Are we running out of oil?

Catalyst ABC 8PM Thu 24Nov05 said:

Real Oil Crisis

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Catalyst ABC 8PM Thu 24Nov05 said:

Reporter: Jonica Newby
Producer: Greg Swanborough
Researcher: Leonie Hansell

Transcript
Related Info

24 November 2005
What would happen if the world were to start running out of oil? Conventional wisdom says we’ve got 30 years, but there’s a growing fear amongst petroleum experts it’s happening much sooner than we thought – that we are hitting the beginning of the end of oil now. So how soon will the oil run out, and can we stop our economy collapsing when it does? How prepared are we for the real oil crisis?

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This was a very interesting article last night. I have no idea to the level of truth or accuracy, but it could be a very interesting time over the next decade if they are even half right.

Anyone in the industry have any better insight?

David.

Hi

I am kinda in the game having invested in Oil start ups. Other here are more knowledgeable but Oil threads seem to start bun-fights.

Firstly, there are heaps of opinion out there, scientific and otherwise.

Some say we will hit the balance point of greater demand than supply in 2010, others 2015. A lot depends on the Saudi’s and there reserves which no-one really knows. Iraq has a lot but they say if the fighting stopped tomorrow it would take $BN’S and 5 years to get the infrastructure back online.

What is very certain and scary is growth in demand (India and China) is much more than growth in new deposits found.

Also....

As old deposits start to slow down the cost of getting the remaining oil out of the ground increases (pumping seawater, etc) and hence, cost of oil goes up.

And....

Most new deposits are ocean rigs with again, greater recovery costs.

On the plus side, the recent increase has spurned many Companies to research old ground that was deemed uneconomical in 80's and with new technology the costs of exploration are less. Modern technology in cars heaps but China is not building Hybrids engines so a lot of 10 year old level consumption is still going to be produced.

In short, in my opinion, Petrol at the Pump will never see under $1 a litre again and can only rise.

Peter 147

Davidr,

Guessing you know Acey wrote a bit about oil (the soon to be lack of the cheap stuff ) in other threads.

Incase your interested .... www.peakoil.com

A86

Especially this thread!

http://www.peakoil.com/fortopic14960.html

A86

agent 86 said:

Davidr,

Guessing you know Acey wrote a bit about oil (the soon to be lack of the cheap stuff ) in other threads.

Incase your interested .... www.peakoil.com

A86

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A86,

Yeah I remember reading Acey's posts but with a very blasé attitude, “knowing” that it was something for 30 years or so. I haven't jumped over to ‘the-world-as-we-know-it is ending tomorrow’ camp (frankly I don't know enough to make that decision). However, last night's show certainly opened my eyes to the situation a little.

As Sim' mentioned in another forum, us humans are resourceful buggers when in need. The alternative fuels (eg hydrogen fuel cells) though not mature are well on the way. It was the lack of alternative for aviation fuel that really made me think.

Thanks for the PeakOil link. Some interesting discussions over there.

David.

Oil in a form through petrochemicals is also used for plastice etc isn't it?

i'd be expecting natural gas etc to be on the increase..

just a personal observation though.

Humans are resourceful and as Oil increases in price move invest in exploration and more will be found.

Change in use is already happening. I saw figures showing new car sales of Large 4WD has dropped 12% which I understand is like dropping off a cliff.

Natural Gas is cheap in Aus but not overseas. Thus, most research and design goes into diesel and petrol engines because in the world vehicle numbers Australia is a very small market and diesel is in greater supply overseas.

As for the oil used in plastics, I have heard various reports of it being nothing to 25% of the cost base?!?!?

Acey is the expert but I know his has given up because some found him views too radical. A shame.

To ignore Oil price and the link to economy is ridiculous. Virtually everything is impacted by Oil to some extent, i.e. Farming, Mining, Manufacturing, Transport of Good and People, Defence, and overseas it is critical to Heating.

Peter 147

Peter 147 said:

Other here are more knowledgeable but Oil threads seem to start bun-fights.

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They usually end in bun fights because when you discuss oil, by it's very nature, you are discussing an international topic which is governed by international interests. Australia is very much a tiny player and follows whatever the far larger producers and consumers do....this usually doesn't sit well with us Ozzies, who...some of us...sometimes...think and act as if we have anything to do with running "the show". This is where the tension usually lies, as us Ozzies refuse to accept we are irrelevant in the oil industry, and on the world stage in general. As I have said previously on this forum, when important decisions are made in the oil industry that affect the entire world's population, Australia isn't even invited into the room, let alone be allocated a seat at the decision table. I'm sure that situation makes the Ozzy Govt as frustrated as it's citizens, when we turn around and have a whinge to them about 'doing something' to lower petrol prices and they shrug their shoulders and say it's out of our hands. It most certainly is...but we don't like hearing that, generally speaking.

