Crude Oil Peak

Australian crude oil imports could decline by 5% in next years

Matt — Thu, 02 Sep 2010 16:04:13 +0000

Asian crude oil supplies to Australia peaked in December 2007 and declined by 8% pa since then. Two thirds of current crude imports come from a group of countries whose exports to Australia peaked already in November 2005 and declined by 5.8%. pa, despite a slight uptick in Malaysia and Indonesia. Australia managed to offset this decline by importing increasing quantities of crude from the UAE, New Zealand and a handful of far-away countries like Russia, Azerbaijan, Libya, Algeria and Nigeria. If this compensating growth came to an end – while assuming the underlying decline would continue – the overall decline rate of Australian oil imports would be around 5%. The current import increase of 11% over the last 12 months (almost back to 2007 levels) would be absolutely unsustainable.

Australian refineries now depend by 2/3 on crude oil imports. In November 2005, Australian crude oil imports from a group of countries, including Saudi Arabia and comprising 93% if total imports, peaked at 414 kb/d and declined since then by 5.8% pa. Crude imports from Asian countries peaked 2 years later in December 2007 and declined since then by 8% pa. This was well before the collapse of Lehman Brothers in September 2008.

Since end 2005, Australia was remarkably successful in compensating this decline by importing increasing quantities from other suppliers, albeit from far away corners of the world. Supply lines have become longer:

Biggest supplier in this compensating group was UAE. It replaced Saudi Arabia where exports peaked in 2005 as described in this previous post: http://www.crudeoilpeak.com/?p=1738 As for UAE’s overstated oil reserves see “OPEC’s oil reserves revisited” http://www.crudeoilpeak.com/?p=355 This makes Australia’s refineries again more vulnerable to OPEC’s reserve risk as well as geopolitical events in the Middle East.

Amazing is the contribution from New Zealand’s 2^nd oil boom, in particular the new Tui and Kupe fields.

http://www.crownminerals.govt.nz/cms/pdf-library/about/Anual%20Report%202008-2009.pdf

But these fields are offshore and decline is fast as can be seen in this estimate for the period up to 2020 (NZOG’s share is 12.5%)

http://www.nzog.com/f7,151719/151719_NZOG_Company_Profile_2010.pdf

Please note that Kupe produces more gas (red) than oil and that this is mostly condensate and LPG, not crude oil.

The 3^rd group of countries now supplying increasing quantities of crude include Russia, Azerbaijan, Libya, Algeria and Nigeria. We know the problems in some of these countries.

The above graph shows the individual crude import profiles by country. Clearly visible is the decline from Saudi Arabia and how UAE replaced it. Most critical was the decline from Vietnam. Imports from Indonesia and Malaysia are on an undulating plateau but their crude oil production peaked in 1998 and 2004 respectively while demand in these countries is increasing due to growing population. See menu item “Net Oil Exports”. We may experience declines in these countries as has already happened.

Direct diesel imports have reached a bumpy plateau with an initial peak in February 2009.

It is remarkable that imports from Singapore have not substantially increased (competition with China?) but that increasing quantities come from Japan and Korea.

In the case of Japan we can safely say that Australia is gobbling up the diesel Japan is saving.

Direct petrol imports, mainly from Singapore, peaked end 2009

In order to assess the vulnerability of these supplies one would have to analyse crude oil imports to Singapore. That is a topic for another story.

Conclusion: It will be increasingly difficult for Australia to import crude oil in future. A 5% decline in crude oil imports would endanger the medium term viability of one of Australia’s oil refineries. Such a decline rate would also be too high to be offset by fuel efficiency improvements or electric car transition programs as assumed by the RTA in their final report on the M2 widening.

Investors who should still consider financing this unnecessary project, especially after spectacular failures of other tollways, are advised to do what the RTA failed to deliver: a detailed fuel availability analysis for the vehicles using the M2, for 30 years, the timeframe used in the Cost Benefit Analysis. It would be useful if readers of this post could write to their banks and/or super funds to do such calculations in relation to their investments.

The decline rate also demonstrates how unrealistic the whole population growth debate is because a growing car fleet is incompatible with declining oil production.

Rail development and conversion of our truck fleet to CNG/LNG have become ever more urgent.

Bizarre: Prime Ministerial candidate in Australia thinks there is more oil than previously thought

Matt — Wed, 18 Aug 2010 15:20:54 +0000

In the dying days of an election campaign in which peak oil was totally ignored, Prime Ministerial candidate Tony Abbott from the Liberal Party produced himself as a peak oil sceptic during a Town Hall style public forum in Brisbane, Queensland. He thinks that technology and the “right” oil price will always ensure that more oil is found, in the next 20-50 years. In other words: there is more oil than previously thought. What’s worse, a potential future Prime Minister doesn’t see the concept of peak oil as a useful tool for decision making.

Voters, who are largely illiterate on peak oil due to the failure of consecutive governments to educate the public about this important issue, are unlikely to consider this gross incompetence when going to the polls on Saturday. After all, the current Rudd/Gillard government is hardly any better.

Here is the question asked during the Forum:

Hello Mr Abbott and I’m a Commonwealth public servant, hopefully not one to be affected by the loss of 12,000 jobs you just mentioned, but back to my question. I know you’re not a believer human induced climate change, but could I test you on peak oil? Do you acknowledge that the world is facing a future of oil depletion and if so, how would you begin to prepare Australia for the major threat this poses to the way we live our lives?

