1 Peak Oil What are the probabilities that the rate of global oil production will start its final decline soon? Bruce Robinson Convenor, ASPO-Australia.

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Peak OilWhat are the probabilities that the rate of global oil

production will start its final decline soon?

Bruce RobinsonConvenor, ASPO-Australia

10th August 2007

Curtin Corner

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www.ASPO-Australia.org.auAn Australia-wide network of professionals working to reduce oil vulnerability

ASPO-Australia Working groupsFinance SectorHealth Sector Social Services SectorRemote indigenous communitiesActive transport (bicycle & walking)Agriculture, Fisheries and FoodBiofuels Urban and transport planning Oil & Gas industryBehavioural changeLocal Government sectorRegional and city working groupsConstruction IndustryFreight sectorPublic transport sectorDefence and Security EconomicsTourism Young Professionals working group

Senate inquiry submission

ASPO-Australia is part of the international ASPO movement

Senate Inquiry into Australia's future oil supply and alternative

transport fuels

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Outline What is Peak Oil ?

the time when global oil production stops rising and starts its final decline

We will never "run out of oil"

Is "Peak Oil" a fallacy, a theory, a probability, or an inevitability? inevitable

When is the most probable forecast date ? perhaps 2010-2015

Will market forces solve our Peak Oil problems ? no, sorry!

Should Governments, universities, businesses and communities be preparing for Petrol Droughts and Peak Oil ? yes!

1930 1970 2010 2050

Peak Oilbutwhen?

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Unexpected transport pattern changesand infrastructure provision decisions

Fremantle Passenger Terminalcompleted 1962

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-

50,000

100,000

150,000

200,000

250,000

61-6

2

63-6

4

65-6

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67-6

8

69-7

0

71-7

2

73-7

4

75-7

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77-7

8

79-8

0

81-8

2

83-8

4

85-8

6

87-8

8

89-9

0

91-9

2

93-9

4

95-9

6

97-9

8

99-0

0

01-0

2

Passengers p.a. Fremantle Port 1961-2001

Fremantle Passenger Terminal opened

Unexpected transport pattern changes, and infrastructure

World Air travel 1950-2001

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7

Many books about Peak Oil

Campbell & Laherrère March 1998

Campbell 2003

Brian Fleay Perth 1995

Deffeyes 2001

Heinberg 2003 Roberts 2004

2005

2006

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•Please put your hand up if you think that we have crossed the Hubbert Peak and we are entering a demand driven pricing era,

•and hands up those who don’t?

•Undecided

Eric StreitbergEric StreitbergExecutive Director Executive Director ARC Energy LimitedARC Energy Limited

Australian Petroleum Production & Exploration Association conference

APPEAApril 2005Perth

•1/3rd

•1/3rd

•1/3rd

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Mb/d

US oil production: Peak in 1970

2007

Jeremy Gilbert, ex BP www.PeakOil.net

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0

10

20

30

40

0

10

20

30

40

40

10

30

20

01930 1970 2010 2050

IEA 2002

Shell

Bauquis, Total Deffeyes

ASPO & Skrebowski

Gb pa

0

2007

Past World Oil Production and Forecasts

Prof. BauquisFrance

Dr Ali Samsam BakhtiariIran

Chris SkrebowskiUK

Prof. Aleklett, ASPOSweden

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Chris Skrebowski Editor, Petroleum Review, London

The practical realities

• The world needs oil production flows

• Reserves are only useful as flows

• Worry about flows not reserves• "Deliverability" (Les Magoon, USGS)

"40 years reserves left at current production rates"....This is a very misleading statement

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A simple observation -- or why peak will be earlier than most people expect

‘Global production falls when loss of output from countries in decline exceeds gains in output from those that are expanding.’

Decline

Expansion

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Why are oil supplies peaking?

• We are not finding oil fast enough

• We are not developing fields fast enough

• Too many fields are old and declining

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Blue is water, green is water and oil mixed and red/purple is “dry” oil with little water in it

Ghawar is Saudi Arabia's and the world's biggest oilfieldIf it is at peak, then global peak is probably very close

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The real oil discovery trendLongwell, 2002

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1995-2025 Discovery Forecast USGS

The real oil discovery trendLongwell, 2002

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How old are the fields?

