Peak Oil News: The Peak Oil Crisis: Picking the Peak

Thursday, November 23, 2006

The Peak Oil Crisis: Picking the Peak

Falls Church News-Press

By Tom Whipple

Last week Cambridge Energy Research Associates (CERA) who characterize themselves as "a leading advisor to international energy companies, governments, financial institutions, and technology providers," sent out a press release announcing that they had a new report on peak oil for sale. For some time now, CERA has been the leading debunker of the notion that world oil production might just peak in the near future, so their reports are always of interest.

They don't say oil production will never peak, it's just that they want you to believe that the peak won't come until 2030 and after that production will decline so gradually that there will be plenty of oil right on out through the rest of the 21st century.

The occasion of a "new" report on peak oil from CERA always creates a great stir amongst followers of the peak oil story. This time was no exception. CERA is, of course, a profit-making entity that is used to selling their analyses to major corporations and rich governments for big bucks, so $1000 was set as an appropriate amount for a 16-page report debunking a subject as important peak oil.

CERA, or at least their PR folks, realized that at this price, "WHY THE PEAK OIL THEORY FALLS DOWN" was unlikely to make the best seller list, so they thoughtfully provided a tightly written four page press release covering the main points of the study. This of course allowed the world's press to write stories about the gist of the report without having to pony-up the $1000.

The purpose here is not to critique the CERA report's shortcomings for within hours of the press release's issue, numerous voices from the Internet had torn the CERA report, its logic, and argumentation into a thousand intellectual shards.

In case you are interested, there was nothing new in the report that CERA has not said many times before. The heart of their argument is that their parent company has a secret database of the world's oil fields. After studying this database, depletion rates, and likely new sources of oil or oil-like hydrocarbons, they conclude that world oil production will continue growing right on up to 130 million b/d by 2030. After that, production will bounce along on their famous "undulating plateau" for decades giving us plenty of time for future generations to go out and find some other source of energy. You should be aware, however, that several other individuals and organizations have done similar analyses and have come to far more alarming conclusions.

Now there is nothing intrinsically wrong in an organization examining a problem as complex as peak oil and coming up with an optimistic judgment that we have 25 years of plenty ahead. They start to get out of line however when they mischaracterize what serious students of peak oil are really saying and follow this up with dubious assumptions that technological advances in the near future will turn all manner of carbon deposits into affordable fuels.

This all leads to the question of just what is going on here? Why is CERA putting out the same old claims -- this time wrapped in some name-calling about the inadequacies of the people who believe that peak oil is imminent? Why is CERA ignoring reams of solid evidence that world oil production is indeed approaching a peak and that there is unlikely to be any technological quick-fix? Why are they doing this now?

There just might be a clue buried in the rather strange first paragraph of CERA's press release. "The peak oil argument is based on faulty analysis which could, if accepted, distort critical policy and investment decisions."

We might just be on to something; widespread acceptance of imminent peaking of oil production is "distorting critical policy and investment decisions?" What policies and whose investment decisions?

CERA, of course, makes a good living by selling advice about the future of energy to corporations and governments that can afford very expensive reports and consulting fees. There is also no question that many investments decisions made in 2006 are going to look brilliant or dumb depending on whether oil is cheap and plentiful or expensive and scarce ten years from now.

Moreover, there is no secret about peak oil and the path to the peak. It is all over the Internet in as much detail as one would like to know. It is highly unlikely that planners for large corporations are unaware of the concepts behind peak oil and do not know that the price of oil has increased three or four fold in recent years. The price spikes of last summer coupled with the problems that Detroit has had selling large cars should be enough to focus most decision-makers’ attention.

CERA is clearly hanging its credibility and future on the idea that worldwide oil depletion is still a long ways off. It is a popular message and probably finds a good market in corporate board rooms where a massive paradigm shift is highly unwelcome news.

Events of the last year, however, should give those accepting this optimistic view cause for concern. It is not much of leap to believe that CERA is coming under heat from those who recognize that a bad call on peak oil will be devastating. This CERA report, which is obviously an attempt to defend their position, may be a sign that the message of peak oil may just be getting through to the corporate world.


4 Comments:

At 1:28 AM, November 24, 2006, Anonymous Anonymous said...

Of course, it's those depletion rates that are critical to the CERA analysis. But I'm sure that they are not using double digit declines for many (if any) of their fields, as per recent PEMEX announcement!

Pemex CEO Sees Oil Field Output Dropping


© 2006 The Associated Press

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MEXICO CITY — The chief executive of Mexico state oil monopoly Petroleos Mexicanos, or Pemex, said Wednesday the company expects production at its Cantarell oil field to decline by an average of 14 percent a year between 2007 and 2015.

Speaking to members of the Senate Energy Committee, Luis Ramirez Corzo said the average annual decline is equivalent to about 150,000 barrels a day.

The offshore Cantarell, Mexico's largest source of crude oil, began declining in 2005 from a record 2.13 million barrels a day in 2004.

Ramirez Corzo said output at Cantarell is expected to average 1.8 million barrels daily this year. Pemex is aiming to substitute Cantarell's declining output with production from other projects under way, he said.

The main problem facing the state company is how to finance future projects, Ramirez Corzo said. He estimated the company needs to invest at least US$18 billion (euro14 billion) a year in exploration and production as it aims to maintain crude production at around 3.3 million barrels a day between now and 2015, while producing 6.5 billion cubic feet (180 million cubic meters) a day of natural gas.

He said current natural gas production is 5.6 billion cubic feet (160 million cubic meters a day.

Pemex is currently producing around 3.2 million barrels daily in crude, of which it exports about 1.7 million barrels daily, mostly to the United States.

 
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