The Association For The Study Of Peak Oil
The Oil Depletion Analysis Centre*
Newsletter No 10 - October 2001
C.J. Campbell and Staball Hill
Oil and the "Third World War"
Donna AB U-Nasr, Associated Press Writer
The war rumbles on with downright opposition in many countries and not more
than muted support in the so-called coalition. It is now compounded by an
anthrax scare in the United States of unknown origins. So far, there has been no
particular direct link with oil, although to judge from the following quotation
from a 1998 interview with bin-Laden, it indirectly may be one of the principal
- On the U.S. -backed fight against the Soviet presence in Afghanistan
(bin-Laden said): "Those who waged jihad in Afghanistan ... knew they
could, with a few RPGs (rocket-propelled grenades), a few anti-tank mines and a
few Kalashnikovs, destroy the biggest military myth, humanity has ever known.
The biggest military machine was smashed and with it vanished from our minds
what's called the superpower."
- Bin Laden claimed the United States has carried out the "biggest theft
in history" by buying oil from Persian Gulf countries at low prices.
According to bin Laden, a barrel of oil today should cost $144. Based on that
calculation, he said, the Americans have stolen $36 trillion from Muslims and
they owe each member of the faith $30,000.
"Do you want (Muslims) to remain silent in the face of such a huge
theft?" bin Laden said.
The following quotation from the Spectator of 20th October points to
the wide popular sense of injustice, especially in Middle East countries, which
lies behind the conflict.
Throughout the cafes of the Muslim world, hundreds of thousands of young men
are saying ..... "We have all this oil, yet what happens? It is sold
cheaply to westerners, who despise us, to pay the night club bills of decadent
pseudo-Islamic rulers. Given our control of oil, we could squeeze the world
economy's windpipe. Yet we have not even been able to dislodge the Israelis from
the lands they stole. Our current leaders are wasting our substance and our
opportunity; let us rise up against them". Bin-Laden's aim is to compress
all that hot air until it explodes.
The Times of London sees the oil risks but doesn't question the reported
"The Last Oil Rush"
October 25 2001
Could the West survive without Saudi oil? The war on
terrorism means that we may have to. The former Soviet Union could fill the
gap, but this would bring its own set of pitfalls. It is mid-February, 2002.
North America is in the depths of a bitter winter. Consumption of heating oil
is at an all-time high and petrol use is back to prewar levels thanks to a
long slump in world prices, but the war on terrorism drags on.
Contrary to most forecasts, Osama bin Laden has been
captured alive and airlifted to the USS Carl Vinson by triumphant US Marines.
In line with other forecasts, the terrorism has not stopped. The Strasbourg
anthrax outbreak appears to be contained but a smallpox scare is unfolding in
Los Angeles and well-sourced Pentagon leaks say that Saddam Hussein has
assembled a "dirty" nuclear bomb with enriched uranium packed around
a Scud warhead Range: 1,300 miles.
The Bush-Blair coalition is intact but under intense
pressure from Washington hawks who want to take the war to Baghdad. The
nuclear leaks win the argument for them and, with Blair's regretful
non-cooperation, B2 bombers of the 509th air wing resume their 22-hour raids
from Whiteman Air Force Base in Missouri, this time on Saddam's revivified
military infrastructure and key Iraqi oil assets.
Saudi Arabia erupts. The new offensive persuades millions
in Riyadh and Jedda that the war on terror is in fact the war on Islam against
which their imams have railed for months. Following the lead of a prominent
dissident cleric, tens of thousands take to the streets to condemn the royal
family's tacit support of the American attackers.
To restore calm, the Saudi Government suspends oil sales to
the US in what it privately assures Washington is just a temporary move. But
Iraqi exports under the UN-approved oil-for-food programme have already dried
up and the damage is done. With a third of the world's known oil reserves in
jeopardy, global prices zoom to $44 a barrel.
