

We are currently finishing out an extraordinary year. For several years now, oil prices have been moving steadily higher. They passed $100 a barrel around New Year's and moved on to peak at around $147 in July. By late spring much of the world was in turmoil. Politicians were out in force, bashing speculators, environmentalists, OPEC, additions to the Strategic Petroleum Reserve and you name it. Airlines and car sales were collapsing. The President flew off to Saudi Arabia where he personally appealed to the King to send us more oil. The King held a big oil conference and promised to do what he could.

Then, in mid-July, the great oil panic came to a screeching halt. While several explanations have been offered for this turnabout, I believe the start of the Beijing Olympics the most proximate cause. If 2008 has been hard on America it has been traumatic for China. In the first half of the year the Chinese endured a great earthquake, major snowstorms, and a nationwide panic over readiness to put on the Olympics. All this, of course, was accompanied by some of the worst air quality on earth.

For six months China was in an oil-buying frenzy trying to compensate for lost production during the quakes and storms, and ensuring that there would be no fuel shortages during the Olympics. To clean up the air, Beijing banned half the cars and trucks in and around the capital from operating and shut down every industrial enterprise that contributed to air pollution for hundreds of miles around the Olympic sites. The plan worked, but China's oil imports plummeted and the greatest oil price plunge in history began.

The great plunge was aided by the $4 to $10 gallon cost of gasoline and diesel in the U.S. and Europe which some believe was a primary cause for the world economy tanking in the second half of the year. To the surprise of nearly all observers, once oil prices began falling; they fell, and fell, and then fell some more. From $147 a barrel, prices dropped until they briefly touched $32 last week and are currently sitting around $40. To the delight of motorists, gasoline prices in the US went from $4 - $5 a gallon in July to $1 - $2 in December. Although it went unnoticed, America's economy received a massive stimulus from the billions of dollars that were left in consumers' pockets after each fill-up.

Now we get to the key question of why oil has fallen so low and the corollary of what happens next -- $20 or $200 oil. For the why-so-low question there can only be two answers: either demand has dropped well below readily available supplies or market factors such as speculation, trader pessimism, or the unwinding of hedge funds has caused oil to drop so rapidly.

Despite the lack of good information, it is clear that worldwide demand for oil has fallen in the last six months. U.S. demand is down about 1.2 million barrels a day(b/d). OECD commercial petroleum inventories, including those of the US have increased steadily as importers have taken advantage of lower prices. We know that Japanese imports are down around 500,000 b/d over last year and that Chinese imports have dropped a little. What is missing for now is a good feel for the actual size of the worldwide drop in demand. At one end of the scale is the IEA who recently opined that for 2008 worldwide demand will only be down by 200,000 b/d. Some, however, are saying demand is already 6 or 7 million b/d lower than the peak of around 86 million b/d reached last summer. This will take some time to sort out.

What is important, however, is that oil traders and the financial press continue to repeat over and over again that oil prices are dropping because of the contracting world economy. This has become the mantra of the market. There is also a substantial body of opinion that some component of the fall in oil prices is due to the unwinding of hedge funds and the general deleveraging of nearly all financial institutions.

While U.S. demand for oil products currently is down about 6 percent, this number has been stable for several months. Oil is so deeply ingrained in the fabric of most countries, particularly that of the U.S., that deeper cuts in consumption are unlikely unless the economy really sours.

OPEC production cuts are now approaching 2 million b/d and are scheduled to reach 4 million b/d in the next couple of months. Whether this will be enough to cover the drop in demand is the question of the day. Most commentators are fearlessly predicting a rapid rise in oil prices as soon as economic recovery sets in -- either in a few months or a couple of years. The more interesting issue is what happens if there is no recovery in the next few years or the next few decades. Do oil prices bounce merrily along at rock bottom levels until geological and investment constraints start to massively limit supplies? OPEC is already talking of yet another cut as the last three have had no measurable effect. Will OPEC overcut and cause another price spike within the next year despite the state of the economy?

There is clearly an irreducible minimum amount of oil consumption out there below which our oil-based economies will begin to deteriorate rapidly. If there is anything that is certain as a result of the present low oil prices, it is that investment in new oil production is dropping so rapidly that there will be serious problems three to five years from now.


Sunday, December 21, 2008

George Monbiot asks Fatih Birol, chief economist of IEA, when will the oil run out?

The Guardian


George Monbiot puts the question to Fatih Birol, chief economist of the International Energy Agency - and is both astonished and alarmed by the answer

By George Monbiot

Can you think of a major threat for which the British government does not prepare? It employs an army of civil servants, spooks and consultants to assess the chances of terrorist attacks, financial collapse, floods, epidemics, even asteroid strikes, and to work out what it should do if they happen. But there is one hazard about which it appears intensely relaxed: it has never conducted its own assessment of the state of global oil supplies and the possibility that one day they might peak and then go into decline.

