About Peak Oil
Understanding Peak Oil
By Colin J. Campbell
Oil was formed in the geological past under well understood processes. In fact, the bulk of current production comes from just two epochs of extreme global warming, 90 and 150 million years ago, when algae proliferated in the warm sunlit waters, and the organic remains were preserved in the stagnant depths to be converted to oil by chemical reactions. Natural gas was formed in a similar way save that it was derived from vegetal material. It follows that these are finite natural resources subject to depletion, which in turn means that production in any country or region starts following the initial discovery and ends when the resources are exhausted. The peak of production is normally passed when approximately half the total has been taken, termed the midpoint of depletion.
Oil has been known since antiquity but the first wells were drilled for it in the mid 19th Century in Pennsylvania and the on the shores of the Caspian. The Industrial Revolution was already in progress being driven by the steam engine, fuelled by coal. But then in the 1860s, a German engineer found a way to insert the fuel directly into the cylinder inventing the Internal Combustion Engine, which was much more efficient. At first, it used benzene distilled from coal, before turning to petroleum refined from crude oil, for which it developed an unquenchable thirst. The first automobile took to the road in 1882 and the first tractor ploughed its furrow in 1907. This cheap and abundant supply of energy changed the world in then unimaginable ways, leading to the rapid expansion of industry, transport, trade and agriculture, which has allowed the population to expand six-fold in parallel. These remarkable changes were in turn accompanied by the rapid growth of financial capital, as banks lent more than they had on deposit, confident that Tomorrow’s Economic Expansion was collateral for To-day’s Debt, without necessarily recognising that the expansion was driven by an abundant supply of cheap largely oil-based energy.
The peak of oil discovery was passed in the 1960s, and the world started using more than was found in new fields in 1981. The gap between discovery and production has widened since. Many countries, including some important producers, have already passed their peak, suggesting that the world peak of production is now imminent. Were valid data available in the public domain, it would a simple matter to determine both the date of peak and the rate of subsequent decline, but as it is, we find maze of conflicting information, ambiguous definitions and lax reporting procedures. In short, the oil companies tended to report cautiously, being subject to strict Stock Exchange rules, whereas certain OPEC countries exaggerated during the 1980s when they were competing for quota based on reported reserves. Despite the uncertainties of detail, it is now evident that the world faces the dawn of the Second Half of the Age of Oil, when this critical commodity, which plays such a fundamental part in the modern economy, heads into decline due to natural depletion. A debate rages over the precise date of peak, but rather misses the point, when what matters — and matters greatly — is the vision of the long remorseless decline that comes into sight on the other side of it. The transition to decline threatens to be a time of great international tension. Petroleum Man will be virtually extinct this Century, and Homo sapiens faces a major challenge in adapting to his loss. Peak Oil is by all means an important subject.
Glossary
A,B,C,D
- ASPO
- The Association for the Study of Peak Oil and Gas
- Cumulative production
- The cumulative production is the sum of all oil that has ever been produced until a specific date. Cumulative production can be given for a field, oil basin, country or the world.
- Decline rate
- The decline rate refers to production only. It is defined as the negative relative change of production over a time period. Often a period of a year is used. The decline rate can be expressed as a fraction or as percent.
- ( Last year's production – This year's production ) / Last year's production
- Assume a production of 1 Gb in year 2000 and 0.95 Gb in year 2001. The decline rate for year 2001 would then be (1 - 0.95)/1 = 0.05 = 5%. If the production is rising, the decline rate becomes negative.
- Depletion rate
- The depletion differs from the decline rate in that it takes into account the amount of oil that is left. The depletion rate is defined as this year’s production divided by the amount of oil that is left
- Depletion rate = This year's production / Oil left at start of this year
- The amount of oil left is calculated by taking the URR minus last year’s cumulative production. The depletion rate depends on the estimated amount of oil left. As more oil is produced, less oil is left. At a constant production the depletion rate grows while the decline rate is zero. The depletion rate can never become negative.
E,F,G,H
- Geological basin
- A large geological area in which sedimentation is occurring or has occurred. Certain parts of the basin might therefore have the required geological conditions to trap oil. Consists of many oil fields.
- Hubbert peak theory
- A synonym for Peak oil theory
I,J,K,L
M,N,O,P
- Oil
- In context of oil production, the definition from BP Statistical Review (B.4) is used: crude oil, shale oil, oil sands and NGLs (natural gas liquids - the liquid content of natural gas where this is recovered separately).
- In context of oil consumption, the definition from World Energy Outlook (A.6) is used: crude oil, condensates, natural gas liquids, refinery feedstocks and additives, other hydrocarbons and petroleum products (refinery gas, ethane, LPG, aviation gasoline, motor gasoline, jet fuels, kerosene, gas/diesel oil, heavy fuel oil, naphtha, white spirit, lubricants, bitumen, paraffin waxes, petroleum coke and other petroleum products).
- Oil-in-place / Recovery factor
- Oil-in-place is the estimated total amount of oil that is in the ground before production has started. For various reasons far from all of this oil can be recovered. Oil-in-place is usually calculated on a field basis and in an early stage. The oil-in-place value is multiplied by a valuecalled recovery factor and results in an estimated URR for a single field (see below). Later in a field’s production phase the URR is usually calculated with other techniques
- Oil reservoir
- A subsurface porous and permeable rock body that contains oil, gas or both.
- Oil field
- An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition.
- Production
- Production refers to the amount of oil that is produced during a certain time period (most often a day or a year). The following units are common in litterature:
- kb/d (1 000 barrels per day)
- Mb/d (1 000 000 barrels per day)
- Gb/y (1 000 000 000 barrels per year)
- 1 Mb/d = 365/1000 = 0.365 Gb/y
- 1 Gb/y = 1000/365 = 2.74 Mb/d
Q,R,S,T
- Recoverable Reserves (Estimated future production from known fields)
- The recoverable reserves are an estimate of how much recoverable oil is still left in the already found oil fields. It can only be an estimate since it’s impossible to know exactly how much oil is still in the ground.
- Because of this uncertainty, reserves are calculated with a certain probability. A reserve estimate followed with, for instance, ‘P90’ means that there is a 90% chance that there is at least as much recoverable oil as the reserve estimate claims.
U,V,W,X
- Ultimately Recoverable Resources (URR)
- URR is a concept with many names: Total Recoverable Reserves, Ultimately Recoverable Reserves (shortened to URR) or simply "Ultimate"
- The URR is an estimate of the total amount of recoverable oil that exists in the ground before the production starts. In case of a single oil field, URR is defined as:
- URR (single field) = cumulative production + recoverable reserves
- When talking about a region or a country, the URR refers to the total amount of oil that will ever be produced from that region/country including yet-to-find fields:
- URR (region, country) = cumulative production + recoverable reserves + yet-to-find
- Wildcat
- A wildcat is an exploration borehole drilled when searching for oil or gas.
X,Y,Z
- Yet-to-find
- Yet-to-find is an estimate of the amount of recoverable oil that exists in fields that have not yet been found.