President Bush authorises an emergency withdrawal of 200
million barrels from the Strategic Petroleum Reserve held in underground
caverns in Texas and Louisiana. It will make up the shortfall in US imports
for barely a fortnight unless he can persuade voters to switch overnight from
conspicuous consumption to manic conservation —a trick he is loath even to
try. Instead, flanked by his energy secretary and an uneasy-looking clutch of
oil executives gathered in the Roosevelt Room of the White House, he announces
an historic ten-year plan to wean the US off Middle-Eastem oil and meet its
energy needs elsewhere. "My proposals," he says, choosing words that
would have been unimaginable six months earlier, "will end the Arab
world's unhealthy dependence on the petrodollar. They will boost export-led
growth for our friends elsewhere in the world. They will bolster our national
security and transform how we define it. They may even transform the health of
the planet we call home."
This scenario could be triggered in any number of ways
besides the bombing of Iraq. AI-Qaeda terrorists could sink a supertanker in
the Strait of Hormuz. Saudi Arabia could be overtaken by a full-blown
revolution, or slapped with embargoes for failing fully to condemn future
The result would be a seismic shift in patterns of oil
procurement that would define the coming century. The losers, at least in the
short term, would be the Gulf states of the Middle East. The winner, in the
supreme irony of the post-Cold War period, would be Russia. In fact, it is
already happening. Immediately after the September attacks, President Putin
endeared himself mightily to President Bush by ordering his armed forces to
stand down from the heightened alert they would otherwise have adopted in such
circumstances. But he also offered to make up any shortfall in Middle East oil
exports to the West that might result from the war on terror.
As if on cue, an Italian tanker left the Russian Black Sea
port of Novorossiysk last week with the first load of oil to flow through a
new 990-mile pipeline linking the Tengiz field in Kazakhstan to the open seas.
To the west, a Russian oil terminal is to open before the end of the year at
Primorsk on the Gulf of Finland to bring more crude from western Siberia,
Russia's booming oil zone, to Europe via the Baltic. In the Far North, Lukoil,
Russia's biggest oil producer, is building an Arctic Coast terminal from which
to ship 250,000 barrels a day straight across the Arctic Ocean in a fleet of
Plans for former Soviet Central Asia are even more
ambitious. Starting in Azerbaijan, at least two pipelines will eventually
carry oil and gas to the outside world via Georgia and Turkey, and in
Turkmenistan, a land of scorching deserts and vast gas reserves bordering
Afghanistan to the north, the current fighting has paradoxically revived hopes
of long-term stability making possible the most Herculean undertaking of all:
a gas pipeline over the Hindu Kush to Pakistan and India.
These are the outlines of the last great oil rush; a race
to open the Caspian basin in the hope that it may replace the Middle East as
filling station to the world —and the expectation that even if it doesn't,
its oil will find a market somewhere.
The stakes could hardly be higher. With America alone
spending £100 million a day on imported crude, oil remains the world's great
wealth-creator. The rise of the personal computer notwithstanding, it still
drives every industrial economy, provides profits for the world's largest
corporations, pays for most of the Middle East's arms, and funds a sprawling
culture of gilded vulgarity stretching from Dubai's seven-star Burj Al Arab
Hotel to the subterranean swimming pools of Kensington Palace Row.
"Access to large sources of oil has long constituted a
strategic prize," writes Daniel Yergin in "The Prize", his
seminal study of oil politics. "It enables nations to accumulate wealth,
to fuel their economies, to produce and to sell goods and services, to build,
to buy, to move, to acquire and manufacture weapons, to win wars."
It also forces importing nations to do business with
regimes they would otherwise condemn, and the race to the Caspian could lead
the West into an array of new strategic relationships every bit as problematic
as those now under strain in the Persian Gulf.
Azerbaijan, key to the Caucasus and the oil-drenched
Apsheron Peninsula, is one of the most corrupt nations on earth. At the start
of the 1990s its capital, Baku, was hailed as the next Houston and enjoyed a
brief boom, depicted with surprising accuracy by Robbie Coltrane and a host of
dancing girls in 007's The World Is Not Enough. More recently, the
multinationals have been pulling out in droves rather than adapt to Baku's
rising violence and bribery. Kazakhstan is still run by its former communist
chieftain, Nursultan Nazarbayev, ten years after the Soviet collapse, while
his three daughters hold those levers of power that he does not. One is
married to the son of the President of neighbouring Kyrgyzstan, another to the
head of Kazakhstan's oil and gas monopoly. The third controls state TV. And
Turkmenistan has degenerated from its previous incarnation as a Soviet
Socialist Republic (something few thought possible in 1991) to a parody of a
Third-World dictatorship under the deeply eccentric guidance of Saparmurad
Niyazov, who likes to be known as "Father of all the Turkmens" and
has anointed himself President for life.