If you ask, the government always produces the same response: "Global oil resources are adequate for the foreseeable future." It knows this, it says, because of the assessments made by the International Energy Agency (IEA) in its World Energy Outlook reports. In the 2007 report, the IEA does appear to support the government's view. "World oil resources," it states, "are judged to be sufficient to meet the projected growth in demand to 2030," though it says nothing about what happens at that point, or whether they will continue to be sufficient after 2030. But this, as far as Whitehall is concerned, is the end of the matter. Like most of the rich world's governments, the UK treats the IEA's projections as gospel. Earlier this year, I submitted a freedom of information request to the UK's department for business, asking what contingency plans the government has made for global supplies of oil peaking by 2020. The answer was as follows: "The government does not feel the need to hold contingency plans specifically for the eventuality of crude-oil supplies peaking between now and 2020."

So the IEA had better be right. In the report on peak oil commissioned by the US department of energy, the oil analyst Robert L Hirsch concluded that "without timely mitigation, the economic, social and political costs" of world oil supplies peaking "will be unprecedented". He went on to explain what "timely mitigation" meant. Even a worldwide emergency response "10 years before world oil peaking", he wrote, would leave "a liquid-fuels shortfall roughly a decade after the time that oil would have peaked". To avoid global economic collapse, we need to begin "a mitigation crash programme 20 years before peaking". If Hirsch is right, and if oil supplies peak before 2028, we're in deep doodah.

So burn this into your mind: between 2007 and 2008 the IEA radically changed its assessment. Until this year's report, the agency mocked people who said that oil supplies might peak. In the foreword to a book it published in 2005, its executive director, Claude Mandil, dismissed those who warned of this event as "doomsayers". "The IEA has long maintained that none of this is a cause for concern," he wrote. "Hydrocarbon resources around the world are abundant and will easily fuel the world through its transition to a sustainable energy future." In its 2007 World Energy Outlook, the IEA predicted a rate of decline in output from the world's existing oilfields of 3.7% a year. This, it said, presented a short-term challenge, with the possibility of a temporary supply crunch in 2015, but with sufficient investment any shortfall could be covered. But the new report, published last month, carried a very different message: a projected rate of decline of 6.7%, which means a much greater gap to fill.

More importantly, in the 2008 report the IEA suggests for the first time that world petroleum supplies might hit the buffers. "Although global oil production in total is not expected to peak before 2030, production of conventional oil ... is projected to level off towards the end of the projection period." These bland words reveal a major shift. Never before has one of the IEA's energy outlooks forecast the peaking or plateauing of the world's conventional oil production (which is what we mean when we talk about peak oil).

But that is as specific as the report gets. Does it or doesn't it mean that we have time to prepare? What does "towards the end of the projection period" mean? The agency has never produced a more precise forecast - until now. For the first time, in the interview I conducted with its chief economist Fatih Birol recently, it has given us a date. And it should scare the pants off anyone who understands the implications.

Birol, the lead author of the new energy outlook, is a small, shrewd, unflustered man with thick grey hair and Alistair Darling eyebrows. He explained to me that the agency's new projections were based on a major study it had undertaken into decline rates in the world's 800 largest oilfields. So what were its previous figures based on? "It was mainly an assumption, a global assumption about the world's oil fields. This year, we looked at it country by country, field by field and we looked at it also onshore and offshore. It was very, very detailed. Last year it was an assumption, and this year it's a finding of our study." I told him that it seemed extraordinary to me that the IEA hadn't done this work before, but had based its assessment on educated guesswork. "In fact nobody had done this research," he told me. "This is the first publicly available data."

So was it not irresponsible to publish a decline rate of 3.7% in 2007, when there was no proper research supporting it? "No, our previous decline assumptions have always mentioned that these are assumptions to the best of our knowledge - and we also said that the declines [could be] higher than what we have assumed."

Then I asked him a question for which I didn't expect a straight answer: could he give me a precise date by which he expects conventional oil supplies to stop growing?

"In terms of non-Opec [countries outside the big oil producers' cartel]," he replied, "we are expecting that in three, four years' time the production of conventional oil will come to a plateau, and start to decline. In terms of the global picture, assuming that Opec will invest in a timely manner, global conventional oil can still continue, but we still expect that it will come around 2020 to a plateau as well, which is, of course, not good news from a global-oil-supply point of view."

Around 2020. That casts the issue in quite a different light. Birol's date, if correct, gives us about 11 years to prepare. If the Hirsch report is right, we have already missed the boat. Birol says we need a "global energy revolution" to avoid an oil crunch, including (disastrously for the environment) a massive global drive to exploit unconventional oils, such as the Canadian tar sands. But nothing on this scale has yet happened, and Hirsch suggests that even if it began today, the necessary investments and infrastructure changes could not be made in time. Birol told me: "I think time is not on our side here."

