Sunday, December 09, 2012

“Peak Oil” is Nonsense… Because There’s Enough Gas to Last 250 Years.

The title is a condensate of the latest rendition from Nigel Lawson, who served Margaret Thatcher’s government, both as Secretary of State for Energy and as Chancellor of the Exchequer. In a recent interview, published by the Daily Mail (http://www.dailymail.co.uk/debate/article-2244822/Thought-running-fossil-fuels-New-technology-means-Britain-U-S-tap-undreamed-reserves-gas-oil.html), Lord Lawson makes various assertions, each of which invite some consideration and question. At bold face, his conclusions confound the difference between a resource and a reserve. Furthermore, they ignore the fact that it is not the quantity available, but the rate at which it may be recovered - and this not only as a technical but economic reality (this is the “reserve”) – which is the determinant of whether and when oil or gas will “peak”.

As an example where the former but not the latter criterion holds, we might say that it is technically feasible to mine minerals from the moon, and bring them back to earth, but in economic terms, the prospect is unrealistic. However, it is the inclusion of all known, proved, probable and theoretical, that is reckoned-up as a resource, not only ignoring technical and economic factors, but the uncertainty of whether the material is there to be had in the first place. A useful analogy for the relationship between the amount in the reserve, and how quickly it may be recovered, is that it is not the size of the tank but the size of the tap that matters.

No sensible person that I am aware of, is saying that oil or gas is going to “run out” any time soon. I give a talk entitled “What happens when the oil runs out?”, but I begin by explaining that this is not going to happen, and we will be producing oil for decades to come. That noted, continuing to produce oil at the present rate of 30 billion barrels every year is unlikely to be possible for very much longer. At some point, reckoned to be around now, conventional crude oil production will reach a maximum, and then fall relentlessly. It must – this is the nature of a finite reserve. In principle, so long as that “hole” in the output of crude oil can be filled from alternative, unconventional sources, all is well, but once the loss of conventional production exceeds the provision of the latter, the overall sum will pass into the negative; in other words, global oil production will have peaked.

Lawson begins with mention of the extraction of gas and oil from shale by hydraulic fracturing (frac’ing, for the purists, but more commonly designated as fracking). He is entirely correct that it is new technologies – horizontal drilling combined with fracking – that have brought the cost down sufficiently that exhuming gas and oil from such inaccessible reservoirs is now both practically and economically viable. In principle, shale gas can be recovered all over the world, although until an actual well is drilled, there remains speculation as to how much gas there is and indeed its quality; for example, from several shale wells in Poland, came a gas that was so heavily contaminated with nitrogen that it wouldn’t burn. It also contained high levels of hydrogen sulphide, and removing both these other gases to leave pure methane would be extremely costly. That noted, because production from shale wells, of either gas or oil, tends to decline quite rapidly, down to perhaps only 20% of the initial rate within 2 years, more wells must be drilled year on year, to maintain the overall output of a field, and this rate must be elevated to raise gas production, as is sought. Ultimately, the scheme must run up against material limits to the levels of financial investment, infrastructure, equipment and trained personnel that can be brought to bear in the effort.

As to how much shale gas the United States has, claimed in the media as sufficient to last for 100 years, detailed inspection of the available figures reveals this to relate to a resource – i.e. the most optimistic set of accounts – while the reserve (proved plus probable) is more like 20 years worth. Given the known reserves of shale oil, and  the expected production from it over the next few years, it is difficult to see how the U.S. will overtake Saudi Arabia, to don once more its crown as the world’s greatest oil-producing nation, which would mean an output of about 11 million barrels a day, up from just under 6 mbd currently, by 2017. In the tally of “oil” is included other “liquids”, including biofuels, natural gas plant liquids and refinery gains, which compromise the truth, since they have different properties from crude oil - in particular, a lower energy density.

Unsurprisingly, oil shale gets a mention, for which it is claimed there is three times as much “oil” under the U.S. as has been used in the past 100 years. Yes, it’s that resource thing again. It is probably worth stressing that oil shale is not the same thing as shale oil. Shale oil (tight oil) is actual crude oil that if recovered, e.g. through horizontal drilling and fracking, can be refined in the normal way. However, oil shale does not contain oil as such, but a solid organic material called kerogen. To produce a material resembling crude oil requires large amounts of energy to heat the kerogen to above 300 degrees centigrade, in order to crack it into liquid form; the process also uses large amounts of freshwater, and churns-out an equal volume of contaminated, wastewater which must be dealt with responsibly.

