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The world stands on the cusp of an oil supply crisis. Years of insufficient investment in offshore mega-projects combined with the end of U.S. shale hyper growth and a recent shift by global supermajors to preferentially invest in alternative energy over traditional hydrocarbons have resulted in an oil industry that lacks the ability to meaningfully grow its production in the years ahead.

Why does this matter when we read headlines every day prophesizing the end of oil due to the imminent mass adoption of alternatives such as hydrogen and electric cars?

This is our energy reality: the world is nowhere near peak oil demand. Global population growth of 1.2 billion people over the next 20 years combined with decades’ long runway for alternatives to reach critical scale mean that oil demand will grow for years to come.

Yet, the delusion of imminent peak oil demand is having a profound impact on the willingness of companies to invest today in large, extremely expensive projects that often take four to six years to come onstream and a further four years to recoup initial investment.

How can a CEO justify sanctioning a multi-billion dollar project that takes 10 years to reach payout when the demand outlook a decade from now is so uncertain? The fear of peak demand is leading to the reality of peak supply.

As a result of seven years of falling investment and given the hugely capital intensive nature of the oil business, global offshore production (about 1 in 4 barrels produced) has now entered a period where new projects cannot offset existing declines and at best production will stay flat for the next several years.

…click on the above link to read the rest of the article…

BP peak oil (UK decline, asset sales and decommissioning Part 1)

May 11, 2021

BP peak oil (UK decline, asset sales and decommissioning Part 1)

West of the Shetland Islands, the battle against oil decline is over for BP. SPGlobal reports:

BP halts production at oldest West of Shetland oil facility Foinaven on asset decline

15 Apr 2021

London — BP has halted production at its oldest West of Shetland oil facility, Foinaven, citing the age of the facility [Petrojarl] and operational challenges, as several BP facilities in the region suffer output setbacks.

Fig 1: FPSO (Floating Production Storage Offloading) Petrojarl Foinhaven, 250 m long, 280 kb storage

https://www.teekay.com/petrojarl-foinaven/

Production from the deepwater field dropped sharply again last year, to 12,000 b/d, far off its 2002 peak of 113,000 b/d.
BP said the field could still contain up to 200 million barrels of resources, which could still be extracted with further investment in alternative facilities, but the current facilities were no longer viable.
“Work had been underway to consider options to extend the life of the vessel out to 2025,” BP said. “However, it has now been concluded that, due to its age and the demands of operating West of Shetland, even with material further investment the Petrojarl Foinaven is not the right vehicle to recover the remaining resources from the Foinaven fields.”
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/041521-bp-halts-production-at-oldest-west-of-shetland-oil-facility-foinaven-on-asset-decline

Let’s have a look at the Foinhaven production, using data from the UK Oil and Gas Authority (OGA):

Fig 2: Foinhaven oil production history
Underlying image: https://www.offshore-technology.com/projects/foinaven/
Off the continental shelf at 400-600 m water depth

Using above OGA data, 393 mb have been produced until January 2021. In BP’s 1998 Form 20-F, Foinhaven’s BP share of reserves(72%) were given as 193 mb, i.e. a total of 268 mb. That oil was extracted by 2007 when production had dropped to half its peak. The reserve growth was therefore 125 mb, but at a much lower and still declining production level.
Foinhaven is located 190 kms west of the Shetland Islands as shown on this map:

…click on the above link to read the rest of the article…

A Sense of Déjà Vu

April 14, 2021

A Sense of Déjà Vu

Déjà vu—the sudden insistent feeling that you’ve encountered the present moment before—can be one of the oddest of human experiences. Sometimes, though, it happens for perfectly prosaic reasons. Right now, as I look at headlines and certain other indicators, I’m having a very strong case of déjà vu for reasons that require only the simplest explanation. Sometimes, after all, you really have been there before.

Twenty years ago, for example, I could look back at the energy crises of the 1970s and see a certain pattern unfolding with great clarity. I’ll summarize the pattern for those of my readers who weren’t born yet at that time. All through the 1950s and 1960s, a handful of people had been warning that petroleum is a finite resource and that the breakneck extraction of petroleum at ever-rising rates was sooner or later going to slam face first into hard limits. They were of course dismissed as cranks by all right-thinking people. They were also correct.