When I pressed him on the shift in the agency's position, he argued that the IEA has been saying something like this all along. "We said in the past that one day we will run out of oil. We never said that we will have hundreds of years of oil ... but what we have said is that this year, compared with past years, we have seen that the decline rates are significantly higher than what we have seen before. But our line that we are on an unsustainable energy path has not changed."

This, of course, is face-saving nonsense. There is a vast difference between a decline rate of 3.7% and 6.7%. There is an even bigger difference between suggesting that the world is following an unsustainable energy path - a statement almost everyone can subscribe to - and revealing that conventional oil supplies are likely to plateau around 2020. If this is what the IEA meant in the past, it wasn't expressing itself very clearly.

So what do we do? We could take to the hills, or we could hope and pray that Hirsch is wrong about the 20-year lead time, and begin a global crash programme today of fuel efficiency and electrification. In either case, the British government had better start drawing up some contingency plans.


George Monbiot asks Fatih Birol – Click to view video interview


International Energy Agency says peak oil is coming sooner

Straight.com


By Gwynne Dyer


Worried about "peak oil"? The International Energy Agency's annual report, "The World Energy Outlook 2008", admits for the first time that "although global oil production in total is not expected to peak before 2030, production of conventional oil...is projected to level off towards the end of the projection period."

When the Guardian's environmental columnist, George Monbiot, pressed the IEA's chief economist, Fatih Birol, on that opaque phrase, the actual date turned out to be 2020.

The IEA's previous reports, which assured everyone that there was plenty of oil until 2030, were based on what Birol called "a global assumption about the world's oilfields": that the rate of decline in the output of existing oilfields was 3.7 percent a year.

But this year some of the staff actually turned up for work occasionally and did a "very, very detailed" survey on the actual rate of decline. It turns out that production in the older fields is really falling at 6.7 percent a year.

There are still some new oilfields coming into production, but this number means that the production of conventional oil--oil that you pump out of the ground or the seabed in the good old-fashioned way--will peak in 2020, 11 years from now.

Birol assumes, or rather pretends, that new production of "unconventional oil" will allow total production to match demand for another decade until 2030, but this is sheer fantasy.

"Unconventional oil" is oil that is extracted, at great expense and environmental cost, from tar sands or oil shales.

But nobody is actually working the oil shales, and only 1.4 million barrels per day are currently being taken out of tar sands, all in Alberta.

The most optimistic production forecast for the tar sands in the 2020-2030 period is five million barrels per day, half of which would merely replace declining Canadian production of conventional oil. Tar-sands oil is not going to postpone the arrival of peak oil for long.

So what are we to make of this news? Monbiot uses Birol's admission to launch an impassioned appeal for the rapid development of non-oil-alternative sources of energy.

That is obviously urgent if we are close to "peak oil", but this may not be as great a crisis as it seems. It may not be a bonanza for the oil-producing countries, either.

The IEA presumes that demand for oil will rise indefinitely, so the price of oil only gets higher after "peak oil", but in technology nothing is forever.

Set into the front doorstep of my house (and most other 19th-century houses in London) is an iron contrivance called a boot-scraper. It is a device for scraping the horseshit off your boots before coming into the house, and the iron blade is worn into a shallow curve by a half-century of use.

Nineteenth-century cities depended on horses to move people and goods around. London in the 1890s had 11,000 horse-drawn taxis and several thousand buses, each of which required twelve horses a day.

Add all the private carriages and the tens of thousands of horse-drawn carts, wagons and drays delivering goods, and there were at least 100,000 horses on the streets of London every day--each producing an average of 10 kilos of manure.

Two thousand tonnes of manure a day. There were flies everywhere, and if you didn't shovel the manure up quickly, it dried up and blew into your eyes, your hair, your nose, your clothes.

As the cities grew, even more horses were needed and the problem grew steadily worse. One writer in the Times in 1894 estimated that in 50 years, the streets of London would be buried under three metres of manure.

In fact, within 35 years the streets of London were almost completely free of horses, and filled with automobiles instead. They created a different kind of pollution, but at least you didn't step in it.

The same fate is likely to overtake oil-fuelled vehicles in the next 35 years.

The shift will be driven by concerns about foreign exchange costs and energy independence, and increasingly by the need to curb greenhouse gas emissions.

It is starting with ever-tightening standards for fuel efficiency. That will be followed by the first mass-market generation of electric vehicles, due in the next two or three years.

The coup de grace will be delivered by third-generation biofuels, probably produced from algae that do not use valuable agricultural land, that are fully competitive with oil in price and energy content.

We will never get back the eight wasted years of the Bush administration, and it may now be too late to avoid drastic climate change, but Barack Obama is clearly going to try.