• Of the 18 largest fields, 12 are in decline, 5 have some potential and 1 is undeveloped

• 70% of production from fields 30+ years old• Few large recent discoveries

• Relying more and more on ageing fields and new small discoveries

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The top five decliners in 2005

Country Production Peak Year DeclineUSA 6.8mn b/d 1985 -5.51%Norway 2.9mn b/d 2001 -7.50%UK 1.8mn b/d 1999 -11.00%Mexico 3.8mn b/d 2004 -1.60%Syria 0.5mn b/d 1995 -11.40%

1970

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How the Megaprojects database is created and used

• All publicly available data

• 2006-2012 148 Opec and 70 non-Opec projects

• Opec data (from their website)

• Incremental production allocated by start up date

• Graphed to show volumes available to meet demand

Megaprojects Report, Petroleum Review April 2006

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60.00

70.00

80.00

90.00

100.00

110.00

120.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year

Mil

lio

n b

/d Supply IEA

Capacity CS

Capacity CERA

Global liquids capacity to 2015

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Chris Skrebowski's conclusions

• Supply will remain tight and prices high barring a major economic setback

• Oil supply will peak in 2010/2011 at around 92-94 million barrels/day

• Oil supply in international trade may peak earlier

• Collectively we are still in denial

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-4000

-2000

0

2000

4000

6000

1965 1970 1975 1980 1985 1990 1995 2000 2005

1000 Barrel/day

UK

Consumption

Export/Import

Quelle: BP Analyse: LBST, ß

Production decline rate ~ 10%UK already a net importer

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-4000

-1500

1000

3500

6000

1965 1970 1975 1980 1985 1990 1995 2000 2005

1000 Barrel/day

Indonesia

Consumption

Export

Quelle: BP; Analyse: LBST, ß

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-4000

-2000

0

2000

4000

6000

1965 1970 1975 1980 1985 1990 1995 2000 2005

1000 Barrel/day

China

Consumption

Imports

Data: BP. Analyse: Zittel LBST, ß, Pang Xiongqi

2020

Production

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Oil available for export

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ABARE forecasts

"If the price of eggs is high enough, even the roosters will start to lay." ABARE to Senate inquiry into Australia's future oil supplies

"Forecasters' Droop" ??

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70

1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77May-06 Dec 2012Dec 2011

NYMEX Futures WTI 10th April 2006 US$/bbl

ABAREUS$39 in 2011

NYMEXUS$67

in 2011now US$70

(10th August 2007)

ABARE2005US$35 in 2006

ABARE oil price forecastsUS$/bbl2002 for 2004 $262004 for 2005 $322004 for 2005 $37.95 – 4.8%

NYMEX New York Metals Exchange

Oil Futures Prices

0

20

40

60

80

2007 2008 2009 2010 2011 2012 2013 2014 2015

10th August 2007ABARE: 25th June 2007"In the second half of 2007, oil prices are forecast to average U$63 a barrel"

NYMEX WTI futures $US/bbl

10th April 2006

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0.0

0.2

0.4

0.6

0.8

1.0

1 11 21 31 41 51 611965 202520051985

1.0

0.0

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0.8

Geoscience Australia, APPEA, ABARE

Australia’s oil production and consumption1965-2030

Million barrels/day

Actual Forecast

Consumption

Production

P50

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Perth’s Central Park building is 249 m high, to top of tower

Australia uses 45,000,000,000 litres of oil each yeara cube of about 360 metres size

100 ml of oil contains 1 kWh of energy. Enough to move a small car to the top of the Eiffel tower

80% of Australia’s oil usage is in transport

If Australia’s 20 M tpa wheat crop → ethanol = 9%

=1.3 EfT3

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Australia China United States

1 kml l

Million barrels/ day 2005 BP Statistical Review, 2006

Australia uses 0.9 China 7.0US 20.6World 82.5 US 1 cubic km oil / year

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Energyfiles LtdEnergyfiles Ltd

EENERGYNERGYFFILEILESS

www.energyfiles.cowww.energyfiles.comm

Oil production is not shared equitablyUS: 5% of world's population uses 25% of world oilChina: 21% 8%

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"Federal agency efforts that could reduce uncertainty about the timing of peak oil production or mitigate its consequences are spread across multiple agencies and are generally not focused explicitly on peak oil.

....there is no coordinated federal strategy for reducing uncertainty about the peak’s timing or mitigating its consequences".

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PEAKING OF WORLD OIL PRODUCTION:IMPACTS, MITIGATION, & RISK MANAGEMENTRobert L. Hirsch, Roger Bezdek & Robert Wendling

February 2005for US Dept of Energy

"The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem.

As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented.

Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking."

"The world has never faced a problem like this.

.. oil peaking will be abrupt and revolutionary".

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0 5 10 15

5

0

15

25

Years After Crash Program Initiation

Impact (MM bpd)

20

35EOR

Coal Liquids

Heavy Oil

GTL

Efficient Vehicles

Worldwide Crash Program Mitigation of Conventional Oil Production Peaking

A Study for US DOE NETLHirsch, Bezdek and Wendling, 2005

Delay / Rapid growth.

Roughly 35 MM bpd at year 20.

2005

Study

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3. HIGHER PRICES WILL CREATE MORE OIL?Not true“Economists are better at finding oil on paper than geologists are at finding it in the ground”

7. GOVERNMENT INTERVENTION NOT REQUIRED?Wrong: Intervention by governments will be requiredEconomic and social implications of oil peaking would otherwise be chaotic

Dr Roger Bezdek is a senior energy economist in Washington

On his recent Australian tour for ASPO he briefed ministers for Transport and ministers for Energy in Victoria and Queensland, prominent multinational firms, nationwide TV, the Defence Department, the Federal Shadow Minister for Resources and Energy and had a number of meetings at Queensland Transport

Full presentation slides and video at www.ASPO-Australia.org.au

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Time

Cost of Error

COST AS A FUNCTION OF START TIME (Notional)

Premature Start

Peaking Scenario I

- 10 Years Scenario II

- 20 Years Scenario III

“It is also certain that the cost of preparing too early is nowhere near the

cost of not being ready on time.”

Alannah MacTiernan, 2004

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Scenario

Wait for peaking

Start 10 years early

Start 20 years early

Result

Oil shortages largest, longest lasting

Delays peaking; still shortages

Avoids the problem; smooth transition

SCENARIOS ANALYSIS CONCLUSIONSBasis: Immediate crash program implementation

No quick fix!

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Is there a possible transition to another fuel?. Probably not.

Can we run ALL our cars on water, hydrogen, ethanol, GTL ?? No.

EROEI (Energy return on energy invested) Very important

Les Magoon, USGS 2001

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Mortgage and Oil Vulnerabilityin Perth

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PrioritiesFirst: Community awareness

and engagement2: Frugality3: EfficiencyLast: Alternative fuels

[email protected] 08-9384-7409

Failure to act now will prove incredibly costly

www.ASPO-Australia.org.au

Oil vulnerability assessment and risk management is an important mechanism of minimising exposure and maximising opportunities. It is a new and promising field.

Hint: Check your superannuation is not being invested into urban toll-roads, tunnels and airports.

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a few more slides follow,in case they are needed for questions

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1: “Talk about it, Talk about it”2. Engage people, “Participatory democracy”3. Dismantle the "perverse policies" that subsidise heavy car use and excessive freight transport.

Australian Government Policy and Action Options

4. Encourage frugal use of fuel, and disadvantage profligate users. Fuel taxes should be incrementally raised to European levels to reduce usage.5: SmartCard tradable personal fuel allocation system. A flexible mechanism for short-term oil shocks, as well for encouraging people to reduce their fuel usage..6. Concentrate on the psychological and social dimensions of automobile dependence, not just “technological fixes”7. Implement nationwide "individualised marketing" travel demand management.8. Railways, cyclepaths and public transport are better investments than more roads.9. Give priority for remaining oil and gas supplies to food production, essential services and indigenous communities, using the Smart-Card system.10. Review the oil vulnerability of every industry and community sector and how each may reduce their risks.11 Promote through the United Nations an Intergovernmental Panel on Oil Depletion, and a Kyoto-like protocol to allocate equitably the declining oil among nations. An international tradable sliding scale allocation mechanism is one hypothetical option.

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Petrol taxes OECD

IEA Dec 2003

PortugalUK

Australia

US

€ 0.80

0.60

0.00

0.20

0.40

Au$cents/litre

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The UK Fuel Tax Escalator Margaret Thatcher

Australian fuel taxes should be raised to European levels on a fuel tax escalator

1988 1990 1992 1994 1996 1998

Nominal tax per litre (pence)

Real tax

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30

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0

pence

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2007 }Oil

Gboe/pa World All Oil

www.PeakOil.net ASPO 2006

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2007}Oil

}Gas

Gboe/pa World All Oil & Gas (gas at 10,000 cft=1bbl)

www.PeakOil.net ASPO 2006

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}0

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20

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1930 1950 1970 1990 2010 2030 2050

