PEAKING OF WORLD OIL

PRODUCTION
The Problem & Its Mitigation

Robert L. Hirsch, Ph.D.

Senior Energy Program Advisor, SAIC
6th National Conference on Science, Policy and the Environment
January 27, 2006.

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 THIS PRESENTATION

• THE PEAK OIL PROBLEM

• MITIGATION OPTIONS

• THREE SCENARIOS

• TIMING & RISK

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 Why will conventional oil production peak?

Oil Fields Regions Peak

Peak (Many oil fields)

Production
Production

U.S Lower 48 States

1945 2000
Time - Decades Year

The world
will peak
(All regions)

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 World Additions to Oil Reserves Have Been
Lagging Consumption for Decades.

40
Annual
Additions 20
Minus
Consumption
0
(Billions of
Barrels)
-20
1940 Year 2000

We now consume 3 barrels for each new barrel added.

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What Might Happen at Peaking?

Oil demand grows

in a healthy world
economy

• PRICES
Supply ESCALATE
cannot
meet
demand • SHORTAGES
DEVELOP
Production
reaches a
maximum &
then declines
- PEAKS -
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 When?
No one knows for certain
Forecast Source

2006-2007 Bakhitari (Iran)

2007-2009 Simmons (U.S.)

After 2007 Skrebowski (U.K.)

2010 Campbell (Ireland) 5 years

Before 2009 Deffeyes (U.S.)

Before 2010 Goodstein (U.S.)

After 2010 World Energy Council

2012 Weng (China) 5-15 years

2016 Doug-Westwood (U.K.)

After 2020 CERA (U.S.)

2030 or later EIA (U.S) / Exxon Mobil > 20 years

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 Forecasting Oil & Gas Supply Is Difficult!
DOE EIA Forecasts of N. American Natural Gas Supply to U.S.

34.0
33.0
’02 Looks good
32.0
’03
31.0
30.0
29.0
Tcf/Year

28.0 4 years
27.0 ’04
26.0
25.0
24.0
’05
23.0
22.0
’06E Trouble!
21.0
20.0
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

EIA, Annual Energy Outlook 2002, 2003, 2004,

2005 and 2006E 11/18/08 7
 Why worry now?

• World oil demand is huge & growing.

• World consumption outstripping discoveries.

• Oil production in decline in 33 of the 48 of the world’s

largest oil producing countries.

Many experts are deeply concerned.

Mitigation requires time.
The risks are enormous.

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 Fundamentals

Peaking is maximum production,

not running out.

It’s a liquid fuels problem, not

“energy.”

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 Mitigation Study

Scenario I - No action until peaking occurs

Scenario II - Mitigation started 10 years before peaking

Scenario III - Mitigation started 20 years before peaking

ASSUMED CRASH PROGRAM

IMPLEMENTATION:
THE MOST OPTIMISTIC,
LIMITING CASE

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Mitigation Options Considered

- Vehicle fuel Efficiency

- Heavy oil / oil sands

- Coal Liquefaction

- Gas-To-Liquids (GTL)

- Enhanced Oil Recovery (EOR)

Why these? There’re ready for

Implementation
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Options Not Included in Our Analysis

Option Reasoning

– Nuclear
LIQUID
– Wind ………... Electric FUELS
needed
– Solar

– Hydrogen……………Neither ready nor economic

– Biomass……………. Not economic

– Shale Oil……………. Not commercial

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 Sum of Contributions
30

EOR
Impact 20
in Millions of Coal Liquids
barrels of oil
per day Heavy Oil
10
(MM bpd)
GTL
Eff. Vehicles
0
0 5 10 15
Years After Crash Program Initiation

Delay, then rapid growth.

Roughly 25 MM bpd 15 years after crash program start.
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Q: Why can’t we do more conservation faster?

A: Fleets of vehicles are huge & median life is long.

Autos Light Heavy Airplanes

Trucks Trucks

Fleet size - Millions 130 80 7 Small

Median life - Years 17 16 28 22

U.S. Transportation - 2003

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 A Pattern for World Oil Demand
Date for peaking left open

Extrapolated Demand
-Growing World Economy

120

100 Shortage
80 (60 MM bpd
@ year 20)
PRODUCTION 60
U.S. Lower 48
(MM bpd) 40 production pattern

20

0
-20 -10 0 +10 +20
YEARS BEFORE / AFTER OIL PEAK

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 SCENARIO I: MITIGATION @ PEAKING

120 Mitigation
100
Shortage
80
PRODUCTION 60
(MM bpd)
40

20

0
-20 -10 0 +10 +20
YEARS BEFORE / AFTER OIL PEAK

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SCENARIO II: MITIGATION 10 YEARS BEFORE

120
Mitigation
100

80 Shortage
PRODUCTION 60
(MM bpd) Start
Oil Decline
40
Delayed
20

0
-20 -10 0 +10 +20
YEARS BEFORE / AFTER OIL PEAK

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SCENARIO II: MITIGATION 20 YEARS BEFORE

120

100
Mitigation

80
PRODUCTION 60
(MM bpd) Oil Peaking
40 Further
Start Delayed
20

0
-20 -10 0 +10 +20
YEARS BEFORE / AFTER OIL PEAK

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 Summary
Crash Program Implementation

I. Wait for peaking BIG TROUBLE!

II. Start 10 years early SERIOUS TROUBLE!

III. Start 20 years early NO PROBLEM?

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 Forecasts of World Conventional Oil
Production Peaking
Forecast Source

Now 2006-2007 Bakhitari (Iran)

2007-2009 Simmons (U.S.)

After 2007 Skrebowski (U.K.)

2010 Campbell (Ireland)

Before 2009 Deffeyes (U.S.)

Scenario
Before 2010 Goodstein (U.S.) III
After 2010 World Energy Council

2012 Weng (China)

Now + 10 years 2016 Doug.-Westwood

After 2020 CERA (U.S.)

Now + 20 years
2030 or later EIA (U.S) / Exxon Mobil
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 A Chinese View on Peak Oil

Gb/year50

50
Demand

40
40

WORLD OIL Growth

30 30
GAP
Past Production

20 20 Forecast
Production

10
10

2006
0
1930 0
1950 1970 1990 2010 2030 2050

Peak ~ 2012

China has been taking aggressive action to secure oil supply.

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 Past / Future?

• Oil interruptions in 1973 & 1979 caused recessions &

inflation.

• Both events were brief.

• World oil peaking impacts could last for decades.

• We have never faced a problem like world oil peaking.

The world’s first forced energy transition.

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 Conclusions
• Oil peaking timing is uncertain.
• It may be soon.
• Soon is less that 20 years hence.

• It’s a world liquid fuels problem.

• Peaking = World’s first forced energy transition.

• The risks of over optimism are enormous!

• Mitigation technologies ready; Implementation the challenge.

• With timely mitigation, economic damage minimized.

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