1. Peak Oil and Uncertainty of Climate Change 19992004 James W. Murray School of Oceanography University of Washington with special acknowledgement to David Rutledge (Cal Tech) and Jim Hansen (Seattle) BREST IUEM / LPO/ IRD May 2010 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.”

2. Today’s Conclusions Evidence is 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. Even so production rate, not reserves, are what matter for society. We know enough to see that Resource Limitation needs to at least be an IPCC Scenario “geological limitation of oil, gas and coal will 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 ”

3. Some Definitions IEA – International Energy Agency (International) EIA – Energy Information Agency in US Department of Energy (DOE) CERA – Cambridge Energy Research Association (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: www.theoildrum.com www.aspo-us.com www.energybulletin.net www.peakoil.net

4. Production Today World Liquid Fuels = ~85 mbd (includes crude oil, lease condensates natural gas liquids, ethanol, CTL, GTL) World Crude Oil = ~74 mbd* Recent History of Reports and Predictions 2004 IEA to 121 mbd by >2030 2005 DOE Hirsch Report 2005 IEA to 115 mbdby >2030 2005 EIA to 120 mbd by >2030 2006 IEA to 116 mbd by >2030 2006 EIA to 118 mbd by >2030 2006 CERA to 130 mbd by >2035 2007 GAO Report 2008 EIA Projection 97 mbd 2008 CERA to 112 mbd by 2017 to 118 mbd by 2030 2008 Price spike to $148* 2008 IEA World Energy Outlook Quote “crossroads” 2009 IEA Whistle Blower 2009 IEA to 105 mbd 2010 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” Christophe de Margerie CEO Total SA 2007 <100 mbd 2008 <95 mbd 2009 <90 mbd

5. May, 2005

6. To June 2010

7. The price of oil has increased almost continuously since 1999. 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 2100 18.7% / yr

8. Ali al-Naimi – Sweet spot for oil prices ≈ $75 But the price will be difficult to control. Expect the economy to zig-zag in the future with the lows getting progressively higher

9. 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

10. 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 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

11. 11 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 -1 28 182 mbd Based on Rogner, 1997

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

13. 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

14. OPEC Oil “Proven” Reserves! Accurate reserve estimates for OPEC countries are closely guarded state secrets Values for 1983 are probably accurate (for 1983) 430Gb rise in reserves, 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). 1980 Kuwait reserves adjusted for production since then are 55Gb From BP Statistical Review Not proven by anybody! Gb = billions of barrels

15. 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

16. Oil Wells and Fields Peak --- Regions Peak --- The World will peak Everyone agrees that world oil will peak – controversy on the date A model logistic distribution

17. Examples: Rapid Depletion is Normal

19. 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

20. Mexico Net Oil Export

21. US Oil Consumption today is about 21 million barrels of oil/day ANWAR will not save us! US Production today is 5.5 mbd.

22. 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 1970 Hubbert has been much criticized  there is no consideration of supply and demand curves, prices, or policy, and new technologies

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

24. US Crude-Oil Production Production is bell-shaped, like the curves Hubbert drew Average price after the peak is 2.6 times higher than before 24 Price Production

25. The model fit to the real data is not bad. The model predicts 1973. The real maximum occurred in 1970 Hubbert’s Model - US Case Study

26. P/Q = mQ + a Q for which P/Q = 0 is 198 gigabarrels of oil. Also called 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

27. 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 2011 225Gb ultimate 31Gb remaining Includes 48+Alaska USGS/MMS assessment 189Gb

28. 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 28 Hubbert USGS McKelvey

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

30. 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

31. 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

32. From US EIA 2009 How will the shortfall called “unidentified projects” be met?

33. Who are the experts that IPCC turn to? Energy Information Agency (EIA) - DOE International Energy Agency (IEA) – Paris 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 97 mb/d) (  = +12 mbd). The hard truth is that increasing energy supply at all will be difficult. To have growth we need to balance decline of exisiting fields with discovery of new oil

34. Existing oil fields are declining at - 6.7% per year (IEA 2008) For 2005 to 2030 the world needs 45 mbd of new production – just to maintain flat production The projected growth requires discovery of 45 + 12 = 57 mbd of new oil! Existing Oil Fields are in Decline 57 mbd ÷ 9 mbd = ~6+ new Saudi Arabias

35. The red box shows the average amount estimated to be discovered by the USGS each year between 1995 and 2025. 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

36. Canadian Tar Sands 1.2 mbd in 2008; projected 2.4 mbd in 2020 4 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

37. 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

38. 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

39. 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.

