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Peak Oil is Nonsense ... Because There's Enough Gas to Last 250 Years

By Professor Chris Rhodes | Mon, 10 December 2012 23:07 | 7

The title is a condensate of the latest rendition from Nigel Lawson, who served Margaret Thatcher’s government, both as Secretary of State for Energy and Chancellor of the Exchequer. In a recent interview, published by the Daily Mail, Lord Lawson makes various assertions, each of which invite some consideration and question. At bold face, his conclusions confound the difference between a resource and a reserve. Furthermore, they ignore the fact that it is not the quantity available, but the rate at which it may be recovered - and this not only as a technical but economic reality (this is the “reserve”) – which is the determinant of whether and when oil or gas will “peak”.

As an example where the former but not the latter criterion holds, we might say that it is technically feasible to mine minerals from the moon, and bring them back to earth, but in economic terms, the prospect is unrealistic. However, it is the inclusion of all known, proved, probable and theoretical, that is reckoned-up as a resource, not only ignoring technical and economic factors, but the uncertainty of whether the material is there to be had in the first place. A useful analogy for the relationship between the amount in the reserve, and how quickly it may be recovered, is that it is not the size of the tank but the size of the tap that matters.

No sensible person that I am aware of, is saying that oil or gas is going to “run out” any time soon. I give a talk entitled “What happens when the oil runs out?”, but I begin by explaining that this is not going to happen, and we will be producing oil for decades to come. That noted, continuing to produce oil at the present rate of 30 billion barrels every year is unlikely to be possible for very much longer. At some point, reckoned to be around now, conventional crude oil production will reach a maximum, and then fall relentlessly. It must – this is the nature of a finite reserve. In principle, so long as that “hole” in the output of crude oil can be filled from alternative, unconventional sources, all is well, but once the loss of conventional production exceeds the provision of the latter, the overall sum will pass into the negative; in other words, global oil production will have peaked.

Related Article: Oil Sands Crude Crashes Through $60 a Barrel

Lawson begins with mention of the extraction of gas and oil from shale by hydraulic fracturing (frac’ing, for the purists, but more commonly designated as fracking). He is entirely correct that it is new technologies – horizontal drilling combined with fracking – that have brought the cost down sufficiently that exhuming gas and oil from such inaccessible reservoirs is now both practically and economically viable. In principle, shale gas can be recovered all over the world, although until an actual well is drilled, there remains speculation as to how much gas there is and indeed its quality; for example, from several shale wells in Poland, came a gas that was so heavily contaminated with nitrogen that it wouldn’t burn. It also contained high levels of hydrogen sulphide, and removing both these other gases to leave pure methane would be extremely costly. That noted, because production from shale wells, of either gas or oil, tends to decline quite rapidly, down to perhaps only 20% of the initial rate within 2 years, more wells must be drilled year on year, to maintain the overall output of a field, and this rate must be elevated to raise gas production, as is sought. Ultimately, the scheme must run up against material limits to the levels of financial investment, infrastructure, equipment and trained personnel that can be brought to bear in the effort.

As to how much shale gas the United States has, claimed in the media as sufficient to last for 100 years, detailed inspection of the available figures reveals this to relate to a resource – i.e. the most optimistic set of accounts – while the reserve (proved plus probable) is more like 20 years worth. Given the known reserves of shale oil, and the expected production from it over the next few years, it is difficult to see how the U.S. will overtake Saudi Arabia, to don once more its crown as the world’s greatest oil-producing nation, which would mean an output of about 11 million barrels a day, up from just under 6 mbd currently, by 2017. In the tally of “oil” is included other “liquids”, including biofuels, natural gas plant liquids and refinery gains, which compromise the truth, since they have different properties from crude oil - in particular, a lower energy density.

Related Article: Internal Divisions could Burst Canada's Oil Bubble

Unsurprisingly, oil shale gets a mention, for which it is claimed there is three times as much “oil” under the U.S. as has been used in the past 100 years. Yes, it’s that resource thing again. It is probably worth stressing that oil shale is not the same thing as shale oil. Shale oil (tight oil) is actual crude oil that if recovered, e.g. through horizontal drilling and fracking, can be refined in the normal way. However, oil shale does not contain oil as such, but a solid organic material called kerogen. To produce a material resembling crude oil requires large amounts of energy to heat the kerogen to above 300 degrees centigrade, in order to crack it into liquid form; the process also uses large amounts of freshwater, and churns-out an equal volume of contaminated, wastewater which must be dealt with responsibly.