Peter 147 said:

Some say we will hit the balance point of greater demand than supply in 2010, others 2015. A lot depends on the Saudi’s and there reserves which no-one really knows.

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Umm, correction...no-one in the West really knows. There is a difference.

Extremely smart analysts predicted in the 1900's that the world's known reserves would last 20 years. Then they revised the scary prediction to read that in the 20's, it would last 30 years. Then in the 50's they said by the mid 80's, oil would be a spent resource...ad nauseum. Fear not, SA alone has enough to keep the whole world's consumption of 84 MMbbls ticking along by itself for quite some time. Then of course there is the vast amounts of both crude and even more so gas in Russia...of which the West once again has no clue of, then there's Venezuela and Mexico and Iran and whole bunch of other countries that the US doesn't particularly get along with. But then, the US doesn't allow every swinging cat to troll through their strategically important data to often either.

Peter 147 said:

Just because Iraq has a lot but they say if the fighting stopped tomorrow it would take $BN’S and 5 years to get the infrastructure back online.

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Nah...the boys were rolled back into Kuwait after the devastation and got all of those wells, especially those big nasty sour gas wells in the Burgan field, up and running in pretty short time. I think that 5 year time frame was probably estimated by some expert trader in New York dressed in a 3 piece suit who has never been close to a Xmas tree or a production facility.

Peter 147 said:

What is very certain and scary is growth in demand (India and China) is much more than growth in new deposits found.

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Surely this depends on where you sit. I bet the Indians and Chinese don't think it's scary at all, I bet they are very much looking forward to increasing their standard of living, as are their Govts. However, if you are sitting comfortably in the West with every gadget under the sun made of plastic and powered by oil to make your life comfy...absolutely, I can see why you are scared. Sharing a lot of the world's wealth with those two countries more than 2 billion folk must be daunting for those who have a fantastic lifestyle right now. A more equitable distribution, however strongly resisted by the present wealthy, will surely arrive. Scary for the first world nations, exhilirating for the not so developed.

Peter 147 said:

On the plus side, the recent increase has spurned many Companies to research old ground that was deemed uneconomical in 80's and with new technology the costs of exploration are less.

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Agreed.

Peter 147 said:

In short, in my opinion, Petrol at the Pump will never see under $1 a litre again and can only rise.

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Agreed.


Hey Peter, lucky this little 'ol topic is just being bantered around in the Coffee Lounge and no-one really takes it too seriously.

Peter 147 said:

Acey is the expert but I know his has given up because some found him views too radical. A shame.

Peter 147

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By the way, what happened to Acey? He is posting much less that he used. If he has really given up, that would be a shame. His contributions were so interesting.

What a interesting thread and a fascinating topic. This has such a high impact on our lives that I am surprised that so few people are paying attention to it.

A few random thoughts on the topic...

Does anybody know why is diesel more expensive that petrol is Australia? In europe, diesel is cheaper. This has encourage people to drive diesel cars, that much more fuel efficient that petrol cars. A diesel car burns about 5 to 6 litres per 100km, compared to 8 to 9 litres per 100 km for a petrol car.

When will the americans start to wake up and start moving away from a petrol-driven economy? America's depency on petrol is scary. They have minimal public transport, plenty of inefficient 4WD, and towns build around the assumption that cars is the main form of transport. Not only they are inefficient, but they give a poor model to the rest of the world.

From the ABC transcript, it is clear the only question is when, not wether will demand for petrol seriously push prices up, to the point where we are to re-shape the way we live. It could be 5 years or 30 years. Anyway it's not that far ahead. For many of us it will happen in our lifetime and have a serious impact on the way our kids live. From a property investment point of view, this would indicate that properties close to the city will become more valuable than properties in the far suburbs. From a long-term perspective, inner city investment would be the way to go.

Cheers,

redwing said:

Oil in a form through petrochemicals is also used for plastice etc isn't it?

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i bought that very question up at the dinner table a few weeks back only to receive a lecture from year12 student about making plastics from sugar cane byproducts. i can't recall the details, but was content enough to know it can be done.

also, as the technology for hybrid cars becomes more readily accepted and avail, surely this will extend the life of oil reserves a little.

House_Keeper said:

From a property investment point of view, this would indicate that properties close to the city will become more valuable than properties in the far suburbs. From a long-term perspective, inner city investment would be the way to go.

