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Oil Price

Diminishing Returns of Fossil Fuel Energy Invested

When investing money, everyone calculates how profitable that is, either in interest paid from bonds, dividends received from shares or cash flows from a business. But for all these investments to be successful we need energy. So how about energy supply projects: how much energy do they return for the energy invested?

This is the 4th post in a series on the best slides of the ASPO 2009 conference.http://www.aspousa.org/index.php/2009/11/2009-conference-proceedings/ There are 3 slide shows on the topic of energy returned on energy invested (EROEI):

(1) Hannes Kunz: Economic Scenarios for an Age of Declining EROIs
http://aspo-usa.com/2009presentations/Hannes_Kunz_Oct_11_2009.pdf
Institute for Integrated Economic Research http://www.iier.ch

(2) David Murphy: Recent Applications of Energy Return on Investment
http://aspo-usa.com/2009presentations/David_Murphy_Oct_11_2009.pdf
Web site: http://netenergy.theoildrum.com

(3) Jeff Vail: The Renewables Gap
http://aspo-usa.com/2009presentations/Jeff_Vail_Oct_11_2009.pdf
Home page: http://jeffvail.net

This is the general definition, a dimensionless factor which should be greater than 1:

eroei

http://en.wikipedia.org/wiki/EROEI

As an introduction let’s look how much energy is needed to produce oil itself. The latest work on this is here:

(4) A Preliminary Investigation of Energy Return on Energy Investment for Global Oil and Gas Production. July 2009
eroei_oil_gas_hall_et_al Nathan Gagnon, Charles A.S. Hall and Lysle Brinker
http://www.mdpi.com/1996-1073/2/3/490/pdf

The current EROEI is around 20, that is 1 unit energy invested yields 20 units of energy gained. But that figure was almost 35 just a couple of years ago. The graph shows that the energy efficiency of producing oil has peaked around 1999 and is now in decline. The reason for this is that out of 70 mb/d of crude oil production around 55 mb/d come from fields which are past their production peak (see http://www.crudeoilpeak.com/?p=355) and that means enhanced oil recovery (EOR) must be used to reduce decline rates. This EOR of course requires energy: heat for steam injection, pumping increasing amounts of water for maintaining reservoir pressure or building pipelines for gas injection. As an example, this article http://www.crudeoilpeak.com/?p=812 shows Saudi Arabia’s latest efforts in producing oil in Khurais.  There is a lot of embedded energy in those oil/gas/water separation plants and the operation of these facilities also needs energy. The increasing number of offshore fields is also a reason for increased energy input requirements. Hannes Kunz (1) showed a nice slide to illustrate this:

eroi_oil_decreasing

eroei_oil_gas_trend_hall_et_al

What could be the trends into the future? Figure 2 from (4) shows trends are declining, but it is not clear whether the future trend is linear or not. For a more detailed discussion see here: http://netenergy.theoildrum.com/node/5600#more But there will be a further decline and that is the important point. It will deform the Hubbert Curve to a net Hubbert curve as shown in this graph: http://www.theoildrum.com/files/Net%20Hubbert_6.png

An EROI of 1 means of course that for the purpose of producing oil as an energy source this is no longer energy profitable. But the minimum EROEIs are much higher than the theoretical limit of 1.

(a)    EROEImin = 3 for transport only

(b)   EROEImin=  8-10 to support society

“If the decline in EROI continues, then the amount of energy that will be available to sustain and grow the economy, both nationally and worldwide, will decline as well. The recent paper by Hall et al. ( (5) http://www.mdpi.com/1996-1073/2/1/25) on the minimum EROI for society indicates that society, even at its most basic level, cannot function on an EROI at the wellhead of less than about 3:1, and that considerably more than that would be required for the full suite of goods and services (such as medical care and education) that we have come to expect.”

eroi_energydelivered

David (2) gives more details on the EROEI for petrol, diesel and ethanol. The above paper (5) adds to the usual EROImm (at the mine mouth or farm gate) following definitions:

Energy returned at the point of use:

eroei_pou

and energy returned including the energy cost of infrastructure:

eroei_ext

david_murphy_implication_low_eroi_fuels

From (2): as we are going towards lower EROIs, society runs into a net energy cliff.

Hannes Kunz (1) shows the higher the speed the higher the energy costs :

eroei_transport

In order to avoid the net energy cliff we have to invest energy to build up genuinely renewable energy systems.  Jeff Vail (3) warns of a renewable gap when replacing declining oil production

jeff_vail_renewables_gap

In http://www.jeffvail.net/labels/Renewables%20Hump.html Jeff calculates as follows:

1 million barrels * 1700 KWh /barrel / 24 h  = 70.83 GW installed (heat equivalent)[1]

Assuming a net 5% decline in oil production (4.4 mb/d) that’s globally

4.4 * 30 years [energy return period] * 70.83 GW / 20 [EROI] = 467 GW installed

See data point on light blue curve for year 2. This curve declines because 5% from a declining oil production base is less in absolute terms every year.

This is a gigantic job on top of replacing/retrofitting existing coal fired power plants.

Let’s do this for Australian oil consumption of 870 kb/d and also a 5% decline (assuming functioning oil markets and no limits to the fungibility of oil, i.e. free exports and imports)

0.87 * 0.05 * 30 * 70.83 / 20 = 4.6 GW EVERY YEAR

Has anyone geared up industrial capacities to do this job? I’ll explore this in more detail in a later post. This calculation serves only the purpose of showing the magnitude of the task.

Conclusion:

There are  3 energy related tasks ahead:

(A) Replace coal fired power plants with renewable or low carbon energy systems
(B) Offset declining oil production with a renewable primary energy source (electricity and hydrogen are NOT energy sources, they are energy carriers)
(C) Set aside energy (=save from consumptive use of energy) to build up the new energy systems for A and B

In Australia:

Task (A) is about 40 GW over, say, 40 years, that is 1 GW/year – assuming there is no abrupt climate change which forces us to do the conversion faster, e.g. in 20 years. Task (B) is therefore 2-4 times bigger than that.

If we are not immediately doing (C) we’ll get stuck in jobs (A) and (B)

What are the practical policy implications?

(A) Do not add new energy hungry structures. But what does the NSW government plan? Yes, a mini Dubai in Darling Harbour. The steel in those skyscrapers (embedded oil for mining and CO2 emissions from coking coal!) should be used for e.g. building up wind farms to produce electricity for existing skyscrapers.

barangaroo_grand_slam

Neither do the architects seem to have heard about sea level rises (see external links).

http://www.smh.com.au/national/grand-slam-for-barangaroos-grand-plan-harbour-makeover-looks-like-worst-of-dubai-20091221-la26.html

Who will be fooled by this spin:  Barangaroo to be carbon neutral

http://www.smh.com.au/environment/barangaroo-to-be-carbon-neutral-20091101-hrl5.html

(B) Do not build any more oil consuming tollways. But what does the NSW government plan? A widening of the M2:

m2_additional_lanes

http://buildingsydneymotorways.com.au/m2-a-lane-cove-tunnel-corridor/m2/planned-improvements

m5_corridor_expansion

http://buildingsydneymotorways.com.au/m5-corridor/m5-corridor-expansion

And an extension of the M5 because the air traffic is assumed to double. A complete disconnect to reality.

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[1] http://www.physics.uci.edu/~silverma/units.html

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