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Opinion & Analysis |
Saturday, February 31, 2008 |
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Simplistic predictions of looming oil drought are wide of the markTONY ALLWRIGHT The price of oil has been topping $130 a barrel, fuelled in part by fears that it is running out. But that isn't going to happen for a very long time, writes Tony Allwright
PEOPLE unfamiliar with the oil industry often ask "when will the oil run out?" It's not a straightforward one to answer, for a variety of reasons. According to published sources, the world has something like one trillion barrels of oil reserves and consumes about 87 million barrels a day. Divide a trillion by 87 million and you get 11,494 days or 31½ years of oil left - that is, it will run out in 2040 or thereabouts. That's within the lifetime of many of us, so panic about a coming oil drought is entirely appropriate. Right?
Consumption is also driven by oil price (higher prices lead to less consumption), which is itself driven by demand (more consumption leads to higher prices); by free-market competition forcing businesses to drive down their costs in order to survive; and by overall world economic circumstances that can foster either tighter or looser financial control, and lower or higher demand. So if there is one thing you can be certain of between now and 2040, it is that consumption is not going to remain at 87 million barrels a day or any simple multiplicator of this. Then there's the reserves question, which is even trickier. The reserves of a given oilfield are someone's best estimate of how much oil can be economically produced at today's prices and using today's technology. But reserves can't be measured like liquid in a swimming pool, because oil sits in countless tiny voids (eg the space between adjacent grains of sand) within rock several kilometres downstairs and typically between a million and a billion cubic metres in size. So you have to estimate the volume of the oil-bearing rock you've got; how much of this comprises voids able to contain fluids (porosity); how well the voids are connected together for easy tapping (permeability); the percentage to which the voids are filled with oil rather than water (saturation); how easily the oil itself can flow from one void to another till it gets to a well bore (viscosity); what help you may need to provide to push the oil along (eg external pressure); and the proportion, based on all the above, of the oil actually present that you will be able to economically extract - the so- called recovery factor. On the last point, recovery factors for given oilfields range typically from 15 per cent to 60 per cent, with a global average of about 40 per cent, meaning the other 60 per cent doesn't appear in reserves estimates. The above is what you need to know, but all you can measure is a few metrics that will yield seismic data that vaguely maps the shape of the rocks; good raw data about rocks and fluids from individual wells drilled - but wells are expensive, so they are few and far between; and reliable data about past production, though this largely just tells you how wrong your previous estimates were. So with this limited, spaced-out information, covering only a very small percentage of the rock, you nevertheless have to interpolate and extrapolate what it means for all of the rock. It is not hard to see, therefore, that if two engineers get together to agree on a reserves estimate, they come up with at least three different answers.
But even all this is only part of the story. Technology is changing all the time in a manner that in effect continuously increases reserves, as new ways emerge to use ever-better seismic techniques to locate oil-bearing rocks - smaller, deeper, tougher - that would otherwise remain hidden; to drill wells in ever-deeper, rougher waters and in more demanding land locations (from frozen wastes to thick jungle) that go ever deeper underground, that snake in three dimensions through multiple oil-bearing zones like a fighter jet stalking its prey, that are multi-tentacled, able to reach out several kilometres - perhaps up to 15km - in all directions like the spokes of a bicycle wheel; and to drill wells ever more cheaply, and to re-use old wells, thus yielding a profit from what would otherwise be uneconomic oil. Increasingly sophisticated engineering provides solutions that improve the recovery factor, ie by untrapping more of the 60 per cent of oil (over a trillion barrels) currently not economically producible. These enhanced recovery techniques include cracking the rock open by pumping in water at high pressure; dissolving the rock and/or solid impurities by soaking with acid or other solvents; flushing the reservoir with water, or steam, or gas, or thinning chemicals, or viscous fluids down one set of (injection) wells, in order to drive more oil into the bores of other (producing) wells; or combining such methods. Modern applied science allows us to convert gas to liquid fuel using the latest so-called gas-to-liquid (GTL) technology, or indeed coal to liquid, so adding to liquid fuel reserves; to double present reserves by economically developing vast oil deposits hitherto locked within, for example, Canadian tar sands (over 0.3 trillion barrels), Venezuelan bitumen (over 0.1 trillion barrels) and US oil-shales (an astonishing two trillion barrels); and to transport and process oil in ways that relentlessly drive down costs on a never-ending basis. And we must not forget the direct effect of oil price. Firstly, price rises encourage further exploration and investment, which ultimately add to reserves. Contrary to conventional wisdom, the days of finding super-giant oilfields are not yet over. Not long ago, Petrobras announced the discovery of no fewer than three of them off Brazil - Cariocas-Sugar Loaf, Tupi and Jupiter - which between them hold an astonishing 46 billion barrels of recoverable oil, plus unquantified gas and condensates. But also, a rise of one dollar a barrel, instantly, with no effort by anyone whatsoever, augments global reserves by making economic a slew of prospects from which the oil was previously uneconomic to extract. Thus, for example, rising demand pushes up prices that in turn cause reserves to rise. And vice versa of course. Moreover, as the oil price rises, so alternative energies become economic, which, of course, reduces oil demand and hence spins out oil reserves for longer. Published reserves of the world's oil represent the sum of millions of estimates that take into account all the above factors. They are performed every day all over the globe by hundreds of thousands of engineers and geologists, competent and incompetent, honest and flaky, checked and not checked. So when you see a figure like one trillion barrels of reserves, know that it is no more than a best estimate as of a certain moment in time, and certainly wrong, and that it's changing all the time. Bear in mind also that less conventional energy alternatives - geothermal, wind, solar, hydrogen, tidal - are developing fast, their costs are dropping and before long they will be able to displace significant oil volumes (in the process making oil reserves last longer). Above all, know and trust that there is no limit to human ingenuity. Indeed it is said that oil is found not in the ground but in that unfathomable, inexhaustible resource that is the human brain, prompted it must be said by the driving force of benign human greed that so fascinated the Scottish economist Adam Smith, spiritual father of capitalism. The limitless human mind will always ensure there is sufficient oil to meet humankind's needs until well after our grandchildren have died of old age. And then there's politics and oil. Ah, but that's a story for another day. Tony Allwright is an occasional Irish Times columnist. He is a retired oil industry engineer, specialising in exploration and production. His last position was with Shell in Oman, where he was technical director © 2008 The Irish Times
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Further details in a blog post entitled “When Will the Oil Run Out?” |
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This article prompted an invitation from
RTE, the state broadcaster, to debate on live radio oil issues with
Colin Campbell, on its morning chat-show,
Today with Pat Kenny.
