Peak Oil and Uncertainty of Climate Change James W. Murray School of Oceanography University of Washington with special acknowledgement to David Rutledge (Cal Tech) and Jim Hansen (Seattle) WHOI Ocean Climate Institute March 21, :00PM 507 Clark IEA World Energy Outlook - Nov 2008 “The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable — environmentally, economically, socially. What is needed is nothing short of an energy revolution.”

CO 2 emission Scenarios From ∑ Oil + Gas + Coal These scenarios drive almost all climate change research

Today’s Conclusions Evidence is increasingly strong suggesting that energy resource limitation will be a serious issue. Peak Oil has occurred or will occur soon. Why? existing oil fields are declining at ~5-7% per year (~5 mbd) New discoveries are not keeping up. You will see nothing about this in the press or from the governments Oil and Coal Reserves are much less than assumed by the IPCC. Production rate, not reserves, are what matter for our economy. We know enough to see that Resource Limitation needs to at least be an IPCC Scenario “geological limitation of oil, gas and coal will likely result in significantly less production of CO 2 than assumed in the IPCC scenarios” “uncertainty about climate change must include uncertainty about the source of CO 2 “

Some Definitions IEA – International Energy Agency (International, Paris) EIA – Energy Information Agency in US Department of Energy (US DOE) CERA – Cambridge Energy Research Association (Dir: Daniel Yergin) IPCC – Intergovernmental Panel on Climate Change SRES – Special Report on Emission Scenerios OPEC – Oil Producing and Exporting Countries Non-OPEC USGS – US Geological Survey MMS – US Mineral Management Service WEC – World Energy Council EWG – Energy Watch Group ANWAR – Alaska National Wildlife ASPO - American Society of Peak Oil Useful websites:

Recent History of IEA-WEO Predictions Production Today World Liquid Fuels = ~85 mbd (includes crude oil, lease condensates natural gas liquids, ethanol, CTL, GTL) World Crude Oil = ~74 mbd*

Key Reports and Events 2005 DOE Hirsch Report 2007 GAO Report 2008 IEA World Energy Outlook Quote “crossroads” 2008 Price spike to $148* 2009 IEA Whistle Blowers 2010 (March) US Joint Operating Environment (JOE) Report 2010 (Feb) UK Industry Taskforce on Peak Oil and Energy Security 2010 (March) UK Peak Oil Summit with “Chatham House Rules” 2011 WikiLeaks KSA can’t produce what they claim However, Sadad al-Husseini, former head of exploration at the Saudi oil monopoly Aramco, met the US consul general in Riyadh in November 2007 and told the US diplomat that Aramco's 12.5m barrel-a-day capacity needed to keep a lid on prices could not be reached. Husseini said that at that point Aramco would not be able to stop the rise of global oil prices because the Saudi energy industry had overstated its recoverable reserves to spur foreign investment.energy

May, 2005 to June 2010

The price of oil has increased almost continuously since If oil gets too high the economy becomes unstuck If oil gets too low new investment is halted SRES A1 AIM scenarios expect $43 in 2020 then $73 in % / yr

Ali al-Naimi – Sweet spot for oil prices ≈ $75 Expect the economy to zig-zag in the future with the lows getting progressively higher. Demand destruction keeps the supply-demand in balance

Outline The 4 th UN IPCC Assessment Report SRES Scenarios Oil Reserves Hubbert’s peak –The history of US oil production –How much oil and gas will the world produce? The Coal Question Discussion –Future carbon-dioxide levels and temperatures –Summary

The UN Panel on Climate Change (IPCC) The UN Intergovernmental Panel on Climate Change publishes assessment reports that reflect the scientific consensus on climate change The 4 th report (AR4) was released in 2007 –Over one thousand authors –Over one thousand reviewers –Nobel Prize Report discusses climate simulations for fossil-fuel carbon-emission scenarios There are 40 scenarios, each considered to be equally valid, with story lines and different government policies, population projections, and economic models AR5 will only have 3 scenarios