There is, as yet, no commercial scale production of oil from “oil shale”, and there may never be, since it takes almost as much energy to get oil from it as will be delivered by the oil itself, i.e. pointless. The returns are better on “oil sands”, maybe 3 to 1, in energy terms - once the material has been “upgraded” to provide a liquid fuel - but here too, vast quantities of water are needed, and sufficient energy is required to extract the bitumen in the first place, that installing nuclear reactors in such locations is being considered seriously as a source of heat, currently generated  by burning natural gas.

Lawson concludes, “Today, oil, gas and coal represent 80 per cent of the global energy mix. They will continue to dominate the world’s energy markets for decades to come. And within that picture, natural gas is going to offer the cheapest way to produce electricity: cheaper than nuclear energy and massively cheaper than renewables...”. He’s obviously forgotten about climate change.

15 comments:

Justin said...

This emerging belief that shale gas has removed the fossil fuel constraint (and if you believe the likes of Dieter Helm) has removed the necessity to fast track renewables) drives me nuts. Even Obama appears to subscribe to such nonsense, pace his comments on 100 years of gas. I blogged about this some months back here:

http://climateandrisk.com/2012/02/10/shale-gas-part-iv-obama-and-the-pipe-dreams-of-presidents/

Chris Rhodes said...

Nicely put, and the comment too makes a very insightful case. I've just posted something related on my blog http://ergobalance.blogspot.co.uk/2012/12/lord-nigel-lawson-in-daily-mail-peak.html in relation to Nigel Lawson's latest outpouring in The Daily Mail. These are very dangerous ideas - in fairness, Lawson isn't the only one coming out with this nonsense - but they reflect a fundamental crisis in misunderstandings about the matter of oil production. I note that your figures are even more pessimistic than mine, i.e. 11 years worth of "proved" reserves, although there will probably be more gas recovered, as you say, to make that 23 year figure that I was thinking of.

Matthew Ritchie said...

I was at your talk on What do we do when oil runs out talk at Cafe Scientifique in Guildford. I would like to use your figures and images to push the word out further via my blog. At Uni I did electronics but within that was a course on Alternative Energy. From then my mind has been captured. Alas my dissertation was building and evaluating an electric motorbike and since finishing my studies I designed (from web instructions)(heavily altered) a 2.3m diameter set of blades. Cost curtailed the final hub and generator though not to mention the mast etc.

I really ask, because I think these numbers etc need to be shared more so to change minds...

Oh yup, I played Devils Advocate :) on the night. But in my defense, Tom Clancy and Steven King got there before me.

Matthew John Ritchie

Open enterprise community.com

Chris Rhodes said...

Hi Matthew,

good to hear from you. No, "devil's advocate" is always fine... you were the guy talking about biological weapons to reduce the human population, right? Well, it's a thought!

I have some issues over "ownership" of a number of the slides, but I can send you the attached which at least are mine and have "numbers" etc. I presume you will attribute them to me, if you use them on your blog or elsewhere?

Can you give me an email address to send them to?

Regards,

Chris

Sandra Cass said...

Excellent summary of reality. My only minor quibble is your assertion that horizontal drilling and hydro fracturing have kept the price down and made the shale plays economical. We have practiced both technologies for decades. They are not cheaper. The thing that made the shale plays temporarily economical is simply the high price of oil - which comes from the inexorable slowdown in conventional oil production worldwide.

LeftLibertarian said...

I think he should go ahead and fill up his automobile with naturalgas and let us know how it goes.

Matthew Ritchie said...

Hi Chris

Yes that was me. I just remembered watching `The Day the Earth Stood Still` on Sunday evening, we may never know if such a scenario would play out.

I'm currently reading The New Industrial Revolution by Peter Marsh and the current chapter is very much along the line of your talk. The Environmental Imperative. It is good to read what some big companies are actually trying to do to reform their methods of manufacturing.

My email devils advocate@open enterprise community.com well any email going to any of my URLs will come direct to me :) via google . I'll keep an eye open on my mobile telephony device.

I will certainly provide links to your blog website and book, by all means

Gratefully

MatthewJohnRitchie

Chris Rhodes said...