You do not appoint Steve Chu as your energy secretary and Carol Browner as your "climate tsarina" if you intend to evade the issue. So American oil consumption is going to start falling quite fast, quite soon.

The same is true elsewhere. Indeed, it is a safe bet that the demand for oil is going to fall faster than the supply over the next 10 or 15 years. Even if we are already at or near "peak oil", the annual decline in oil production just after the peak is actually quite shallow--around two percent---in the classic Hubbert curve. And if demand falls faster than supply, the price will also collapse.

Ladies and gentlemen, place your bets....

Gwynne Dyer's latest book, "Climate Change", has just been published in Canada by Random House.


Thursday, December 18, 2008

Nigeria oil reserve may dry up in 50 years, says DPR

Guardian Newspapers


By Sulaimon Salau

Even though optimists in the energy sector have flayed the insinuations that the nation's oil reserve would dry up in the next 50 years, reports from the Department of Petroleum Resources (DPR) recently suggest that the woe may still take effect on the country if the current trend in the industry continues.

Specifically, the Director of DPR, Mr. Aliyu Sabonbirni, presenting the third quarter report of the industry in Lagos recently, said the situation of event in the industry does not prove the probability of an increase in reserve, instead, daily decrease.

He however attributed the downward trend to poor performance of the Joint Venture (JV) companies and the lingering Niger Delta crises, which had prevented most companies from full operations in the oil-rich region.

Sabonbirni, who was represented by the Head of Gas, DPR, Mr. Billy Agha, said, "current daily oil production is 2.108 million barrels of oil per day (bopd). Current oil reserves depletion rate is 2.23 per cent based on an estimated yearly production of 730.90 million barrels. Remaining reserves' life index is 45.75 years.

"Investigation conducted on reserves situation from 2002 - 2007 revealed a downward trend in the oil reserves in most of the JV companies, which accounted for 70 per cent of our nation's reserves."

However, he said PSC companies and a few indigenous operators showed aggressive exploration activities that led to some reserves growth over the reviewed period.

"As at January 1, 2008, the nation's Proven plus Probable (P+P) oil reserves was 32.93 billion barrels. Condensate (P+P) reserves was 5.19 billion barrels. Net increase of 525.67 million barrels or 1.62 per cent was recorded over January 2007 reserves," he said.

Sabonbirni noted that crude oil production for 2007 was 805.1 million barrels with an average of 2.21 million bopd. While it was noted that the current production from deep offshore is 458,542 bopd, the current average daily production as at August 2008 stood at 2.108 million bopd.

As at 2008, second half technical allowable is 2.4 million bopd as against 2.7 million bopd in first half of 2008.

On the impact of the Niger Delta crises, he said the situation has caused an average daily production deferment of 397,697 bopd showing a significant improvement from 406,493 bopd in the first quarter, noting that SPDC is making efforts to commence operations at the western location and the remaining locations in the East.

Affected companies are SPDC, Express, Elf (in western area), NAOC's Beniboye flowstation, NPDC, Dubri, SNEPCO's EA field and Cavendish. Cavendish's Obe field was shut down due to dry-docking of the FPSO.

Meanwhile, he said not less than 6,630 oil wells have been drilled in the Nigeria's onshore and offshore basins till date, while a total of 1,088.967 sq. km of seismic data was also acquired between April and September 2008.

His words, "four appraisal wells were drilled during the period under review, 75 wells were drilled and at various stages of completion between April and September 2008. Over 6,630 oil and gas wells have been drilled in Nigeria as at end of August 2008."

The department, he said has started reviewing companies' performances against their set objectives or targets, while the year 2008 work programme/budget presentation to DPR by E & P companies has been concluded.

Current deep offshore projects that are being monitored are given as; the Bonga Main, Bonga Southwest/Aparo, Bonga Northwest, Abo, Nsiko, Bosi, Erha Facilities, Usan, Agbami Aparo and Akpo.

Noting that Abo, Erha, Agbami Bonga main fields have been put to production, he said the rest are expected to come on stream between 2009 and 2012.

The DPR report also stated that about 75 rigs were in operations during the second and third quarters of 2008 as against 32 in the first quarter.


Tuesday, December 16, 2008

Don’t be fooled by low gas prices — the crunch is nearly here

The Ottawa Citizen


By Dan Gardner

In Greek mythology, the enchanting songs of the Sirens lured unwary sailors to shipwreck and death. Today's Sirens are the roadside signs singing sweetly, "Cheap gas! Cheap gas! Drink deeply and be at ease, weary traveller!"

After suffering record-high oil and gas prices earlier this year, it's understandable that we see cheap gas as anything but a danger. We're in a recession. Times are tough. It's a relief that the cost of getting around and heating our homes has plummeted. It's also an economic stimulus at a time when we need all the stimulus we can get.