Qualms over democracy and human rights have not impeded the
hunt for oil in the past. A more important question, as Western leaders
reassess their energy policies in the light of September 11, is whether the
former Soviet Union has enough of it.
Broadly speaking, it does. According to figures from the US
Energy Information Administration and the London-based Petroleum Argus, the
Middle East produces about 16 million barrels of oil a day, of which Saudi
Arabia pumps 7.5 million. The US relies on the region for 2.6 million, or
about a third of its imports. The former Soviet Union pumps four million
barrels a day, projected to rise to seven million over the next five years and
much more within a decade as the Tengiz field and the even larger Kashagan
reserves in the northern Caspian come on stream. Kazakhstan, by the most
conservative estimates, is sitting on more than 20 billion barrels of
recoverable oil. Russia has nearly 50 billion barrels, and exploration has
barely begun in some of the remoter reaches of Siberia.
For Putin and Nazarbayev, that is the good news. The bad
news is that Saudi Arabia's energy reserve remains the biggest and most
accessible on the planet by such a margin that it would take a full-blown
revolution there to end its dominance of OPEC and the global oil business.
"Stick a straw in the ground there, and oil gushes," says Ian
Bourne, the editor of Petroleum Argus. "Then you put it in a tanker and
ship it for $2 a barrel. It's almost as simple as that." At 262 billion
barrels, Saudi Arabia's known reserves are still biblically huge. Its
infrastructure is so extensive that if Iraq were to shut down production
altogether, it could summon enough reserve capacity within 90 days to make up
the shortfall and stabilise world prices. Over time, its shimmering sands have
yielded so many new fields that successive predictions of a peak in production
followed by decline have turned instead into a series of peaks —a plateau,
as Bourne says, with no horizon in sight.
Iran, Iraq and Kuwait are similarly blessed. This is why,
despite the region's record of war, sanctions, ecological devastation and
grotesque abuse of human rights, most major Western oil companies were
returning there before September 11 in the hope of winning new access to old
but reliable reserves. Before the world changed irrevocably, Western companies
were competing fiercely for new gas extraction contracts in Saudi Arabia that
they still hope to use as toeholds in the Saudi oil business. In Iran, the
prospects of an end to the national oil monopoly's supremacy were better than
at any time since the 1979 revolution that toppled the Shah. Even Iraq looked
a good long-term bet, as pressure from Russia and elsewhere mounted for a
complete end to sanctions.
Now Big Oil has fallen silent, sometimes to the point of
hostility. No company I phoned would comment publicly on what the war on
terror might mean for its business. Bourne says: "They're holding their
breath and crossing their fingers." One British spokesman insisted on
anonymity before saying: "Nothing will change."
Analysts agree it is highly unlikely that Saudi Arabia will
stop selling its oil to the West, or that the West will stop buying it. Yet if
nothing changes within the world's only oil superpower, it could detonate a
demographic time bomb. The Saudi Royal Family has cleaved to power since the
1930s thanks to an unwritten social contract by which its subjects remain
politically submissive in return for free, oil-funded education and healthcare
and an average annual income of $7,000. That contract is crumbling. Saudi
Arabia's population is young, fast-growing, underemployed and increasingly
resentful of the institutionalised corruption that is said to siphon the
revenue from 600,000 barrels of oil a day to fund the louche lifestyles of the
country's 15,000 princes.
The Saudi exchequer needs an oil price of $24 a barrel for
the foreseeable future to put the economy back on a sound footing. The price
is now $19 a barrel —barely enough to meet the country's immediate expenses
and service its debts— and OPEC is loath to raise it for fear of being seen
to profit in a time of crisis.
Next to most Middle Eastern governments, Putin's Russia is
a model of progressive development, even if the same cannot be said of his
Central Asian neighbours. He has a vision of his country as a Eurasian
commercial behemoth selling its oil to the highest bidder and earning transit
fees on most of Kazakhstan's as it flows from Tengiz to the Black Sea. In this
vision, Moscow's profits are limited only by the bore of its pipelines and the
size of tanker that can squeeze through the Bosphorus.