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And for the majority who can't afford the inner city there are also likely to be suburban 'hot spots'.

It may be possible to identify these by asking whether all everyday needs are available within a 10 minute walk of the property in question.

Otherwise suitable inner suburbs often fall down due to lack of a Coles/Woolworths (at best only a convenience store or small independent supermarket is nearby and one can't live on 7-11, Subway and Gloria Jeans all day!).

Outer suburbs tend to have fewer larger supermarkets, so only a small proportion of homes fit the critieria, but those that do might be worth considering if there are major employers nearby.

The other issue is access to schools.

Closures and amalgamations reduce the proportion of homes within handy distance of a school. This is driven by the falling birthrate, population movements and government policy. The problem may be aggravated if high schools are split up into a dual 'middle school' and 'secondary college' arrangement, as fewer of each type increase the amount of travelling required.

Even though the birth rate is dropping and the larger number of new households won't be families with children, areas within walking distance of a 'good school' (whatever that means) may still attract a premium and be increasingly sought after by those that do.

Given the increasing number of single parents and pressures on affordability, lower cost homes in such areas may be good renters. They don't even need to be seperate houses; if the area is near a popular school, a 2 or 3br duplex half with yard and carport should still appeal to smaller families on a budget.

Affordable homes that meet the above criteria in suburban areas 8 to 20km out with good public transport links may be quite good investment choices, no matter what happens to fuel prices.

Peter

G'day Housekeeper,

Does anybody know why is diesel more expensive that petrol is Australia?

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What I'd heard is that, since Australia has its own oil reserves (BUT they are light crude - not heavy enough to produce diesel) the price of petrol in Australia remains lower. OTOH, ALL diesel is imported.

Note this only hearsay - hoping others can confirm/deny this,

Regards,

One of the guys at work was talking about this yesterday to me, but I didn't pay much attention.

What he was basically saying is that there is a peak level of oil, that until you get to that amount (about 50%) the oil pretty much comes out under its own steam, then after the peak level is reached they have to start pumping it out.

Apparently Australia reached the peak level in 1981. Now the bit I didn't really agree with was that he said it now takes us 2 barrels of oil to make 1 new barrel, because of the pumping and filtering processes etc.

If this was the case then it would be pointless getting anymore oil?

I don't know how much of this info is true or not, but it is definately an interesting topic.

Oh yeah, we have 3 years of oil left. He mentioned that too.

BR

Spiderman said:

And for the majority who can't afford the inner city there are also likely to be suburban 'hot spots'.

It may be possible to identify these by asking whether all everyday needs are available within a 10 minute walk of the property in question.

Otherwise suitable inner suburbs often fall down due to lack of a Coles/Woolworths (at best only a convenience store or small independent supermarket is nearby and one can't live on 7-11, Subway and Gloria Jeans all day!).

Outer suburbs tend to have fewer larger supermarkets, so only a small proportion of homes fit the critieria, but those that do might be worth considering if there are major employers nearby.

The other issue is access to schools.

Closures and amalgamations reduce the proportion of homes within handy distance of a school. This is driven by the falling birthrate, population movements and government policy. The problem may be aggravated if high schools are split up into a dual 'middle school' and 'secondary college' arrangement, as fewer of each type increase the amount of travelling required.

Even though the birth rate is dropping and the larger number of new households won't be families with children, areas within walking distance of a 'good school' (whatever that means) may still attract a premium and be increasingly sought after by those that do.

Given the increasing number of single parents and pressures on affordability, lower cost homes in such areas may be good renters. They don't even need to be seperate houses; if the area is near a popular school, a 2 or 3br duplex half with yard and carport should still appeal to smaller families on a budget.

Affordable homes that meet the above criteria in suburban areas 8 to 20km out with good public transport links may be quite good investment choices, no matter what happens to fuel prices.

Peter

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Good points Peter!

still on the subject of oil,

Something that most people have no idea about, is the almost total reliance on oil for agriculture.

Basically, agriculture is the conversion of oil and other fossil fuels into food. The obvious fuel used is diesel, for the tillage, spraying, harvest and transport, but other less obvious inputs, are chemicals, which are made from hydrocarbons, but more importantly, fertilizer. Nitrogen fertilizers, are made from natural gas mainly, but can also be made from coking coal. Now, I know people here will say...

