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Report Card 2009 (part 1) – Energy Policy – Has the Federal Government prepared for declining oil production?

This is the 2nd annual report card. The 2008 report is here: http://www.crudeoilpeak.com/?p=403

The 2009 report is structured and packaged by topic, rather than just month by month as in the 2008 report. The 1st part in this 2009 report card series is on how the government deals with peak oil in the process of developing an energy white paper. The Senates’ role is also shortly analysed. This graph gives an overview:

reportcard2009_energypolicy

i) NESA: http://www.ret.gov.au/energy/Documents/Energy%20Security/National-Energy-Security-Assessment-2009.pdf

ii) ACIL Tasman’s Liquid Fuel Vulnerability Assessment:  http://www.ret.gov.au/energy/Documents/Energy%20Security/Liquid%20Fuel%20Vulnerability%20Assessment.pdf

iii) ACIL Tasman’s Oil Import Infrastructure: http://www.ret.gov.au/resources/Documents/oilcode_submissions/Petroleum%20import%20infrastructure%2024%20August%20%20FINAL.pdf

iv) IEA WEO 2006:  http://www.iea.org/weo/2006.asp

v) ABARE Energy 2007:  http://www.abareconomics.com/publications_html/energy/energy_07/auEnergy_proj07.pdf

2 years in power, the Rudd government hasn’t delivered an official energy policy, let alone response plans for peak oil. The release of an energy green paper was delayed in August by Resource Minister Martin Ferguson giving this reason:  “Any green paper on energy must be based on a set investment horizon, and uncertainty over the CPRS [Carbon Pollution Reduction Scheme] and the renewable energy target means you cannot properly assess alternative energy options for Australia.”

The Age reports: Heat on emissions too much for energy policy http://www.theage.com.au/environment/heat-on-emissions-too-much-for-energy-policy-20090806-ebi9.html

The energy paper is also said to wait for the outcome of Ken Henry’s tax review.

While there is some truth about the Resource Minister’s argument, oil depletion does not stop during the slow process of producing various versions and layers of papers. From a logical policy planning and sequencing point of view the physical energy limitations must be analysed first. They then would need to be an INPUT into both the CPRS and Tax Review processes. The CPRS is definitely peak oil ignorant as recommendation #3 in my submission to the Garnaut Review was never followed up:

“Incorporate into modeling the global peaking of oil production (happening right now) which will impact already in a couple of years on the availability of fuels to implement all projects needed to de-carbonise the economy. Set aside oil & gas fields for this purpose by legislation.”

http://www.garnautreview.org.au/CA25734E0016A131/WebObj/D0834046GeneralSubmission-MattMushalik/$File/D08%2034046%20%20General%20Submission%20-%20MattMushalik.pdf

The Tax Review report is not yet out but unlikely to mention peak oil. In his last speech to CEDA Ken Henry mentioned congestion pricing as a new tax base, implying that traffic will grow.

http://taxreview.treasury.gov.au/Content/Content.aspx?doc=html/speeches/10.htm

Future  congestion, however,  will most likely be in petrol lines at filling stations.

Not surprisingly, the peak oil issue has also been largely left out of the energy discussion papers themselves, and is now skilfully tucked away in a link named ”related pages”

with 2 documents:

(a)    a liquid fuel vulnerability assessment by a private consultant, ACIL Tasman, engaged by NOSEC (National Oil Supply Emergency Committee, of the Ministerial Council of Energy) and published in November 2008

(b)   a departmental National Energy Security Assessment  (NESA) released in March 2009

http://www.ret.gov.au/energy/facts/white_paper/related_pages/Pages/default.aspx

It is not clear how many stakeholders who participated in the public consultation process for the energy white paper clicked on the above link and read or considered these documents.

The decisive sentence in the ACIL Tasman report is this:

“ACIL Tasman concludes that while there will be a peak in production of crude oil at some time, internationally accepted information from authoritative sources suggests that this peak is still some decades away and will occur beyond 2020. It is not anticipated to be a significant factor that will affect Australia’s liquid fuels vulnerability prior to 2020.”

The main problem here is that this statement was already outdated by the time it was published in November 2008 because the “authoritative source” (IEA) had – in the same month – come out with the WEO 2008, containing a detailed oil field decline analysis which made obsolete the WEO 2006 which ACIL Tasman has used. Moreover, the statement is illogic. A peak cannot be decades away if the year 2020 is mentioned as a qualifier. So something is wrong here.