There is, as yet, no commercial scale production of oil from “oil shale”, and there may never be, since it takes almost as much energy to get oil from it as will be delivered by the oil itself, i.e. pointless. The returns are better on “oil sands”, maybe 3 to 1, in energy terms - once the material has been “upgraded” to provide a liquid fuel - but here too, vast quantities of water are needed, and sufficient energy is required to extract the bitumen in the first place, that installing nuclear reactors in such locations is being considered seriously as a source of heat, currently generated  by burning natural gas.

Lawson concludes, “Today, oil, gas and coal represent 80 per cent of the global energy mix. They will continue to dominate the world’s energy markets for decades to come. And within that picture, natural gas is going to offer the cheapest way to produce electricity: cheaper than nuclear energy and massively cheaper than renewables...” He’s obviously forgotten about climate change.

By. Professor Chris Rhodes

About the author

More recent articles by Professor Chris Rhodes

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  • Ron Wagner on December 11 2012 said:
    Prof. Rhodes has obviously not heard of, or prefers to not think of, methane hydrates, estimated to equal ten times all land based methane, Biogas, peat bog gas, etc. Nor has he any faith in wind, geothermal, nuclear, hydro, wave power etc. We have sources of energy all around us. There is no peak energy period.
  • Mr C on December 11 2012 said:
    @Ron Wagner and Nigel Lawson - you cant lump energy(s) together and say there is enough energy to last - what about reducing EROEI? what about the petrochemicals found in oil that make fertaliser that allow for industrial food production - electricty from wind or gas or methane wont help here? What about the petrochemicals derived from oil that make plastics, pharmacuticals and textiles? Renewables (as nice as they are) will never replace fossil fuels. What about climate change? Why must we listen to those with their heads in the sand?
  • Professor Chris Rhodes on December 11 2012 said:
    Prof. Rhodes is well aware of methane gas hydrates and that there are thought to be vast quantities of them on the ocean floor and also in permafrost. However, there is no immediate technology for extracting them on a commercial scale - it's that reserve vs resource problem. He has faith in the other renewable technologies that you mention, but all of these generate energy in the form of electricity, which does not get us around the liquid fuels crisis, which will be the most urgent impact of peak oil. There are over one billion vehicles on the world's roads and we won't have that number of electric cars any time soon, or ever. The problem remains.
  • MrColdWaterOfRealityMan on December 11 2012 said:
    Professor Rhodes, could you show your work? If I use the USGS numbers (http://www.usgs.gov/blogs/features/usgs_top_story/worlds-oil-and-gas-endowment/), which admittedly may be purely political, and consider the matter in terms of energy, it looks like our energy supply has only been extended by about 45 years - much less if we convert the natural gas to oil. What have I missed here?
  • Chris Rhodes on December 12 2012 said:
    As far as I can tell, you've missed nothing. Looking at those UGGS figures there is undiscovered gas to the tune of 5,606 trillion cubic feet, or 159 trillion cubic metres. The world use of natural gas is 3,172 billion cubic metres/year, so the R/P ratio amounts to 50 years worth. Hence, where Lord Lawson gets 250 years worth from, I'm not sure. And "undiscovered" surely means a resource, not a reserve, so how much gas supply there is remains an uncertain quantity.
  • MrColdWaterOfRealityMan on December 12 2012 said:
    Mr. Rhodes,

    Presumably, the oil net energy decline slope will be offset somewhat by increased use of natural gas. Is there any data of which you are aware that attempts to quantify natural gas's net energy decline?
  • Chris Rhodes on December 13 2012 said:
    I think this might help to answer your question, taken from The Oil Drum: http://www.theoildrum.com/node/5615

    On page 2 it suggests that to replace all gasoline consumption by natural gas would require an increased production of the latter by 71%.

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