The IEA’s latest report is released, just as two whistleblowers from amongst their own senior staff rail against their oil production projections
The report, for the uninitiated, looks at expected supplies in oil, coal and natural gas, as well as demand for the same – making projections up to 2030. It is, or should be, significant in that it paints a picture of what life might be like in the next few years – either steady flows of fossil fuel energy to maintain the industrial/consumer status quo (and increase CO2 levels in tandem), or, alternatively, a potentially society-upturning peaking of energy supplies; oil in particular.
The IEA was traditionally always famously optimistic about supply, to the point where many disregarded the reports as merely an industry-sponsored publication to serve industry interests. It’s only been over the last couple of years that their reports have appeared to even entertain the possibility that fossil fuels might in fact be finite. Their predictions of supply were always in parallel with their predictions of demand.
Last year, however, (through a "field-by-field analysis of production trends at 800 of the world’s largest oilfields") they shocked the world with the announcement that we need to invest…. wait for it…. over 26 trillion dollars over the next 22 years in order to maintain present or just above present rates (with around half of that investment for finding and developing fields that potentially do not exist).
Anyway, the new report echoes last year’s figures, that – with enough investment – we’ll be able to increase production from our present 83 million barrels of oil per day (worldwide) to 105 million. Although the 105 million projection is a marked decrease from previous years, not a few believe this figure is also still wholly unrealistic, and some think it is entirely manufactured.
Significantly, some of those doubting Thomases appear to reside within the IEA itself:
The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying.
Other sites discussing this issue in case you’re a readerholic:
Jeremy Leggett, CEO of Solar Century and a member of the taskforce, told CNN that the allegations from within the IEA were particularly worrying, but not surprising. "I increasingly think there are parallels between [the oil industry] and what we now know of the banking culture," Leggett told CNN. "It’s the systematic, cultural burial of risk. Investment bankers did it with complex derivatives. And I very firmly believe that the oil and gas industry culturally does the same thing with the depletion of reserves.
Time – who start with the same concern I’ve been voicing for a while now:
Here’s the bad news about the global recession’s potentially coming to an end: the recovery could spark a massive energy crisis with increased demand for fossil fuels from China and other developing countries, tighter oil supplies and skyrocketing oil prices. And this is just in the near future.
The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves.
The allegations raise serious questions about the accuracy of the organisation’s latest World Energy Outlook on oil demand and supply to be published tomorrow – which is used by the British and many other governments to help guide their wider energy and climate change policies.
In particular they question the prediction in the last World Economic Outlook, believed to be repeated again this year, that oil production can be raised from its current level of 83m barrels a day to 105m barrels. External critics have frequently argued that this cannot be substantiated by firm evidence and say the world has already passed its peak in oil production.[…]
A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organisation was that it was "imperative not to anger the Americans" but the fact was that there was not as much oil in the world as had been admitted. "We have [already] entered the ‘peak oil’ zone. I think that the situation is really bad," he added. – Guardian
I don’t have time for a big review right now, but a couple of quick observations from me:
1) Last year’s WEO report, made after analysing over 800 of the world’s largest fields, provided the energy forecast below (figure 1). Note that any increase in supply beyond 2008/2009 is only through: developing new fields, finding and developing new fields, additional EOR (Enhanced Oil Recovery) – which means getting desperate and pushing CO2 or water into older fields to create more pressure – non-conventional oil (think tar sands), and natural gas liquids. What all that adds up to is everything above the bottom dark blue segment represents a significant amount of investment. Take just the red section below – the oil fields that may not exist – out of the picture, and recalibrate the projection again to see what I mean. You suddenly have a flatline up to 2030. Start to take other colours out, and so on.
Figure 1: From the World Energy Outlook 2008 report
This year’s version, in different format, says similar.
From the World Energy Outlook 2009 report
Take the light blue section out, and the drop is abrupt.
2) In 2009 world demand for oil has shrunk for the first time in history, and the industry is feeling the pinch. The world is broke. No, more – the world is swimming in debt. Over the last year, since the recession hit, investment in developing new oil fields, and even in maintaining existing fields, has been cut across much of the industry. If the economy does begin to pick up speed, the potential lag time in oil-industry response could quickly translate to shortages. If demand even hints at going above supply, 2008-style price spikes are highly likely – particularly if stock markets are unregulated. This would have enormous consequences – potentially sending new economic growth into a tail spin. You may begin to understand why I recently wrote the post ‘Heading into a Perpetual Recession‘.
3) If prices begin a rapid incline yet again, and peak oil becomes even more obvious, investment will return. Some of the money, rather than continue to chase hard-to-get oil, will inevitably go into cheaper fuel alternatives – dirty technologies like coal-to-liquids. Although highly polluting, it is perhaps the fastest, easiest way to replace transport fuels. The low hanging fruit of easy, sweet crude, also happens to be the cleanest in comparison to these alternatives.
4) As well as calling for significant investment in oil and gas, the WEO report is also calling for sizeable funding of renewable technology to mitigate climate change – and doesn’t pull any punches in its assessment of our climate woes. Yet, its call to invest in both quarters is a good example of the quandary of politicians and economists, who are trying to figure out how to grow the economy whilst shrinking its consequences. Asking the world to invest significantly in oil production, so we can continue our past growth curve, and continue polluting, while simultaneously asking us to invest heavily in renewables, to reduce our impact on the planet, is like asking a man to lift a bucket off the ground – while asking him to get inside it at the same time. And, given we’re dead broke, you could stretch the analogy a little further by making the man armless.
5) The report states:
As conventional oil production in countries not belonging to the Organization of the Petroleum Exporting Countries (OPEC) peaks around 2010, most of the increase in output would need to come from OPEC countries, which hold the bulk of remaining recoverable conventional oil resources.
This equates to increased political tensions….
Whether geologically, or economically, or both, there’s a very real chance we’ve already peaked – that we’ll never pump more than 83-85 million barrels of oil per day out of the ground. We may also begin a rather steep drop in production, particularly in the most ‘developed’ countries, who are all experiencing increasing decline rates. If so, buckle up. We could be in for an interesting ride. Apocalypse might be better spelt Petrocollapse?
I’ll leave you with one more quote. Earlier this year, Stephen Harvey, Director of the Oil and Gas Office at the Energy Information Administration (EIA – not to be confused with IEA) of the US Department of Energy wrote:
There are many compelling arguments regarding the increased difficulty in reaching oil reserves which may well result in a future view of historical production that looks sort of like a bell curve. And, it is quite plausible that the peak of that curve is around now. – EnergyBulletin.net