40. 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

41. 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) 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

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

43. Rate Plot for British Coal

44. 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) 44

45. 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

46. From Aleklett

48. Many independent groups are coming to the same conclusion David Rutledge – Cal Tech Uppsala – Kjell Aleklett Peak Coal in 2030 (examples follow) http://www.tsl.uu.se/uhdsg/Publications/Coalarticle.pdf Energy Watch Group (EWG-Germany) Peak Coal in 2025 http://www.energywatchgroup.org/files/Coalreport.pdf Institute of Energy (IFE) Kavakov and Peteves (2007) The Future of Coal http://ie.jrc.ec.europa.eu/ Richard Heinberg Post Carbon Institute (2009) “Blackout : Coal. Climate and the Last Energy Crisis” New Society Publishers

49. 1.6Tboe coal remaining 4.7Tboe fossil fuels remaining Future Fossil-Fuels Production 50% in 2022 D. Rutledge

50. 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

51. 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

52. 1) Supply Limitation will be serious and soon! Existing scenarios and energy policies are based on emissions - 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. Is CO 2 sequestration realistic? 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 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

54. We have built a world economy on the premise of endless, cheap fuel. But we have reached the point where its production can no longer be increased. By the end of the century, nearly everything will have to be powered by renewably-generated electricity, not liquids or gases. Scaling up renewables to take over fossil fuels, and transitioning all the infrastructure, is going to be mind-boggling expensive, difficult and slow.

55. 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

56. Nobody can predict oil prices, but the pattern will be something like this. Demand surges will result in oil price shocks Oil price shocks cause recessions and force reductions in demand The average price of oil goes up over time Demand destruction keeps the supply-demand in balance

57. James Hamilton (UCSD) – Recessions generally correlate with the price of oil. If energy expenditures rise faster than income, then the share of income for other things must decline Oil Expenditures as a % of GDP Energy as a buffer on economic growth 5.7% is the key

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

59. Natural Gas – Shale Gas is overhyped! Shale Gas is the big news – in the US the Barnett, Haynesville, Fayetteville and Marcellus formations get the big news. But while the initial production rates are very high the first year decline rates are extremely steep. Example below from the Barnett Fm. in Texas Environmental issues (ground water contamination) associated with hydraulic fracturing (fracking) are a major issue. An exemption from the Clean Water Act is required. Arthur Berman At $7.00/Bcf requires 1.5 Bcf. Avg Barnett = 0.95 Producers claim 2.2 to 2.3 Bcf/well

60. Hydrofracing

61. Can there be economic growth without growth in energy? David Fridley - LBNL

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

64. Regional Fits vs Reserves, Gt Region Fits for Ultimate WEC Reserves plus cumulative Europe155195 US and Canada141316 China (with Japan, South Korea)115159 South Asia and Middle East 78 Russia 74219 Australia and New Zealand 59 86 Africa 22 57 Latin America 19 World6631,129 64 850 left to be mined IPCC range is 355 to 3500 in 2100

65. “ We are all extraordinary skeptical of the "peak oil" stuff. We know of no reliable information that suggests that we're going to be running significantly short of any fossil fuel in this century…It certainly won't happen with any significant price on carbon.” “We've done a few 300-year scenarios that have some shortages in them, but even that may not be realistic. This is especially so with coal!” “The Chinese say they have enough coal for centuries…The idea that we're only going to reach 450 ppm is not defensible, especially when we're already around 385 ppm. Do we really think there is only another 60 years of fossil fuel left? I don't think so.” PNNL Climate Modelers …but, see my figures!