In 1973, declining production from US oilfields combined with political instability in the Middle East to slap the United States with a sudden shortfall in petroleum. The government and the Fed responded clumsily, expanding the money supply, which drove up prices, not only for petroleum products but for everything that was made and shipped using petroleum—that is to say, pretty much everything bought and sold in the country. The result was stagflation. Meanwhile renewable-energy advocates convinced themselves that their time had come, and rushed a great many poorly conceived products to market, while the apocalypse lobby—those people who are constantly on the lookout for reasons to insist that everything is about to crash to ruin and we’re all going to die in the next few years—embraced the oil crisis as their cause du jour.

…click on the link above to read the rest of the article,..

Oil and Debt: Why Our Financial System Is Unsustainable

February 25, 2021

Oil and Debt: Why Our Financial System Is Unsustainable

How much energy, water and food will the “money” created out of thin air in the future buy?

Finance is often cloaked in arcane terminology and math, but the one dynamic that governs the future is actually very simple.

Here it is: all debt is borrowed against future supplies of affordable hydrocarbons (oil, coal and natural gas). Since global economic activity is ultimately dependent on a continued abundance of affordable energy, it follows that all money borrowed against future income is actually being borrowed against future supplies of affordable energy.

Many people believe that alternative “green” energy will soon replace most or all hydrocarbon energy sources, but the chart below shows why this belief is not realistic: all the “renewable” energy sources are about 3% of all energy consumed, with hydropower providing another few percent.

There are unavoidable headwinds to this appealing fantasy:

1. All “renewable” energy is actually “replaceable” energy, per analyst Nate Hagens: every 15-25 years (or less) much or all of the alt-energy systems and structures have to be replaced, and little of the necessary mining, manufacturing and transport can be performed with the “renewable” electricity these sources generate. Virtually all the heavy lifting of these processes require hydrocarbons and especially oil.

2. Wind and solar “renewable” energy is intermittent and therefore requires changes in behavior (no clothes dryers or electric ovens used after dark, etc.) or battery storage on a scale that isn’t practical in terms of the materials required.

3. Batteries are also “replaceable” and don’t last very long. The percentage of lithium-ion batteries being recycled globally is near-zero, so all batteries end up as costly, toxic landfill.

4. Battery technologies are limited by the physics of energy storage and materials. Moving whiz-bang exotic technologies from the lab to global scales of production is non-trivial.

…click on the above link to read the rest of the article…

Olduvai: Excerpt read by author, Steve Bull

February 24, 2021

Olduvai: Excerpt read by author, Steve Bull

A Practical Exercise Suggestion for Peak Oil Sceptics

February 23, 2021

A Practical Exercise Suggestion for Peak Oil Sceptics

(Translated from Spanish by Amelia Burke, originally published in two parts.)

When someone calls into question the existance of a peak in the production (extraction) of a non-renewable resource, which oil is, you should invite them to study carefully the curves of the Energy Export Databrowser. This Databrowser is formed using data from British Petroleum’s annual energy statistics. If necessary, round off with the data from the Hallock et al. document ”Forecasting the limits to the availability and diversity of global conventional oil supply: Validation” (Energy 64, 2014, 130-153). Then ask them to explain why —if everything depends on our human ingenuity and anything is possible given the amount money which is put into it, and given the God of Technology— there are already 50 oil producing countries that have exceeded their peak of production and are carrying on downhill. That is, except (temporarily) the U.S.A., specialists in rooting around in the filth of shale, with lots of technology and fabricated money.

