IEA Projections and Peak Oil Politics

[wintler2]

WikiLeaks cables: Saudi Arabia cannot pump enough oil to keep a lid on prices
US diplomat convinced by Saudi expert that reserves of world's biggest oil exporter have been overstated by nearly 40%

* John Vidal, environment editor
* guardian.co.uk, Tuesday 8 February 2011 22.00 GMT


The US fears that Saudi Arabia, the world's largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.

The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%.

The revelation comes as the oil price has soared in recent weeks to more than $100 a barrel on global demand and tensions in the Middle East. Many analysts expect that the Saudis and their Opec cartel partners would pump more oil if rising prices threatened to choke off demand.

However, Sadad al-Husseini, a geologist and former head of exploration at the Saudi oil monopoly Aramco, met the US consul general in Riyadh in November 2007 and told the US diplomat that Aramco's 12.5m barrel-a-day capacity needed to keep a lid on prices could not be reached.

According to the cables, which date between 2007-09, Husseini said Saudi Arabia might reach an output of 12m barrels a day in 10 years but before then – possibly as early as 2012 – global oil production would have hit its highest point. This crunch point is known as "peak oil".

Husseini said that at that point Aramco would not be able to stop the rise of global oil prices because the Saudi energy industry had overstated its recoverable reserves to spur foreign investment. He argued that Aramco had badly underestimated the time needed to bring new oil on tap.

One cable said: "According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described, and the timeline for their production not as unrestrained as Aramco and energy optimists would like to portray."

It went on: "In a presentation, Abdallah al-Saif, current Aramco senior vice-president for exploration, reported that Aramco has 716bn barrels of total reserves, of which 51% are recoverable, and that in 20 years Aramco will have 900bn barrels of reserves.

"Al-Husseini disagrees with this analysis, believing Aramco's reserves are overstated by as much as 300bn barrels. In his view once 50% of original proven reserves has been reached … a steady output in decline will ensue and no amount of effort will be able to stop it. He believes that what will result is a plateau in total output that will last approximately 15 years followed by decreasing output."

The US consul then told Washington: "While al-Husseini fundamentally contradicts the Aramco company line, he is no doomsday theorist. His pedigree, experience and outlook demand that his predictions be thoughtfully considered."

Seven months later, the US embassy in Riyadh went further in two more cables. "Our mission now questions how much the Saudis can now substantively influence the crude markets over the long term. Clearly they can drive prices up, but we question whether they any longer have the power to drive prices down for a prolonged period."

A fourth cable, in October 2009, claimed that escalating electricity demand by Saudi Arabia may further constrain Saudi oil exports. "Demand [for electricity] is expected to grow 10% a year over the next decade as a result of population and economic growth. As a result it will need to double its generation capacity to 68,000MW in 2018," it said.

It also reported major project delays and accidents as "evidence that the Saudi Aramco is having to run harder to stay in place – to replace the decline in existing production." While fears of premature "peak oil" and Saudi production problems had been expressed before, no US official has come close to saying this in public.

In the last two years, other senior energy analysts have backed Husseini. Fatih Birol, chief economist to the International Energy Agency, told the Guardian last year that conventional crude output could plateau in 2020, a development that was "not good news" for a world still heavily dependent on petroleum.

Jeremy Leggett, convenor of the UK Industry Taskforce on Peak Oil and Energy Security, said: "We are asleep at the wheel here: choosing to ignore a threat to the global economy that is quite as bad as the credit crunch, quite possibly worse."

guardian.co.uk © Guardian News and Media Limited 2011

[Stephen Morgan]

That's not news. I read a book several years ago pointing out that we only have the Saudis word for their reserves, not even the minimal audit oil companies have (Shell were done a few years ago for inflating their figures). And peak oil from conventional oild sources in already gone.

[Nordic]

I was thinking the same thing. Yet another wikileaks "revelation" that is old news.

[JackRiddler]

I was thinking the same thing. Yet another wikileaks "revelation" that is old news.