Hi Sandra,

do you know off-hand what the EROEI is for shale gas or shale oil extraction? I've seen figures of 6, but they seem to vary quite a lot depending one exactly the procedure is being done, and how the costing is made.

I know that actual conventional C plus C production has been pretty much flat for the past 7-8 years, and light crude peaked in 2005. The current reference to "liquids" obfuscates the reality, and I wonder if that is a deliberate plan?

Regards,

Chris

Chris Rhodes said...

I like the suggestion by LeftLibertarian that Lord L should fill-up with gas, because this alludes to the nitty-gritty of the task that would be needed to convert the vast fleet of vehicles to run on natural gas rather than liquid fuels refined from crude oil.

Even if we take the "100 years worth of gas" for the U.S. figure as being true, if the gas is used to replace coal in power stations and to run heavy vehicles alone, the figure falls massively, to about half that; and if the amount of gas is really only 20 years worth or so, any claims to an imminent "energy independence" are hardly credible, since that amount of gas would be got through in a little more than 10 years - and that's even if the engineering could be done to convert power stations and trucks to run on gas, rather quickly.

Regards,

Chris

Anonymous said...

"The bottom line is that, contrary to the peak oil fantasists, fossil fuels are going to become more available, not less."

Wow, what BS that article is...who is backing that kinda nonsense?

Ken
S/V Trim

Chris Rhodes said...

Not sure if you mean that I'm writing BS or the Daily Mail is, Ken.

But taking the statement you have in italics at face value, Peak Oil is not the same as Peak Fossil Fuel. I have no doubt that fossil fuels - coal, gas (conventional and shale), and oil (conventional and the various unconventional sources) - has yet to peak.

Peak oil is the year of maximum production of conventional crude oil. Once this - the cheap and easily got stuff - peaks, an enlarging hole in production will occur.

Whether or when overall oil production peaks depends on whether that hole can be filled by the unconventional sources.

The timing of this will determine if conversion over to gas for transportation can be done in time to avoid any inconvenience. That said, since we are principally talking about a crisis in liquid fuels, moving the world's billion road vehicles over to run on gas is likely to be a considerable and lengthy undertaking.

This chart was drawn-up by the EIA 3 years ago: http://www.resilience.org/stories/2012-12-09/the-one-chart-about-oil-s-future-everyone-should-see

And if anyone is backing Lord L. I have no idea, but no one is paying me, I can assure you of that.

Chris

Dr. Eldridge said...

Chris...you know I would never say that about you ;-)

Yeah, the Daily Mail article.

Chris Rhodes said...

Hi Ken,

I thought not! I was being a tad ironic, but for the benefit of anyone else, I stressed the main points. :-)

Chris

JohnW said...

Hello Chris,
I first heard about you while listening to George Galloway's radio show in Jne 2008 when you explained the concept of Peak Oil. I became very interested and have read your blog on & off since then.

Have you seen Thomas Pascoe's latest article and more importantly, Chapter 5 of Dr Tim Morgan's report for Tullet Prebon?

Here: http://blogs.telegraph.co.uk/finance/thomaspascoe/100022487/the-death-of-the-west-the-bad-news/

and the Morgan report:
http://www.tullettprebon.com/Documents/strategyinsights/TPSI_009_Perfect_Storm_009.pdf

Chris Rhodes said...

Hi John,

good to hear from you. Yes, that was a few years ago, just before the economic melt-down, which some argue was triggered by the massive oil-price hike.

I have the gut-wrenching feeling that Dr Morgan is probably right. The falling energy return almost certainly means that "recovery" is never going to happen. The globalised world then will unravel, and the only hope that I can envisage is that while global growth will become related to history, growth at the local level is possible. But this means the loss of the conventional global economy, and in its place a system based on (smaller-scale) community self-reliance (resilience), which is the basis of the Transition Town movement.

As Noel Coward put it, "There are bad times around the corner."

http://www.lyricsoncall.com/lyrics/noel-coward/there-are-bad-times-just-around-the-corner-lyrics.html

What is to come, scares the hell out of me. Probably I was alluding to the likely consequences of peak oil, back in 2008 to George Galloway. What I find most unnerving is how rapdily the change seems to be occurring, and the recent claims that peak oil is nonsense - because of all that can be had through fracking, oil sands, heavy oil, oil shale, etc. - are just a smokescreen to an undeniable reality.

Best wishes,

Chris