The only true metric of energy abundance: The rate of flow

Okay, I'm going to give you the shortest course ever in energy abundance: Energy abundance depends entirely on the RATE of energy flow. Let me say it again: Energy abundance depends entirely on the RATE of energy flow.

Now, here is what it does NOT depend on: supposed, but often unverified, fossil fuel reserves in the ground; hypothetical, sketchy, guesstimated, undeveloped, undiscovered resources imagined to be in the ground by governments or by energy companies and often deceptively referred to as "reserves"*; claims about future technological breakthroughs; mere public relations puffery about abundance in the face of record high average oil prices.

Why is the rate of flow the key metric? Because in order to function the global economy depends entirely on continuous, high-quality energy inputs. We cannot shut down the world's electric generating plants for six months or even three months without crashing world society into a state of irretrievable chaos and decline. We cannot shut down the world's shipping fleet for even a few weeks without doing irreparable harm. Modern global society has become like a shark. It either keeps barreling forward or it dies.

Fossil fuels that are actually proven to be in the ground are by definition not currently being used, whatever we may consider their potential. Fossil fuels that are hypothetical and undiscovered by definition cannot be used. Technology is NOT energy. Technology runs ON energy. Energy first, then applied technology. The ancient Romans designed and built small steam engines and used them to animate children's toys. But, the Romans lacked the dense energy sources needed to make steam engines practical as a mode of transportation or of power for manufacturing.

Now, why am I making such a fuss about all this? Because this week we have yet another entry in the ongoing energy misinformation derby, this time from the usually sensible Atlantic Monthly magazine. In fairness, the headline on the magazine's cover which reads "We will never run out of oil" was probably not chosen by the author for it does not really respect the nuances found in the piece which inside has the only slightly less disinformational headline: "What If We Never Run Out of Oil?" The subheading makes the astounding claim that fossil fuels may not be finite making me believe that the editors didn't actually read their own story.

The editors are, of course, trotting out the tired canard that the opposite and urgent claim that we are running out of oil is made by those skeptical about oil abundance. But, the real claim from skeptics is that the RATE OF FLOW may begin to decline sometime in the not-too-distant future. Oil will be with us for a very long time, just not at these levels of production. If the rate of flow for oil declined by half in the next 20 years, we wouldn't be running out of oil at all. We'd still be pumping about the same amount as we were in 1967, a year of exceptional economic vitality. But, we'd feel the crunch because there are twice as many people on the planet now as there were then. And, the per capita consumption of oil has risen considerably since that year.

The Atlantic Monthly article does include some dissenting voices. But Charles Mann, the author of the piece, has missed the two most crucial points about the future supply of oil and natural gas. First, new unconventional sources of these hydrocarbons are more difficult and costly to extract than conventional ones. In addition, the unconventional well flows exhibit very steep declines in their rate of production--so steep that in the tight oil fields of Texas and North Dakota drillers must replace about 40 percent of their production PER YEAR just to maintain current output. The decline rates for shale gas are no more encouraging: 79 to 95 percent after three years according to a comprehensive survey of 65,000 oil and gas wells in 31 shale plays. Shale natural gas and tight oil drillers face a task similar to climbing up a down escalator. Each must replace enormous fractions of their current production frequently just to keep production flat. A path to persistently rising global production of oil and gas far into the future cannot be built on production from such fields.

Already, the shale gas production boom in the United States has ceased as natural gas production has been flat since December 2011 despite the more than doubling of natural gas prices from their lows in April 2012. World oil production has been on a bumpy plateau since 2005. Mann seems unaware of stalled natural gas production in the United States, and he failed to take into account the total picture of oil flows. Some 60 percent of current production flows come from aging giant fields representing just 1 percent of the world's fields, and as a group they are in decline. Production from all existing oil fields worldwide is believed to be declining at a rate of about 4 to 5 percent. We are trying to make up that decline from tight oil fields that decline around 10 times faster, and we are only just succeeding for the moment. Failing to understand the centrality of flow rates is such an elementary error that it is hard to believe that the Atlantic Monthly missed it.