You guys still don't get it that almost all of the cables are going to be "old news." So what? The cables give us confirmation from the State Department. They tell you what the USG policymakers and implementers know amongst themselves, and can no longer deny credibly (assuming people remember to use this resource). Also, they give you insight into their mindsets and their concerns. We all fucking wish it was the CIA files, and maybe soon it will be!

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[wintler2]

Yes Sadad al-Husseini was saying the same thing publicly a few years ago after he retired, also to deafening silence, as at present, which is curious given that he was the head of exploration in SA. What is significant is (to echo JR) that the US State Dept didn't disregard his remarks, instead they gathered reports and fwdd internally, said nothing publicly - thats how you run an empire. I expect discussions on what the fuck to do about it are at higher security levels than the wikileaked cables. If you're waiting for the 60 Minutes special report with gotcha soundbites and pretty graphics, you will need to wait until it is way too late to do anything about it.

[SonicG]

I think most here probably know The Oil Drum but here is their post on it with links to previous articles they have run pointing this out more from various angles.
I haven't really delved much into the whole Wikileaks thing because of what Nordic says above: "Oh yeah- no shit Sherlock"...I was listening to Jimmy Dore's KPFK show and he had a good thing on the 60 Minutes interview with Assange: "Yeah- he's doing what you 'reporters' should have been doing: Digging deeper, dismissing the spoon-fed information, getting reliable covert sources..."

[JackRiddler]

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July 8: Bumping this fine thread for relevance in light of the other peak oil discussion running again.

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[JackRiddler]

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Oct 9: Bumping this thread in light of etc. etc.

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[JackRiddler]

bumping b/c of newer threads.

[jakell]

The terrain on this thread reminds me of the bumpy plateau we are now on.

I would have thought that any debate on the reality of peak oil is now defunct though. The debate is now about how much longer we can pretend that economics alone will keep the the fossil fuel bubble from deflating.

[Wombaticus Rex]

Today's news, tomorrow's headlines, or something...

In some respects, crashing bond markets are a too-obvious threat. A real black-swan event contains the element of surprise, so it is worth looking around to see if there is a bubble out there that everybody is missing, something so obvious it is staring us in the face. How about fracking? The assumption is that the solution to the world's energy needs lies in shale oil and gas, which is why investment has been piling into the sector. Yet the Oil & Gas Journal reported last month that 15 major companies have written off $35bn in investment since the boom began. Getting oil and gas out of the ground is proving costlier and less profitable than expected. So the third threat is that fracking proves to be the new sub-prime.

Via: http://www.theguardian.com/business/eco ... -signs-imf

For the record: Fracking will be much bigger than subprime.

[Rory]

I can see a better link for this piece of rejoycefulness

So, quit your griping about end times, because ENERGY INDEPENDENCE BY 2037, BITCHES! FUCK YEAH!

US may stop importing oil by 2037 as abundant domestic crude supplies, including North Dakota’s Bakken field and Texas’s Eagle Ford formation, may push production to the level of consumption, according to the US government.

The US Energy Department’s branch that collects and analyzes data - the Energy Information Administration (EIA) says that within 23 years the world's largest economy may become energy independent, while demand for crude is expected to be modest.

“This is the first time the Annual Energy Outlook has projected that net imports’ share of liquid fuels consumption could reach zero,” Bloomberg quotes John Krohn a spokesman for the EIA.

The most optimistic assessment by the EIA assumes that production will increase to about 13 million barrels a day over the next two decades. The projection is based on more favorable assumptions relating to technological improvements and the productivity of wells.

Automatic Earth is waaayyy more cynical about the report - but they are dirty traitors.

The real question is: Why do US government agencies issue reports like this? What are they seeking to achieve? The entire shale industry has been fully exposed by the likes of Rune Likvern and Chris Hughes for quite a while, so it all looks to be purely a propaganda game, where the mass media convey to their audience whatever it is the government would like them to believe. But that just turns the US into Bizarro world more every step of the way. And whatever that may be, or why it may be happening, it’s certainly not going to solve the problems, energy or finance, of the American people.

