Post Carbon Toronto

The Peak and Decline of Fossil Fuels

Fossil fuels are finite.

Our fossil fuel resource bases are finte but large, large enough for us in the first world to have built an energy intensive civilization that uses oil at the tremendous rate of over 30 billion barrels per year or a thousand barrels per second. Of the 421 quadrillion BTU's of energy used by the world in 2003, 88 percent came from fossil fuels: 40% from oil, and 24% each from natural gas and coal.

How long can we continue to use fossil fuels at this rate?

The answer depends on two primary factors: the size fossil fuel resource reserve base and how quickly it can be converted into usuable forms and delivered to consumers — the rate of production.

Experience has shown us that long before we run out of a finite geological resource the rate of extraction or production reaches a peak and then begins to decline. The reasons for this are geological facts and simple economics.

Geological resources are not uniform in quality and distribution. It is more profitable to use the cheapest, largest, easiest to extract resources first, so that is what we do. As production continues there are diminishing returns on investment both in terms of money and energy, calling for ever growing rates of investment to maintain or increase rates of production. Eventually we reach the point where we can no longer continue to increase the investment per unit of production and the rate of production begins to fall. This generally happens long before the resource is exhausted, often when about half the resource has been extracted. This point is the peak of production.

The size of our fossil fuel resource base is relatively well defined. The global reach of the oil, gas and coal industry and modern technology have allowed geologists to survey the planet and identify, with a fair degree of precision, the ultimate size of the fossil fuel resourse base. While a significant amount of oil and gas remains to be discovered, geologists know in which regions it is likely to be found and can estimate the amount that can be recovered.

Taking these factors into consideration, and allowing for technological improvements in the efficiency of oil, gas and coal production made possible by higher prices, most analysts have concluded that production of all fossil fuels, even coal, will peak in the first half of this century, starting with oil.

After nearly two centuries of rapid energy supply and consumption growth, we are entering an era of decline.

 

Peak Oil

 

Peaking is a historical fact.

To take oil for example, major oil producing regions have already gone into decline, despite expanded exploration and drilling. In the US, production peaked in 1970 and has declined by over 50% to date, despite major new discoveries in Alaska and the Gulf of Mexico. Production from the North Sea peaked in 1999, about a decade earlier that expected by the oil companies and production decline rates have been as high a 17% per year. In all, of the 54 countries and regions reported in the authoritive BP Statistical Review, 34 have peaked and are in decline. The countries in decline collectively accounted for the majority of production in 2004.

Declining discoveries.

The peak in discovery of oil reserves occurred about 1960. Over every 10 year period since then, the amount of oil discovered has declined. Discoveries are progressively fewer and smaller, despite increased exploration efforts and new technology. Since 1981 we have consumed oil faster than we have found it, and the gap between our growing consumption and shrinking discovery continues to widen. Oil is now being consumed at about four times faster than it is being discovered.

Declining prospects for exploration.

Of the 937 geological provinces world wide cataloged by the US Geological survey of 2000, only 102 either have or are expected to produce significant amounts of oil. Of those 102, the remaining unexplored or under explored prospects are either in deep water off the continental shelves, or in the high arctic or antarctic.

Dependence on aging giant fields.

Over half of world crude oil production comes from just 127 giant fields. Many of these large fields have been produced for many years and are now in decline, including 3 of the top 4 largest fields (Canterell, Mexico, Burgan. Kuwait and Daqing, China). Once the giant fields are depleted, it will take the discovery of very many more new small fields to replace their output. History has shown that oil producing regions contain few large fields but many fields of increasingly smaller sizes. Very few giant fields are now being found. The last was Kashagan, Kazakhstan, in 2000.

Estimated ultimate reserves cannot meet our long term needs.

The US Geological Survey has estimated that there is a 50/50 chance of ultimately producing 3 trillion barrels of oil and only a 5 percent chance of ultimately producing more than 4 trillion barrels of oil. We have already consumed about 1 trillion barrels. At the current long-term average annual rate of growth in consumption, about 2%, over the next 70 years we would need to produce about 4.6 trillion barrels of oil to meet world needs, more than the USGS believes remains to be recovered in even its most optimistic scenario.

The rate of decline.

The expected rate of decline in conventional world oil production is unknown. If US history is any indication, the rate could be as low as 2 or 3 percent per year. However, the North Sea fields are declining at a much higher rate, as high as 17% per year. Many analysts think that modern techniques of field production management which have maximized production rates will lead to high rates of decline.

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