But there's more. The affordability of hydrocarbons will also matter greatly. Gail Tverberg has outlined in detail on her blog Our Finite World how the high price of hydrocarbons tends to suppress economic activity which then leads to a downturn that then causes oil and natural gas prices to fall due to falling demand. That fall in prices makes unconventional sources of oil and natural gas uncompetitive leading to a slowdown in their production even as production from conventional sources continues to decline. As prices rise with economic recovery, we begin the same cycle again. This suggests that there is a limit to how much of the modern economy's financial and physical resources can be devoted to extracting energy without causing an economic contraction--something that the shark-like nature of the modern financial economy cannot withstand without the kind of severe repercussions we saw in 2008.

The Atlantic article makes one more misleading claim even as the author admits to a bias formed in 1998 while working on a previous energy article. He didn't correctly foresee the promise of experiments with hydraulic fracturing that led to the shale gas and tight oil production boom. Like a racetrack junky who bet on the wrong horse in the first race, the writer doesn't want to miss the next winner. But, he makes a faulty analogy between the new form of hydraulic fracturing and current pilot projects designed to harvest natural gas from methane hydrates, essentially natural gas trapped in ice crystals, most of which lie in deep ocean sediments. A successful test that produced natural gas from this source off the Japanese coast in 3,000 feet of water and 1,000 feet below the seabed has the energy optimists atwitter with talk of virtually unlimited natural gas supplies.

But, attempts to extract natural gas from methane hydrates should more properly be compared to the search for methods to extract oil profitably from the vast oil shale deposits in the western United States. After more than a century of trying, no one has been able to produce oil commercially from these deposits. It may happen someday at much higher prices and in very limited quantities given all the constraints. Not the least of those constraints is the water necessary to process what is not actually oil, but kerogen, a waxy, long-chain hydrocarbon that requires considerable energy and water to convert into what we call oil. Even the ever optimistic U.S. Energy Information Administration projects that by 2030 these deposits may produce only 140,000 barrels a day of what will essentially be synthetic oil. That compares to current world consumption of around 75 million barrels per day of crude oil plus lease condensate (which is the definition of oil).

As for methane hydrates, researchers have tried for decades to figure out how to extract the methane profitably and without causing the occasional explosion--a hazard encountered by companies drilling for conventional deepwater gas when they hit hydrates on their way to sought-after conventional reservoirs. As with oil shale, there are known methods now for extracting these gaseous hydrocarbons from methane hydrates. The remaining questions for both oil shale and methane hydrates are similar: How high must prices go before extraction of either will be profitable? So far, the answer is higher than what people will pay and therefore what the economy can stand. And, at what rate will we be able to get these resources out? Rate is the crucial question.

When it comes to oil shale, we know where it is. It's just that it costs so much to extract and process that we are not producing it commercially. When it comes to methane hydrates, however, we do not even know if the deposits are numerous enough or concentrated enough to make substantial commercial production possible. To pin our hopes on this has the makings of dangerously foolish energy policy.

I am not attempting here to address the climate implications of natural gas production from methane hydrates and shale, nor those of oil extraction from tight oil deposits or oil shale (kerogen). Needless to say, if the optimists somehow turned out to be right, burning all these hydrocarbons would lead to almost certain climate catastrophe. But, we are in bad enough shape as it is without compounding inaction on climate change with a misdiagnosis of oil and natural gas supplies.

Despite our best efforts, we have only just been able to keep oil supplies from declining in the last seven years. Despite (possibly exaggerated) claims that we have more oil reserves than ever, we need to remember that the rate of flow, that is, our daily consumption, has grown by a factor of eight from 1950 to the present. And, half of all the oil ever consumed has been consumed since 1985. The available reserves may be large, but they are being consumed at such a colossal rate that supposedly record reserves have been unable to lift that rate appreciably above a plateau that started in 2005. The result has been record average prices for oil worldwide for two years running. Rate is and always will be primary in evaluating our energy wealth.