But before we drink deeply and relax, let's have a good look through the telescope at what lies ahead.

In November, the International Energy Agency - an intergovernmental organization which advises 28 member countries - released its latest forecast. The current global economic downturn changes the numbers, the IEA concluded, but not in a way that will make a difference in the long term. Between 2006 and 2030, the IEA predicts, worldwide energy consumption will grow 45 per cent.

"Current trends in energy supply and consumption are patently unsustainable," declared Nobuo Tanaka, executive director of the IEA. "Rising imports of oil and gas into OECD regions and developing Asia, together with the growing concentration of production in a small number of countries, would increase our susceptibility to supply disruptions and sharp price hikes. At the same time, greenhouse-gas emissions would be driven up inexorably, putting the world on track for an eventual global temperature increase of up to 6° C."

Now, some people continue to deny the reality of man-made climate change. I'm not one of them, but I'd like us all to stay on the same page so I won't even mention climate change for the remainder of this column.

What does Tanaka's statement mean? Think 1973. That year, an oil embargo imposed by the OPEC countries hammered the developed world. Gas stations ran dry, prices soared, economies plunged into recession.

Oil shocks will become more common and more severe. The triggers could be anything. A terrorist attack in the Strait of Hormuz, maybe. A coup in Saudi Arabia. The collapse of Nigeria. Whatever it is, wherever it occurs, it will cause oil prices to explode and economies to fall to their knees.

Canada and every other developed nation runs on oil. It moves our cars and trucks. It heats our homes. It is essential in the manufacture of plastics and countless other products. It is the very foundation of our economy.

But with most of the world's oil production coming from unstable regions far away - and the proportion that comes from places such as the Middle East is growing rapidly - that foundation is not reliable. Tomorrow's headlines could cause it to shake, crack or crumble.

Bad as that sounds, it's likely to turn out even worse.

In preparation for its 2008 report, the IEA conducted a detailed study of depletion rates in 800 of the world's largest oil fields. Nobody had ever done such work before and what the IEA found caused the agency to revise its understanding of the world's energy future in a profound way.

The change has to do with worldwide "peak oil" - which is the point at which global oil production can no longer keep up with global oil demand. That sounds bland and technical, but it's actually a nightmare scenario: If oil demand outpaces oil supply, the price of oil will go up and up and up and never go back down. Imagine the oil shock of 1973 as a permanent reality.

It has always been accepted that the world would get to peak oil one day. The only question is when.

Some over-excited proponents of peak oil have been saying for decades that it would come any day now. More restrained voices say we're at peak now. Or we will be in a few years.

The IEA always insisted peak oil was decades off. Nothing to worry about. And so governments didn't.

But then the IEA conducted its survey of oil fields and got spooked. "Although global oil production in total is not expected to peak before 2030," the IEA's 2008 report states, "production of conventional oil ... is projected to level off towards the end of the projection period."

That's alarming, but vague. So British journalist George Monbiot asked the IEA's chief economist, Fatih Birol, to elaborate.

The really bad news lies in oil-producing countries that are not members of the OPEC cartel, Birol said. "We are expecting that in three, four years' time the production of conventional oil will come to a plateau, and start to decline."

And worldwide? "In terms of the global picture, assuming that OPEC will invest in a timely manner, global conventional oil can still continue, but we still expect that it will come around 2020 to a plateau as well, which is of course not good news from a global oil supply point of view."

Not good news, indeed. If oil production comes to "a plateau," it's not rising - but demand will be.

That's the nightmare scenario of peak oil. And it starts in 2020.

That's 11 years from now.

Now, for some problems, 11 years is plenty of time to get ready. But not for this problem.

As George Monbiot notes, the U.S. Department of Energy commissioned a report by oil analyst Robert L. Hirsch on how long it would take for developed economies to mitigate the effects of peak oil. Hirsch concluded that even a worldwide emergency response launched 10 years before the crisis hit would still result in "a liquid fuels shortfall roughly a decade after the time that oil would have peaked." That would be a disaster.

In order to avoid this scenario, Hirsch advised, a massive mitigation program must begin at least 20 years before peak.

If a chill didn't run up your spine, you need to read that again.

Fortunately for every man, woman and child on the planet, one of the few politicians who seems to understand the urgency of the situation is the president-elect of the United States.

On Monday, in announcing his energy policy team, Barack Obama noted that presidents since Richard Nixon have recognized that oil addiction is a dangerous vulnerability but all have failed to make real change. "This time has to be different," he said. "This time we cannot fail. Nor can we be lulled into complacency just because, for now, the price of gas has fallen below $4 a gallon."

Obama backed his rhetoric with a daring choice for energy secretary. Rather than appoint a politician who could be counted on to say and do what is politically expedient, Obama picked Steven Chu, a physicist and Nobel laureate who has been leading research into cutting-edge energy technology.