A detailed critique of ACIL’s paper can be found here: http://www.crudeoilpeak.com/?p=793

In the meantime, in August 2009, the Independent quotes the Chief Economist, Dr. Fatih Birol,  of the IEA in this article:

Warning: Oil supplies are running out fast

Catastrophic shortfalls threaten economic recovery, says world’s top energy economist

“In a stark warning to Britain and the other Western powers, Dr Birol said that the market power of the very few oil-producing countries that hold substantial reserves of oil – mostly in the Middle East – would increase rapidly as the oil crisis begins to grip after 2010.”

http://www.independent.co.uk/news/science/warning-oil-supplies-are-running-out-fast-1766585.html

The Energy White Paper site says ACIL Tasman’s vulnerability report “directly contributed” to the NESA paper so this paper is also outdated. Not only that. Its table 8 contains blatant inconsistencies. For example, for 2013-2018, adequacy and reliability of oil supplies are judged “high” although “tightening of global supply/demand balance with demand growth recovery and mature field decline” is acknowledged.

http://www.ret.gov.au/energy/energy_security/emergency_response/liquid_fuel_emergency/lfe_vulnerability/Pages/lfe_vulnerability.aspx

nesa_table_page8

Extract from a table on page 8 in the NESA report. The contradictions are obvious.

For 2013, “domestic crude production increases as new fields start production” is in direct conflict with the assessment of permanently declining oil production by Geoscience Australia and the WA department of Mines and Petroleum as shown in these 2 graphs:

geoscience_australia_2008

This graph shows Geoscience Australia’s forecast for crude oil and condensate as provided in their submission 127 to the Senate Inquiry on future oil supplies. Superimposed are actual production curves up to 2008. It can be seen that in the last 3 years the P90 forecast has materialized.  It is very important to understand that only 5% of condensate can be used in Australian refineries so the oil vulnerability is really given by the most important feedstock and that is crude oil (dotted line)

wa_crude_production_to_-2030_pwa_sep_2008

This forecast for crude oil  is from the WA department for Mines and Petroleum (PWA September 2008).  However, the predicted peak in 2008 of 22 GL was not achieved as can be seen on the next graph showing actual production data: New fields – which peak early and don’t last long – sit on top of a declining wedge of maturing fields which will peter out by around 2016

wa_crude_oil_2000_2008

Despite these facts the Senate doesn’t seem to be in a hurry to prepare for oil decline, either:

senate_shot_in_the_foot

xiv) Select Committee on Fuel and Energy: http://www.aph.gov.au/Senate/committee/fuelenergy_ctte/interim_report/report.pdf

xv) Senate Inquiry on future oil supplies: http://www.aph.gov.au/Senate/Committee/rrat_ctte/completed_inquiries/2004-07/oil_supply/info.htm

xvi) Hansard On peak oil motion: http://www.aph.gov.au/Hansard/senate/dailys/ds181109.pdf

The Select Committee on Fuel and Energy was supposed to deliver a report in October 2009 but still had hearings in December. In its interim report the Committee states (page 45)

“2.178 Australia is fortunate to be rich in energy resources. Australia is one of the few developed countries to be a significant exporter of energy. It is the largest exporter of coal and one of the largest exporters of liquefied natural gas (LNG). More than three-quarters of black coal produced in Australia is exported. Uranium exports are also significant, accounting for 34% of Australia‘s energy exports. Around 53% of Australia‘s consumption of crude oil and LPG is met by domestic production. Australia is a net importer of crude oil and petroleum products, but a net exporter of LPG.”

This complacency is typical for the whole situation in Government and Parliament. The years of coal are numbered, LNG exports don’t replace coal in the destination country, uranium mining itself is heavily dependent on diesel supplies and LPG exports won’t help us if the global supply of crude oil  is tight. The real richness, wind and sun, are not being harnessed.

Summary: The final version of the energy white paper is unlikely to deal with peak oil. What is more important than reports and papers, however, is that business as usual stops and that we physically prepare for declining oil production as detailed here: http://www.crudeoilpeak.com/?p=36. But this is not happening. Year after year, month after month are being wasted. Unfortunately, we’ll need some sort of external oil shock to wake up our decision makers. The 1st phase of peak oil which – together with the problem of a global debt mountain – triggered the financial crisis was obviously not enough.

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