Many signs of peak oil and decline

Preface.  Recently the IEA 2018 World Energy Outlook predicted an oil crunch could happen as soon as 2023.  Oil supermajors are expected to have 10 years of reserve life or more, Shell is down to just 8 years.

Political shortages are as big a problem as geological depletion. At least 90% of remaining global oil is in government hands, especially Saudi Arabia and other countries in the middle east that vulnerable to war, drought, and political instability.

And in 2018, the U.S. accounted for 98% of global oil production growth and since 2008, the U.S. accounted for 73.2% of the global increase in production (see Rapier below).   What really matters is peak diesel, which I explained in “When trucks stop running”, and fracked oil has very little diesel, much of it is only good for plastics, and yet America may well be the last gasp of the oil age if production isn’t going up elsewhere.

Related

2019. When will ‘peak oil’ hit global energy markets? dw.com.  Darren Woods, CEO of ExxonMobil predicts a 25% rise in global energy demand for the next two decades, due to “global demographic and macroeconomic growth trends. When you factor in depletion rates, the need for new oil grows at 8% a year,” he told analysts in March.

Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer, Barriers to Making Algal Biofuels, and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Derrick Jensen, Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report

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Clearly the depth of wells we need to drill show we are reaching peak oil production:  2019-11-19 The Truth About The World’s Deepest Oil Well

How deep into the ground do we have to go to tap the resources we need to keep the lights on? How deep into the ground are we able to go? 

The first oil well drilled in Texas in 1866 was a little over 100 feet deep: the No 1 Isaac C. Skillern struck oil at a depth that, from today’s perspective, is ridiculously shallow.

Ten years ago, data from the Energy Information Administration shows the average depth of U.S. exploration oil wells was almost 7,800 feet. It’s safe to assume that over these past 10 years, the average well depth has only increased.

The Bertha Rogers No 1 natural gas well in the Anadarko Basin used to be the deepest in the world, at over 31,400 feet. Unfortunately, at this depth the drillers struck liquid sulfur, which put an end to plans to continue drilling.

BP’s Tiber field in the Gulf of Mexico, drilled by the infamous Deepwater Horizon, became the location for the deepest oil well. The Tiber well’s depth was more than 35,000 feet.

There is also a record-breaker in terms of water depth: Maersk Drilling’s Raya-1 well offshore Uruguay was drilled in water depths of 3,400 meters or 11,156 feet.

2019-10-27 The Biggest Oil & Gas Discoveries Of 2019

Conventional oil and gas discoveries have fallen to their lowest in 70 years.  All in all, this year has seen new discoveries of nearly 8 billion barrels of oil equivalent, compared to 10 billion barrels of oil equivalent discovered last year, so only one barrel out of every six consumed is being replaced with new resources. 

Not only has the pace of discovery declined, but discoveries are also in much more challenging geological venues and typically offshore, which means it could take many years just to bring new resources online. 

The age of discoveries onshore is over. The future game of discovery is decidedly in deep waters.

2019-6-10 World crude production outside US and Iraq is flat since 2005

Alice Friedemann   www.energyskeptic.com  author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report ]

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Rapier, R. 2019. The U.S. accounted for 98% of global oil production growth in 2018. Forbes.

Earlier this month BP released its Statistical Review of World Energy 2019.   The U.S. extended its lead as the world’s top oil producer to a record 15.3 million BPD (my comment: minus 4.3 million BPD natural gas liquids, which really shouldn’t be included since they aren’t transportation fuels).  In addition, the U.S. led all countries in increasing production over the previous year, with a gain of 2.18 million BPD (equal to 98% of the total of global additions),… which helped offset declines from Venezuela (-582,000 BPD), Iran (-308,000 BPD), Mexico (-156,000 BPD), Angola (-143,000 BPD), and Norway (-119,000 BPD).

Peak demand?  Hardly: “the world set a new oil production record of 94.7 million BPD, which is the ninth straight year global oil demand has increased.

