Saturday, March 31, 2007

Oil Peak Could Catch United States Unprepared

WASHINGTON, DC, March 30, 2007 (ENS) - The U.S. government needs a strategy to coordinate and prioritize federal agency efforts to reduce uncertainty about the timing of an oil peak and to advise Congress on how best to mitigate consequences, finds a new report by the Government Accountability Office, GAO, the investigative branch of Congress.

The oil peak is that point when global production reaches its maximum and then can only decline.

The GAO report, published Thursday, says most studies estimate that oil production will peak sometime between now and 2040. But today, a Swedish scientist warned that the peak could come as early as next year.

Fredrik Robelius in the Department of Nuclear and Particle Physics at Uppsala University published his doctoral thesis today in which he says the rate of extraction from giant oil fields is a better indicator of the peak than oil prices.

"The reliability of the oil price as a single parameter can be questioned, as earlier times of high prices have occurred without having anything to do with a lack of oil," said Robelius.

"Instead," he said, "giant oil fields, the largest oil fields in the world, can be used as a parameter."

Future demand for oil is expected to increase annually by 1.4 to 1.7 percent, Robelius says.

"A worst-case scenario sees a peak in 2008, and the best-case scenario, following a 1.4 percent demand growth, peaks in 2018," Robelius predicts.

Texaco oil workers drill a vertical compound well. (Photo courtesy NASA)
The GAO says the range of estimates it found for the date of peak oil is wide because the timing of the peak depends on "multiple, uncertain factors" that will help determine how quickly the oil remaining in the ground is used.

These factors include the amount of oil still in the ground; how much of that oil can ultimately be produced given technological, cost, and environmental challenges as well as potentially unfavorable political and investment conditions in some countries where oil is located; and future global demand for oil.

Demand for oil will, in turn, be influenced by global economic growth and may be affected by government policies on the environment and climate change and consumer choices about conservation, the GAO said.

In any case, the GAO said, the federal government is not well prepared at this time. Federal efforts are spread across multiple agencies and are not focused explicitly on peak oil.

A giant oil field contains at least 500 million barrels of recoverable oil. Only one percent - 507 out of some 47,500 oil fields in the world - are giants, and the majority are found in the countries surrounding the Persian Gulf.


Fredrik Robelius is a PhD student in the Uppsala Hydrocarbon Depletion Study Group at Sweden's Uppsala University. (Photo courtesy Uppsala University)
Over 60 percent of the 2005 production and about 65 percent of the global ultimate recoverable reserve is from giant fields, says Robelius.

But giant fields are things of the past, the Swedish researcher says, since a majority of the largest giant fields are over 50 years old, many have begun to decline, and the discovery trend of fewer giant fields with smaller volumes is clear.

Robelius developed a model, based on past annual production and the ultimate recoverable reserve, to forecast future production from giant fields.

"In all scenarios," Robelius says, "peak oil occurs at about the same time as the giant fields peak."

The world's four largest oil fields are - Ghawar in Saudi Arabia, which produces 4.5 million barrels per day, Cantarell in Mexico, which produces nearly two million barrels per day, Burgan in Kuwait which produces 1.7 million barrels per day and Da Qing in China which produces one million barrels per day.

Oil rig in the Gulf of Mexico off the coast of Louisiana (Photo courtesy NOAA)
The most mature oil region, the continental United States, peaked in 1970, while the latest oil region discovered, the North Sea, peaked in 2001. Both regions continue to decline despite strong demand and high oil prices, which motivates high production rates, Robelius says.

"The declining trend in giant field discoveries suggests the good prospects are already drilled," he says.

In the United States, alternative fuels and transportation technologies face challenges that could impede their ability to mitigate the consequences of a peak and decline in oil production, unless sufficient time and effort are brought to bear, the GAO said in its report.

"Although corn ethanol production is technically feasible, it is more expensive to produce than gasoline and will require costly investments in infrastructure, such as pipelines and storage tanks, before it can become widely available as a primary fuel," the GAO said.

Key alternative technologies currently supply the equivalent of only about one percent of U.S. consumption of petroleum products, and the Department of Energy projects that even by 2015, they could displace only the equivalent of four percent of projected U.S. annual consumption.

In such circumstances, the GAO said, "an imminent peak and sharp decline in oil production could cause a worldwide recession."


Oil rig off the coast of Saudi Arabia (Photo courtesy Saudi Embassy in Washington, DC)
But if the peak is delayed, these technologies have a greater potential to mitigate the consequences, the GAO said.

To better prepare for a peak in oil production, GAO recommends that the Secretary of Energy work with other agencies to establish a strategy. In letters to the GAO, the Energy Department and Department of the Interior agreed with most aspects of the report.

The Department of Energy projects that the technologies could displace up to 34 percent of U.S. consumption in the 2025 through 2030 time frame, if the challenges are met.

"The level of effort dedicated to overcoming challenges will depend in part on sustained high oil prices to encourage sufficient investment in and demand for alternatives," the GAO said.

In its letter to members of Congress who requested the report, the GAO writes that U.S. consumers paid $38 billion more for gasoline in the first six months of 2006 than they paid in the same period of 2005, and $57 billion more than they paid in the same period of 2004, in large part because of rising oil prices, which reached a 24 year high in 2006 when adjusted for inflation.

Robelius writes that new oil discoveries are not likely to help ease consumers over the peak oil point.

"Although contributions from new field developments and deepwater is large, production from the 333 giant oil fields still dominates," says Robelius. "Despite optimistic production forecasts of the undoubtedly large resources of Orinoco and Alberta, their contribution is not enough to offset peak oil."

The Robelius study, "Giant Oil Fields - The Highway to Oil: Giant Oil Fields and their Importance for Future Oil Production," is online here.

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