TONY ABBOTT:

Ok, well, you know, the interesting thing about oil reserves is that they’re always being expanded. I mean, at any one time, people think we have say 20 or 30 years of oil reserves. 20 or 30 years later, people still think we have 20, 30, 40 or 50 years of oil reserves, as the case may be and the reason for that is because as the technology changes, more reserves become accessible, and as the price changes, reserves that weren’t really accessible become more accessible.

So, look, I know about the concept of peak oil. I don’t claim to be the world’s greatest expert in it, but I’m sceptical as to its value as a tool for policy makers because at the right price, we’ve got a lot more reserves than we currently think. With better technology, we’ve got a lot more reserves than we currently think.

DAVID SPEERS:

So, are you saying, Tony Abbott, that oil is a limitless resource?

TONY ABBOTT:

I’m not saying that it’s limitless. But it’s not nearly as finite as we would think if we had looked at the kind of studies that were done a generation ago or even now.

http://australianconservative.com/2010/08/tony-abbott-at-the-brisbane-peoples-forum/

Let’s go through this answer:

(1) “So, look, I know about the concept of peak oil”

Congratulations! What a progress in only 8 months!

3/12/2009
New Liberal leader did not know what peak oil is
http://www.crudeoilpeak.com/?p=727

(2) “….the interesting thing about oil reserves is that they’re always being expanded”

Too interesting for comfort, in fact. Expanded on paper, perhaps. For example, have OPEC reserves been audited by a 3rd party? Where are those 300 Gb of claimed proved reserves which ex-Saudi Aramco chief Sadad-al-Husseini reclassified as “resources” in an oil and money conference of Energy Intelligence in October 2007 in London?

http://www.energyintel.com/om/program.asp?year=2007

Those resources – if there – are not cheap and, what’s even more important, slow to produce. They could be so expensive the economy dies before we see one drop of those resources. Even the International Energy Agency, not an organisation known for pessimistic outlooks, knows about those OPEC paper barrels, since 1998, in fact:

http://www.iea.org/textbase/nppdf/free/1990/weo1998.pdf

The above graph shows how OPEC countries artificially increased reserves – without matching discoveries – in the so-called quota war of the 1980s.

That was revealed under Howard’s watch. He failed his historic duty of care to prepare Australia for peak oil. No wonder his scholars haven’t learned a thing since then. This problem will soon explode and lead to a deep confidence crisis in oil reserves, not only in OPEC. So what’s the consequence of all this? That, for example, Iran’s oil exports will shrink in the next 5 years:

Calculations that Iran would need an oil price of $130 to balance their budget are here: http://www.crudeoilpeak.com/?p=1669

Let’s have a look what annual oil flows (that’s what really matters) these “growing” reserves actually produce:

What we can see is that a lot of (growing) reserves produce oil flows which are peaking. And look at the impact of modern technology in those tar sands in Canada. That’s not dirt on your monitor, that’s the annual oil flow from there. More details are here: http://www.crudeoilpeak.com/?p=1591

(3) Abbott: “….but I’m sceptical as to its [peak oil] value as a tool for policy makers”

Whow! With Tony as PM we’ll never ever prepare for peak oil (which started in 2005) and declining oil production which means we have to wait for physical oil shortages to teach him a lesson what peak oil is all about. Unfortunately, we are all sitting in the same boat, otherwise I would have a lot of schadenfreude.

Not that the Rudd/Gillard government would be better by even a single barrel of oil:

29/5/2009
Critique ACIL Tasman liquid fuel vulnerability
http://www.crudeoilpeak.com/?p=793

On 22/5/2008 (after the Q&A show http://www.abc.net.au/tv/qanda/txt/s2241916.htm) I handed over to former Prime Minister Kevin Rudd a paper on public transport

28/4/2008
Rail crash program for Sydney’s North West: Surface Metro Solutions
http://www.crudeoilpeak.com/?p=1175

containing the above Husseini graph. Only 2 weeks later:

Rudd calls on G8 to pressure OPEC to raise supply

http://www.theage.com.au/national/rudd-calls-on-g8-to-pressure-opec-to-raise-supply-20080608-2nhc.html

The latest proof of the peak oil denial mode of the Gillard government came on 11/8/2010, just in time for the election:

Work starts on Hunter Expressway

“The start of major construction work on the new Hunter Expressway is the culmination of the community’s twenty year campaign for better road infrastructure to support the Hunter’s continued growth, not just for the next three years but for the next three decades.”

http://www.anthonyalbanese.com.au/file.php?file=/news/ZFERYQNHPMGGJSZDHWGEDSXQ/index.html

Growth of the coal dependent Hunter valley in the next 3 decades?

8/3/2010
NASA climatologist James Hansen at Sydney Uni: “Australia doesn’t agree now that they got to stop their coal, but they are going to agree. I can guarantee you that within a decade or so because the climate change will become so strongly apparent that’s going to become imperative”
http://www.usyd.edu.au/sydney_ideas/lectures/2010/professor_james_hansen.shtml

That was my assessment about the embellished traffic projections:

1/3/2010
Hunter Expressway: yet another peak oil ignorant project
http://www.crudeoilpeak.com/?p=1203

What a choice between the 2 main parties!

Saudi Arabia lost production share to Russia

Matt — Fri, 13 Aug 2010 03:01:03 +0000

This month’s crude oil graph compares Russian and Saudi Arabian crude production. Russia is now #1 producer, around 1.3 mb/d higher than Saudi Arabia which lost production share. This means there are limits to Saudi Arabia’s capacity to pump oil.

The graph also shows that during the boom period in the 1st half of 2008 Russia could not increase production.