And for those in our still relatively comfortable country who begin to worry that there might be actually be a peak and wonder what it could mean and when we think it might happen, I would confront them with a vision which is not quite so eurocentric as the one we are used to. I would invite them, with those calculations at hand, to do a little adding up in order to try and clarify it for themselves, based on counting the number of post-peak producer countries. Let them try by themselves to sketch out a possible date for the peak, or a slightly undulating plateau perhaps. I would tell them that more than 50 oil producing countries are already in decline, visible decline or terminal oil-bearing decline…

…click on the above link to read the rest of the article…

Exxon Mobil’s refinery closure in Australia: peak oil context

February 17, 2021

Exxon Mobil’s refinery closure in Australia: peak oil context

Exxon Mobil’s Melbourne refinery is closing and will be converted into a fuel import terminal. The Australian public broadcaster has found the right title for its article:

Australia loses another oil refinery, leaving our fuel supply vulnerable to regional crises
11/2/2021
https://www.abc.net.au/news/2021-02-11/australia-loses-another-oil-refinery-risking-fuel-supply/13139648

Fig 1: Exxon-Mobil Altona refinery in Melbourne

The refinery has a capacity of 86 kb/d, around 10% of Exxon Mobil’s Asia Pacific capacity.

Fig 2: Exxon Mobil’s refineries in Asia Pacific

“The Altona refinery produces up to 14.5 million litres of refined products per day.
Petrol represents approximately 60 percent of production [8.7 ML/d], with diesel representing a further 30 percent [4.35 ML/d] and jet fuel around 10 percent [1.45 ML/d]. The percentage of each product depends on the type of feedstock used – different types of crude oil, for example, will produce more or less LPG from the refining process.

Around 90 percent of products are transported by pipeline from the refinery to Mobil’s Yarraville terminal and other industry terminals for distribution by road.

The refinery supplies feedstock for the nearby Altona chemical complex, which in turn supplies feedstocks to a number of petrochemical manufacturing plants at Altona. These plants produce the raw material from which a multitude of consumer products are made.”

https://www.exxonmobil.com.au/Energy-and-environment/Energy-resources/Downstream-operations/Altona-Refinery#AltonaRefineryfacts

How much is that compared to Victoria’s fuel sales?

Fig 3: Victoria’s petroleum sales by product

Between 2010 and December 2019 Victoria gasoline sales were practically flat at 400 ML/month or 13.2 ML/day. In contrast, Diesel sales increased by a whopping 5.5% pa from a trend average of 290 ML/month in July 2010 to 440 ML/month or 14.4 ML/day by end 2019. Jet fuel sales increased from 100 ML/month in 2010/11 to 200 ML/month or 6.5 ML/day in 2018/19 (jump due to international flights)

Let’s stack it all up:

Fig 4: Total Victoria fuel sales

…click on the above link to read the rest of the article…

Shell says its oil production has peaked and will fall every year

February 11, 2021

Shell says its oil production has peaked and will fall every year

Royal Dutch Shell (RDSA) said its oil production and carbon emissions have peaked as it detailed plans to gradually wean itself off fossil fuels. Climate activists said it hadn’t gone far enough.

The Anglo-Dutch company said in a statement on Thursday that it expects its oil production to decline by between 1% and 2% each year after peaking in 2019. Its total carbon emissions likely peaked in 2018, it added.

Shell unveiled plans in September to become a net zero emissions business by 2050 (including from its own products and those that it sells), joining European rivals BP (BP) and Total (TOT) in making a shift towards clean energy.

The oil giants have written off billions of dollars of assets, spurred on by forecasts that global oil demand may never recover to levels reached before the pandemic, amid permanent changes to how people work and travel and growing concerns about the climate crisis.

Now Shell is setting out how it hopes to achieve its goals. It wants to sell more clean energy, while investing in carbon capture and forestation projects to offset emissions. It will also expand its biofuels production and distribution business.

“Whether our customers are motorists, households or businesses, we will use our global scale and trusted brand to grow in markets where demand for cleaner products and services is strongest, delivering more predictable cash flows and generating higher returns,” said CEO Ben van Beurden.

While European oil companies try to reinvent themselves, America’s ExxonMobil (XOM) and Chevron (CVX) have so far resisted major changes to their businesses. But shareholders are agitating for a shift in direction and there are signs that the pressure may be starting to have an impact.

…click on the above link to read the rest of the article…

Where Energy Modeling Goes Wrong

February 8, 2021

Where Energy Modeling Goes Wrong

There are a huge number of people doing energy modeling. In my opinion, nearly all of them are going astray in their modeling because they don’t understand how the economy really operates.