13 Oil Production in the IPCC Scenarios Gb = billions of barrels 1 barrel = 42 gallons = 159 liters = GJ In 13 scenarios, oil production is still rising in 2100 In none of the scenarios did oil production decrease because of resource limitation Today’s Crude Oil Production is 28 Gb y mbd Based on Rogner, 1997

CO 2 emission Scenarios From ∑ Oil + Gas + Coal These scenarios drive almost all climate change research A2 = BAU

What is Peak Oil? It’s not about Reserves! It’s all about the Production Rate! We are not close to running out of oil

OPEC Oil “Proven” Reserves! Accurate reserve estimates for OPEC countries are closely guarded state secrets Values for 1983 are probably accurate (for 1983) No adjustment for 193Gb produced since 1980 These questionable reserves are 45% of world oil reserves used by IPCC! Kuwait Example: A recent leak of Kuwait Petroleum Company documents showed the actual reserves are only 48Gb (official reserves are 102Gb) Kuwait reserves adjusted for production since then are 55Gb From BP Statistical Review Not proven by anybody! Gb = billions of barrels

M. King Hubbert Geophysicist at the Shell lab in Houston In 1956, he presented a paper with predictions for the peak year of US oil production

Oil Wells and Fields Peak --- Regions Peak --- The World will peak Everyone agrees that world oil will peak – controversy on the date The curve is the derivative of a logistic function

Examples: Rapid Depletion is Normal Not always bell-shaped

Mexico Was the #2 supplier of oil to the US Now is #4 Cantarell from >2,000 in 2005 to 860,000 in Jan 2009 to 588,000 in July 2009 Both Mexico and the US are in trouble. Mexico: Sale of oil = 40% of federal budget US: Net exports are decreasing fast

US Oil Consumption today is about 20 million barrels of oil/day ANWAR will not save us! US Production today is 5.5 mbd.

Case Study: Apply the Principals of Hubbert’s Model to the US to see how this works

Hubbert’s Peak From Hubbert’s 1956 paper Hubbert drew bell-shaped curves by hand, and added up barrels by counting squares For the larger estimate, he predicted a peak in 1973 Hubbert has been much criticized  there is no consideration of supply and demand curves, prices, or policy, and new technologies

US Crude-Oil Production Production is somewhat bell-shaped, like the curves Hubbert drew Average price after the peak is 2.6 times higher than before Price Production

If curve is parabolic (bell shaped) then P/Q = mQ + a Q for which P/Q = 0 is 198 gigabarrels of oil. Q t (maximum cumulative production) Half of this is 99 which occurred in 1973 A model for exponential growth in a finite system The Logistic Curve or Rate Plot Lower 48

The model fit to the real data is not bad. The model predicts The real maximum occurred in 1970 Hubbert’s Model - US Case Study

Another Approach: Cumulative Oil Production EIA data from 1859 Fit for cumulative normal gives the ultimate production and the time for 90% exhaustion 90% exhausted in Gb ultimate 31Gb remaining Includes 48+Alaska USGS/MMS assessment 189Gb

Historical Projections for US Oil The power of Hubbert’s Linearization is that it uses past behavior of a system to indicate possible future performance 29 Hubbert USGS McKelvey

Can we apply this approach to estimate ultimate global oil production?