2007

World oil shortfall scenarios

Past Production of Oil

ForecastProduction

Demand Trend

Gb/year

0

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40

50

Shortfall

By 2030, the gap is equivalent to 6,000 nuclear reactors

2030

50

0

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1930 1950 1970 1990 2010 2030 2050

0

1 0

2 0

3 0

4 0

5 0

World oil shortfall scenarios

Past Production of Oil

ForecastProduction

Demand Growth

Deprivation, war

City design/lifestyle

Pricing / taxes

Transport mode shifts

Efficiency

Other petroleum fuels gas, tar-sands

Other fuels

Gb/year

• no single “Magic Bullet” solution, • probably no replacement ever for cheap plentiful oil• Urgent preparation and adjustment are vital

2007

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1

2

3

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1965 1975 1985 1995 2005

Oil Consumptionmillion barrels/day

UK

Australia (x 5)

Japan

M bbl/d

BP Statistical Review of World Energy, 2006

UK Fuel Tax Escalator started

Japan

Australia (x 5)

UK

0

石油消費 （単位 100 万バレル／日）

英国

日本

オーストラリア（ 5 倍に誇張）

英国でのガソリン税課税強化開始

52www.ASPO-Australia.org.Au

Bicycles are powered by biofuel, renewable energy,

either Weetbix or abdominal fat

No shortage of either

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Perth

Sydney

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Urban passenger mode shares Australia

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000

Mo

de

sh

are

(p

er

cen

t)

Car

Rail

BusOther

Potterton BTRE 2003

High automobile-dependence

Public transport share is very low

Car

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Government of Western Australia

STATE LIQUID FUEL SHORTAGE

EMERGENCY PLAN

OPERATIONAL PLAN PREPARED BY

ENERGY SAFETY DIRECTORATEDEPARTMENT OF CONSUMER

AND EMPLOYMENT PROTECTION20 Southport Street, W Leederville WA 6007Tel: (08) 9422 5200 Fax: (08) 9422 5244

January 2003

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PERTH TRAVEL SURVEYS - 1976 to 2003 (Prepared by Robin White 15 March 2007)

1976 1986 PTS 2003 2003PRTS (See note 9) PARTS PARTS

(weekdays, school days?,

(weekdays, school days,

(weekdays, school days, (all days,

5yo+) 9yo+) 9yo+) all ages)(see note 1) (see note 2) (see note 3) (see note 3)

Mode SharesWalk only 15.7% 11.6% 10.8% 10.6%Cycle 3.0% 5.3% 1.6% 1.6%Public transport 8.0% 7.4% 5.5% 3.9%Car passenger (see note 4) 14.8% 18.0% 29.1%Car driver (see note 4) 59.1% 62.5% 53.2%Other (taxi, motorbike, etc.) 3.5% 1.8% 1.6% 1.5%Total 100.0% 100.0% 100.0% 100.0%

69.8%

We need both petrol rationing plans and public transport rationing plans in place in case of fuel emergencies.

Bicycle transport is one substantial opportunity for public transport load-shedding in the event of a liquid fuel emergency.

PTA must have more input into Liquid Fuel Shortage planning

0%

20%

40%

60%

80%

100%

Walk Bicycle Transit Car

Perth Mode Share (2003)

{If 25% of car users change to public transport

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Peak OilAn urgent challenge

for sustainability

Bruce RobinsonAustralian Association for the Study of Peak Oil & Gas

6th February 2006

? ? ? ? ?

Look Out !! Something serious is looming on the radar

www.ASPO-Australia.org.au

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Hurricane Katrina New Orleans

Govts warn of general hurricane risks, forecast, and track individual hurricanesGovts help: longterm; planning, standards, short-term; preparations & consequencesThey do not attempt to prevent hurricanesPeak Oil is a natural phenomenon too. Should we reduce fuel taxes? or strengthen the levees?

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Crude oil: Saudi versus Russia

0

2,000

4,000

6,000

8,000

10,000

12,000

Saudi Arabia Russia

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February 2004

By 2015, we will need to find, develop and produce new oil and gas equal to eight out of every 10 barrels being produced today.

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01930 1970 2010 2050

IEA Shell

Bauquis

Deffeyes ASPO

WorldASPO and others

Gb pa

0

Samsam Bakhtiari

Demand

AustraliaGeoscience Australia

2007

Past Oil Production and Forecasts

1930 1970 2010 2050

TotalBass Strait

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China

US

Australia