Peak Oil

PEAK OIL is a term used to describe the point

where demand for oil outstrips supply.

Source: ASPO Australia (Australian Association for the Study of Peak Oil & Gas

http://www.aspo-australia.org.au/

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Australian oil production decline

Australia has been shielded from past oil shocks by our domestic oil production from Bass Strait. Hence, as a nation we have not learnt as much about oil conservation and transport planning as European countries, especially the Netherlands which radically changed its transport planning policy to reduce its oil dependence after the 1973 oil crisis.

However, Bass Strait production has been declining since 1985 and until now other fields have filled the production gap. Reliable recent predictions by Geoscience Australia and Woodside indicate that Australia's oil and condensate production will fall substantially in the next decade (Akehurst (2002), APPEA (2004)).

Figure 2. Oil and condensate production profiles of individual Australian fields, and the forecast cumulative production at 50% probability derived from industry data, Powell (2001), Akehurst (2002). BI denotes Barrow Island; GF denotes giant Gippsland Basin Fields.

The dominance of a few large fields, shown in Figure 2, is typical of oil regions. The giant fields are normally found first. An increasing discovery rate of usually progressively smaller fields is needed to keep production relatively constant as the giant fields decline. Then inability to keep finding adequate volumes in ever-smaller fields leads to an overall decline.s becoming increasingly vulnerable to serious oil shortages, in the short term (within a year), in the medium term (within 5 years) and in the long term (within one or at most two decades). Self-sufficiency is expected to decline from an average of 80-90% over the past decade to about 20% by 2020 (APPEA (2004))

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World oil production decline predictions

A world-renowned US Geological Survey petroleum geologist, Les Magoon, visited Australia in November 2001 as the Distinguished Visiting Lecturer of the Petroleum Exploration Society of Australia. He gave talks around Australia entitled "Are We Running Out of Oil". As reported (Australian Energy News (2001), Magoon (2001)), he describes the "Big Rollover" as the change from the current world oil buyers'-market to a world sellers'-market when global production starts to decline. Various forecasts have put the "Big Rollover" date at sometime around 2003, 2007, 2010 or by 2020 (Andrews and Udall (2003)). "At BP, our best estimate of when global oil shortages will begin to bite deeply is between 20 and 40 years", Greg Bourne, Regional President of BP Australasia, told the 5th Energy in WA conference in Perth in March 2003.

Figure 3a: Current forecast of future world oil production, including non-conventional oil. (ASPO (2002)). Scale is in gigabarrels of oil-equivalent per year. The peak of the curve is the “Big Rollover”     Figure 3b: Current forecast of future world oil and gas production, (ASPO (2002)). The inclusion of gas does not change the shape of the global hydrocarbon depletion curve substantially.

Prof. Pierre-René Bauquis of the French Institute of Petroleum told a combined meeting of the Society of Petroleum Engineers and the Petroleum Exploration Society of Australia in Perth that he expected global oil production to start its terminal decline in about 16 years (Bauquis (2004)). He does not see any significant renewable energy substitutes for petroleum over the next 20-50 years. He was also dismissive of hydrogen as a transport energy carrier and foresaw the use of nuclear energy to help manufacture synthetic hydrocarbon fuels

As can be seen in Figure 1, there are some considerably more optimistic forecasts of future oil supplies. The most optimistic ones are driven by economic and political perspectives, rather than by geology and engineering constraints, for example see Lynch (2002). There are very considerable grounds on which to doubt the forecasts published by the International Energy Agency. The IEA takes without question the oil reserve data provided by all the national governments. Many of these estimates are clearly misleading as they either increase dramatically without any matching exploration success, or they remain constant for years in spite of substantial production which must reduce the actual oil reserves. Conflicting definitions and national and political priorities make the IEA figures as dubious, for example, as similar audited and glowing accounts of the financial strength of HIH and Enron just before their catastrophic corporate crashes.

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Shell has recently revised its "proven reserves" downward by 23%, showing that oil-company reserve claims are subject to uncertainties and mistakes. The scope for analogous errors and misrepresentation at the national level is very substantial. Mexico has twice halved its claimed reserves since the mid 1990s. Recent presentations by Matthew Simmons (Simmons (2004), (2004a)) cast considerable doubt on the reliability of the claimed Saudi oil reserve figures. Similar doubts about OPEC's overall reserves are also raised by Salameh (2004)

In the case of Saudi Arabia, any substantial errors in reported reserve estimates are of very serious global significance. There is of course the complementary but lower probability that some reserves may have been understated, but most concern has been expressed about over-optimism.