We must have a "global energy revolution," the IEA's Fatih Birol told Monbiot. And it has to start now. "I think time is not on our side here."

Don't listen to the Sirens, weary travellers. Be not at ease.

Dan Gardner writes Wednesday, Friday and Saturday and blogs at ottawacitizen.com/katzenjammer. E-mail: dgardner@thecitizen.canwest.com.


Thursday, December 11, 2008

Study: End of oil could worsen warming

Discovery.com


As humanity wrings ever more fossil fuels from our planet, the question of when the taps will start to run dry — when "peak oil" will occur — looms ever closer on the horizon. Some say a decade, maybe two. Some say it's already passed. No one is sure.

Whatever the answer, new research has come to the ominous conclusion that slackening oil and gas supplies could actually accelerate the pace of global warming.

If it seems counter-intuitive, consider that generating a kilowatt hour of energy by burning oil pumps 274 grams of the greenhouse gas carbon dioxide into the atmosphere. Natural gas is cleaner, accounting for 202 grams. But coal is by far the worst polluter, clocking in at 331 grams of CO2 per kilowatt hour (a kilowatt hour is when 1000 watts of energy is used for one hour).

As the oil and gas begin to dry up, coal could move in to fill the demand for energy, Pushker Kharecha of the Goddard Institute for Space Studies at Columbia University explained. And unless the carbon it emits is captured and sequestered underground, it will saturate the atmosphere, pushing temperatures ever higher and worsening a host of global environmental problems.

In a series of calculations, Kharecha and co-author James Hansen, also of Goddard, suggest that major climate damage could be avoided even if oil and gas production continue unabated, and are allowed to peter out as reserves dwindle.

"Those two fossil fuels couldn't keep us in the danger zone for very long," Kharecha said, referring to a CO2 concentration of 350 parts per million in the atmosphere or higher.

Right now, the concentration is about 385 part per million, which Kharecha said is already "undesirably high," adding, "but we must reduce coal emissions. Coal has the potential to keep us in the danger zone for a very long time, well past the year 2150."

Kharecha and Hansen will present their work in San Francisco next week at the Fall meeting of the American Geophysical Union.

Kevin Gurney of Purdue University said the world is even more addicted to coal than it is to oil because it is cheap and abundant. And that's not likely to change in the near future.

As peak oil begins to dictate the need for new sources of energy around the world, he said "I unfortunately think that without serious leadership intervention, we are going to trundle along and start using coal."

"Of course there could be some kind of fuel crisis, or the president could put his career on the line and embrace a green economy, or there could be a profound technological breakthrough," he said. "But failing something like that, I just don't see how we're going to make a dent in the energy generation mix."

Kharecha, however, remains optimistic that the story of humans' influence on climate can still have a happy ending.

"Peak oil and gas can really go both ways," Kharecha said. "If people choose to use coal, oil sands, methane, or other fossil fuels as a substitute, that's going to be a major problem. But if it spurs society to realize we need to wean ourselves off fossils fuels, it could be a huge boon for climate."


Monday, December 08, 2008

A Gift to Planet Earth and Humanity

huffingtonpost.com


By Patrick Takahash


A miracle has occurred. Many were beginning to contemplate a survival strategy because of the dual hammer of Peak Oil and Global Warming. But a funny thing happened on our way to doomsday. It is appearing that we are getting a reprieve, and, ironically, the gift is this serious, but fixable, economic collapse.

An absolutely incredible prognostication in Bloomberg is that January delivery will see crude oil below $20/barrel and oil traders are today purchasing gasoline for $0.97/gallon. What does all this mean?

Let us look at some historical consequences. Much of this is detailed in Chapter 1 of SIMPLE SOLUTIONS for Planet Earth, but the price of gasoline in 1973 (all the following will be in 2008 dollars) was $1.80/gal when the First Energy Crisis increased the price to $2.30/gal. The Second Energy Crisis of 1979 kicked it up to $3.17/gal in 1981. Gasoline then, with a small uptick due to the Gulf War of 1991, declined to $1.35/gal in 1998. That was the absolutely lowest real price of gasoline in history.

On July 11, 2008, petroleum skyrocketed to $147.27/bbl, causing gasoline to sell for $4.12/gallon on July 17. Gasoline on December 5 subsequently crashed to $1.77/gallon, 57% lower. The stock market only declined about half that in this interim.

This time, then, the economy affected oil prices, as the recession is reducing use, causing an oversupply. Following the First and Second Energy Crises, higher oil prices dampened the economy. After recovery, oil (and gasoline) prices dramatically dropped. The key question is, will this next recovery raise oil prices? Yes, of course.

We can thus expect the following:

1. Oil could drop below $30/bbl.

2. Gasoline prices might plunge below $1/gallon. This will be the lowest gasoline will ever be in all of history, even if the decline only settles down to $1.34/gallon.