Let’s zoom into the 2003 period. There was the Venezuelan strike and then the Iraq war. Saudi Arabia could not offset these production losses as the claimed spare capacity could not be activated

5 years later, in 2008, extra demand from China for the Olympic games again challemged Saudi oil supplies. The peak didn’t last long. In the meantime projects like Khurais have come on-stream but it is not clear whether this is just offsetting decline in other Saudi fields or whether this is part of real additional capacity which can be sustained over many years. In any case, world oil demand is now highly vulnerable to what happens in oil-geologically limited crude oil supply systems.

All data are from: http://www.eia.doe.gov/ipm/

Australian election 2010: next phase of peak oil ignored

Matt — Wed, 11 Aug 2010 10:17:17 +0000

It is unbelievable: peak oil (=limited oil supplies at 73-74 mb/d of crude oil) started in 2005 and 5 years later this is still not an election issue. What we have seen so far is the response of the economy and the financial system to oil production NOT growing. Peak oil hit when the economy had a pre-condition of accumulated debt. Debt can only be paid back (or easily rolled over) in a growing economy. But our oil-dependent economy can only grow if the annual efficiency improvement in the use of oil is higher then the oil decline rates ahead of us. However, governments are NOT working on a portfolio of projects which would ensure this to actually happen. A 2nd airport for Sydney, a ring road for Mackay, a Princes Highway duplication and planning money for more tollways in Sydney are not the sort of projects which will increase oil efficiency.

Because the electorate is not being told about peak oil and its consequences voters are buying the wrong cars and the wrong houses in the wrong suburbs. When in the not too distant future voters realize they have not been properly informed, the backlash will be enormous. The current government is lucky that the combination of high oil prices and the credit crisis resulted in an oil demand destruction of about 5 mb/d in OECD countries, oil which was snatched away by China, for example, allowing it to grow. That meant a continuation of the mining boom. But that luck will not last long as China will also get stuck in peak oil.

Today’s transport announcements are typical for the continuing peak oil ignorance:

Gillard’s $2b transport fix

http://www.smh.com.au/federal-election/gillards-2b-transport-fix-20100810-11y71.html

Some may just see “election pork barrelling” but these proposals give a revealing insight into the untested assumptions the government is relying on. It is thought

we have time until 2014-2017 while by 2015 we are going to be in a deep oil import crisis
money for expensive rail tunnels will be available from a surplus budget while many economists are predicting a continuing financial crisis
we can also build more road tunnels because our car based society will continue
and all this infrastructure is needed to accommodate growth

While the headline is on rail, real planning money is wasted on new road tunnels. It is still not understood that peak oil means the end of our car culture in this coming decade and that every month counts to prepare for declining oil production. In urban areas, the job at hand is to replace EXISTING car traffic of the EXISTING population by public transport. As car traffic will go backwards with declining oil production, we can use the road corridors for rail development.

Let’s analyse the above article:

(1) Timing

“THE Gillard government will make a push into western Sydney today with a promise to build the long-awaited $2.6 billion rail link between Parramatta and Epping.

The state government contribution will be spent first with the federal funds not scheduled to be available until 2014-15, by when the budget is due to be back in surplus.”

One may ask what will happen if the budget is not in surplus in that year. This is because by that time Australia will be in a deep oil import crisis.

21/2/2008
MARTIN FERGUSON, RESOURCES MINISTER: Australia’s got a huge challenge. We’ve got huge problems on the trade front, but also importantly, a real problem in terms of energy security and our economic future by 2015. http://www.abc.net.au/7.30/content/2007/s2169087.htm

Here are the facts which can be found in my previous posts (old hats, but still ignored)

Western Australia’s battle for offshore oil: Crude Oil dropped by 27% in 2009
http://www.crudeoilpeak.com/?p=1425

IEA: Iran’s crude oil production to decline by 700 Kb/d by 2015

This means Iran needs an oil price of $130 a barrel to balance their budget

http://www.crudeoilpeak.com/?p=1669

Note on the rail map that Carlingford Court, a large car-based shopping centre (1,400 car spaces)

http://www.carlingfordcourt.com.au/content.aspx?urlkey=getting_here

would not get any underground station which shows the NSW government hasn’t understood the task ahead, namely to rescue these car oriented centres. A Carlingford Court station was considered in the original EIS but the cheapest option 1 (existing Carlingford station) was preferred:

Indeed, a station under the Carlingford shopping centre would be very deep, around 50 m:

It has now transpired that the original planning approval for the rail link has lapsed already in the 1st quarter of 2007.

Here is an excerpt from a recent project summary document of the Parramatta-Epping Rail Link (PERL) of the NSW government.

The program for construction of this link is estimated to be six years.

This demonstrates that the NSW government has killed precious time since Transport Minister Costa cancelled the Epping to Parramatta leg of the Chatswood to Parramatta link.

It also means that – contrary to what the Prime Minister said on 16/8/2010 – the rail link is NOT ready to go:

KERRY O’BRIEN: ……. So how rigorous was the Cabinet process on your promise last week, clearly designed to help you in marginal Western Sydney seats to find $2.6 billion for a rail link from Parramatta to Epping?