[Perelandra]

Age of Gas Seen as Sideshow to U.S. Producers Prizing Oil
By Isaac Arnsdorf - Apr 8, 2014

The “golden age of gas” that the International Energy Agency foresees as a result of the U.S. energy boom is hardly the future being embraced by industry executives.

At least based on comments from company officials presenting at the Independent Petroleum Association of America’s conference in New York yesterday. For them, oil is still the prize. Gas is almost an afterthought.

Abraxas Petroleum (AXAS) Corp. Chief Executive Officer Bob Watson boasted about how much of his company’s proved reserves are oil and liquids rather than gas (74 percent). PDC Energy (PDCE) Inc. said it’s sitting on huge leases in gas fields that aren’t worth drilling. Whiting Petroleum Corp. (WLL) Chairman and CEO James Volker explained why: oil sells for three times as much as the equivalent amount of natural gas.

That’s no knock against the producers for chasing oil - the commodity that makes the best return for their shareholders. Still, at a time when President Barack Obama is saying natural gas will be a bridge for the U.S. economy from fossil fuels to clean energy, the industry’s views put some realism into the discussion about what energy resources get unlocked by fracking shale rocks.

Tumbling Gas
U.S. natural gas futures have plunged 72 percent from their 2005 peak to $4.476 as supply expanded to a record. Even after the coldest winter in decades drained stockpiles, the fuel costs about half as much as in Europe. Crude oil, by contrast, is stuck at around $100 a barrel. Even as the growth of U.S. oil supplies has brought the domestic price below the international benchmark, it’s still 7.6 percent higher than a year ago.

The U.S. is still very much addicted to oil. Consumption will inch up to 19 million barrels a day this year, more than Europe and China combined, the IEA estimates. Even as expanding domestic supplies reduce imports, they haven’t curbed reliance on oil outright.

If natural gas is to be a bridge fuel, the transition can’t depend on supply alone.

Now that natural gas is so abundant, it needs more uses. While power plants are switching to gas, the U.S. still gets more electricity from coal.

Billionaire Pickens
Billionaire T. Boone Pickens wants trucks and buses to run on natural gas. The chemical industry is investing more than $100 billion in expansion projects spurred by cheap shale gas, according to the American Chemistry Council in Washington. And the Energy Department has approved seven projects to export about 9.3 billion cubic feet a day of natural gas in liquid form.

In the time it takes for those new demand sources to develop, making natural gas more valuable in its own right, its role as a byproduct of oil drilling is contributing to more pollution. In North Dakota, drillers pumping oil in the Bakken shale formation are burning off about $1.4 million worth of natural gas every day.

While politicians and industry may pay lip service to natural gas as the clean fuel of the future, the companies out exploiting America’s oil fields leave no doubt that they’re interested in the same fuel as 100 years ago.

Link

[JackRiddler]

surprise surprise surprise

How did the fracking-shale scam go anywhere?! What will continue to fuel hope in this hoax solution? A thrilling financial bubble, that's what.

http://www.theguardian.com/environment/ ... cking-myth

Write-down of two-thirds of US shale oil explodes fracking myth
Industry's over-inflated reserve estimates are unravelling, and with it the 'American dream' of oil independence

Next month, the US Energy Information Administration (EIA) will publish a new estimate of US shale deposits set to deal a death-blow to industry hype about a new golden era of US energy independence by fracking unconventional oil and gas.

EIA officials told the Los Angeles Times that previous estimates of recoverable oil in the Monterey shale reserves in California of about 15.4 billion barrels were vastly overstated. The revised estimate, they said, will slash this amount by 96% to a puny 600 million barrels of oil.

The Monterey formation, previously believed to contain more than double the amount of oil estimated at the Bakken shale in North Dakota, and five times larger than the Eagle Ford shale in South Texas, was slated to add up to 2.8 million jobs by 2020 and boost government tax revenues by $24.6 billion a year.