There is a catch, of course. As James Bond learnt on his
latest adventure, every pipeline is a potential terrorist target. And as
Hitler showed with his murderous advance on Stalingrad —and, he hoped, the
"oily rocks" of the Caspian shore— a thriving oilfield can drive
the world to war even if it is embedded in the heart of Russia.
It is February 2002 again. The pundits are digesting
President Bush's brave switch away from the Middle East in search of
apolitical oil. They ask if he has found the answer to America's latest energy
crisis and conclude that he has probably not, because oil, by its nature, will
always be political. Instead they paint a picture of an America turning away
from oil altogether in favour of liquefied natural gas, methanol, solar and
wind power and hydrogen, the holy grail of alternative fuels. The Wall Street
Journal says that America can lead the technological revolution that will lead
the world into the post-oil era. A1 Gore, with beard, emerges from obscurity
to note that this might save the planet. This is a future that could work, the
Whether Bush is the man to embrace it is another matter.
Time will tell what the outcome of the struggle will be. President Wilson at the
end of the First World War adopted the slogan "Peace without Victory".
It did not exactly enthral his allies, but perhaps offers a useful formula today
before more collateral casualties inflame passions further. Some hoped for a
Ramadan face-saver, but that has now been lost.
One positive outcome of the war is that the separatists in Northern Ireland
appear to be laying down their arms, possibly having realised that their
traditional sponsors will be less keen to fund their activities, which for many
years have included bombings with collateral casualties.
Meanwhile, World recession, now widely recognised as such, deepens, reducing
the demand for oil. It will be necessary to take this into account in updating
our depletion models when the new data become available from the Oil & Gas
Journal in December.
There might be a case for adopting the following scenarios:
High Case (previously the Base Case): the World recovers rapidly from
the present turmoil with oil demand resuming its previous upward growth at 1.5%
a year until Swing Share hits 35%, which is taken to trigger another oil price
shock, leading to a plateau of production until it reaches 50%, when production
commences its long term decline at the then depletion rate.
Base Case (previously the Low Case): mild recession holds demand flat
until Swing Share reaches 50%, as above.
Low Case: deep recession causes demand to fall at 1.5 a year until
Swing Share reaches 50%, as above. (It means that peak oil occurred in 2000).
Prices are likely to remain weak under the Base and Low Cases as the low
demand is in better balance with supply. The High Case Scenarios does not seem
very likely because any economic improvement would lead to a parallel increase
in oil demand, which would soon again reach the sloping ceiling of spare
capacity, causing a new price shock, which would reimpose recession.
The low prices are however a mixed blessing, for they allow governments to
continue to ignore depletion, delaying the introduction of effective energy
saving policies. They also inhibit exploration, the development of
non-conventional oil and gas, and renewable energy. Oil demand is not however
infinitely elastic, meaning that prices will have to firm in due course, as
essential needs, especially for agriculture, are faced.
Shell is famous for its scenarios, but how plausible they are is another
matter. Certainly, the latest pronouncement includes a bizarre case, termed
"Dynamics as Usual ", with oil production reaching 105 Mb/d in 2050,
implying an Ultimate of 7000 billion barrels, as depicted in the attached graph
by Jean Laherrere. This is far out of the range of all published estimates over
the past fifty years, including the 2000 Gb estimate by Shell itself in 1998
(published by Bookout). It is even far removed from the recent excessive USGS
Mean and High estimates. It probably means that whoever compiled it simply
extrapolated the past trend oblivious of the resource constraints. Oil company
planning departments evidently have their fair share of "flat-earth"
economists, and are often isolated from the exploration departments, whose
members have little motive to draw attention to the limitations that their
technical knowledge reveals.
(For the Shell scenarios, see: ( http://www.shell.com/files/media-en/scenarios.pdf
Dr. Bakhtiari of Tehran, who is on the ODAC Board of International Advisors,
has, by contrast, published some useful scenarios of OPEC supply under
alternative price and geopolitical assumptions, using realistic resource
estimates. In all cases, they show a peak in the second decade of the Century.