JULIA GILLARD: Well our Minister for Infrastructure and Transport, Anthony Albanese, has had this project under consideration for some time. It’s ready to go, Kerry. That’s what recommends it.

http://www.abc.net.au/7.30/content/2010/s2984637.htm

On the positive side, the need for a revised EIA creates the opportunity to rethink the whole concept and plan for a light rail/surface metro on Carlingford Rd with a short, only 15-20 m deep metro type tunnel under Mobbs Hill. That leads us to the next point

(2) Costing

For every tunnel Km one can build 10 light rail kms. We are going to see a replay of the CBD metro disaster:

Too late for Sydney Metro Tunnels
http://www.crudeoilpeak.com/?p=290

(3) Real (planning) money is spent on road tunnels

“Ms Gillard and the Transport Minister, Anthony Albanese, will announce today that the upgrading of the M5 East, and the F3-to-M2 link, will also be overseen by Infrastructure Australia.”

http://www.smh.com.au/federal-election/gillard-hopes-for-commuterled-head-of-steam-20100810-11y7g.html

The traffic forecasts for these 2 projects have been embellished just like those of the Lane Cove Tunnel.

F3-M2 road tunnel

“$150 million for planning; road paid for by private sector”

Here goes your tax money down the drain and your super annuation, too. And the winner is: peak oil ignorant consultants. This was my submission to the F3-M7 corridor review 3 years ago:

13/4/2007 End of Freeways – the tipping points of Peak Oil and Global Warming
http://www.crudeoilpeak.com/?p=48

In her final report Mahla Pearlman, former Chief Judge of the Einvironment Court, writes on page 82:

“However, I note these claims [on peak oil and global warming issues] for completeness, and so that they will not be lost sight of in any further progress of the Link.”

Well, not only sight has been lost, but the planning money, too. The same applies to the M5. In an Alexandria community meeting on the M5 in December 2009 one top official of the RTA responded to peak oil by saying that in California they are developing hydrogen cars with electric motors in their wheels. It is hair raising to hear on which naive thinking multi billion dollar investments are based.

12/3/2010 Car pooling and rail freight for M5 corridor
http://www.crudeoilpeak.com/pdfs/27

7/2/2010 Which bank would now finance more road tunnels?
http://wwwcrudeoilpeak.com/?p=1097

It is still not understood that the simultaneous double challenge of peak oil and global warming (=all coal fired power plants must be replaced ASAP) will mean there’ll be a severe energy crisis:

19/6/2010
M2 widening: Primary Energy Dilemma for cars
http://www.crudeoilpeak.com/?p=1631

(4) Population growth

“Patronage forecasts would grow because, according to his own government’s metropolitan strategy, job numbers on the lower north shore would also grow by as much as 70 per cent by 2031, as would housing around Carlingford, Dundas and Telopea.”

http://www.smh.com.au/federal-election/back-on-track–and-just-the-ticket-for-commuters-20100810-11y72.html

As soon as physical petrol shortages arrive at filling stations, motorists will demand a reduction of immigration as they will immediately understand that every new arrival will mean longer petrol lines.

9/4/2010
Australian Population Scenarios in the context of oil decline and global warming
http://www.crudeoilpeak.com/?p=1300

Natural population growth will peak between 24-25 million. I encourage the reader to do his or her own calculations, using treasury’s software. Follow these steps:

(a) Visit this site: http://www.pc.gov.au/research/labour-markets/fertmod

(b) Download XLS file http://www.pc.gov.au/__data/assets/excel_doc/0005/90095/fertmod.xls

(d) “Click here to Start program”

(e) Set immigration to zero; accept all other parameters; press “OK’

(f) In the “Inputs” sheet, under “key results” the long run population growth is zero and the population peaks at a theoretical 25.6 million in 2051, a year when even our children are already in retirement.

Transport Solutions

26/5/2010
Submission Sydney’s Metropolitan Transport Plan
http://www.crudeoilpeak.com/?p=1519

Example Adelaide:

http://www.infrastructure.sa.gov.au/coast_to_coast_lightrail/coast_to_coast_light_rail/images_-_project_artist_impressions

but also importantly, a real problem in terms of energy security and our economic future by 2015. http://www.abc.net.au/7.30/content/2007/s2169087.htm

Here are the facts which can be found in my previous posts (old hats, but still ignored)

Western Australia’s battle for offshore oil: Crude Oil dropped by 27% in 2009
http://www.crudeoilpeak.com/?p=1425

IEA: Iran’s crude oil production to decline by 700 Kb/d by 2015
http://www.crudeoilpeak.com/?p=1669

(2) Costing

For every tunnel Km you can build 10 light rail kms. We are going to see a replay of the CBD metro disaster:

Too late for Sydney Metro Tunnels
http://www.crudeoilpeak.com/?p=290

(3) Real (planning) money is spent on road tunnels

“Ms Gillard and the Transport Minister, Anthony Albanese, will announce today that the upgrading of the M5 East, and the F3-to-M2 link, will also be overseen by Infrastructure Australia.”

Saudi Aramco’s crude oil exports peaked in 2005

Matt — Sat, 31 Jul 2010 03:36:55 +0000

Saudi Aramco’s crude oil exports have peaked in 2005 at 2,622 million barrels and declined by 21.4% to 2,061 mb in 2009. Refined products and natural gas liquids (NGL) exports have also peaked in 2005 and then declined by 25.8 % and 4.1% respectively. Most of the decline happened between 2008 and 2009.

Saudi Aramco publishes oil export data in its annual series “Facts and Figures”

http://www.saudiaramco.com/irj/portal/anonymous?favlnk=%2FSaudiAramcoPublic%2Fdocs%2FNews+Room%2FFacts+and+Figures&ln=en

The above table is from the 2009 report with 2001 and 2002 pasted into it from earlier versions of the report.