Preparation for Probable Oil Shocks

There is a great deal that can be done to prepare for the likelihood of future oil shocks and hence to ameliorate the effects when (or if) they hit us. Many possible precautions will be "no-regrets" options already justified on equity, environment, health, social or economic grounds. Australia's existing reserves of uncommitted natural gas coupled with local understanding of demand management (especially in water use efficiency and TravelSmart individualised marketing) provide an encouraging opportunity for the nation to both forecast and to weather the coming storms better than many other regions. It is particularly important that the issues be tackled seriously and urgently at all levels in the community. WA Planning and Infrastructure Minister, Alannah MacTiernan (2004) said, in opening the "Oil: Living with Less" conference "It is also certain that the cost of preparing too early is nowhere near the cost of not being ready on time."

Figure 5. An adaptation of the scenario outlined by Swenson (1998) of the various mechanisms of bridging the coming gulf between growing current world demand for oil and the forecast decline in the production of conventional oil (Robinson (2002)).

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Communication about potential solutions and their limitations

It will be crucially important that there be open and informed discussion about oil depletion. Broad consideration of the various strategies for reducing our oil vulnerability; especially their limitations and the input energy needed, the time required and the costs needed to implement them are essential precursors to effective decision-making.

Contrary to many common predictions, it is highly unlikely there will ever be a single "Magic Bullet" panacea for our oil vulnerability. A major aim should be to reduce our very high levels of automobile dependency. Some of the possible oil-use reduction and replacement strategies are outlined above in Figure 5.

Travel mode shifts: Individualised Marketing

Very substantial changes have already been triggered in existing urban travel patterns when people are given personalised information about the travel choices available to them. Empowering people in this way has resulted in sustained decreases of 8% to 19% in car-kms travelled. The oil saved by these voluntary travel pattern changes is very significant, and shows that reducing car-travel demand is more cost-effective than exploring for more oil.

Australia leads the world in the application of Individualised Marketing to make very significant reductions in car travel rates. Programmes have been completed or are underway in several states. WA has the most extensive record with a number of very successful and well documented programmes. The average reduction in car-kms travelled in the completed WA projects is 13% at a benefit:cost ratio of 30:1, far higher than those of most transport projects. Similar results have been obtained in Europe and the US, (Robinson (2004), Socialdata (2004)).

The TravelSmart Individualised Marketing programmes in WA have covered suburbs with some 158,000 people to date, and have resulted in the annual saving of some 115 million car-kms, or 11 million litres of petrol (John (2004), MacTiernan (2004)). Extrapolated to Australia's urban population, this would equate to about a thousand megalitres of oil saved each year. Globally, this level of travel reduction and mode shift would save each year oil amounting roughly to the annual production of Iraq, as an example.

Alternative Fuels

All alternative fuels to replace petrol and diesel have severe constraints to their introduction. Enormous volumes are required to replace a sizeable proportion of our current liquid fuel usage, and the timescale for their provision in these volumes is very short. For instance, diverting Australia’s entire wheat crop to produce ethanol would replace less than 10% of our oil usage. Hydrogen is an energy carrier, not an energy source. It requires large amounts of energy for its manufacture and for its distribution. For the foreseeable future, the vast bulk of the world’s hydrogen will continue to be made from oil and gas. The ‘Hydrogen Economy’ may well turn out to be just a pipe-dream like fusion power. Concentration on hydrogen diverts attention and resources from practical and immediate fuel conservation options. The most likely alternative for our current cheap plentiful oil will also be oil, but much more expensive and less plentiful oil.

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Technological changes

It will be very risky indeed to rely on unproven technologies becoming available on such enormous scales within a decade or so, which is the timeframe likely to be required if the Big Rollover forecasts are accurate. There are around 14 million motor vehicles in Australia, and at only $25,000 each, a fleet replacement exercise to change them to other technologies or other fuels would need the outlay of $350,000 million, which would be diverted from other community and Government needs. Currently half the registered motor vehicles are more than ten years old, and 20% more than 20 years old. Normal fleet changeover rates are actually very slow. Half of today's new cars will still be on the roads in 20 years (BTRE (2002))

For instance, it has taken Australia almost two decades since 1985 to switch from leaded to unleaded petrol (Figure 6), a very much simpler technological change indeed than a conversion to fuel-cell cars, for instance. This change was mandatory for all new cars purchased from 1st January 1986.

Figure 6. Example of the inevitably slow rate of introduction of new technology into Australia's vehicle fleet. Unleaded and leaded (or LRP) petrol sales, Australia, from 1987 and extrapolated to 2008, (Australian Institute of Petroleum at www.aip.com.au), following mandatory introduction of emission-control engines in new cars in 1986. The introduction of hybrid vehicles and fuel cells is likely to be much slower as the technological differences are much greater.

Plug-in hybrid and electric car technology is available and feasible today (see electric cars display), but we need to show to the car companies that there is a strong demand for electric cars!!!

Please go to your local car dealer and register your interest for a plug-in hybrid or electric car.

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