Matt Mushalik. 2019. World crude production outside US and Iraq is flat since 2005. crudeoilpeak.info

After 20 charts showing global oil production Matt concludes “When US shale oil peaks and Iraq can no longer increase production there will be some surprises for a complacent world which should have used the 2008 oil price shock as a warning to get away from oil – voluntarily.”

Fickling, D. 2019. Sunset for Oil Is No Longer Just Talk. Bloomberg.

An oil company that doesn’t increase its reserves eventually runs out of product to sell, so having 10 years of reserve life is traditionally considered a bare minimum for oil supermajors (for our purposes, take these to be Shell plus Exxon Mobil Corp., BP Plc, Total SA, Chevron Corp., ConocoPhillips, and Eni SpA).  Shell crossed below the 10-year level all the way back in 2016, and the figure at the end of 2018 stood at just 8.5 years.

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Williams, A. March 31, 2017. Down 10%, Mexico Oil Reserves Gone in 9 Years Without New Finds. Bloomberg.

Mexico’s existing oil reserves are dwindling so fast the country could go dry within nine years without new discoveries according to the National Hydrocarbons Commission, which said reserves fell 10.6% to 9.16 billion barrels in 2016, from 10.24 billion barrels a year earlier. Once the world’s third largest crude producer, Mexico’s proven reserves have declined 34% since 2013.

The decline in proven reserves is driven by record-low drilling activity the last three years. State-owned producer Petroleos Mexicanos drilled 21 wells last year, a record low, after averaging 31 per year since 2010.

Kaufman, A. C. 2016-10-26. Exxon Mobil could be on the brink of irreversible decline. Huffington Post.

Exxon Mobil Corp. may be facing “irreversible decline” as the oil giant fails to cope with low oil prices and mounting debt, a report released Wednesday found.The Texas-based company has suffered a 45% drop in revenue over the past 5 years as it bet big on drilling in oil sands, the Arctic and deep-sea sites ― decisions that proved expensive, environmentally risky and politically controversial.

Combined with a two-year plunge in oil prices, ballooning long-term debt to cover dividend payments to shareholders and an evaporating pool of cash, Exxon Mobil’s finances show “signs of significant deterioration,” according to new research from the Institute for Energy Economics and Financial Analysis, a nonprofit based in Cleveland.

“Investors right now are getting less cash from Exxon than they have historically, and are likely to get less cash in the future,” Tom Sanzillo, director of finance at the IEEFA, told The Huffington Post on Wednesday. “This is going to be a much smaller company in the future, and the oil industry is going to be much smaller in the future.”

In April, Exxon Mobil was stripped of Standard & Poor’s top credit rating for the first time since the 1930s. The rating agency said it worried Exxon took on billions in debt to fund new drilling projects at a time when oil prices were high. Now, with the price of crudebelow $50 per barrel, that debt looks risky. Despite S&P specifically citing such payments in its downgrade, Exxon Mobil actually increased its dividend by 2 cents the next day.

Usually, dividends go up as a company’s stock price thrives. But shares of Exxon have trailed the S&P 500 for 10 quarters in a row, the report noted, and that’s before factoring in the risks of climate change.

Exxon Mobil is embroiled in a bevy of legal fights, notably with a handful of state attorneys general who are investigating the company for spending decades covering up the role of burning fossil fuels in global warming. The firm has repeatedly insisted such probes are politically motivated, and claimed that subpoenas seeking internal documents on climate change violate its constitutional rights.

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7 Responses to Many signs of peak oil and decline

  1. Ken Barrows says:

    The only question, perhaps unanswerable. Does it take more energy to extract the next barrel of oil?

    • energyskeptic says:

      Once the EROI of oil goes below 10, social unrest will increase, and at some point long before 1:1.1 or whatever production will stop, especially if we need EROI of 12-14 to maintain civilization as we know it today. Perhaps by 8 society will be ruled by greedy ignorant Trump-like or Hitlerian leaders.

    • EnterpriseSpaceShip says:

      The only question, perhaps unanswerable. Does it take more energy to extract the [any] next barrel of oil?