Let’s see how that compares to the total Saudi crude production:

Total Saudi crude production declined from 3,486 million barrels in 2005 to 3,011 mb in 2009. This is 13.6 % over 4 years. Therefore, the decline rate of exports was 57 % higher (21.4/13.6 = 1.57). This is due to a higher domestic consumption and confirms what Westexas from the oildrum always repeats in his comments like the most recent on 28/6/2010:

“Given a production decline in an oil exporting country, there are three characteristics of net export declines:

(1) The net export decline rate tends to exceed the production decline rate;

(2) The net export decline rate tends to accelerate with time and

(3) The bulk of post-peak Cumulative Net Oil Exports (CNOE) are shipped early in the decline phase (the initial CNOE depletion rate tends to exceed the net export decline rate).”

http://campfire.theoildrum.com/node/6626#comment-662360

Please note that global crude oil production declined by only 2 % during the same period as shown in this graph:

http://www.crudeoilpeak.com/wp-content/gallery/gallery1/world_crude_2001_2009.jpg

from this post:

Back to the 2004 future, but with double the oil price

http://www.crudeoilpeak.com/?p=1271

Saudi King ordered oil exploration to cease. But will it matter?

Matt — Sun, 11 Jul 2010 17:21:49 +0000

Saudi Arabia seems to jump on the bandwagon of a rethink on oil exploration following the oil spill in the Gulf of Mexico, packaging it in an apparently wise policy of resource conservation. But this article shows that the Saudi exploration ban will have no impact as discoveries in the last years were negligible anyway. If anything, the exploration stop will serve as a future explanation for production drops.

—————————

While the Obama administration is fighting and apparently losing court battles over a drilling ban in deep water

Court rejects Obama administration’s bid to restore oil drilling moratorium

http://www.news.com.au/breaking-news/court-rejects-obama-administrations-bid-to-restore-oil-drilling-moratorium/story-e6frfku0-1225889697057#ixzz0tKceD8HT

and the European Energy Commissioner coming up with similar ideas

Europe should freeze deep water drilling: top official
http://news.yahoo.com/s/afp/20100707/sc_afp/usoilenvironmentpollutioneu

the Saudi King has ordered oil exploration in his kingdom to cease completely, not just temporarily

Saudi King Seeks Wise Oil Use, Not Output Ban, Banque Saudi Analyst Says

The monarch told Saudi scholars studying in Washington that he had ordered all oil exploration to cease “in order to keep the earth’s wealth for our sons and grandsons,” state-owned Saudi News Agency reported yesterday.

http://www.bloomberg.com/news/2010-07-04/saudi-king-seeks-wise-oil-use-not-output-ban-banque-saudi-analyst-says.html

While it is certainly a wise decision to preserve oil resources for future generations this instruction will hardly have any impact on finding new oil fields. This is because the 2009 drilling program was not very successful anyway, in particular with oil:

From Aramco’s 2009 exploration report:

Non-associated gas field Sanaman, 444 barrels per day of condensate
Arabian super light oil field Sirayyan, 3.7 kb/d ; Siryyan 2 well flowed at 3.4 Kb/d
Gas field Unayzah, 1.74 Kb/d of condensate

http://www.saudiaramco.com/irj/go/km/docs/SaudiAramcoPublic/AnnualReview/2009/AR09_Exploration.pdf

For comparison: Australia consumes around 900 Kb/d

Let’s have a look at Saudi oil reserves as presented by Mamdouh Salameh

http://www.eoearth.org/contributor/mamdouh.salameh

to the 10th IAEE European Conference “Energy, Policies & Technologies for Sustainable Economies” in Vienna in September 2009

http://www.aaee.at/2009-IAEE/uploads/presentations_iaee09/Pr_6_Salameh_Mamdouh.pdf

The above graph shows the discoveries (red columns) and the cumulative oil in place (=oil in the rock, whether it can technically or economically be produced or not). The last significant find were 6 oil fields in the Hawtah trend with 6 Gb OIIP in 1990. ASPO estimated a total of 15 Gb for the period 1982-2004, bringing the total to 580 Gb

Saudi Aramco, however, claims an additional 110 Gb OIIP for this period, with a total OIIP of 700 Gb in 2003 . This total figure is taken from slide 8 in this presentation by Baqi/Saleri at the CSIS in Washington in 2004:

50 year crude oil supply scenarios: Saudi Aramco’s Perspective

http://csis.org/files/media/csis/events/040224_baqiandsaleri.pdf

In this slide show Saudi Aramco adds another 200 Gb to be discovered until 2025, or 10 Gb every year. These sort of discoveries were not made in the last 5 years.

Salameh writes: “Applying the previously assumed lower and upper global recovery factor limits of 30% to 35% to the more realistic estimate of 580 Gb OIIP gives a range of 174 to 203 Gb of recoverable [original] reserves. Given that Aramco has cumulative production of 120 Gb by end 2008, this gives a range of remaining recoverable crude oil reserves from 54 to 83 Gb, not Aramco’s propaganda claim of 264 Gb. Even if we accept the Saudi OIIP figure of 700 Gb we come to estimated reserves of 90 to 125 Gb.”

The corresponding depletion levels would be as follows:

(a) 120 Gb / 174 Gb = 69%

(b) 120 Gb / 203 Gb = 59%

(d) 120 Gb / 245 Gb = 49%

So even using the most optimistic parameters half of Saudi Arabia’s original crude oil reserves are gone. But it could be much more. Take your pick.