While natural gas supply worldwide is likely to grow for a time, the cost of this new supply--especially if most of it comes from shale deposits and possibly methane hydrates--will be far higher than the optimists would wish. And, that has the kind of implications cited above for affordability and thus demand.

We seem to have hit a double wall that is both financial and physical when it comes to the flow of oil and natural gas. If we remain ignorant of the first principle of energy abundance, that flow rates are the key metric, then we will be doomed to bad energy policy and other serious consequences that flow from that ignorance.

*Reserves are properly defined as resources that can be extracted from known fields using existing technology and sold profitably at today's prices. Reserves are thus a tiny fraction of "resources," the estimates for which are actually vague, sketchy guesses about the amount of a substance present in the Earth's crust in a given area.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he writes columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin, The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Scientific viewpoint or 'religious' belief: My cat explains energy optimism

Each morning when I release my cat from the basement where he sleeps, he rushes to the upstairs bathroom to drink water from a bowl placed there for him. He appears to have a 'religious' belief that the water in this bowl is far superior to that in the bowl sitting alongside his food in the basement. So far as I can tell, there is no discernible evidence available to him to make this distinction. I take his preference then as a matter of faith rather than evidence. The water upstairs is holy. The water in the basement—not so much.

How do I know that the upstairs water is really holy? When I forget to fill the upstairs bowl, the cat complains even if his basement bowl is full. It is hard enough to reason with a cat, but even harder to argue one out of what is essentially a religious belief.

And so it is with humans. Some ideas find their basis in fact, while others fall under the category of faith. As it turns out, those that are faith-based are the most difficult to overturn. I rarely try. But, then there is a vast sea of ideas parading as facts, when really, these 'facts' are nothing but ideology based on ideas that are empirically false or at least suspect.

Such is the ideology of the fossil fuel optimists who tell us that the marketplace will bring forth whatever fossil fuel supplies we need when we need them at prices we like. Some, but not all, tell us that fossil fuel supplies have no practical limits because it is our imagination that brings them out of the ground. Statements like that are part and parcel of the kind of magical thinking that infects the public discussion about the future of energy.

I style myself as an energy realist with an emphasis on risk management. No one can know the future. That's why it is important to use our imagination to picture outcomes that might hurt us badly and to suggest measures to prevent or mitigate those outcomes.

The fossil fuel optimists in the world tend to be economists, not geologists (who generally take an empirical rather than religious approach to matters). Those economists simply know that they know that the marketplace is a superior force—even a god-like one—to which we should exclusively entrust our energy future. Yet, that same marketplace has failed to yield enough crude oil in the last decade to provide the cheap energy that keeps the global system stable. In fact, the record price of oil has and continues to be a destabilizing force in global affairs.

My colleague Jeffrey Brown—who back in 2006 conceived the Export Land Model and through it correctly foretold the subsequent decline in global oil exports and the accompanying price rise—recently remarked that many of the optimists believe something which defies logic. They believe that the sum of production from discrete oil wells, oil fields and oil producing countries around the world—which provide innumerable examples of peak production followed by persistent declines—will never add up to a global peak and decline in oil production—ever! Oil production will grow at some percentage each year forever, indefinitely.

In fairness, I must point out that quite a few of the other optimists say that a peak in oil production is decades away. So, at least their case does not rest on a logical impossibility imposed on a finite Earth. But, they refuse to admit that no one knows the day when oil production will peak. And, the inescapable logic of their position is this: If world oil production will someday peak and decline, the risk of a decline grows with each day. Failed peak oil predictions of the past don't mean that peak oil is wrong, only that peak oil draws ever closer. The bumpy plateau in oil production proper (crude oil plus lease condensate) since 2005 ought to be cause for alarm.

