“The era of cheap oil is over and will never come back… Conventional oil peaked in 2006,” - Fatih Birol, International Energy Agency Chief Economist, 25 May 2011
There is perhaps no more divisive issue in the world energy markets than the concept of “peak oil,” which has ignited vociferous debate on both sides of the issue.
Shorn of its complexities, peak oil boils down to a half-empty/half-full glass debate. The peak oil theory, first enunciated by Marion King Hubbert, a geologist working at Shell’s research lab in Houston, stated that any finite resource (including oil), will have a beginning, middle, and an end of production, and at some point it will reach a level of maximum output, to be followed by a decline, which cannot be effectively arrested. Elaborating upon his theory, Hubbert presented a paper to the 1956 meeting of the American Petroleum Institute in San Antonio, which predicted that U.S. overall petroleum production would peak between the late 1960s and the early 1970s, igniting fierce controversy, but Hubbert became famous when this prediction proved correct in 1970 when U.S. oil production did in fact decline.
Production vs. consumption
In 1973 oil accounted for 46 percent of the world's total energy consumption; by 2005, its share had declined to 35 percent. But oil remains well ahead of other energy sources: coal meets 25 percent of the world's energy needs, natural gas is next with a market share of 20 percent and nuclear power provides 6 percent of the world's energy needs.
While there are more than 40,000 oil and natural gas fields worldwide, 94 percent of known oil is concentrated in fewer than 1,500 giant and major fields. Of these, 100 super-giant fields contain approximately 65 percent of cumulative production plus remaining reserves. Current world production and consumption remain heavily dependent on super-giant and giant oilfields discovered in the 1950s and 1960s, and only rarely in recent decades have discoveries equaled production. Instead, it’s usually been one barrel discovered for every three barrels produced.
Old super-giant fields are aging and their production is declining. Kuwait’s Burgan field, which has proven reserves of 70 billion barrels and has a daily output of 1.6 million barrels a day, the world's second-biggest field after Saudi Arabia's Ghawar field, was discovered in 1938 and peaked in 2005. Ghawar, containing 75 -83 billion barrels, was discovered in 1948 and production also reportedly peaked in 2005. Pemex’s Cantarell, discovered in 1976 in the Gulf of Mexico, peaked in 2004, earlier than anticipated. Alaska’s Prudhoe Bay, containing 13 billion barrels, was discovered in 1969 but production there began to decline in 1998, again, earlier than expected.
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