Industry lobbyists have for long highlighted the Monterey shale reserves as the big game-changer for US oil and gas production. Nick Grealy, who runs the consultancy No Hot Air which is funded by "gas and associated companies", and includes the UK's most high-profile shale gas fracker Cuadrilla among its clients, predicted last year that:

"... the star of the North American show is barely on most people's radar screens. California shale will... reinvigorate the Golden State's economy over the next two to three years."

This sort of hype triggered "a speculation boom among oil companies" according to the LA Times. The EIA's original survey for the US Department of Energy published in 2011 had been contracted out to Intek Inc. That report found that the Monterey shale constituted "64 percent of the total shale oil resources" in the US.

The EIA's revised estimate was based partly on analysis of actual output from wells where new fracking techniques had been applied. According to EIA petroleum analyst John Staub:

"From the information we've been able to gather, we've not seen evidence that oil extraction in this area is very productive using techniques like fracking... Our oil production estimates combined with a dearth of knowledge about geological differences among the oil fields led to erroneous predictions and estimates."

The Intek Inc study for the EIA had relied largely on oil industry claims, rather than proper data. Hitesh Mohan, who authored the Intek study for the EIA, reportedly conceded that "his figures were derived from technical reports and presentations from oil companies, including Occidental Petroleum, which owns the lion's share of oil leases in the Monterey Shale, at 1.6 million acres." Mohan had even lifted his original estimate for the EIA to 17 billion barrels.

Geoscientist David Hughes, who worked for the Geological Survey of Canada for 32 years, said:

"The oil had always been a statistical fantasy. Left out of all the hoopla was the fact that the EIA's estimate was little more than a back-of-the-envelope calculation."

Last year, the Post Carbon Institute (PCI) published Hughes' study, Drilling California: A Reality Check on the Monterey Shale, which conducted an empirical analysis of oil production data using a widely used industry database also relied on by the EIA. The report concluded that the original EIA estimate was "highly overstated," and unlikely to lead to a "statewide economic boom.... California should consider its economic and energy future in the absence of an oil production boom."

A spokesman for the Institute, Tod Brilliant, told me:

"Given the incredible difference between initial projections of 15 billion barrels and revisions to 600 million, does this not call into account all such global projections for tight oil?"

As I'd reported earlier in June last year, a wider PCI study by Hughes had come to similar conclusions about bullish estimates of US shale oil and gas potential, concluding that "light tight oil production in the USA will peak between 2015 and 2017, followed by a steep decline", while shale gas production would likely peak next year. In that post, I'd pointed out previous well-documented, and alarmingly common, cases of industry over-estimates of reserve sizes which later had been questioned.

Analysts like Jeremy Leggett have said, citing exaggerated oil industry estimates, that if reserve and production reality are indeed significantly lower than industry forecasts, we could be at risk of an oil shock as early as within the next five years.

The latest revelations follow a spate of bad news for industry reassurances about the fracking boom. New research published this month has found that measured methane leaks from fracking operations were three times larger than forecasted. The US Environment Protection Agency therefore "significantly underestimates" methane emissions from fracking, by as much as a 100 to a 1,000 times according to a new Proceedings of the National Academy of Sciences study published in April.

The Associated Press also reported, citing a Government Accountability Office investigation, that the US Interior Department's Bureau of Land Management had failed to adequately inspect thousands of oil and gas wells that are potentially high risk for water and environmental damage.

Despite the mounting evidence that the shale gas boom is heading for a bust, both economically and environmentally, both governments and industry are together pouring their eggs into a rather flimsy basket.

According to a secret trade memo obtained by the Huffington Post, the Obama administration and the European Union are pushing ahead with efforts to "expand US fracking, offshore oil drilling and natural gas exploration", as well as exports to the EU, under the prospective Transatlantic Trade and Investment Partnership (TTIP) agreement.


Dr. Nafeez Ahmed is an international security journalist and academic. He is the author of A User's Guide to the Crisis of Civilization: And How to Save It, and the forthcoming science fiction thriller, Zero Point. Follow him on Facebook and Twitter @nafeezahmed.