The best outlook comes from Aramco’s oil operation report:

“With the completion of the oil production increments portion of our capital program, we are turning our attention to increasing gas production and to integrated refining and petrochemical projects. However, we are moving forward with one mega-project in oil: The offshore Manifa increment is scheduled to begin production of 500,000 bpd of Arabian Heavy crude oil by June 2013 and will ultimately produce 900,000 bpd by January 2024. This increment will offset natural declines in other producing fields.”

http://www.saudiaramco.com/irj/go/km/docs/SaudiAramcoPublic/AnnualReview/2009/AR09_OilOperations.pdf

This oil reserve problem is not limited to Saudi Arabia:

12/11/2009 “Key oil figures were distorted by US pressure, says whistle blower”
http://www.crudeoilpeak.com/?p=564

18/10/2009 OPEC reserves revisited
http://www.crudeoilpeak.com/?p=355

Coming back to the introductory theme of oil exploration, what is the response of the Australian government? Surely not conservation and saving oil:

Green light to oil drilling

PETER GARRETT, MINISTER FOR ENVIRONMENT PROTECTION: The release of areas for exploration acreage for petroleum is just something which happens every year. They identify certain areas which have got potential, depending on prospectivity and the like, and it’s a process which happens, more or less, automatically. I don’t see it as being inimical to what we’re doing in terms of the marine planning process.
http://www.abc.net.au/7.30/content/2010/s2948671.htm

Automatic? Let’s have a look at how automatic the process is after peak oil:

The pre 2004 fields are trending towards zero some time in this coming decade and there is an offshore struggle to compensate this decline, just like in the Gulf of Mexico. Nothing automatic here.

What will be automatic, however, is the fastest return to Jurassic Park:

The incredible journey of oil

http://www.abc.net.au/science/crude/

And this following CTL (coal to liquids) project – designed to solve the problem of declining oil production will even dwarf – in terms of emissions – the environmental impact of offshore drilling:

$3.5 billion liquid fuels project planned for Felton

http://www.ambreenergy.com/investors/media/liquid-fuel-project

4 million tons of coal (=12 mt of CO2) turned into 950 ML of petrol and 150 ML of LPG, just 5% of demand. Reminder:

Our government certainly hasn’t understood the double challenge of peak oil and global warming and doesn’t follow the solutions proposed in many of my previous posts, e,g. here:

26/5/2010 Submission Sydney’s Metropolitan Transport Plan
http://www.crudeoilpeak.com/?p=1519

OPEC going sideways; not a good time for oil importers

Matt — Sun, 04 Jul 2010 09:39:57 +0000

The IEA Medium Term Oil Market Report 2010

http://www.iea.org/W/bookshop/add.aspx?id=397

sees OPEC’s capacities increase 1.94 mb/d by 2015. But will production also increase?

Let’s put the table “Estimated Average Sustainable Crude Production Capacity” from page 82 into some graphs. We start with the decline.

Although the report mentions a whopping 7.1 mb/d decline until 2015 (at field level), at country level the decline is just 850 Kb/d, mainly from Iran. See impact on oil exports in this post:

http://www.crudeoilpeak.com/?p=1669

On top of the decline curve we stack the incremental increases in capacity:

OPEC’s increase is heavily dependent on Saudi Arabia and Iraq. In fact, without increases in Iraq OPEC is back to square one in 2012/13. Imagine the conflicts within OPEC about quotas for Iraq (at present outside the quota system) while Iran’s production is declining.

Ok, so we have an increase of 1.9 mb/d, but on what? The quoted table on page 82 says on 34.85 mb/d (OPEC 12) to make it 36.78 mb/d by 2015. Let’s have a look at previous IEA capacity calculations and compare them with actual production:

We see that in the series of medium term oil market reports starting with 2006 the estimated capacity was continuously reduced by around 2 mb/d until the 2009 report. The slightly more optimistic 2010 report is a bit up again, but mainly because of Iraq. More importantly, a huge gap between capacity and actual production has developed, suggesting there is plenty of spare capacity. While one may argue the 2009 drop in production was the result of less oil demand after Lehman Brother’s collapse, the following financial turmoil on global markets and the recession, that was not the case in the 1st half of 2008 when the economy was booming and high oil prices encouraged maximum production. Yet, OPEC’s claimed oil production capacity was not turned into actual production.

The MTOMR 2007

http://www.iea.org/papers/2007/mtomr2007.pdf

estimated a capacity of 31.06 mb/d for OPEC 10 including Indonesia (which is now no longer in OPEC as this country has become a net oil importer). So without Indonesia, but including Iraq, the capacity in 2008 was supposed to be 31.06 – 0.88 + 2.4 = 32.58 mb/d while actual production was 29,49 mb/d, a difference of 3 mb/d. Saudi Arabia alone did not deliver 1.7 mb/d during the critical period June/July 2008 – shortly before the Olympic Games when China went into the oil markets with an extra demand of 800 kb/d (see IEA oil market report October 2008, page 14)

So we have to be very careful with those capacity estimates. The safest way to estimate future supplies is by adding the net increments to the actual production of 2009 which we do in this graph:

According to the latest IEA Monthly Oil Market Report

http://omrpublic.iea.org/omrarchive/10jun10full.pdf

crude oil production for OPEC 12 in 2009 was 28.69 mb/d. From this base we add 1.94 mb/d to make 30.63 mb/d. If we assume a spare capacity of nominally 1 mb/d there won’t be much more crude oil in 2015 than there was at the 2008 peak. Consider rising domestic demand in all OPEC countries and crude oil exports from OPEC will shrink. Not a good time for oil importers.

IEA: Iran’s crude oil production to decline by 700 kb/d by 2015; budget neutral oil price $130 a barrel

Matt — Sat, 03 Jul 2010 08:27:08 +0000

The new IEA Medium Term Oil Market Report 2010
http://www.iea.org/W/bookshop/add.aspx?id=397

estimates Iran’s oil production capacity will decline by 700 Kb/d by 2015. The above graph shows the change of crude oil capacities between 2015 and 2009, for various OPEC countries.

