Peak oil output possible in just ten years

Fatih Birol, the chief economist of the IEA, believes that if no big new discoveries are made, “the output of conventional oil will peak in 2020 if oil demand grows on a business-as-usual basis.”

Coming from geologists and former oil-industry hands who believe the world is facing an imminent shortage of oil, this would be unremarkable. But coming from the IEA, the source of closely watched annual predictions about world energy markets, it is a new and striking claim.

Despite repeated downward revisions in recent years in its forecasts of global oil supply in 2030, the IEA has not until now committed itself to a firm prediction for when oil supplies might cease to grow. Its latest energy outlook, released last month, says only that conventional oil (as opposed to hard-to-extract sources like Canada’s tar sands) is “projected to reach a plateau sometime before” 2030.

Birol’s willingness to acknowledge conventional supplies may peak in a decade’s time points to a subtle shift in policymakers’ attitude toward the “peak oil” debate.

This debate is not about whether the supply of oil, a finite resource, could some day stop growing. Rather, it hinges on the timing of an end to increases in global oil production, and on what happens next. The most pessimistic peak-oil proponents think that global oil supply has peaked or is about to do so. Given projections of demand increasing well into the future, they fear economic disaster.

By contrast, oil optimists like Cambridge Energy Research Associates, an energy research firm based in Boston, argue that high prices will lead to improved technology that will enable oil firms to find new oil fields; make it economically feasible to extract oil under more challenging geological conditions or manufacture it from coal or natural gas; and increase the amount of oil that can be recovered from existing fields.

This, they argue, will allow demand to be met for at least a couple of decades. After that, CERA reckons, “supply may well struggle to meet demand, but an undulating plateau rather than a dramatic peak will likely unfold.”

Until now official estimates from the IEA were far closer in spirit to those from the likes of CERA than the pessimists. Birol’s statement suggests that the IEA has extended a tentative foot into the other camp.

The reasons are not hard to find. After analyzing the historical production trends of 800 individual oil fields in 2008, the IEA came to the conclusion that the decline in annual output from fields that are past their prime could average 8.6 per cent in 2030. “Even if oil demand were to remain flat, the world would need to find more than 40 million barrels per day of gross new capacity — equal to four new Saudi Arabias — just to offset this decline,” says Birol.

The IEA expects unconventional sources of oil to take up a lot of the slack, as progressively higher prices make them economically viable. But these sources are also much dirtier than conventional oil and require significantly more energy to tap. That sits uneasily with efforts to mitigate climate change, the subject of talks that began in Copenhagen this week.

These negotiations matter hugely for the peak-oil debate.

The IEA reckons that coordinated action to restrict the increase in global temperatures to 2 C will restrict global demand for oil to 89 million barrels per day in 2030, compared with 105 million barrels per day if no action is taken.

That, Birol says, “could push back the peak of production, as it would take longer to produce the lower-cost oil that remains to be developed.” Action on climate change may yet save the world from an early supply crunch.

News Source: Chronicle Herald

Tags:  2020, IEA, peak oil, ten years