The modeling that comes closest to being correct is that which underlies the 1972 book, The Limits to Growth by Donella Meadows and others. This modeling was based on physical quantities of resources, with no financial system whatsoever. The base model, shown here, indicates that limits would be reached a few years later than we actually seem to be reaching them. The dotted black line in Figure 1 indicates where I saw the world economy to be in January 2019, based on the limits we already seemed to be reaching at that time.

Figure 1. Base scenario from 1972 Limits to Growth, printed using today’s graphics by Charles Hall and John Day in “*Revisiting Limits to Growth After Peak Oil,*” with dotted line added corresponding to where I saw the world economy to be in January 2019, based on how the economy was operating at that time.

The authors of The Limits to Growth have said that their model cannot be expected to be correct after limits hit (which is about now), so even this model is less than perfect. Thus, this model cannot be relied upon to show that population will continue to rise until after 2050.

Many readers are familiar with Energy Return on Energy Invested (EROEI) calculations. These are favorites of many people following the Peak Oil problem. A high ratio of Energy Returned to Energy Invested is considered favorable, while a low ratio is considered unfavorable. Energy sources with similar EROEIs are supposedly equivalent. Even these similarities can be misleading. They make intermittent wind and solar appear far more helpful than they really are.

…click on the above link to read the rest of the article…

Peak oil in Africa part1: OPEC quotas Jan 2021

January 29, 2021

Peak oil in Africa part1: OPEC quotas Jan 2021

We examine whether OPEC’s quotas for its African members are actually on the production decline path of these countries.

OPEC’s quota levels can be found here:
https://www.opec.org/opec_web/static_files_project/media/downloads/Voluntary%20Production%20Levels.pdf

At present 7 oil producing countries in Africa are members of OPEC:

Algeria, Nigeria, Libya, Angola (2007), Gabon (2016), Equatorial Guinea (2017) and Congo Brazzaville (2018) https://www.opec.org/opec_web/en/about_us/25.htm

Historic peaks

Fig 1a: African countries which joined OPEC

The stacking order in the above graph is important for understanding the history. We start with Algeria at the bottom because this country seems to have the most reliable production. Next in the stack is Nigeria which shaped the November 2005 peak. Then Libya with an erratic production profile after the 17th February Revolution in 2011. Both Algeria and Libya were still growing when Nigeria peaked:

Fig 1b: OPEC w/o Angola peaked in Nov 2005 at 5,536 kb/d

OPEC then took in Angola in 2007 to overcome this embarrassing situation, but Angola itself also approached its peak a year later, in 2008, which shaped the common peak of 4 countries in Nov 2007 – Mar 2008 at 7.1 mb/d. The dotted lines in Fig 1a show production including Angola and 3 other countries before joining OPEC.

Trendlines

Fig 2: Algeria crude oil production

Algerian crude oil production peaked in June 2008. A trend line since then points to 950 kb/ for March 2021. Production between August and December 2020 was around 860 kb/d, near to the quota. The reference is approximately equivalent to the pre-Covid average since 2016.

Fig 3: Angola crude oil production (EIA data minus 3.6% condensate)

Angolan crude oil production peaked in December 2008. A trend line starting in July 2016 (when there was a kink in the production trend) points to 1,230 kb/ for March 2021. Production in December 2020 has dropped to around 1,170 kb/d, below the quota. The reference is the production level in 2018.

Fig 4: Nigeria crude oil production

…click on the above link to read the rest of the article…

Peak Oil? Drivers—and Voters—Could Delay It for Years

January 9, 2021

Peak Oil? Drivers—and Voters—Could Delay It for Years

Investors and politicians have made their views clear about oil’s uncertain future. Consumers, not so much.

Drivers traverse the 405 freeway at night in California. The fate of the oil industry... — Drivers traverse the 405 freeway at night in California. The fate of the oil industry depends as much, or more, on consumers as it does on politicians and policymakers.

PHOTO: PATRICK T. FALLON/BLOOMBERG NEWS

You might be filling up your tank a lot longer than BP thinks.

Ambitious green policies—from politicians and even the newly climate-conscious oil companies—suggest the world is moving at warp speed away from fossil fuels. But the transition might not be easy on consumers’ wallets, which is precisely why it could take a while.