***Lets grow food organically***.

Great.....So says all the hollywood stars...... Problem is, to supply the nitrogen for organic food, the land has to be spelled while a legume crop is grown. It takes a year for enough nitrogen from a legume, to grow a crop. So straight away, production is halved. The world is awash with grain at the moment, but it is a very fine balance between supply and demand. A drought anywhere in the world sends prices higher. I can assure everyone that if every farmer in the world had to rely on legumes to supply the nitrogen, and have production cut in half, then grain production would halve, and prices would skyrocket. With grain production halved, there would not be enough grain in the world to feed to animals, so there would be no manure, therefore, no organic fertilizer for the organic food industry. A farm is a system. What is removed has to be put back. Millions of tonnes of nutrients are removed each year. It has to be replaced. The only reason 6 billion people can live on this planet is because of chemical nitrogen fertilizers. Hard to believe, I know. This backs up my claims....


http://www.cgfi.org/materials/articles/2002/nov_15pr_02.htm


I have heard people say that ethanol and biodiesel will solve all the energy problems. Well, it won't, because it can't. The main problem is that it is very inefficient to convert grain to energy via ethanol and biodiesel. It will help, and it will make oil last longer, but it can never be the solution. Remember, grain is dependant on fossil fuels for every step of production, and for nitrogenous fertilizer. Accey used to go on about this. Accey claimed that it took more energy to produce ethanol than resulted. I don't think this is correct, but then Accey sounded like he knew more about it than me.

Grain prices are now at decade lows thanks to subsidised production from the US, and Europe, and big crops overseas. Nitrogen fertilizer, and fuel production costs have more than doubled. Grain is the backbone of the food chain. Grain is used to feed cattle, pigs, chooks, to produce meat, eggs, milk etc. It also supplys the straw and manure for the organic food industry.

***If oil will never be cheap again, then neither will food.***

Why is food still cheap? Well, the crops in the ground now were planned last year. They were planted 6 months ago. Prices are shocking. When farmers get their checks next year, they will realise that they made no or little money. Hectares planted will be reduced, fertilizer imputs will be reduced. Grain production will reduce dramatically. Grain prices will rise dramatically. This will flow through to the other agriculture industrys that rely on grain. [thats all of them]. This will happen all over the world. All farmers are effected.

Oil will get more expensive, one day. If not due to supply, it will be increased demand. So will natural gas, and maybe coal, and uranium as a result. I don't know when production will peak. It may not peak for many years. I do know that food prices will eventually rise, and not just a little, a lot. I do know that most people have no idea about any of this stuff.

See ya's.

Bantam Roosta said:

One of the guys at work was talking about this yesterday to me, but I didn't pay much attention.

What he was basically saying is that there is a peak level of oil, that until you get to that amount (about 50%) the oil pretty much comes out under its own steam, then after the peak level is reached they have to start pumping it out.

Apparently Australia reached the peak level in 1981. Now the bit I didn't really agree with was that he said it now takes us 2 barrels of oil to make 1 new barrel, because of the pumping and filtering processes etc.

If this was the case then it would be pointless getting anymore oil?

I don't know how much of this info is true or not, but it is definately an interesting topic.

Oh yeah, we have 3 years of oil left. He mentioned that too.

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Having a degree in Petroleum Engineering and 15 years post graduate experience, living and working mainly in the Middle and Far East in both Drilling Engineering and Reservoir Engineering roles for major international oil companies, I'd suggest the "guy at work" you are talking to wouldn't know the first thing about the subject if it jumped up and bit him.

Most of the terms you are using are a complete non-sense. I've never once come across any of those terms in the industry. I think the journo's have done a marvellous job spinning and dumbing it down so the general folk can try and grasp the subject. Be very wary when TV presenters start off sentences with "Well, basically...." usually everything they say thereafter is complete tripe.

Oil and Gas flows naturally to surface when the pore pressure in the reservoir is greater than the hydrostatic head to which it is subjected to reach the wellhead. If it is...it flows...if it isn't, the density of the fluid 'kills' the flow and hence other methods are needed to extract or lift it (eg..gas lifting, sucker rod pumps, water flood injection, gas injection, underground fires to heat up the oil and make it less viscous - hence flow better etc etc...)

All of this 'peak oil' waffle is a complete nonsense.

Woodside has 8 Tcf (that's alot) up in Sunrise of Darwin.
Woodside has 15 Tcf (that's even more) up in Scott Reef Brecknock off Broome.
Chevron / Shell have oodles with Gorgon offshore Barrow island.
Exxon have Jansz offshore which apparently is bigger than all of them put together.

With 25 and 30 year LNG contracts being signed up over the past 12 months or so, and prices for both crude and gas being what they are, the industry in Oz and more importantly overseas has never looked rosier.

Don't forget North Rankin, Goodwyn, Harriet, Cossack Wanea and a bunch of other platforms out there merrily producing away.