3. If no Solar Manhattan effort occurred in 1982 when gasoline prices were near the modern day high, what are the prospects of anything monumental happening when it will be at an ALL-TIME LOW when Barack Obama becomes President on January 20? Remember, T. Boone Pickens, with all his sincere bluster, abandoned his wind farms when oil was still more than $50/barrel.

4. The economy will recover. It might take all of a year if there is no depression, but, certainly, in 5 years.

5. If, in the meantime, oil does rise to $75/barrel in a year or two, the slack now available to producers will delay any sudden escalation, for OPEC can increase production as necessary. However, the surging economies of China, India and rest of the world will almost surely further escalate the price beyond $100/barrel, maybe up to $200/barrel, in five to ten years. There is such a thing as Peak Oil, and there is mounting evidence that the Middle East does not really have as much of this resource as they claim.

In grand summary, then, this world economic collapse could well be a gift to Planet Earth and Humanity, for Peak Oil will be delayed, carbon dioxide in our atmosphere will be somewhat alleviated and, thankfully, we will have this five to fifteen year period to work on sustainable options that can begin to competitively replace fossil fuels.

The following simple solutions can be recommended:

1. Take advantage of this "gift" of time and comprehensively prepare for a sustainable energy economy. The Obama energy transition team and the new Congress can either instill a yes we can change...or royally blow it.

2. As research and development are only a fraction of actual commercial investments, government can cost-effectively and should expeditiously partner with industry and academia to plan for, fund and implement a visionary renewable energy mandate, even more monumental than the Apollo Project.

3. Smartly insert a carbon tax linked to the price of oil, now. As crude prices increase, so will, thus, this tax. At $30/barrel, something like a 2 cents / pound carbon dioxide tax is significant but tolerable. When oil eventually jumps to $150/barrel, the tax should be proportionately higher, at 10 cents / pound carbon dioxide. The revenues should fund renewable energy and conservation programs.

4. To kick-off the Planet Earth rescue strategy, immediately add a $1/gallon gasoline investment surcharge (also known as a tax, but the semantics can't hurt--and remember, Europe and many parts of the world already pay twice as much for pumped gas), which will result in nearly $150 million/year, also to be applied to the Obama Sustainable Energy Plan.

Society barely reacted after the First Energy Crisis of 1973. We did absolutely nothing after the Second Energy Crisis in 1979. Let us use this "gift" to act wisely this time.


Thursday, December 04, 2008

Gulf CEO: $1 gallon gas in 2009

The Raw Story


CEO also claims carbon-driven warming a 'myth' as Merrill Lynch predicts $25 a barrel oil

Joe Petrowski, CEO of Massachusetts-based Gulf Oil, has some good news for consumers.

In years past, market speculation inflated prices, said Petrowski. Now that the prices are deflated, speculators may 'overshoot' and actually drive the consumer cost down further.

His statements came shortly before Merrill Lynch & Co. predicted oil prices will plunge to $25 a barrel in the coming year if the global recession begins heavily affecting China.

Petrowski also claimed that the threat of global warming driven by carbon emissions is a 'myth,' and instead insisted that dependence on oil imports poses a greater threat to economic stability.

Petrowski's remarks were delivered to the South Shore Chamber of Commerce in Randolph, MA, according to a published report.

In spite of his remarks, the Intergovernmental Panel on Climate Change, in its 2005 report on the effect of hydroflorocarbons on Earth's atmosphere, maintained (PDF link) that "the balance of evidence suggests a discernible human influence of the global climate."

AAA's national average gas price for regular unleaded was $1.78 as of Thursday, down from $3.04 this time last year. The highest recorded national average was $4.11, registered July 17, 2007.

Oil was trading at $44 a barrel on Thursday evening.


Wednesday, December 03, 2008

Does Mr. O Know?

James Howard Kunstler


A lot of readers are twanging on me for refraining to castigate President-elect Obama for deeds yet undone. They're discouraged by the advisors and cabinet sectetaries he's picked, ostensibly because the crew coming in are Washington "insiders," meaning they can't possibly see or do things differently.


My own starting point for this is the belief that in the years just ahead any sociopolitical entity organized at the giant scale will flounder -- this includes everything from the federal government to global corporations to factory farms to centralized high schools to national retail chains. So even expecting Mr. Obama's government to act effectively may be asking too much in a situation that will require mostly local action.


The meta-situation will be the overall decline of energy resources and the necessary downscaling of our activities. We are obviously in a transitional period between the old profligate energy economy and the new economy of relative scarcity. We have no idea how disorderly this transition will be, but there is certainly potential for tremendous instability in daily life.