Mr Campbell is an experienced ex-BP oilfield geologist who runs an
international think-tank and has written a
book devoted to the cult of "“Peak
Oil”,
so I was surprised at how thin his arguments were. A few
months ago I wrote a post,
“Beware
the Peak Oil Salesman”,
deriding the Peak Oil concept, which provided me with useful ammunition.
You can listen to the debate |
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Gift Idea |
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Good to report that as at
FREED AT LAST, |
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BLOGROLL
Atlantic Blog (defunct) Blog-Irish (defunct)
Jihad
Religion
Iona Institute
Leisure
Blog Directory
My Columns in the
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What I've recently
But it's not
entirely honest in its subtle pro-Palestinian bias, and therefore needs
to be read in conjunction with an antidote, such as See detailed review +++++
BP's ambitious CEO John Browne expanded it through adventurous acquisitions, aggressive offshore exploration, and relentless cost-reduction that trumped everything else, even safety and long-term technical sustainability. Thus mistakes accumulated, leading to terrifying and deadly accidents in refineries, pipelines and offshore operations, and business disaster in Russia. The Macondo blowout was but an inevitable outcome of a BP culture that had become poisonous and incompetent. However the book is gravely compromised by a litany of over 40 technical and stupid errors that display the author's ignorance and carelessness. It would be better to wait for the second (properly edited) edition before buying. As for BP, only a wholesale rebuilding of a new, professional, ethical culture will prevent further such tragedies and the eventual destruction of a once mighty corporation with a long and generally honourable history. Note: I wrote
my own reports on Macondo +++++
A horrific account of:
More details on my blog here. +++++
After recounting a childhood of convention and simple pleasures in working-class Aberdeen, Mr Urquhart is conscripted within days of Chamberlain declaring war on Germany in 1939. From then until the Japanese are deservedly nuked into surrendering six years later, Mr Urquhart’s tale is one of first discomfort but then following the fall of Singapore of ever-increasing, unmitigated horror. After a wretched journey Eastward, he finds himself part of Singapore’s big but useless garrison. Taken prisoner when Singapore falls in 1941, he is, successively,
Chronically ill, distraught and traumatised on return to Aberdeen yet disdained by the British Army, he slowly reconstructs a life. Only in his late 80s is he able finally to recount his dreadful experiences in this unputdownable book. There are very few first-person eye-witness accounts of the the horrors of Japanese brutality during WW2. As such this book is an invaluable historical document. +++++
This is a rattling good tale of the web of corruption within which the American president and his cronies operate. It's written by blogger Michele Malkin who, because she's both a woman and half-Asian, is curiously immune to the charges of racism and sexism this book would provoke if written by a typical Republican WASP. With 75 page of notes to back up - in best blogger tradition - every shocking and in most cases money-grubbing allegation, she excoriates one Obama crony after another, starting with the incumbent himself and his equally tricky wife. Joe Biden, Rahm Emmanuel, Valerie Jarett, Tim Geithner, Lawrence Summers, Steven Rattner, both Clintons, Chris Dodd: they all star as crooks in this venomous but credible book. ACORN, Mr Obama's favourite community organising outfit, is also exposed for the crooked vote-rigging machine it is. +++++
It is really just a collation of amusing little tales about surprising human (and occasionally animal) behaviour and situations. For example:
The book has no real message other than don't be surprised how humans sometimes behave and try to look for simple rather than complex solutions. And with a final anecdote (monkeys, cash and sex), the book suddenly just stops dead in its tracks. Weird. ++++++
It's chapters are organised around provocative questions such as
It's central thesis is that economic development continues to be impeded in different countries for different historical reasons, even when the original rationale for those impediments no longer obtains. For instance:
The author writes in a very chatty, light-hearted matter which makes the book easy to digest. However it would benefit from a few charts to illustrate some of the many quantitative points put forward, as well as sub-chaptering every few pages to provide natural break-points for the reader. +++++
The author was a member of Britain's V Force, a forerunner of the SAS. Its remit was to harass Japanese lines of command, patrol their occupied territory, carryout sabotage and provide intelligence, with the overall objective of keeping the enemy out of India. Irwin is admirably yet brutally frank, in his descriptions of deathly battles with the Japs, his execution of a prisoner, dodging falling bags of rice dropped by the RAF, or collapsing in floods of tears through accumulated stress, fear and loneliness. He also provides some fascinating insights into the mentality of Japanese soldiery and why it failed against the flexibility and devolved authority of the British. The book amounts to a very human and exhilarating tale. Oh, and Irwin describes the death in 1943 of his colleague my uncle, Major PF Brennan. +++++ Other books here |
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After
48
crackling, compelling, captivating games, the new World Champions are,
deservedly,
England get the Silver,
No-one can argue with
Over the competition, |
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