Rate Plot from 2005: Maximum Cumulative Production (Q t ) = 2165 Gigabarrels ½ Q t = 1083 Gb Cumulative production of SRES A1 family = ~3400Gb at 100 to 126 mbd A2 family = ~2900 Gb and B family = 2790 Gb

World Crude Oil Production Peaked in May 2005 non-OPEC Peaked in 2004 Saudi Arabia peaked in 2005, Russia appears to have peaked IEA still predicts an increase (May 19, 2009) MBD Year

Who are the experts that IPCC turn to? International Energy Agency (IEA) – Paris Energy Information Agency (EIA) – DOE - Washington US Geological Survey (USGS) - Washington Their economic models for future emissions are driven by demand (not supply). The EIA forecasts in 2008 projects a 30% increase in oil production between now and 2030 (from 85 to 96 mb/d) (  = +11 mbd). To have growth we need to balance decline of exisiting fields with discovery of new oil

Existing oil fields are declining at - 6.7% per year (IEA 2008) From 2010 to 2030 the world needs 45 mbd of new production – just to maintain flat production The projected growth requires discovery of = 57 mbd of new oil! Existing Oil Fields are in Decline 57 mbd ÷ 9 mbd = ~6+ new Saudi Arabias

The red box shows the average amount estimated to be discovered by the USGS each year between 1995 and Urban Legend – we can drill more to get more oil Oil discoveries have been declining since 1964 The world’s oil provinces have been well explored. Future discoveries will be limited to smaller structures and deeper formations US Middle East

Canadian Tar Sands 1.2 mbd in 2008; projected 2.4 mbd in barrels of water for each barrel of oil 2 tons tar sands = 1 barrel Big energy demand EROI = ~6:1 gold (natural gas) to lead (oil) surface mining (~20%) in-situ (~80%) Hugh resource = 1.7 trillion barrels Neither scaleable nor timely

What about coal? There are supposed to be hundreds of years of supply of coal! Big 3 Reserves: US (27%) Russia (17%) China (13%) then India, Australia, South Africa Remarkably the data-quality is very poor globally but especially for China (last update 1992) and SE Asia and FSU See World Energy Council (WEC) Reports

We have a big problem with coal. The reserves may not be as large as We’ve been led to believe. "Present estimates of coal reserves are based upon methods that have not been reviewed or revised since their inception in 1974, and much of the input data were compiled in the early 1970s. Recent programs to assess reserves in limited areas using updated methods indicate that only a small fraction of previously estimated reserves are actually minable reserves." from the National Academy of Sciences Report on Coal, June, 2007

The world’s proven reserves of coal are decreasing fast! Whenever coal reserves are updated the reserve estimates are revised downward (significantly). Not due to production, but rather more thorough geological surveys. Example: World Reserves by WEC decreased from 10 trillion tons to 4.2 trillion tons in 2005 Example: Gillette in Wyoming from 20.9 billion tons to 9.2 billion tons (2009) The energy content of coal mined is decreasing.

Types of coal (four types – different energy content) Anthracite (30 MJ/kg) Bituminous (19 – 29 MJ/kg) Sub-bituminous (8-25 MJ/kg) Lignite (5-14 MJ/kg) The high energy coal is running out US passed peak anthracite in 1950 peak bituminous in 1990 Total energy content of US coal peaked in 1998 Total energy content of world coal should peak in 2025 Another Problem is Energy Content IPCC reports energy units (ZJ) 42 GJ = ton of oil equivalent 6.12 GJ = one barrel of oil

Many independent groups are coming to the same conclusion David Rutledge – Cal Tech Uppsala – Kjell Aleklett Peak Coal in 2030 (examples follow) Energy Watch Group (EWG-Germany) Peak Coal in Institute of Energy (IFE) Kavakov and Peteves (2007) The Future of Coal Richard Heinberg Post Carbon Institute (2009) “Blackout : Coal. Climate and the Last Energy Crisis” New Society Publishers

Energy Watch Group (2007) Coal: Resources and Future production Reserves So-called proven reserves are anything but. Major new discoveries are unlikely China (largest producer) The R/P ratio 55 yrs from 1992 at 1992 rates (now >3x faster) EWG states that China will peak in ~10 yrs China’s reliance on coal means growth will end! USA (“the Saudi Arabia of coal”) Large Reserves but many are of low quality and high sulfur Volume will increase for another 10 to 15 years but net energy will decrease Global Picture Six countries hold 90% of reserves Rarely is coal exported The world coal energy peak will occur ~2025 Compare with IEA WEO scenarios Reference scenario is unrealistic Alternative scenario is feasible