Now, I should classify those economist/optimists so that their motives become more transparent. There are those who work directly for or as consultants to the oil industry. Enough said. There are those who work for Wall Street firms that do substantial business with the oil industry. Enough said. There are those who work in government all around the world. Here it can only be said that most of the world's governments have no plausible plan for addressing the consequences of a persistent decline in world oil production. So, given that, it hardly seems advisable to them to inform the public about a danger for which there is no response.

The optimists associated with the oil and financial industries will tolerate no dissent. Those of us who want a rational discussion about logical outcomes, prudent risk management and sound public policy are to be ridiculed and shouted down as heretics. In fact, those optimists are currently engaging in a public relations blitz designed to drown out dissenting voices and make people think the following: "I'm hearing that we have a lot more oil from a wide variety of credible sources: energy analysts and consultants, oil industry executives, think tank scholars, university academics, even government energy agencies. How can they all be wrong?"

But the simple truth is that—except for the government personnel—they are paid directly by the industry or have financial ties to it through donations to think tanks and grants for academic research. The government personnel get most of their information from the industry, so it is not surprising that they share the industry's view.

Keep in mind that the work that the optimists do on Wall Street and in the oil industry is focused specifically on making rich people richer—that is, the rich who own and run the oil industry and the rich who own, run and/or prosper along with Wall Street and all financial establishments worldwide. These optimists are not paid to think about the public good, but only to search out speculative profits and stoke speculative fevers for the advantage of their benefactors. Their pronouncements about energy or practically any other subject are not made for the sake of good policy, but for the sake of high profits.

If there is room for optimism about energy, logic tells us that it simply cannot lie with finite, depletable resources. We do know that the resource of sunlight is vast. The solar radiation which strikes the Earth over just 20 days is equivalent to all the energy in known reserves of coal, oil and natural gas. But, so far, we have only been able to harvest just a tiny amount of it for human purposes. While there are environmental impacts to large solar and wind installations (and, let's not forget that wind is just another form of solar energy), the energy source, the Sun, is on any human time scale inexhaustible.

As a practical matter, we would have to reduce our energy consumption drastically over time to make it possible for renewable energy to supply the lion's share of our needs. Even a very rapid and large build-out of renewable energy infrastructure would not allow us to consume the colossal amounts of energy that we do today, at least not any time soon.

But, we know how to reduce our energy consumption considerably. I always get a rise out of American audiences when I tell them that the average European lives on one-half the amount of energy of the average American. And, it's worth noting that oil consumption for Japan, Germany, and Italy has been in persistent decline since 2000. But, even in these countries, there is much more to be done.

It matters little whether my cat ever comes to the realization that he's getting the same water upstairs as he is in the basement. His 'religious' belief in upstairs water does no harm to him and inconveniences me only on rare occasions. But the religious devotion of the energy optimists to the oil abundance story and their campaign to prevent a reasoned discussion based on the facts and logic has the potential to harm us all very badly and soon.

The future of energy is not a parlor game or a poker match. It's dead serious business. The oil industry and its spokespersons in their various garbs are taking it seriously. Are you?

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he writes columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin, The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

No post this week

A combination of computer-assisted difficulties and feline health problems have conspired to prevent me from finishing the piece I planned for this week. See you next week.

Aging giant oil fields, not new discoveries are the key to future oil supply

With all the talk about new oil discoveries around the world and new techniques for extracting oil in such places as North Dakota and Texas, it would be easy to miss the main action in the oil supply story: Aging giant fields produce more than half of global oil supply and are already declining as a group. Research suggests that their annual production decline rates are likely to accelerate.

The most recent research on giant oil fields has been available since 2009 so it doesn’t attract media attention the way new discoveries hyped by oil company public relations departments do. And yet, that research is far more important to understanding our oil future.

Here’s what the authors of “Giant oil field decline rates and their influence on world oil production” concluded:

1. The world’s 507 giant oil fields comprise a little over one percent of all oil fields, but produce 60 percent of current world supply (2005). (A giant field is defined as having more than 500 million barrels of ultimately recoverable resources of conventional crude. Heavy oil deposits are not included in the study.)

