Sunday, April 28, 2013

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 the same about 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.

11 comments:

St. Roy said...

Kurt:

Another great post. I was waiting for rebuttal of the Atlantic Monthly article that should be an embarrassment to the magazine's publishers.

CrocodileChuck said...

Kurt

Outstanding post; your clarity and focus in writing put mastheads like The Atlantic to shame. Thanks for all you do.

Anonymous said...

"per capita consumption of oil has risen considerably since that year."

According to:
http://pages.ca.inter.net/~jhwalsh/oilcapv3pages.pdf
Figure 1, it's been 5 barrels per year per capita since 1967.

Anonymous said...

"per capita consumption of oil has risen considerably since that year."

Also:
http://earlywarn.blogspot.ca/2011/09/peak-oil-per-capita.html

fpteditors said...

Another problem with methane hydrates: landslides. Don't forget, Japan is a mountain. If you lived on top of a mountain would you dig huge holes in the sides?

Kurt Cobb said...

Regarding per capita oil consumption, I relied on charts of others rather than doing my own calculations. Doing the calculations now, here's what I come up with:

U.S. Census estimates put the world population at mid-year in 1967 at 3,490,051,163. The population at mid-year in 2011 was estimated at 6,940,712,355. The BP Statistical Review of World Energy reports total world liquid fuel production for 1967 as 35.541 million barrels per day. For 2011 it was 88.034 mbpd. Multiply both numbers by 365 to get the yearly total and then divide by the population and you get 3.7 barrels per capita in 1967 versus 4.6 barrels per capita in 2011 which is a 24.6 percent increase.

Whether you regard this as considerable, it still resulted in a vast increase in the demand for liquid fuels.

(I was unable to get appropriate data on crude plus lease condensate for both years which is my preferred way to measure true oil production since the lease condensate actually enters the petroleum production stream. This is unlike natural gas plant liquids which are included in measures of total liquid fuels. The plant liquids by definition do not enter the petroleum production stream though some of them can be used in a very limited way as substitutes for certain oil products.)

Anonymous said...

Kurt, "We will never run out of oil" is directly from Morris Adelman. He was considered to be a the dean of the resource economists. His reason for saying this was that there will always be a substitute for resources that become scarce. This of course is a weakness of economic theory. It rests on the observation that there have been substitutions in the past, and for this reason the principle of substitution has become part of economists' dogma. They are ignorant of the laws of thermodynamics and the fact that energy is the master resource. Although most will not name what will be substituted for fossil fuels, there are few who recognize that solar energy is the only possible substitute for continued life on the planet. But then they ignore who long it takes for solar energy to grow into as sizable part of our energy mix. I would guess that it will take 40 years, based on what happened in the past for coal, oil, and natural gas. Unfortunately, our fossil fuels will be in steep decline during the next 40 years and solar energy cannot make up for their decline.

mgillesp said...

Well, an interesting post. The general sense that we must keep increasing consumption, however, is not entirely correct. The economy must only grow greater on a GDP per capita basis to avoid the collapse of wages. A declining population could experience increasing prosperity (however distributed) with deceasing energy usage. Also, great efficiency obviously might also help. Given the political realities of our world only two things can help, lowering the birth rate, and education, which by the way go hand in hand. Thanks for the post.

Anonymous said...

Thank you Mr Cobb for going over the basics on Peak Oil.

How come people who, by training and interests, should know better --vs most who've never received formal critical thinking nor the Scientific Method courses-- can be so well-informed but so weak in imagination to follow basic laws of physics to their myriad conclusions? Which are very few, and most of them ugly.

I know personally is quite unnerving the realization that so much cultural belief is based on hubris than actual resource available in the system. But it is quite cathartic too, opening opportunities to live more fully, more ethically, and reality-based.

Another making the rounds is Ramez Naam with his new book "The Infinite Resource..."
I haven't read it, but careful in having the young and uncritical mind around you read it unsupervised. That title is just like that quote of yesteryears by The Gipper, "There are no limits to growth because there are no limits to human intelligence, imagination, and wonder." Hearing that as a child was amazing but it took me too long to put it in its proper context. Time that should've been better spent in actual training to reality, it was a huge delay.

Icarus62 said...

"Modern global society has become like a shark. It either keeps barreling forward or it dies."

Excellent analogy.

Anonymous said...

Not Quite --

"The only true metric of energy abundance: The NET rate of flow"
Looking at the gross energy flow does not tell you what is available to society. When we start approaching 1:1 we will only be digging holes to get energy to dig more holes, nothing left for society at large.