Höök et al (2008) Can we apply Hubbert’s approach to coal? UK Germany Japan

Rate Plot for British Coal

Historical Projections for UK Coal Reserve numbers are available before projections stabilize Produced 18% of the 1871 Royal Commission reserves + cumulative Criteria were too optimistic ― 1-ft seams, 4,000-ft depth (Deffeyes’ law)

Projections vs Reserves for World Coal UN IPCC scenarios assume 18Tboe is available for production RegionProjection GtReserves Gt Eastern US37 96 Western US w/o Montana33 79 Montana 68 Central and South America 16 China88189 South Asia 68 Australia and New Zealand50 77 Former Soviet Union36226 Europe21 44 Africa16 30 World (at 3.6boe/t)435 (1.6Tboe)903 from D. Rutledge

From Aleklett

1.6Tboe coal remaining 4.7Tboe fossil fuels remaining Future Fossil-Fuels Production 50% in 2022 D. Rutledge

Comparing with the IPCC Scenarios This projection has lower emissions than any of the 40 IPCC scenarios This is still true even with full coal reserves Projection D. Rutledge

Carbon-Dioxide Levels Simulations with the program MAGICC from Tom Wigley at the National Center for Atmospheric Research (NCAR) in Boulder This program was used in the earlier UN IPCC Assessment Reports profiles that come with the program are modified to use our projection for fossil-fuel emissions profiles are business-as-usual for other greenhouse gases Projection 50% Stretch-out for Fossil Fuel Burning 460ppm 440ppm

1) Energy Supply Limitation will be serious and soon! Existing scenarios and energy policies are based on demand - not supply Production rate matters not size of reserves 2) Coal is thought of as a solution to energy needs – This will be a disaster for climate change without CO 2 sequestration. CO 2 sequestration is not realistic – neither cost effective or scalable 3) Energy will pass climate change as the hot button issue We have to get our energy plan in order before we can move forward on climate change. Solutions to both are the same. 4) Energy Supply Limitation will Buffer Economic Recovery. 5) Security Issue: Seven nations control 75% of world’s oil exports. There will be shifts in global power and wealth Once it is clear that oil production has peaked is there are reason to believe that exports will not be limited? Conclusions: A slow-motion train wreck

There are three main issues that are usually underappreciated. Energy Cost energy consumption = roughly 20-30% of the gross starting energy in the coal. One “carbon wedge”. Timing Only 3 or 4 small scale carbon storage demonstration projects exist. Scale A storage volume of 30,000 km 3 /yr required. Niagara Falls = 50 km 3 /yr. We need to store 600 Niagara Falls of liquid CO 2. Is geological CO 2 sequestration (CCS) a realistic strategy? See Science, September 25, 2009 issue of Science. “Clean Coal” is an idea whose time will never come

Peak Oil is important because it marks the peak of production of “cheap” oil Substitution (i.e., competitive advantage) versus increasing supply Does Peak Oil Even Matter? In our society like ours, where economic growth is touted as the solution to almost every societal problem, peak oil presents a paradox: the growth of the economy requires an increasing oil supply, but increasing the oil supply, due mainly to a peak in conventional crude oil production, will require high prices which tend to undermine that growth. The billion dollar question is: at what price of oil does the economy stop growing? The true import of peak oil, therefore, may not be sustained high prices, but economic shrinkage. Demand will be destroyed long before oil gets to $200 a barrel. Peak oil will bring about short bouts of economic growth and contraction as oil demand and prices play tug-of-war, creating what has been referred to as an undulating plateau.

The Price Elasticity of Demand has become virtually zero. It’s a supply limited market. from Kenneth Deffeyes

There is a connection between debt, oil prices and personal income