North Sea Peaks
Two studies have been received confirming our own assessment. One by Simmons
(also a board member) underlines the bleak future for UK production, which is
shown to decline at close to our estimated depletion rate of 7%.
The other report documents the evolution of the official reported UK
reserves, illustrating that several of the major fields were initially
under-reported by as much as one-third. As illustrated by the representative
example of the Thistle Field, these fields are now so far depleted that
extrapolation of the decline curve leaves no doubt as to what the size of the
field is. The first year of decline was in 1983, and its extrapolation would
have given a clear indication of the ultimate size of the field, illustrating
incidentally the minimal impact of technology on the reserves.
The explanation for the under-reporting is that whereas the explorers made
confidential volumetric assessments of the size of the prospect, the initial
published reports were based on the planned commercial development with a given
number of wells. During the later life of the fields, every effort was made to
tap subsidiary reservoirs and satellite traps, bringing the reported reserves
closer to the original volumetric estimates. No particular new technology was
involved, although knowledge of the details of the field naturally evolved as
work proceeded. It is most unlikely that the skilled engineers would have
systematically under-estimated the real size of the fields by such a large
factor. It was all in the reporting, because they were reporting an initial
phase of the project and not the full size of the field. There is however much
less scope to under-report the later smaller fields, which accordingly run the
risk of giving disappointing results, as Norwegian experience confirms.
"Reserve growth", as under-reporting is confusingly described, is
one of the most misunderstood elements of depletion studies.
An excellent new book with the above title has been written by Professor K.S.
Deffeyes, and published by Princeton University Press. The author started his
career with Shell, working with the legendary King Hubbert, before moving on to
teach at Princeton. He writes in a lucid, at times humorous, non-technical
style, concluding that oil production will peak around 2005. He draws attention
to the absurdity of the USGS estimates. His explanation of hydrocarbon
source-rocks is particularly useful.
The Economist begins to grasp the hard truth
The Economist, as the principal organ of the flat-earth community,
cannot be expected to admit to resource constraints, but in an interesting
article on November 1st did —after some rather derisory comments about our
endeavour, nevertheless begin to accent the notion of depletion. It ends by
referring to a statement attributed to the IEA that it would take an investment
of a trillion dollars over ten years for the industry to make good the decline
in non-OPEC production. Translated, that means peak and decline.
Yes even the economists are rational
Our anonymous contributor from the heart of the oil industry writes:
Ever since my involvement with ASPO-ODAC started, one
feature has both puzzled and troubled me. Why are otherwise rational
economists so violently opposed to even considering the compelling evidence
that hydrocarbon resources are limited and that peak production is close?
In the outer reaches of web where the geniuses and the
madmen compete for space, there is much to find, and sometimes exciting things
to learn. In this case, the relevant article at <
http://dieoffcom~Vage173.htm > cannot be accused of being particularly well
written or even very coherent, but by the third reading, its devastating
message comes through. It reveals that energy has now become so fundamental
and so integral to any sort of developed economy that, without it, there can
be no economy at all in any meaningful sense. Thus, energy can no longer be
traded and valued within an economy. It is an external because a developed
economy is impossible without it. In the absence of energy, no stock, share or
bond can have value as it simply represents a share or a charge on something
that has no value. Everything then becomes as valuable as Confederate dollars
or Russian bonds.
Now, no one is talking of an absence of energy but we are
talking of a shortfall and an increasing shortfall in the world's key energy
source, namely oil, - and that from some date between 2006 and 2012. We have
tended to concentrate rather narrowly on the immediate implications for the
oil industry and for supply. It seems that economists have subconsciously
grasped that once energy supplies become severely restricted, economics, as we
(and they) understand it, cease to have purpose or relevance. Therefore, for
them, denial becomes not just important but vital.
To expand a little further, there is near universal
acceptance that fossil fuels will provide the bulk of energy supplies for the
next 20 years, with oil easily the most important because of its
transportability, energy content and ease of use. Gas may be environmentally
more acceptable but in terms of transportability and energy content, it comes
second by a wide margin.
