There is a lively debate between ‘concerned’ and ‘unconcerned’ analysts regarding the future availability and affordability of oil. We critically examine two interrelated and seemingly plausible ...arguments for an unconcerned view: (1) there is a growing amount of remaining reserves; (2) there is a large amount of oil with a relatively low average production cost. These statements are unconvincing on both theoretical and empirical grounds. Oil availability is about flows rather than stocks, and average cost is not relevant in the determination of price and output. We subsequently implement a bottom-up model of regional oil production with micro-foundations in both natural science and economics. An oil producer optimizes net present value under the constraints of reservoir dynamics, technological capacity and economic circumstances. Optimal production profiles for different reservoir drives and economic scenarios are derived. The field model is then combined with a discovery model of random sampling from a lognormal field size-frequency distribution. Regional discovery and production scenarios are generated. Our approach does not rely on the simple assumptions of top-down models such as the Hubbert curve – however it leads to the same qualitative result that production peaks when a substantial fraction of the recoverable resource remains in-ground.
► Remaining oil reserves and average costs are of limited use in forecasting. ► We present a bottom-up approach to the modeling of regional oil production. ► Producers maximize net present value under technological and physical constraints. ► Exploration is modeled as random sampling from a lognormal field size distribution. ► Regional production starts declining before half of the recoverable oil is produced.
The assessment of future global oil production presented in the IEA’s World Energy Outlook 2008 (WEO 2008) is divided into 6 fractions; four relate to crude oil, one to non-conventional oil, and the ...final fraction is natural-gas-liquids (NGL). Using the production parameter, depletion-rate-of-recoverable-resources, we have analyzed the four crude oil fractions and found that the 75
Mb/d of crude oil production forecast for year 2030 appears significantly overstated, and is more likely to be in the region of 55
Mb/d. Moreover, analysis of the other fractions strongly suggests lower than expected production levels. In total, our analysis points to a world oil supply in 2030 of 75
Mb/d, some 26
Mb/d lower than the IEA predicts.
The connection between economic growth and energy use is fundamental in the IEA’s present modelling approach. Since our forecast sees little chance of a significant increase in global oil production, our findings suggest that the “
policy makers, investors and end users” to whom WEO 2008 is addressed should rethink their future plans for economic growth. The fact that global oil production has very probably passed its maximum implies that we have reached the Peak of the Oil Age.
The widening gap between EU gas production and consumption may require an 87% increase of import volumes between 2006 and 2030, and there are great uncertainties regarding the amounts of gas that can ...be expected from new suppliers. The potential of increased production from Norway and Algeria is limited; hence, Russia is likely to play a crucial part of meeting the anticipated growing gas demand of the EU. A field-by-field study of 83 giant gas fields shows that the major producing Russian gas fields are in decline, and by 2013 much larger supplies from the Yamal Peninsula and the Shtokman field will be needed in order to avoid a decline in production. Gas from fields in Eastern Siberia and the Far East will mainly be directed to the Asian and Pacific Rim markets, thereby limiting its relevance to the European and CIS markets. As a result, the maximum export increase to the European and CIS markets amounts only to about 45% for the period 2015–2030. The discourse surrounding the EU’s dependence on Russian gas should thus not only be concerned with geopolitics, but also with the issue of resource limitations.
►Natural gas production in the Nadym Pur Taz region (Western Siberia) will start to decline within a few years. ►New production from the Yamal peninsula is critical to ensure gas exports to Europe. ►Additional production in East Siberia and the Far East will not be available for the European market. ►Rapid gas demand growth in China might also lead to competition for gas from Western Siberia.
Bottom-up models of oil production are continuously being used to guide investments and policymaking. Compared to simpler top-down models, bottom-up models have a number of advantages due to their ...modularity, flexibility and concreteness. The purposes of this paper is to identify the crucial modeling challenges, compare the different ways in which nine existing models handle them, assess the appropriateness of these models, and point to possibilities of further development. The conclusions are that the high level of detail in bottom-up models is of questionable value for predictive accuracy, but of great value for identifying areas of uncertainty and new research questions. There is a potential for improved qualitative insights through systematic sensitivity analysis. This potential is at present largely unrealized.
•Bottom-up models are influential in the study of the oil production supply chain.•Nine existing bottom-up models are reviewed.•The high level of detail is of questionable value for predictive accuracy.•There is a potential for more systematic sensitivity analysis.
According to the long-term scenarios of the International Energy Agency (IEA) and the US Energy Information Administration (EIA), conventional oil production is expected to grow until at least 2030. ...EIA has published results from a resource-constrained production model which ostensibly supports such a scenario. The model is here described and analyzed in detail. However, it is shown that the model, although sound in principle, has been misapplied due to a confusion of resource categories. A correction of this methodological error reveals that EIA's scenario requires rather extreme and implausible assumptions regarding future global decline rates. This result puts into question the basis for the conclusion that global “peak oil” would not occur before 2030.