Compared to milk and fancy bottled water, I still think petrol and deisel are an absolute bargain. More than that, these fancy hybrid things and making fuel out of sugar cane is fantastic for the nutty professor, but I suspect we'd need some fairly large Queensland sugar cane fields to make 84 MMbbls every single day. I suspect if it was completely covered, Qld wouldn't even be able to keep up with even 1% of that.

2 excellent post's there by Topcropper and Dazzling.

For anyone that's interested there's a good book i recently read called
"The bottomless well"
by Peter W. Huber and Mark P. Mills.

I recommend it for anyone interested in this topic.

Dazzling said:

Having a degree in Petroleum Engineering and 15 years post graduate experience, living and working mainly in the Middle and Far East in both Drilling Engineering and Reservoir Engineering
...
All of this 'peak oil' waffle is a complete nonsense.
...
With 25 and 30 year LNG contracts being signed up over the past 12 months or so, and prices for both crude and gas being what they are, the industry in Oz and more importantly overseas has never looked rosier.

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Hi Dazzling,

So in effect are you saying that the Catalyst article is wrong, and the 'whistle blowers' they quoted/interviewed are, for whatever reason, JMSU?

Dazzling said:

Woodside has 8 Tcf (that's alot) up in Sunrise of Darwin.
Woodside has 15 Tcf (that's even more) up in Scott Reef Brecknock off Broome.
Chevron / Shell have oodles with Gorgon offshore Barrow island.
Exxon have Jansz offshore which apparently is bigger than all of them put together

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Is Oz a net importer or exporter of oil? I thought we were net importer (could be wrong of course). Why would this be with all the Tcf 's we've got lying around?

Cheers,
David

Hi David,

I really shouldn't comment on the article or TV programme that you refer to. I haven't seen it and don't know the context in which it was pitched. I would imagine however, that the extremely complex topic of oil and the large implications it has (both economically but also politically because of it's importance) has been slightly simplified for the laymen viewers to consume....pointless showing you something on TV you can't understand or have no concept of - right ??

Your question of whether Australia is a net importer of oil....don't know 'cos I don't live there any more, but it's a mute point. We export large amounts of LNG and the trains on the NWS are getting into full swing. Most WA folk will remember back in the late 80's that Bond Petroleum tried to get a refinery up and running, but politic interference blocked him. He had the crude up at Harriet - and subsequently Campbell and Sinbad fields, and wanted to control the full value add chain all the way from the reservoir to the petrol bowser, but the Govt wouldn't let him. He was forced to sell the crude to Singapore and then import the value added refined product back to Perth....crazy stuff indeed, but then that's politics and our leaders for you. The BP refinery which now has a monopoly in Perth has some strong friends. Big cash buys big friends.

On a broader level, and a much bigger cash level, the general topic of when 'oil' is going to 'run out', consider if you will, just one field in one country. Admittedly, it's a monster, but it puts the whole discussion into perspective.

The field of Al-Ghawar onshore in the Kingdom of SA ;

Length = 200 km
Width = 65 km
Net pay = 600 ft (0.2 km)
Porosity = 20%
Oil Saturation = 90%
Recovery ~ 70%

Volume of oil recoverable in this one reservoir = 200 * 65 * 0.2 * 0.2 * 0.9 * 0.7 = about 328 cubic kilometres.

There is 6.29 bbls in one cubic metre, therefore this one reservoir contains 2,063 billion bbls.

At 84 MMbbls/day world consumption, this one reservoir alone, ignoring every other field in every other country in the world could sustain demand for 24,560 days or 67 years.

The world is going to run out of oil in 3 years...yeah right.


By the way, that one single field, at present oil prices is worth USD $ 124 Trillion, and is by a very large margin the single most valuable resource ever discovered by man. I reckon the house of Saud could trade just that one field for the entire US real estate market and then have some change left over.

That type of money makes everyone sit up and take notice, including generals and presidents and kings. I had dinner on Friday night with the 4 star General head duck of the US Army in Iraq. He swung through here to check out the landsacpe. I wasn't happy about that...the locals don't want the same thing happening here as happened in Iraq. We were only introduced to him as the "General", I think his name was Abelese or something, an Arabic speaker anyway. He knew all the oil numbers and what it was worth. Let me tell you, he ain't interested in "freeing the downtrodden people of Iraq". Oil dollars demand respect and attention, and regularly receive it.

I've had a guess at what JMSU means, and if my guess is right, then my answer to that would be yes. Our energy needs will be satisfied by crude oil and LNG for a good while yet.