The economists tell us that a shortfall in supply of any
commodity leads to an increase in price, which will re-balance supply and
demand. This is fine and we can all agree that this is indeed the best way to
allocate goods within the economy. If the price of chocolate bars go up, we
buy and eat less of them, and the market re-balances. However, if the product
is external, like energy, rather different things happen. Energy is
fundamental and intrinsic to the whole of the modern economy. It is a
necessary condition for there to be an economy at all.
If the price of energy goes up, the whole economy goes
down. It shrinks, as every company becomes less profitable, less valuable.
Share prices fall and keep falling. We had a glimpse of this in 1974 when oil
supply was restricted and the price rose. In the 1979 crisis, it was purely a
price effect as there was no actual supply shortfall, just the fear of one.
Now we have the realistic prospect of increasing shortfalls and sustained
price rises once oil supply passes peak. The rest I leave to your imagination.
So my case is the belief in endless and bountiful energy supplies is a sine
qua non if you want to be an economist for more than the next five years.
A funny way to run a railroad!
Our faith in market economics is very great. The oil
companies are passionate believers, even though $10 oil nearly wiped them out,
and so are most western governments. It absolves them from thought, action and
guilt. But for how long? The market is currently driving oil prices down. If
prices were to remain significantly below $20 for any length of time, two
things would happen: firstly, high cost exploration and development in the
non-OPEC countries would rapidly fall. (If you don't believe me just observe
how rapidly US gas drilling is falling now that the gas price is right down).
Secondly, a number of oil producer governments would run out of money, leading
to debt default, instability and quite possibly revolution. Sober and
sympathetic analysts have calculated that for the Saudi State to cover all its
costs, and service its debt, it needs production of 8 million barrels/day and
a price of $25/barrel. Is our enthusiasm for unfettered market pricing about
to become very expensive indeed?
A very good question.
The editorial writer in an oil magazine that recently came
through my door clearly thought he was being whimsical and clever with the
suggestion that there may not be enough carbon available for global warming to
be significant. Initially, I dismissed the thought, but it nagged away so I
jotted down what I thought were the key points.
1. There is a weak linkage between carbon dioxide
concentrations and global temperatures.
2. There is wide range of known and unknown influences on
global climate. Carbon dioxide concentrations are by far the easiest to
3. Carbon dioxide concentrations were 285 part per million
volume in 1850 and reached 360 parts per million volume in 2000.
4. Global temperature rose in an erratic pattern over the
period averaging 0.5 degrees C higher in 2000 than in 1850.
5. All the climate change modelling is done on the basis of
carbon dioxide levels doubling to 500 parts per million.
6. Since 1850, we have burnt 800 billion barrels of oil,
2200 trillion cubic feet of gas and many million tonnes of coal. The human
population has increased six-fold, and cattle tenfold. Vast areas of forest
have been burnt. But the carbon dioxide concentration has increased by only 75
parts per million.
7. The oil burnt is 35-50% of the most likely reserves, the
gas burnt is 15-30% of the likely reserves. For coal we have probably burnt
around 15-30% of reserves.
What then becomes clear is that the whimsical journalist,
who visited me, is probably right. There just isn't enough available carbon to
reach 500 parts per million even if we burn all the fuel, bum the forests and
have lots of cattle with excessive flatulence. The IPCC squares this awkward
circle by assuming future hydrocarbon supplies in such abundance as to make
even the flattest of flatearth economists blush. Everyone appears to have been
too embarrassed to challenge this (all too convenient) nonsense.
The real challenge for ASPO-ODAC is this. Governments are
cheerfully spending fortunes on good, bad and indifferent climate change
research. Some are already making rules and regulations, and imposing costs on
their industries and taxes on their enterprises without even knowing if
there are enough hydrocarbons for the threat to be realistic.
Unless and until governments have a rather more realistic
view of the global hydrocarbon resource:
- there is no chance of building plausible climate change models
- there is no way of knowing whether climate change is a threat that
As explained above, insufficient energy is many orders of
magnitude more important a threat to human welfare than anything else. Yet,
governments are either unaware or have their heads in the sand unable to face
so large a threat. The delicious irony is that the oil companies (at least
those that understand) might like to point out the reality but that would mean
telling shareholders, which wouldn't do a lot for the share price or the
directors' share options.
