Why Will We Run Out Of Oil

why will we run out of oil

Why Engineers Don't Believe (in Peak Oil)

Introduction

I recently attended a one week Oil & Gas conference in south Texas. There were about 350 people present almost all of them highly knowledgeable about the upstream and downstream industries. Moreover, a high percentage of the attendees were engineers and technical specialists. These people know the oil and gas industry both onshore and offshore.

As is normal, the conference was kicked off by a keynote speech from a senior executive. Not only is this person extremely well-informed about the energy and process industries, he is also open minded and willing to engage in new ideas and concepts. During his talk he noted that production of oil from existing wells is steadily declining (he used the phrase depletion never sleeps). He also noted that increasing world-wide demand for oil will lead to a shortfall of around 80 million barrels per day about two decades from now. What made this talk so interesting from my point of view is that it was taken for granted by both the speaker and the audience that new supplies of oil will make up for this shortfall, but no specifics as to how this was to be done were provided.

As far as I am aware I was the only person there who challenged the premise of the above speech. I wrote a short email to the executive. In it I referred to an article that had been published two months earlier by Kurt Cobb. The title of the article was Time to Worry: World Oil Production Finishes Six Years of No Growth. The article provides persuasive evidence that we are not going to find reserves that will generate 80 mmbpd two decades from now. Following my email we had a brief and friendly conversation but no minds were changed.

I have had similar experiences of non-comprehension of the Peak Oil problem from other colleagues, all of whom are intelligent, well-informed and generally flexible in their thinking. Moreover they are typically working on projects that result from our running out of oil in the easy places. The projects typically have one or more of the following features:

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They are in difficult-to-reach places such as the Arctic or ultra-deep water;
They involve extracting hydrocarbons from oil sands/tar; or
They are in difficult locations politically.

In spite of their exposure to the practicality of Peak Oil, it seems that few engineers and other oil and gas professionals understand that we will eventually run out of affordable oil because the costs of exploration and extraction will be prohibitively high.

I have often wondered why there seems to such a low level of awareness and/or acceptance of the Peak Oil thesis among oil and gas the technical experts. Some thoughts as to why this may be are outlined below.

But, before presenting my thoughts, it is important to stress that the people I work with are not being cynical, i.e., its not that they know exactly what is going on and choose to ignore the facts. It is true that these experts generally are paid well by the oil and gas industry and are probably reluctant to embrace an idea that can lead to a decline in their standard of living. But they are also intellectually curious, and would surely be willing to discuss Peak Oil, at least informally.

With those disclaimers out of the way, some of the possible reasons for non-acceptance or pushback are listed below.

Daily Living

The first reason is also the simplest. Day-to-day life continues as normal: the freeways are as clogged as ever, head hunters continue to call, and new car sales are brisk. A week after the conference described above, we went out to dinner a local restaurant on Saturday night. The waiting time was 90 minutes. In other words, Just look around you there are no signs of Peak Oil. Of course there are problems: unemployment remains high, gas prices are stuck above $3 per gallon, home building is slow and the nations deficit seems to be out of control. But there have always been problems life consists of ups and downs (particularly in the energy business). There is no sign that things have changed fundamentally.

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Supply and Price

A very common response to the Peak Oil thesis is that, as the price of oil goes up, so the oil companies will have more funds with which to search for oil in ever-more difficult locations such as ultra-deep offshore water and arctic locations. This response aligns with the experience of the more seasoned professionals. For example, forty years ago the offshore industry in the Gulf of Mexico consisted primarily of small, four leg platforms in shallow water (less than 1000 feet). As production from these platforms declined and oil prices went up, so the industry was able to move into deeper and deeper waters, with considerable success.

There would seem to be no reason for the trend of higher prices leading to more production not to continue.

Technology

Engineers and technical specialists have high confidence in new technology, and that technology will lead to the production of more oil and gas. This belief is not just blind faith they have seen the continuing developments in areas such as horizontal drilling, SCADA control systems and LNG transportation. There is no reason to believe that new technology will not continue to be invented and implemented so as to produce more oil from new and existing fields. Just as the Peak Oil message doesn't fully align with day-to-day experience, as discussed above, it doesn't align with the career experience of many energy professionals.

