The opacity of global oil supply data and just how much oil can be counted as Proven (90-95% probability of recovery), Probable (50%) or Possible Reserves (5-10%) has heightened uncertainty and added impetus to the arguments of Peak Oil theorists and proponents.
Taken together with the sharp and sustained oil price rise, rapid industrial growth in places like China, India and other large developing countries, the rapid rise to political prominence of climate change mitigation and greenhouse gas emissions reduction efforts and associated incentives to promote alternative, renewable energy sources this has raised the uncertainty of demand for oil – and hence investment conditions – and put oil, and fossil fuel producers more generally, on the defensive. Looking at it cynically, you might say that they can cry all the way to the bank, at least for some time to come.
Villain or Scapegoat?
It would be unfair and inaccurate to paint such a picture, however. OPEC is a politically diverse group of 13 member countries whose charter precludes it from using oil as a political weapon. And though individual member’s approaches and goals for production targets vary widely, collectively it has been mindful of the organization’s leading role in the world oil and energy resource supply spectrum. Lately, OPEC is feeling somewhat victimized – certainly at least in the public eye – and underappreciated for its substantial and largely successful efforts to balance supply and demand and facilitate global economic growth and development over recent decades.
Hence, it has come out and announced its intention to make oil supply data, as well as its production and downstream refining and distribution investments, more transparent and public.
One main focus of this effort is Saudi Arabia’s sponsorship of the International Energy Forum, which endeavors to promote dialogue between oil producers and consumers through regular international meetings, and working to implement regular, standardized data gathering and reporting among OPEC’s 13 member states through the Joint Oil Data Initiative (JODI).
Has the Peak Been Reached?
OPEC in its World Oil Outlook 2007 uses a petroleum resource base estimate of Ultimately Recoverable Reserves (URR) from the U.S. Geological Survey to forecast global oil supply out to 2030.
2005 2010 2015 2020 2025 2030 (Mb/d)
Non-OPEC 49.0 54.1 56.3 57.8 58.5 58.8
of which: non-conventional 2.2 4.1 5.8 7.4 8.9 10.2
OPEC NGLs/non-conventional 4.1 5.7 6.8 7.8 8.8 9.8
OPEC crude 31.1 30.2 33.8 38.2 43.5 49.3
World 83.3 89.7 96.5 103.5 110.4 117.6
Source: OPEC World Oil Outlook 2007
To further support its contention that potential the global supply of conventional and non-conventional sources of oil are sufficient to meet anticipated growing world energy demand through 2030 and beyond (see previous post), the authors note that URR estimates have nearly “doubled since the early 1980s, from just 1,700 billion barrels to over 3,300 billion barrels, and it is probable that this upward revision process will continue.” Moreover, they point out, “cumulative production during this period was less than one-third of the increase. In addition, these figures do not take into account the large resources of non-conventional oil.”
A growing contingent of skeptics begs to disagree. In an Oct. 29, 2007 interview, Sadad Al Husseini, the former head of production and exploration at Saudi Aramco, stated that global oil production had likely reached its peak in 2006. He went on to add that forecasts made by the International Energy Agency (IEA) and U.S. Energy Information Administration that OPEC production can increase to more than 45 million barrels per day (Mb/d) are “quite unrealistic.”
The Association for the Study of Peak Oil and Gas (ASPO) in its January 2008 newsletter forecast that a peak in world oil production – including oil from non-conventional sources, such as tar sands, oil shale and synthetic, coal-to-liquid fuel – will occur in 2010.
The Times They Have A’ Changed
Optimistic about industry and governments’ ability to bring alternative energy sources on-line in the longer run – out to the dawn of the next millennium- Shell Oil’s chief executive Jeroen van der Veer nonetheless calls for a saner, more reasoned and cooperative, “Blueprints” scenario alternative to a “Scramble” for energy resources scenario in an employee memo that includes a pre-publication version of an editorial bound for the international media.
In the near- to medium-term van der Veer paints a stark picture of the current state of energy development, and related national and international policies and affairs. “Regardless of which route we choose, the world’s current predicament limits our maneuvering room. We are experiencing a step-change in the growth rate of energy demand due to population growth and economic development, and Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand…
“As a result, society has no choice but to add other sources of energy – renewables , yes, but also more nuclear power and unconventional fossil fuels such as oil sands. Using more energy inevitably means emitting more CO2 at a time when climate change has become a critical global issue.”