2. “[A] majority of the largest giant fields are over 50 years old, and fewer and fewer new giants have been discovered since the decade of the 1960s.” The top 10 fields with their location and the year production began are: Ghawar (Saudi Arabia) 1951, Burgan (Kuwait) 1945, Safaniya (Saudi Arabia) 1957, Rumaila (Iraq) 1955, Bolivar Coastal (Venezuela) 1917, Samotlor (Russia) 1964, Kirkuk (Iraq) 1934, Berri (Saudi Arabia) 1964, Manifa (Saudi Arabia) 1964, and Shaybah (Saudi Arabia) 1998 (discovered 1968). (This list was taken from Fredrik Robelius’s “Giant Oil Fields -The Highway to Oil.”)

3. The 2009 study focused on 331 giant oil fields from a database previously created for the groundbreaking work of Robelius mentioned above. Of those, 261 or 79 percent are considered past their peak and in decline.

4. The average annual production decline for those 261 fields has been 6.5 percent. That means, of course, that the number of barrels coming from these fields on average is 6.5 percent less EACH YEAR.

5. Now, here’s the key insight from the study. An evaluation of giant fields by date of peak shows that new technologies applied to those fields have kept their production higher for longer only to lead to more rapid declines later. As the world’s giant fields continue to age and more start to decline, we can therefore expect the annual decline in their rate of production to worsen. Land-based and offshore giants that went into decline in the last decade showed annual production declines on average above 10 percent.

6. What this means is that it will become progressively more difficult for new discoveries to replace declining production from existing giants. And, though I may sound like a broken record, it is important to remind readers that the world remains on a bumpy production plateau for crude oil including lease condensate (which is the definition of oil), a plateau which began in 2005.

One the clearest cases of the study’s key finding is Mexico’s Cantarell oil field, the second most productive in the world, until a steep decline began in 2004. Production from Cantarell stalled in the early 1990s leading Petroleos Mexicanos (PEMEX), the Mexican national oil company, to begin an aggressive drilling campaign and to build what at the time was the largest nitrogen extraction plant in the world. Once completed, the plant captured nitrogen from the air and injected it into the Cantarell field in order to counter falling pressure.

The result was a dramatic rise in production from about 1 million barrels per day (mbpd) in 1995 to above 2 mbpd in 2003, just two years after the nitrogen injection began. But, by the end of 2005 it was evident that Cantarell was in decline. What followed was a breathtaking slide from 2.136 mbpd in 2004 to just 394,000 barrels per day as of March this year. That’s a total decline of 81 percent in just over eight years.

PEMEX has stabilized total Mexican oil output from all fields at about 2.5 mbpd—it was 3.4 mbpd at Cantarell’s peak—by successfully increasing production from its Ku-Maloob-Zap offshore field. But once again the company is using nitrogen injection to achieve the increase just as it did at Cantarell. And so, PEMEX may be on course to repeat at Ku-Maloob-Zap the rapid decline previously experienced at Cantarell.

Four years on from the 2009 study it is possible that the percentage of world oil production from the giants has slipped as just enough production from new smaller fields has been added to keep global production flat. But if, as the study suggests, the decline rate for giant fields accelerates, the record-breaking expenditures and herculean technical efforts now being undertaken by the oil industry just to keep production flat may be overwhelmed.

Perched on a production plateau, either we are approaching ever closer to a decline in worldwide production of crude oil proper or new developments—that is, ones not yet in evidence—will boost the global rate of production definitively above the current plateau. The weight of the evidence, however, suggests an unfavorable outcome in the decade ahead.

UPDATED 4/9/13: After mysteriously disappearing, the missing PEMEX production report which included the latest production rate from the Cantarell oil field has returned to the company's website. I've now provided a link above.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he writes columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin, The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.