Saturday, August 27, 2011

Potholes on the Road to Peak Oil

What did Hubbert and Simmons miss?
Hubbert came out with the whole concept and Matt Simmons really popularized it five to six years ago. What’s important to understand is it didn’t take into account the unconventional potential and the improvements in technology. Unconventional oil and gas projects like the oil sands in Canada and the shale projects in the US are all now major sources of oil and gas, whereas 20 years ago they were concepts or in early-stage development. Five years ago, no one thought that there would be unconventional shale production in Europe. Well, it’s starting now and that’s going to change the energy dependence of European countries on Russian natural gas.

What’s important to understand is that there is new technology coming on board that ten years ago wasn’t even conceptualized yet; now they’re producing, and in 20 years who knows what there will be. An investor must be aware of the changes, but also be careful not to get caught investing in someone’s science project. _Marin Katusa _ on _ HoweStreet
Al Fin energy analysts say that the biggest problem with the idea of peak oil, is that no one can agree on its definition. That makes it quite difficult to discuss intelligently, since it has become such a vapourous circular tug.

Which is in control: Supply or Demand?
This reality of "peak oil is already here" is presently not a supply-side phenomenon, but is demand driven...

..."Stranded" gas and unconventional gas are abundant. These are the two rational fossil energy great hopes. Oil will stay expensive, in all probability, but gas will certainly get cheaper. New gas resources and supply are given massive coverage by the IEA - and the EIA has no ideological problems with this particular IEA policy stance !

The real world shows no hint of looming peak gas. Supplies have gone through the roof, only since 2008, due to increasing development of massive "stranded" or gas-only fields such as Russia's Shtokman field and Iran's Pars field, and particularly because of new technology for releasing gas trapped in tight shale formations. Shale-based gas production, usually from resources located more than a mile underground, uses hydro fracturing to release the gas - to be sure with relatively frequent but controllable waterbody pollution of "frac job" chemicals and wastes.

Due to at least 40 percent of world oil being used only in transport (and most of this in land and ocean transport), gas substitution is the clearest, simplest, most rational energy policy change that is needed. _MarketOracle
The author of the Market Oracle piece doesn't discuss gas-to-liquids (GTL), but new technologies of GTL (plus CTL, BTL, KTL etc) are likely to tear up the peak oil highway with a vengeance.

Peak manpower: the sobering reality of limitations of conventional energy supplies.
...large accumulations of oil are getting harder and harder to find. They are in more remote locations, more challenging areas. That is also requiring more sophisticated technologies and more and more intellectual power to be invested in being able to identify where those resources are. When discoveries are made, these challenges only get bigger. It becomes a question of how to ultimately get these resources to market to feed the world's energy demand. So the peak is really a combination of one, making those new large discoveries (is more difficult), requiring more investment, more technology, more human intellectual capacity to find that oil, and two, rise in prices as a consequence. If it takes more capital, more people, more time, to produce the hydrocarbons the world needs then the ultimate impact of the peak will be higher prices in order to maintain the balance between supply and demand. Prices will have to go up to attract the financial capital, attract the technology investment and the people to define, develop and deliver the energy needs. _Brad Lingo Interview at OilVoice
The manpower shortage is not just about growing shortages of skilled oil field workers, engineers, geologists, and managers. It is about the growing shortages of skilled workers, engineers, and managers in all of the many fields which support and supply the oil industry. This growing crucial shortage is a reflection of a global demographic crisis, which is covered frequently at the Al Fin blog.

Have the Peak Oil theories all been proven wrong?
As far as the problem of drilling oil and gas at economic rates is concerned, technology has come handy. With the help of horizontal drilling and other innovations, shale gas production in the United States has skyrocketed from virtually nothing to 20% of the US natural gas supply in less than a decade. By 2040, it could account for more than half of it. Further when it comes to onshore oil production, the peak oil theories have all been proven wrong. _EquityMaster
Unfortunately, peak oil theories are harder to pin down than the HIV AIDS virus. Slippery and amorphous, as labile as a borderline personality crack whore. There is no definition of peak oil that can stand on its own, although every peak oil believer thinks that he understands what he spends so much time and emotion arguing about. And the more definitions which are piled on, the more amorphous the conceptual structure becomes.

The simple truisms that: 1. The world has only a finite supply of mineral resources, and 2. Oil fields begin to deplete as soon as production begins, appear to be the subconscious foundations of peak oil belief. But are these trite and obvious axioms solid enough to support the alarmism and rampant doomism which rolls along with the peak oil convoys?

You have to decide that for yourself.



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