They are also comfortable with the possibilities of new technology leading to shifts in the way society is organized. The transition from gasoline to electricity as a means of powering automobiles is a challenge, not a threat.

Related to a belief in technology is a need to understand basic principles and research. This is why I wrote the essay Hubbert the Optimist. In it I present the findings and conclusions of the most important person in the Peak Oil community: Dr. M. King Hubbert. I try to present those conclusions in a neutral and professional manner. (If time permits, I may attempt similar essays to do with the work of other leaders such as Dr. Robert Hirsch.)

Crying Wolf

Anyone talking about Peak Oil almost always runs into the roadblock created by the dismal job that the Global Warming community has done in conveying its message. Why the communications have been so poor is a topic that falls outside the scope of this article. (The high level of funding for the other side is certainly a factor.) But, when presented with arguments to do with Peak Oil, many people may think on the lines of, I heard this once before, and it all turned out to be exaggerated and misleading. Fool me once: shame on you; fool me twice: shame on me.

Imagination

We dont serve neutrinos here, says the bartender.
A neutrino walks into a bar.
(Internet joke)

The discussion here follows the An Engineers View of Peak Oil blog series. Titles in that series are:

In the fifth essay Imagination it was noted that necessity is indeed the mother of invention. Thomas Newcomen invented the steam engine in 1712 because such an engine was needed, not because it seemed like a good idea. The development of new technologies requires not only a perceived need, but also imagination and innovation, and engineers are often very well positioned to provide leadership in these areas.

This is not to say that new inventions are guaranteed to happen. Nor that they will lead to a better society. For example, the industrial society that rose up from the invention of the steam engine was, in many ways, much worse for ordinary people than the earlier agrarian economy.

Negatives Do Not Sell

One of the basic rules of selling is that you never say, If you dont buy my product or service then something bad will happen. You say, If you do buy my product or service then something good will happen. Of course, this is simply a semantic issue, but it makes a huge difference to the manner in which the message is received.

The message from the Peak Oil community is almost 100% negative. Apart from some rather vague and romantic back to the earth discussions, the future that is portrayed is unremittingly bleak. In the words of John Michael Greer, There is no brighter future. Yet, as discussed in the first section, life for most people is not so one-sided; it's a muddle of good news and bad news.

Realistically, it has to be admitted that it is difficult to make the Peak Oil message a positive one. But, given that engineers have high confidence in new technology, maybe the message could be framed in the following manner. The oil industry that we knew is coming to an end. There is much uncertainty and there are no guarantees, but you engineer are in a great position to lead us to a future based on new technology. For example, the Kurt Cobb article alluded to above could be re-titled, Opportunity to Make Money with New Energy Sources as World Oil Production Stays Flat.

Conclusions

The conclusions that I draw in this and previous essays are as follows:

We are entering a new world (the Synthesis). None of us know what it will look like.
Engineers and professionals in the oil and gas business are not persuaded that Peak Oil is a problem. When they look at their day-to-day life, their experiences to do with new technologies, and the unconvincing discussions to do with climate change, they remain skeptical.
The decline of oil supplies will be a forcing function that may lead to technological innovations that create the Synthesis. The impetus will not come from government, large oil companies or individual activists. It will come from business men and women such as Isambard Kingdom Brunel, Henry Ford and Steve Jobs. And they will be driven not by a desire to do good, but to make money and to become famous.
The Peak Oil community does itself little good by dwelling on the bad news. People dont want to hear it and they throw up instinctive objections. It is far better to communicate around the proverb, There are no problems, only opportunities.

Therefore if the Peak Oil predicament is presented as a challenge an opportunity to be grasped then engineers and innovators may just come up with a response to the Peak Oil predicament.

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2012年2月11日土曜日

Why Will We Run Out Of Oil