It looks as though global warming provides a convenient
diversion for governments and oil companies alike. However, for a tiny
fraction of the cost of climate change research they could find out the
reality of the global hydrocarbon resource and the true magnitude of the
problem. Otherwise, they could all find themselves like the British in
Singapore with the guns pointing out to sea and the "problem" coming
at them from behind.
House of Lords Select Committee on the European Union
The following submission has been made by ODAC to a House of Lords Committee
in the United Kingdom. It triggered a series of intelligent questions, and was
followed up by a presentation delivered in person by Dr Bentley and Prof. Meyer
on behalf of ODAC.
1. The world faces almost certain near-term hydrocarbon supply shortages. The
reasoning is as follows:
1.1 Global oil supply is currently at political risk. This is because
the sum of conventional oil production from all countries in the world, except
the five main Middle-East suppliers, is more or —less at the maximum set by
physical resource limits.
1.2 World oil supply will soon be at physical risk. This is because the
Middle-East countries have themselves little spare operational capacity, and
this will be increasingly called upon as oil production declines elsewhere.
1.3 Large investments in Middle-East production, if they occur, could raise
output, but only to a limited extent. The main exception is Iraq, but even here
there would be significant delays before prospects are confirmed, and
infrastructure put in place.
1.4 In any event, global output of conventional oil will soon decline. The
date of the peak depends on the size of Middle East reserves, which are poorly
known, and unreliably reported. Best estimates put the global conventional oil
peak between five and ten years away.
1.5 The world contains large quantities of non-conventional oil and various
oil substitutes, but the rapid decline in the output of conventional oil makes
it unlikely that non-conventional sources could come on-stream fast enough to
1.6 For conventional gas, the world's original endowment is probably about
the same, in energy terms, as its endowment of conventional oil. Since less gas
has been used so far compared to oil, the world will turn increasingly to gas as
oil declines. But the global peak in conventional gas production is already in
sight, in perhaps 20 years, and hence the global peak of all-hydrocarbons (oil
plus gas) is likely to be in about 10 or so years.
2. The above views have been amplified in a document submitted to the Cabinet
Office's Energy Review Team. This is available at:
3. The background to these statements is that a group at the University of
Reading has been studying, for some years, the question of global hydrocarbon
supplies [Ref. 1]. The group has seven members (including the author of this
submission), and contains petroleum geologists, engineers and physicists. This
research has included extensive discussions with oil companies, the UK
government, the IEA, the EU and the US Geological Survey. In addition, the group
has had sight of the main oil industry resource data set.
4. The conclusion of the group is that the report by Campbell and Laherrère
[Ref. 2] represents the best calculations to-date on the future of global
hydrocarbon supplies. Their calculations lead to the conclusions summarized
5. It is worth stressing that the Campbell/Laherrère calculations are based
— the authors' extensive geological knowledge;
— full access to the standard industry oil and gas resource database;
— detailed analyses of current hydrocarbon reserves (where, particularly for
oil, neither FSU nor Middle East reserves can be taken at face value);
— a range of statistical approaches to assessing the yet-to-find;
— the use of models of future hydrocarbon production rates that the group at
Reading has assessed as adequately accurate and robust.
6. The group at the University of Reading discussed these finding with the
EU's DG-TREN, and in the course of these discussions had significant input into
helping to draft portions of the Technical Background document published as
Annex 1 of the EU's Green Paper: Towards a European strategy for the
security of energy supply, (COM(2000) 769). The latter is currently the
focus of Sub-Committee B's attention.
7. In the light of the foregoing, the specific responses of the Oil Depletion
Analysis Centre to the questions raised by Sub-Committee B are as follows:
Q1. The EU faces severe near-term energy security issues.
Q2. Both supply side and demand side policies will be
Q3. There is a need for an EU Energy policy. A
well-thought-out policy can help lessen the shocks from supply limits.
Q4. Producer/Consumer dialogue will be essential for a
Q5. The risks of in-use and after-use of nuclear power
need close examination.
Q6. The EU suggests that taxes on conventional fuel could
support renewables. Many technologies for large-scale use of
renewables are not far from cost-effective.
Q7. Detailed analysis is required, see ODAC's submission
to the PIU.
Q8. The lessons of the "fuel protests" is that
tax harmonization is vital; the public will understand hydrocarbon limits,
but will want to see fairness in the burdens.