Assuming continuing domestic growth of oil consumption for a 70 million population this means that Iran’s oil exports will be half in just 5 years.

What does that mean for the Iranian budget? The Iranian Press TV reports:

Iran’s new budget bill and its challenges

8 March 2010

“…..In 1389 [year 2010 starting in March] crude and oil byproducts incomes stand at %51 of the budget revenues…. the 1389 Budget Bill, that will be passed by the Parliament after making amendments within the next fortnight, has been projected on the basis of oil prices of US$65 p/b and US dollar -IRL exchange rate of 9850 Rials..”

http://www.presstv.ir/detail.aspx?id=120361§ionid=3510304

Therefore, provided all other factors being equal, oil prices need to double from that level to $130 a barrel for declining oil exports to be revenue neutral.

Although many countries are struggling to maintain a balanced budget the geo-political implications of declining oil exports from Iran are incalculable.

The above estimate, however, could well be too optimistic. I have superimposed oil production and consumption curves on the estimate range provided by the late Dr. Bakhtiari which he presented at an ASPO conferennce in May 2003, in Paris:

Workshop:

http://www.peakoil.net/conferences/iwood-2003-paris

Dr. Bakhtiari’s paper

http://www.peakoil.net/iwood2003/paper/BakhtiariPaper.doc

It is interesting to note that Dr. Bakhtiari’s WOCAP model contains “geo-politics” as a factor impacting on oil production

http://www.uvm.edu/~gflomenh/ENRG-POL-PA395/readings/2007-oil-peak.pdf

In his 2006 testimony to the Senate Inquiry on future oil supplies he had explained the transition phase T1 between growing and declining oil production and that the world will experience new econpomic rules:

http://www.aph.gov.au/hansard/senate/commttee/S9515.pdf

Another warning about export extinction in Iran (by 2014-2015) was published in 2007 in the Proceedings of the National Academy of Sciences of the US.

The Iranian petroleum crisis and United States national security

http://www.pnas.org/content/104/1/377.full

Although all of the above reports and the latest IEA decline rate arrive at different time frames for exports going towards zero this problem will for sure attract the world’s attention in the next years to come, long before the actual zero point is reached.

M2 widening: a primary energy dilemma for cars

Matt — Sat, 19 Jun 2010 05:50:19 +0000

The M2 widening proposal can be viewed here:

http://www.hillsm2upgrade.com.au/ea_documents.htm

We superimpose traffic forecasts from chapter 7.2.3 on page 72 with crude oil and condensate projections of Geoscience Australia

Source of data:

http://www.hillsm2upgrade.com.au/files/environmental_assessment/volume2_part1/techpaper1/m2ueavol2pt1ttiamainreportch6to8.pdf

https://www.ga.gov.au/image_cache/GA17051.pdf

It can be clearly seen that a huge gap between assumed traffic growth and declining oil production emerges already in the next years, just when the additional lanes are supposed to open for traffic. Please note that only 5% of the condensate can be processed in Australian refineries, some of which may have to close. So most of the condensate will be exported into the bottomless pit of the global oil markets.

The Federal Government is very well aware of the problem:

Supply fears as oil surges

21/2/2008

MARTIN FERGUSON, RESOURCES MINISTER: Australia’s got a huge challenge. We’ve got huge problems on the trade front, but also importantly, a real problem in terms of energy security and our economic future by 2015.

http://www.abc.net.au/7.30/content/2007/s2169087.htm

That was in February 2008. Are M2 planners not watching the 7.30 report? Why was so much work put into the M2 widening documentation?

What will replace oil? Not much. Read here:

6/1/2010
Diminishing Returns of Fossil Fuel Energy Invested
http://www.crudeoilpeak.com/?p=909

Here is the summary of my submission:

Contents:

Introduction: our energy dilemma

Summary

M2 solutions
Traffic forecasts vs. Australian crude oil porduction
Failed tollway projects
Timetable 2010-2020
War games in the ME
Flawed Metropolitan Strategy
Global warming update
Replacing coal until 2030
Nuclear
Solar and wind
Potential energy for EVs (off-peak)
Transitioning the car fleet
Removal of bus ramp at Beecroft Rd
Epping Heights Public – noise

Appendix on peak oil

The above percentages of Australian energy production have been taken from: “Energy in Australia 2009″

http://www.abareconomics.com/publications_html/energy/energy_09/auEnergy09.pdf

The remaining percentages are 26% for uranium and 2% for renewables.

Peak oil not understood

Peak oil started 5 years ago, in 2005, and hit an economy with a pre-condition of accumulated debt. The combined effect of high oil prices and the financial turmoil resulted in a demand destruction in OECD countries of 5 mb/d – oil which was immediately consumed by OPEC and Chindia. Without the debt crisis and a continuing world-wide economic boom we would have had either physical oil shortages and/or skyrocketing oil prices by now – both of which would also have ultimately killed the global economy.

No crisis awareness

The M2 widening proposal knows nothing about all this and seems to be blissfully unaware of the consequences of peak oil, while at the same time the need to reduce CO2 concentrations from the current 387 ppm to 350 ppm means we have to replace our coal fired power plants, and very soon. The financial crisis is the 3^rd challenge. The Middle East is another source of conflict which may impact on oil supplies. These 4 problems together will merge to a major crisis in this coming decade and have the potential to morph into a multiple system failure, if not well managed. With present business-as-usual policy settings – of which the M2 widening is part – the probability of this happening is increasing by the month, especially as problem #5 is the denial mode by governments of the above.