For a while, perhaps, the federal government may retain some ability to affect the way things go, or give the appearance of doing so. This raises the issue of what Mr. Obama and his team really know about our energy predicament. The president-elect has made some noises -- recently on the 60 Minutes show -- that he understands something about the current price dislocations in the oil markets resulting from the larger financial turmoil. He alluded to the public's erroneous notion that current low-ish oil prices mean the oil problem is over. But does the incoming president know some of the following details?


For instance, does Mr. O know that global oil production appears to have peaked at around 85 million barrels a day, with poor prospects of ever getting beyond that? This single naked fact has broad ramifications, above all whether we can continue to think in terms of industrial "growth" as the benchmark for economic health. There are many interpretations of the current financial fiasco. Some of them are based on long-term technical wave theories. A more down-to-earth view suggests the shock of peak oil -- though it doesn't exclude wave theories.


Does Mr. O know that world oil discovery has fallen to insignificant levels after peaking long ago in the 1960s. Does he know we are finding no more super-giant oil fields on the scale of Arabia's Ghawar or Mexico's Cantarell, which have supplied most of the world's oil for the past forty years and are now running down? Does he know that you can't produce oil that hasn't been discovered? Does Mr. O know that virtually all the oil-producing nations have entered production decline. Surely someone has whispered in his ear about the IEA's projection that global oil production would fall 9.1 percent in the coming year.


Does Mr. O know that oil exports have been trending to decline at a steeper rate than oil depletion? That is, the exporting nations are losing their ability to send oil to the importers (like us) at a rate mathematically greater than the run-down in their production.They are using more of their own oil even while their production is going down. For example, Mexico is depleting overall at more than 9 percent a year (with the Cantarell field alone running down at more than 15 percent annually). Does he know Mexico's net exports are crashing? Mexico has been our number three leading source of imports. In a very few years they will not be able to send us any oil. A deluded American public has no idea that this is happening. Will Mr. O explain it to them?
Does Mr. O know that the "old major" oil companies (Exxon-Mobil, Texaco, Shell, et al) produce less than 10 percent of the world's oil now -- the other 90 percent coming from the foreign nationals -- and that blaming them for the situation is a waste of time. The foreign national companies are changing the landscape of the oil markets. They're making special contracts with "favored customers" rather than just putting their oil up for auction on the futures markets. One thing you can infer from this is that we're entering a period of national oil hoarding based on coming scarcity. The futures markets were based on relative abundance, and they will not operate very well in a climate of scarcity. Consider that the USA will probably not be among the "favored customers" for several oil producing nations. Figure that in with the coming loss of imports from Mexico (and Venezuela and Nigeria).


Does Mr. O know that the current drop in oil prices (due to massive financial deleveraging) has resulted in the cancellation or postponment of the very oil production projects that were hoped to offset the coming depletions? It's not worth it for an oil enterprise (private or foreign) to drill in deepwater or venture into arctic regions when oil is priced at $50-a-barrel -- if it costs $80 to get the stuff out of the ground. It's not worth digging up tar sands in Canada at that price. This halt in activity is going to boomerang back on the US in a year or so, with depletions ongoing everywhere and no new oil to take its place. Does Mr. O know that we're just as likely to see shortages as a resuming rise in oil prices here in the US during his coming term?


Does Mr. O know that the current re-inflation program being run by the Treasury and the Federal Reserve is so egregious that it may lead to loss of the dollar's legitimacy, to the renunciation of dollar holdings by other nations, to the down-rating of US Treasury debt instruments, and finally to an inability of the US to purchase foreign oil -- which comprises two-thirds of all the oil we use every day?


Does Mr. O know that we are not going to run the US automobile and truck fleet on any combination of alt.fuels? Continuing it by other means is a fantasy that will only disappoint us. The motoring era is coming to an end. Heroic investments in highway infrastructure to create jobs will be a tragic waste of our dwindling capital. The pressure for Mr. O to make these misinvestments will be enormous, perhaps insurmountable. There are probably not a thousand people in the US who agree with what I am saying -- meaning the consensus to keep the cars running at all costs overwhelms reality at the moment. Does Mr. O's concept of "change" include the possibility that we may have to live very differently in this society?


Chances are, if Mr. O knows any of these things he might be crucified in the polls and the media by acknowledging them. The only "change" that America really wants to hear about is evicting George Bush from the White House. They're sick of him and all the disturbance he has caused in their financial affairs. But beyond that, the American public is deathly afraid of the kind of changes we actually face -- such as, the end of consumer culture, the gross loss of value in suburban real estate (which forms the bulk of the middle class's private wealth), the prospect of food and fuel scarcities, the need to re-localize our lives, the need to physically shape up to stop the costly and unnecessary drain on our medical resources, to grow more of our own food, to work harder at things that actually matter, and to save whatever we can for a difficult future.


If Mr. O introduces any of these themes into the national discourse, the public and the media and the bloggers will all dump on him for failing to prop up the wild party that American life became in recent decades.