The European Union (EU) is expected to meet its future growing demand for natural gas by increased imports. In 2006, Norway had a 21% share of EU gas imports. The Norwegian government has ...communicated that Norwegian gas production will increase by 25–40% from today's level of about 99 billion cubic meters (bcm)/year. This article shows that only a 20–25% growth of Norwegian gas production is possible due to production from currently existing recoverable reserves and contingent resources. A high and a low production forecast for Norwegian gas production is presented. Norwegian gas production exported by pipeline peaks between 2015 and 2016, with minimum peak production in 2015 at 118
bcm/year and maximum peak production at 127
bcm/year in 2016. By 2030 the pipeline export levels are 94–78
bcm. Total Norwegian gas production peaks between 2015 and 2020, with peak production at 124–135
bcm/year. By 2030 the production is 96–115
bcm/year. The results show that there is a limited potential for increased gas exports from Norway to the EU and that Norwegian gas production is declining by 2030 in all scenarios. Annual Norwegian pipeline gas exports to the EU, by 2030, may even be 20
bcm lower than today's level.
The giant oil fields of the world are only a small fraction of the total number of fields, but their importance is huge. Over 50% of the world’s oil production came from giants by 2005 and more than ...half of the world’s ultimate reserves are found in giants. Based on this, it is reasonable to assume that the future development of the giant oil fields will have a significant impact on the world oil supply. In order to better understand the giant fields and their future behavior, one must first understand their history. This study has used a comprehensive database on giant oil fields in order to determine their typical parameters, such as the average decline rate and life-times of giants. The evolution of giant oil field behavior has been investigated to better understand future behavior. One conclusion is that new technology and production methods have generally led to high depletion rates and rapid decline. The historical trend points towards high decline rates of fields currently on plateau production. The peak production generally occurs before half the ultimate reserves have been produced in giant oil fields. A strong correlation between depletion-at-peak and average decline rate is also found, verifying that high depletion rate leads to rapid decline. Our result also implies that depletion analysis can be used to rule out unrealistic production expectations from a known reserve, or to connect an estimated production level to a needed reserve base.
It has been suggested that oil exploration may lead to false perceptions of decreasing scarcity. We perform a simulation of the exploration process using Bayesian updating. The approach enables us to ...isolate the information effect on the success rate and also to quantify the subjective expectation of the total resource size. The area under exploration consists of a number of regions which may differ in their oil content. Exploration is performed with the goal to maximize the expected success rate. The resulting information about the distribution of oil and the total resource size is assumed public knowledge. A number of scenarios with variations in the dimensions of the area under exploration, the oil distribution and initial beliefs are considered. The results indicate that the information effect on the success rate is significant but brief — it might have a considerable impact on price but is an unlikely mechanism behind a long-term declining price trend. However, the information effect on expectations is gradual and persistent. Since exploration is performed in regions where the expected success rate is the highest, the historical success rate will not be representative of the area as a whole. An explorer will tend to overestimate the total resource size, thereby suggesting an alternative mechanism for false perceptions of decreasing scarcity, a mechanism that could be called the “fallacy of early success”.
► Exploration for oil might lead to false perceptions of decreasing scarcity. ► Exploration is simulated with an agent using Bayesian updating. ► The agent strives to maximize the success rate based on available information. ► Information has a significant but brief effect on the success rate. ► Due to biased information, the agent tends to overestimate the total resource size.
The theme of this thesis is the depletion of petroleum (crude oil and natural gas). Are there reasons to be concerned about an ‘end of cheap oil’ in the near future? There is a lively debate ...regarding this issue. The debate is sometimes described as a clash of ‘concerned’ natural scientists and ‘unconcerned’ economists. However, this clash is both harmful and unnecessary. The views of natural scientists and economists can and should be reconciled. At the micro-level, geological and physical factors (such as diminishing reservoir productivity) are parameters in the producer’s economic optimization problem. Bottom-up modeling therefore appears to hold more promise for forming a common understanding of depletion than prevailing top-down models, such as the controversial Hubbert model. The appended papers treat various aspects of petroleum depletion: critical examination of top-down scenarios (I); bottom-up economic and geologic modeling of regional production (II); review of published bottom-up models and sensitivity analysis (III); simulation of success rates and expectations in oil exploration (IV); bottom-up scenarios of future natural gas production in Norway (V) and Russia (VI); empirical analysis of production profiles of giant oil fields (VII). Bottom-up models have the potential to be accepted by scientists from different disciplines, and they enable interpretable sensitivity analyses. They are, however, not likely to reduce quantitative uncertainty in long-term scenarios. There is theoretical evidence of the possibility that petroleum scarcity occurs long before the recoverable resource is close to exhaustion. This result is a consequence of both geological and economical factors. Several arguments for an ‘unconcerned’ view are at best uncertain, and at worst relying on questionable assumptions (analyzing reserves rather than production flows, using irrelevant reserve definitions, using average cost instead of marginal cost). The considerable uncertainty regarding an issue of such importance is in itself a cause for concern.
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