Recognizing Peak Oil
The Big Oil Crunch
The ‘Big Oil Crunch’ is coming and the world is not prepared!
Most conventional sources of oil have passed their peak.
Debt crisis and environment issues have seriously slowed development of unconventional sources. These reserves include the Arctic, Brazil’s recent offshore discoveries, Canadian oilsands, Gulf of Mexico, and Venezuela’s tar sands.
Unconventional reserves could add sufficient global oil output but development is slow or non existent. With exception of Russian Arctic, the far north reserves will not see the drill bit for many years. Development is a must to maintain present supplies and prevent a serious oil shortage. Analysts predict an oil shortage may occur as soon as 2015 and not any later than 2025.
Most oil companies have lost much market capitalization and in turn have lost most of their borrowing leverage. For the companies with high debt levels, banks have placed restrictions on their borrowing. Some unfortunates have been forced into bankruptcy while others have been pressured to liquidate their assets.
New fields require pipeline and other infrastructure which may take 5 to 10 years before oil flows. Oil from our oilsands requires even more time before production comes on stream. Consider this, global demand will increase by 30% in the next 18 years. Analysts predict global consumption will rise by 30 million barrels per day from the present 87 million barrels before 2030.
At present, Russia, Saudi Arabia and Kuwait have cushioned some increased demand. Oil fields in the North Sea, Alaska’s North Slope and Mexico’s Cantarell are in the later stages of production and are showing a very short life expectancy .
Major oil discoveries were developed before 1950 and some as late as 1980. There are 70,000 known oil fields in production around the world. These are all aged oil fields. Out of this total, only 100 oilfields produce half of the total global oil supplies and 500 of these fields produce an additional 30%.
The super giant, Ghwar oil field in Saudi Arabia was first discovered in 1948, and it has been in production for over 60.years. Saudis have been elusive as to its available reserves. The Saudis are reported to be enhancing production using water, carbon dioxide and nitrogen injection.
It is doubtful that Saudis can maintain the Ghwar field economically productive for the next thirty years. Some experts see the Saudi fields drying out much sooner. It could become another Cantarell surprise.
The North Slope of Alaska was discovered in 1968 and reached its maximum output in 1988. Production has been on a steep downturn since 2005 and the field now produces 450,000 to 500,000 barrels per day. It is estimated that North Slope production will trickle to a stop in the next 10 to 15 years.
Commercial quantities of crude oil in the North Sea were first discovered in 1963. Norway and the United Kingdom are two of the main oil producers. Both countries have experienced a steep decline in their output. Norway reports a drop of 42% in oil production during the past ten years. U.K.’s Buzzard Field first discovered in 2001 is already sputtering with problems.
United Kingdom received a nasty surprise this year. U.K. oil production plummeted this year by 45%. That country’s production levels have now slipped to mid-1970’s levels.
The Brits are no longer a net oil exporter and now rely on more oil imports. Its production has now slipped below one million, and it is now averaging at 998,000 per day.
The sudden drop in North Sea production was perceived not to happen so suddenly. U.S. Energy Information Administration forecasted earlier this year that U.K. production would fall to 1.2 million barrels by the end of 2012 but ...it happened much sooner and more sharply than predicted.
Mexico’s Cantarell Field, first discovered in 1976, and once considered as the largest oil discovery in western hemisphere, has been on a very steep decline for the past decade. U.S. Energy Information Administration forecasts that Mexico will become a net importer by 2020 despite several other fields that are in their prime of production.
Conventional crude oil production in Alaska, California, Texas and throughout continental U.S. reached peak production levels over forty years ago and are on a sharp decline.
Exploration and development has been brisk in North Dakota’s Bakken but this is an unconventional oil field and is costly to develop. Production from the area bordering Canada is slightly over 450,000 barrels per day exiting out of 2011.
The environmentalists and Hollywood actors have been misguided on several fronts concerning the oilsands, hydraulic fracturing and construction of safe pipelines. They feel that setting up wind turbines are a plausible solution to prevent a future energy crisis.
It is unfortunate that this opposing minority has the media in its pocket and both do not have an understanding how important this natural resource is to human kind.
Crude oil not only supplies fuel for automobiles, transport trucks, aircraft, ships, and railways but helps provide over 3000 manufactured items. It is also the raw source for agricultural fertilizers, synthetic fabrics, plastics, chemicals and a wide variety of lifesaving medications.
Let’s not confuse this possible crude oil shortage with exhausted global oil reserves. The oil is there and new fields need to be developed in time to avoid an oil crunch.
By the editor of Canadian Insight
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Did you know?
Geophysicist King Hubbert published in 1956 a peak oil theory. Hubert concluded in his observations that oil production takes the shape of a bell curve. It starts at zero and then rises to a peak. He observed in the U.S. that an oil field’s highest productivity occurs after 32 to 35 years. Once peak production has been reached, from there on it is on a steady decline. At this point oil prices begin to escalate until oil resources reach total depletion or cost become prohibitive.
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