. R.W. Bentley, R.H. Booth, J.D. Burton, ML. Coleman, B.W. Sellwood, G.R.
Whitfield. Perspectives on the Future of Oil. Energy Exploration and
Exploitation, Vol. 18, Nos. 2 & 3, pp 147-206, Multi-Science Ltd., 2000.
. C.J. Campbell and J.H. Laherrère. The World's Supply of Oil, 1930 -
2050. report from Petroconsultants S.A., Geneva, 1995.
A new data-set suggests that about 30 Gb of oil have been found in water
depths of more than 500 m. It lies mainly in Brasil (36%), the Gulf of Mexico
(28%) and Angola (26%), confirming that a very special geo-tectonic setting is
responsible. The sum of the individual modelled production profiles suggests a
peak of about 8 Mb/d by 2012.
An idea for ASPO Co-operation and funding
It is evident that road transport will be particularly affected by oil
depletion. Road building is planned, funded and controlled by departments of
national government, lacking any particular expertise in oil supply.
Furthermore, it involves long-term planning requiring forecasts of future needs.
It might therefore be an idea for ASPO members to approach their national road
planning authorities to explain oil depletion and the need for better
information and analysis than is provided by government bodies directly
responsible for oil supply, which generally have been misled by the IEA, the oil
companies and others.
If members succeeded in getting their foot through the door on this basis,
they could propose that the road authorities should contribute, say, the
equivalent of one kilometer of road building to a research fund, to be used
jointly by ASPO to secure access to the industry database and conduct a proper,
but not difficult, analysis of future supply. It would certainly be the best
investment the road authorities could ever make, saving colossal wasted effort
in unnecessary future roads.
Experience has been that the study of oil depletion does not readily fit the
criteria for normal scientific research, because it is primarily a data
gathering exercise not involving any particularly advanced science. The analysis
itself is straight-forward and simple, being substantially self-evident to
anyone employing common sense. So, possibly, it would be better to approach
those who have a direct long-term interest in the consequences of oil depletion,
such as the road-builders.
Compiled by: C.J. Campbell, Staball Hill, Ballydehob, Co. Cork, Ireland
* ASPO Members
Austria: Arsenal Research - Dipl.-Ing. H. Fechner
Germany: BGR - Prof Dr F-W Wellmer, Clausthal University, Prof. W. Blendinger,
L-B Systemstechnik -Dr W. Zittel.
Ireland: University College, Cork - Dr C. Sage
Norway: Norwegian Petroleum Directorate , Mr. Oystein Kristiansen, Rogaland
Research - Dr J. Karlsen
Portugal: Evora University - Prof. R Rosa
Sweden: Uppsala University, Prof K. Aleklett
United Kingdom: ODAC - Dr R.W. Bentley, Reading University - Prof. M. Coleman
Trustees and AdvisorsUsed with permission of Walter Youngquist
Mrs. Sarah Astor - London
Mr. A.M. S. Bahktiari - Tehran
Prof. R. Booth - Reading
Mr. B. Fleay - Perth. Australia
Mr. R.F.P. Hardman - London
Mr. R. Harrison - London
Mr. A. Ianniello - London
Dr. Klaus Ilium - Denmark
Mr. L.F. Ivanhoe - Ojai, California
Mr. S. Kemp - London
Mr. J.H. Laherrère, France
Mr. R.C. Leonard, Moscow
Prof. S. Peters - Geneva
Mr. M. Simmons - Houston
Mr. C. Skrebowski - London
Mr. D. Strahan - London
Mr. W. Youngquist - Eugene, Oregon
Dr. W.H. Ziegler - Chardonne, Switzerland
Mr. J.M. Bourdaire - Paris
Mr. C. Cleutinx - EU
Dr. D. Fleeting - London
Dr. R. Douthwaite - Ireland
Dr. P.E. Metz - Netherlands
The goal of the Oil Depletion Analysis Centre is to supply independent
information on global hydrocarbon resources.
ODAC Contact: Dr. R.W. Bentley, Coordinator
Oil Depletion Analysis Centre
305 Great Portland Street, Suite 12
London W1N 5DA, UK
Email : <firstname.lastname@example.org>