Energy security not checked

The M2 upgrade documentation (Environmental Assessment) does not contain any numerical calculations of the primary energy (measured in GL of fuels, GJ of fossil fuels or TWh of renewable energy) needed to operate vehicles for the duration of 30 years, the period used for the benefit cost analysis. Neither has it assessed the likelihood of the physical availability of such energies nor the risks associated with supply shortages, whether domestic or international. The Federal Resource Minister has already warned the public in February 2008 that there will be an oil import challenge (=crisis) as soon as 2015, only 2-3 years into the project life time.

Insufficient Fuel Savings

The Net Present Value calculation shows that vehicle operating cost savings are less than 10% of Capex and Opex. These vehicle operating costs would contain fuel costs as a major cost factor. From the point of view of reducing oil consumption and oil dependency this project is definitely not worthwhile.

Moreover, most of the time savings would be savings for private commuters, savings which would not translate into actual cash savings for the economy. Only commercial traffic would accrue these direct benefits. Table 5 does not show these commercial time savings separately. Insofar the table is highly theoretical. However, this is a basic problem in the RUCBA methodology

Terms of reference incomplete

The Director General’s requirements do not explicitly prescribe the above mentioned energy calculations and assessments. However, the consultant should have included this in the chapter on sustainability. After all, a project is not sustainable if there is not sufficient carbon free primary energy available at reasonable cost to support the assumed traffic volumes. Recent financial failures of toll-way projects in Australian Capital cities, but also in the US, due to over-optimistic traffic projections should have prompted the consultant to adopt this prudent approach. The problem here is that consultants want detailed design jobs of the projects they are preparing an EA for. So quite naturally they would not recommend to stop a project.

Prudence of investors

Even more importantly, it would be in the commercial interest of the motorway operator and potential investors in the project (most likely super annuation funds) to make sure that the energy security of the M2 upgrade is checked. Similar to the self interest of consultants many investors are keen to get commissions rather than to design a project which can be successful under all adverse conditions.

Duty of care of the Government

Moreover, the State government is and will be responsible for the overall functionality of the Sydney Metropolitan area in oil crisis years. It is very short-sighted, if not irresponsible, for the NSW government to argue that no taxpayer’s money is at risk. If investor money is lost, as experienced in the Global Financial Crisis, this impacts negatively not only on share holders or bond holders but also on the whole economy and ultimately on the State budget itself.

Oil supply risks in next years

There already is an oil supply risk in the next years. Oil shortages could result from an oil war or other armed conflicts in the Middle East as well as social unrest and oil hoarding when the truth comes out about OPEC’s overstated oil reserves, which have never been audited. Which company would actually make business with a partner whose books have never been audited? This is exactly what toll-way operators and investment funds are doing when they are spending funds on toll-ways.

Making business on the basis of oil imports from countries who don’t allow 3^rd part oil reserve audits is fraught with incalculable risks. Given Australia’s 80% dependency on imported crude and fuels, and the lack of a Strategic Oil Reserve, the impact of such events will be felt within weeks. Petrol rationing and/or mandatory car pooling will mean reduced traffic and toll revenue. Depending on repayment conditions of project debt, the financial end of the M2 upgrade would follow soon.

Recommendation

The M2 upgrade documentation must be re-written to include an energy availability assessment. This analysis will show, as is already calculated in this submission, that the upgrade is neither commercially nor environmentally feasible and that it does not guarantee the long distance commuting by private vehicle which will become dysfunctional within 5-10 years, irrespective of the introduction of green cars, yellow cars or electric cars.. The 2^nd focus of the review should therefore be a new chapter on alternatives to the 3^rd lane. There are 2 options which should be investigated:

Transperth model (electric rail Epping – Quakers Hill on the M2/M7 with a branch to the Norwest Business Park)
Electric trolley buses because they can be rolled out faster than rail

Manufacturing capacity for trolleys should be built up IMMEDIATELY. These buses will be needed anyway in hilly areas of Sydney. The current bus fleet needs to be converted to CNG (compressed natural gas)

Full report , as PDF file: M2 widening: Primary Energy Dilemma for Cars [7.88 MB]

Contents
	Introduction: Our energy dilemma	3
	Summary	4
1	M2 solutions	6
2	Traffic Forecasts vs Australian crude oil production	7
3	Failed tollway projects	9
4	Timetable 2010-2020	10
5	War games in the Middle East	14
6	Flawed Metropolitan Strategy	16
7	Global warming update	21
8	Replacing coal until 2030	24
9	Nuclear	29
10	Solar and Wind	32
11	Potential Energy for Electric Vehicles	34
12	Transitioning the car fleet	39
13	Removal of Bus Ramp at Beecroft Rd	43
14	Epping Heights Public Noise	45
	Appendix on Peak Oil	48

Crude oil 2010 vs 2005 (1st quarter)

Matt — Thu, 17 Jun 2010 23:45:52 +0000

5 years peak oil. What we have seen so far is the response of the economy and the financial system to oil production on a bumpy production plateau

The above graph shows that in the 1st quarter 2010 we are basically back to 2005 production and consumption levels.

But for the same amount of oil, the world pays $25 more per barrel.

Remember 2005 was the Katrina year with a sharp drop in production in September and October but production had already peaked in May even before the hurricanes. This year we have the oil spill in the Gulf of Mexico and no idea how events will evolve.

30/5/2010
GOM oil after the US peak
http://www.crudeoilpeak.com/?p=1508