The idea of “peak oil,” historically a reference to a fear that oil supply was running out, now means something entirely different. British energy giant BP suggested that oil demand might have already reached its apex in 2019 if one were to imagine a world that doubles down on policies that restrict carbon emissions.

Others are more conservative. Under its “stated policies scenario,” the International Energy Agency estimates that oil demand will peak around 2030 and plateau. That scenario takes into account announced policy measures and its own judgment of how attainable they seem. As the IEA acknowledges, though, some of the declared policies are far-reaching targets. Chris Midgley, head of analytics at S&P Global Platts, says his group projects the world is unlikely to reach peak demand until the late 2030s, noting that demand for petrochemicals in particular seems resilient.

Transportation plays a key role in the timing of that peak; it accounts for the largest share of petroleum consumption globally. For electricity to crowd out oil as a transportation fuel, governments must either provide taxpayer subsidies that make electric vehicles more affordable or place a cost on not switching over, such as even higher taxes at the pump.

…click on the above link to read the rest of the article…

The Very Real Possibility Of Peak Oil Supply

December 28, 2020

The Very Real Possibility Of Peak Oil Supply

Three months ago, British oil giant BP Plc. (NYSE:BP) sent shockwaves through the oil and gas sector after it declared that Peak Oil demand was already behind us. In the company’s 2020 Energy Outlook, chief executive Bernard Looney pledged that BP would increase its renewables spending twentyfold to $5 billion a year by 2030 and ‘‘… not enter any new countries for oil and gas exploration.’’ That announcement came as a bit of a shocker given how aggressive BP has been in exploring new oil and gas frontiers.

The investing universe appears to concur with BP’s sentiments, with the oil and gas sector consistently emerging as the worst performer over the past decade. The sector suffered yet another blow after the largest investor-owned oil company in the world, ExxonMobil (NYSE:XOM), was kicked out of the Dow Jones Industrial Average in August, leaving Chevron (NYSE:CVX) as the sector’s sole representative in the index.

Meanwhile, oil prices appear stuck in the mid-40s with little prospects of climbing to the mid-50s that most shale producers need to drill profitably.

Delving deeper into the global oil and gas outlook suggests that it’s peak oil supply, not peak oil demand, that’s likely to start dominating headlines as the quarters roll on.

Source: Bloomberg

Peak Oil Demand

When many analysts talk about Peak Oil, they are usually referring to that point in time when global oil demand will enter a phase of terminal and irreversible decline.

According to BP, this point has already come and gone, with oil demand slated to fall by at least 10% in the current decade and by as much as 50% over the next two. BP notes that historically, energy demand has risen steadily in tandem with global economic growth with few interruptions; however, the COVID-19 crisis and increased climate action might have permanently altered that playbook.

…click on the above link to read the rest of the article…

Peak Oil in South & Central America

December 28, 2020

Peak Oil in South & Central America

(1) Pre-Covid

..Fig 1: Oil production and peak years

Production peaked 2015 due to Venezuela’s production collapse. Brazil’s production has not yet peaked but is unlikely to offset Venezuela’s decline. All other countries together are on a bumpy production plateau for the last 20 years.

Fig 2: Oil consumption peaked 2014

Production vs. consumption

Sorted by net exports (difference between production and consumption)

Fig 3: Venezuela last peak was in 2006, since then net exports are down to 560 kb/d

The US imposed sanctions on Venezuela since 2006 but the oil sector was most hit by E.O. 13808 (Aug 2017) and 13850 (Jan 2019) in which PdVSA properties under US jurisdiction were blocked and transactions prohibited. https://fas.org/sgp/crs/row/IF10715.pdf

Fig 4: Venezuela’s oil passing through the Indian Ocean?

7 months after leaving the JOSE terminal in Venezuela, crude oil tanker SAINT MARCELLA appeared at anchorage outside PORT LOUIS Mauritius, for servicing/rebunkering by TRESTA STAR. The destination shown by Vesselfinder was S.LINGGI in Malaysia (Straits of Malacca)

This Reuters article reports:
27 Nov 2020

Exclusive: Venezuela resumes direct oil shipments to China despite U.S. sanctions

Venezuela has resumed direct shipments of oil to China after U.S. sanctions sent the trade underground for more than a year, according to Refinitiv Eikon vessel-tracking data and internal documents from state company Petroleos de Venezuela (PDVSA).