66. “The scenarios are intended to exclude catastrophic futures that involve large scale environmental or economic collapses. In such scenarios GHG emissions might be low because of negative economic growth, but it seems unlikely they would receive much attention in the light of more immediate problems. Hence, this report does not analyze such futures.” IPCC Mad Max Excluded

67. The UK government is starting to get “Peak Oil” It is light years ahead of the US Findings from UKERC report (Feb 2010) 1.Global oil depletion is well understood and well advanced 2.Peak oil is inevitable. The timing is uncertain but the window is Rapidly narrowing and the range of possibilities is narrowing 3. The quality of the reserves data is appalling, especially for the large OPEC producers 4. The risks presented by oil depletion deserve serious attention. Prices will inevitably be higher

68. Energy Watch Group (2007) Coal: Resources and Future production Reserves Key message is how fast they have been revised downward – 55% in last 25 yrs Germany (23 Bt to 0.18 Bt) and UK down by 90% Counter to conventional wisdom China (largest producer) 55 yrs at current rates – but reserves not updated since 1992! So now 40 yrs but at 1992 production rates * China is now a net coal importer. * EWG states that China will peak in next 5 - 15 yrs USA (“the Saudi Arabia of coal”) 200 yrs of proven reserves! But many are of low quality and high sulfur Volume will increase for another 10 to 15 years but net energy will decrease – due to transport and CCS 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 *Key finding is that data quality is very bad.*

69. Net Export Production - Mexico

71. “It has been estimated that there are over 984 billion tonnes of proven coal reserves worldwide…This means that there is enough coal to last us over 190 years.” The Coal resource, World Coal Institute, 2005 Future Supplies are often discussed in terms of the reserves-to-production (R/P) ratio. Sounds sensible but supply forecasts of nonrenewable resources based on R/P ratios are always wrong! Three main reasons.. 1. Rates of consumption of energy are never constant - they increase 2. It is physically impossible to maintain a constant rate of extraction until the resource is exhausted 3. Reserves are not static, but can increase as a result of new discoveries and new technologies or decrease due to better data. Five independent groups have attempted an to determine when peak coal will occur. Energy Watch Group (EWG), Institute for Energy, Aleklett (Uppsala University), Rutledge (Cal Tech) The reserves to production ratio (R/P)

72. China – Coal Consumption Rates +7% per year means double in 10 years

73. China: Exporter to Importer 150 Mt in 2010

74. Mt = millions of metric tons Production is now 16 times less than the peak, while the average price after the peak is 2.4 times higher than before In 1913, Britain exported 27% of its production, now it imports 74% of the coal it burns UK Coal Production

75. The scenario report SRES (2000) references the 1995 and 1998 WEC surveys Downward trend in proved recoverable reserves The IPCC chose to use additional recoverable reserves and they also chose 1998 (3,368Gt) instead of 1995 (680Gt) — additional recoverable reserves are now 19 times smaller than in 1998 Where Does the IPCC Get Its Coal Numbers? World Energy Council survey Proved recoverable reserves, Gt Additional recoverable reserves, Gt 19921,039702 19951,032680 19989843,368 2001984409 2004909449 2007847180

76. Changing Perceptions of Peak Oil During 2009 the most significant story about peak oil was published by The Guardian (UK) on November 9th Whistleblower #1, still with the IEA, said "The IEA in 2005 was predicting oil supplies could rise as high as 120 million barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year [2008]. The 120m figure always was nonsense but even today's number is much higher than can be justified and the IEA knows this. Many inside the organization believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further.” Such honesty isn’t tolerated by IEA member state USA, which apparently leaned hard on the Agency to bury this hard truth for years. There was a similarly strong warning from a heavy-weight within the oil industry. Christophe de Margerie, CEO of oil super-major Total SA, had previously issued warnings about world oil supply constraints. In 2007, he stated that “production of 100 million barrels a day will be difficult.” He upped the ante during 2008, claiming that “world oil production would peak at or below 95 million barrels per day.” On February 10th, 2009, the CEO’s statement could have been issued by ASPO-USA: “world oil production may plateau below 90 million barrels per day.” Oil optimists like Daniel Yergin and Michael Lynch pushed back against the peak oil story on op-ed pages of several major US newspapers. Reporters wrongfully continued to link peak oil to “running out of oil,” and to confuse reserves with production rate. A fog of sorts still plagues the issue in the media.

77. Exponential growth in wind energy over the past 15 years has boosted energy from renewables to near 50 million tonnes oil equivalent per annum.

78. This shows the scale of the problem