© 2014 Guardian News and Media Limited or its affiliated companies. All rights reserved.

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[seemslikeadream]

California's Fracking Boom Just Got Busted
Wednesday, 21 May 2014 16:58
By Mike Ludwig, Truthout | Report

Oil wells in the Midway-Sunset oil field in Fellows, Calif., Jan. 22, 2013. Monterey Shale, largely untouched territory near Midway-Sunset, had been a hope for the future of California's oil industry - however, recent news has severely undercut that hope. (Photo: Jim Wilson / The New York Times)
Energy Information Administration officials told reporters on Wednesday that they are cutting their estimate of how much oil can be drawn out of California's massive Monterey Shale formation by a whopping 96 percent.
The news deals a serious blow to the fracking industry and has environmentalists cheering as momentum builds behind a legislative effort to put a moratorium on fracking in California. The estimate will be released publically next month, according to reports.
In 2012, the federal officials estimated that 13.7 billion barrels of oil could be recovered from the Monterey Shale. The EIA now says that only 600 million barrels of oil can be recovered using existing technologies such as acid treatment and fracking, the controversial oil and gas technique that involves forcing millions of gallons of water laced with silica and chemicals deep underground to break up rock formations.
The earlier estimate was based on a 2011 study by an EIA contractor that assumed the industry's latest extraction techniques would make the Monterey's reserves as easy to recover as those in shale formations under Texas and North Dakota, where fracking technology has fueled ongoing oil and gas booms. But the geological formations in the Monterey Shale, it turns out, are not as easily punctured because they have been impacted by seismic activity.
"From the information we've been able to gather, we've not seen evidence that oil extraction in this area is very productive using techniques like fracking," John Staub, an EIA analyst, told the Los Angeles Times.
The 2012 estimate sparked a boom in California as oil companies rushed to use fracking and other methods to exploit the Monterey Shale, which contains two-thirds of the nation's oil reserves. A 2013 Truthout investigation revealed that oil companies even experimented with fracking technology in the ocean on offshore rigs in the Santa Barbara Channel, and federal regulators permitted the frack jobs without a review of potential environmental impacts.
Despite steadfast opposition from environmental groups, California Gov. Jerry Brown embraced the boom, which was originally projected to bring 2.8 million new jobs to the state and $24.6 billion in annual tax revenues, according to a 2013 study that was partially funded by the Western States Petroleum Association (WSPA).
"We now know Governor Brown's promised shale oil economic bonanza isn't coming," said Jennifer Krill, director of the environmental group Earthworks. "The environmental risk of fracking remains, but without any possibility of California reaping an economic reward."
Sabrina Lockhart, a spokesperson for Californians for a Safe, Secure Energy Future who spoke to Truthout on behalf of the WSPA, said the EIA estimate doesn't mean that California should move away from domestic oil production.
"These numbers reflect that fact there needs to be advances in technology to extract this oil safely…so when this technology is available these estimates could increase," said Lockhart, who represents a pro-industry group that is rallying opposition to a proposed moratorium on fracking in California.
Environmentalists, however, say the new estimate should sound a death knell for fracking in California.
"Fracking pollution still threatens our state’s air, water and progress on climate change," said Patrick Sullivan, a spokesman for the Center for Biological Diversity. "Oil companies are still fracking and acidizing wells near people’s homes in many communities. Gov. Brown needs to stop the oil industry from experimenting on our state with dirty and dangerous extraction techniques."
Two California state senators recently introduced SB 1132, which would establish a statewide moratorium on fracking and other new extraction methods. The bill faces an uphill battle and similar legislative efforts have failed in the past, but the bill's supporters hope the government's new oil estimates will change that.
"Governor Brown should face facts, order a moratorium on fracking, and the legislature should pass SB 1132," Krill said.
Similar moratoriums have kept fracking at bay in New York and Maryland, and Vermont recently banned fracking.