Chinese state companies China National Petroleum Corp (CNPC) and its listed subsidiary PetroChina – long among PDVSA’s top customers – stopped loading crude and fuel at Venezuelan ports in August 2019 after Washington extended its sanctions on PDVSA to include any companies trading with the Venezuelan state firm.

The imposition of the sanctions was part of a push by the Trump administration to oust Venezuelan President Nicolas Maduro, but they failed to completely halt the South American nation’s oil exports or to loosen Maduro’s grip on power.

…click on the above link to read the rest of the article…

2020: The Year Things Started Going Badly Wrong

December 23, 2020

2020: The Year Things Started Going Badly Wrong

How today’s energy problem is different from peak oil

Many people believe that the economy will start going badly wrong when we “run out of oil.” The problem we have today is indeed an energy problem, but it is a different energy problem. Let me explain it with an escalator analogy.

Figure 1. Holborn Tube Station Escalator. Photo by renaissancechambara, CC BY 2.0 https://creativecommons.org/licenses/by/2.0, via Wikimedia Commons.

The economy is like a down escalator that citizens of the world are trying to walk upward on. At first the downward motion of the escalator is almost imperceptible, but gradually it gets to be greater and greater. Eventually the downward motion becomes almost unbearable. Many citizens long to sit down and take a rest.

In fact, a break, like the pandemic, almost comes as a relief. There is suddenly a chance to take it easy; not drive to work; not visit relatives; not keep up appearances before friends. Government officials may not be unhappy either. There may have been demonstrations by groups asking for higher wages. Telling people to stay at home provides a convenient way to end these demonstrations and restore order.

But then, restarting doesn’t work. There are too many broken pieces of the economy. Too many bankrupt companies; too many unemployed people; too much debt that cannot be repaid. And, a virus that really doesn’t quite go away, leaving people worried and unwilling to attempt to resume normal activities.

Some might describe the energy story as a “diminishing returns” story, but it’s really broader than this. It’s a story of services that we expect to continue, but which cannot continue without much more energy investment. It is also a story of the loss of “economies of scale” that at one time helped propel the economy forward.

…click on the above link to read the rest of the article…

Why The World Can’t Quit Fossil Fuels

December 8, 2020

Why The World Can’t Quit Fossil Fuels

Have the recent pronouncements of the death of oil and reigning renewables been more rhetoric than reality? Yes and no. It’s true that peak oil is now closer than ever, and globally we’re seeing a more earnest effort to decarbonize than ever before, in large part thanks to green stimulus packages for post-COVID economic recovery. But for all of the advances that green energy is making around the world, it’s just not enough to achieve the kind of greenhouse gas emissions reductions necessary to curb the impact of climate change. In fact, it’s not even close. This week Axios reported on the “chasm between CO2 goals and energy production,” saying that “projected and planned levels of global oil, natural gas and coal production are way out of step with the kind of emissions cuts needed to hold global warming significantly in check.” This reporting is based on a brand new study. The second annual “Production Gap Report” is the continuation of a project developed in collaboration with the United Nations Environment Programme (UNEP). The 2020 report was put together by the UN, the Stockholm Environment Institute, the International Institute for Sustainable Development, the Overseas Development Institute and the climate think tank E3G.

The purpose of the report, which is modelled after and alongside UNEP’s Emissions Gap Reports is to synthesize and communicate “the large discrepancy between countries’ planned fossil fuel production and the global production levels necessary to limit warming to 1.5°C and 2°C.” And, as it turns out, that discrepancy is still quite large, even after the COVID-19 pandemic took a huge bite out of fossil fuel demand and the oil and gas industry as a whole.

…click on the above link to read the rest of the article…

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Drivers traverse the 405 freeway at night in California. The fate of the oil industry depends as much, or more, on consumers as it does on politicians and policymakers.

(1) Pre-Covid

How today’s energy problem is different from peak oil

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