      It does, to the magnitude of 1000+ to 1. That is, humans put 1000+equivalent (likely 10000e+) units of energy to extract, collect and utilise 1 unit.

      A well producing 3 BOPD (a brilliant real audit, below) is a net energy sink, given the total energy put into running it over the decades.

      The US has a million+ active oil wells. Running them wasn’t possible without drawing energy from the past: coal, n. gas, oil, earlier-built infrastructure, systems, solar for food, and imported supplies, including all past energy units put into activating the processes that made the system up and running end-to-end, tracing back to the early steam engine and the forests of middle ages Britain.

      In the 1980s, Iraq has identified that it takes 1 barrel of injected water to extract one barrel of its known-to-be easy oil (that’s why you hardly see mad-jacks going up and down in Iraq, if any, but injection pumps).

      Imagine how much more barrels of water per unit are needed now and what energy needed to extract minerals, manufacture, ship, install and run the water pumps in coal, n.gas, oil and food – drawn from Canada, Germany, Russia, Saudi Arabia, China, Australia and others – as Iraq doesn’t have an industrial base that produces even a screwdriver.

      The right hand side of Hubert’s curve should have been drawn exponentially, not linearly.

      That is when fuel is cut from the well-example below, the well stops producing any BOPD, as what it produces is not enough to running it, including sustaining humans involved.

      “No energy store holds enough energy to extract, collect and utilise an amount of energy equal to the total energy it stores.

      Energy, like time, flows from past to future”.

      https://www.oilystuffblog.com/single-post/2019/08/07/One-Mans-Junk-Is-Another-Mans-Treasure

      • Todd Cory says:

        “The right hand side of Hubert’s curve should have been drawn exponentially, not linearly.”

        indeed, we have traded increased extraction speed for a steeper rate of decline… all while population and consumption (demand) increase.

        the future will be very “dynamic”.

  2. JT Roberts says:

    Looking at the social unrest at the periphery it’s clear a contraction is already happening.

    The industrial economic system is basically a dissipative structure. At its core is the Anglo American empire that has maintained control of resources particularly energy. Those who play nice allowing their resources to be exploited to feed the machine are rewarded with power and kept in power. Anytime some country of value breaks rank they suddenly have US military occupation. Which more often or not is permanent. This works as long as growth is achievable.

    Once the system starts contracting the peripheral substructure that keep the barbarians at bay, or dare we say migrants, starts collapsing it puts pressure on the core. In a desperate attempt the core super inflates in an attempt to preserve the previous order however there is not productive gain so the costs can not be recouped so a Wall is needed.

    The system continues contracting because of the failure to recognize the sub feeders to the core. Cheap energy Cheap labor Cheap resources. By the time the core realizes that it’s protectionist stance is unbearable because it infrastructure can’t be sustained without the inexpensive replacement parts it is too weak to reinflate the structure. Overwhelmed by internal collapsing systems it expends it’s last energy equity trying to stave off internal social unrest through distractions.

    Once the lights go out everyone is left with what ever their perception was molded to think.

    For the racist whites it was immigration. To the anti Semitic it’s was the Jews. To the racist blacks it was the whites. To the extreme right it was the left. And to the extreme left it was the right.

    When it was simply time to pay the piper.

    The system simply is unsustainable and what can’t be sustained won’t be. Eventually someone has to pay for the street in front of my house.

    • Xabier says:

      Brilliant, and true, J T Roberts.

      Very few indeed will understand what happened to them, or even wish to. A systemic collapse is simply beyond the mental and emotional ability of the majority to comprehend.

      I suspect the accompanying insanity, violence and crime will be overwhelming.

      ‘For now the time of gifts has gone,
      O boys that grow, O snows that melt’……..

  3. Hamish McGregor says:

    Hi Alice,
    Thanks for another insightful article.

    Bad Link : “specifically citing” https://twitter.com/BenDWalsh/status/725394800980189184

    Missing Word : “that [are] vulnerable to war, drought, and …”