In his column of July 2nd George Monbiot recanted peak oil, claiming “the facts have changed, now we must change too”. Much of the article was spent regurgitating a recent report by Leonardo Maugeri, a former executive with the Italian oil company Eni, which Monbiot breathlessly reported “provides compelling evidence that a new oil boom has begun”.Plenty of ink has already been spilled by oil depletion experts exposing some of the wildly optimistic assumptions contained in Maugeri’s report. More damning is that the work is shot through with crass mistakes that render its forecast worthless.
When I interviewed him, Mr Maugeri was forced to admit a mathematical howler that would disgrace the back of an envelope, and it also became clear he did not understand the work of the other forecasters he attacks. It also looks as if he has double or even triple counted a vital component of his predicted oil glut.
Maugeri forecasts the global oil supply will soar by almost 18 million barrels per day to around 111mb/d by 2020, the biggest increase in production since the 1980s, which he claims could lead to prolonged overproduction and “a significant, stable dip of oil prices”. So, arrivederci peak oil.
Maugeri claims this looming glut has three legs: booming upstream investment by the oil industry; the rise and rise of unconventional production such as US shale oil; and a tendency among forecasters to over-estimate massively the rate at which production from existing oil fields declines. The first point is uncontroversial, the second is moot, but the third is the most important; without it, Maugeri’s glut evaporates.
All oilfields eventually peak and go into decline as production is sapped by falling reservoir pressures, and as water increasingly dilutes the flow of oil from the well. Measuring the impact of these declines on aggregate oil production is a complicated business, but vital to predicting the future oil supply. There have been two primary studies of decline rates in recent years: one by the International Energy Agency in its 2008 World Energy Outlook; and another by the oil consultancy IHS-CERA.
Maugeri cherrypicks numbers from the IEA study and misrepresents them to claim that “most forecasters” work on decline rates of 6 to 10 percent. He then argues this is incompatible with the observed growth of the oil supply over the last decade – and therefore must be wrong – and uses this conclusion to justify his inflated oil production forecast. But the whole thing is a straw man; an email he sent me revealed he simply doesn’t understand the IEA numbers. The IEA’s global decline rate is actually 4.1%, and CERA’s broadly agrees, at 4.5% (see here for more detail).
Even if we were to accept his 6 to 10 percent range, Maugeri has got his sums horribly wrong. In the key section of the report, he claims that even the lower end of the range “would involve the almost complete loss of the world’s “old” production in 10 years”. But this is laughable. A 6% annual decline over 10 years leaves you with 54% of your original production, because each year’s 6% decline is smaller volumetrically than the previous one. So over a decade the decline is 46% – and very far from an “almost complete loss”.
When I put this to him, Mr Maugeri seemed genuinely confused, and tried briefly to persuade me the loss was much larger. “If you have a 6% decline each year over a 10 year period, the loss of production is close to 80%”, he said, but then the penny dropped. It looks to me as if he compounded 6% in the wrong direction – for growth, not decline. “Maybe on this you are right”, he conceded sheepishly. So by his own admission, Mr Maugeri has overestimated the alleged overestimation of production decline by almost three-quarters(1).
Nowhere in his report does Mr Maugeri explicitly state his own decline rate assumptions. The closest he gets is the unsupported claim that “I did not find evidence of a global depletion rate of crude production higher than 2-3 percent when correctly adjusted for reserve growth”. And yet his actual assumptions appear to be far lower. By analysing Maugeri’s forecasts, Steven Sorrell of the Sussex Energy Group and Christophe McGlade, a doctoral researcher at UCL Energy Institute, have shown his actual global decline rate for 2011-2020 is just 1.4% – scarcely a third of the established estimates. Replacing this implicit rate with the IEA number eliminates the Maugeri glut entirely, slashing his production forecast for 2020 to below his estimate of current production capacity. Sorrell concludes “Since most analysts expect average decline rates to increase over this period, this projection must be considered optimistic”. So, buongiorno peak oil.
When I challenged Mr Maugeri about the discrepancy between the 2-3% decline rate and the 1.4%, he said the difference was explained by reserves growth – the tendency to squeeze more oil than originally expected from existing fields, through new technology, the exploitation of secondary reservoirs and so on. But in that case he seems to have counted it twice, to judge by his quote in the paragraph above. Or possibly even three times, since the notion of reserves growth is already accounted for in the existing estimates. Both the IEA and IHS-CERA numbers are observed overall decline rates: they reflect the actual loss of production that happened after – or in spite of – all the industry’s investment to boost flagging output at existing fields.
“If Maugeri has adjusted decline rates for future reserves growth, he has either double counted, because it’s already in the existing forecasts, or assumes a massive acceleration in reserves growth in future”, explains Richard Miller, an oil consultant who previously worked for BP, and was the first to spot Maugeri’s dodgy maths. “Either way, it’s not credible”. When I emailed Mr Maugeri to check if he understood the definition of the IHS-CERA decline number he had quoted, I received no reply.
Perhaps it’s not so surprising. Maugeri is a long standing cornucopian, and has form in the slapdash stakes. In a previous article for the journal Science(2), he sought to disprove peak oil modelling using a graph of Egyptian oil production. Sadly, the graph he printed was not for Egyptian oil production. Worse, if it had been, it would have demolished the very point he was trying to make(3).
What is astonishing is that George Monbiot finds Maugeri’s work so “compelling”. How many times have I read Monbiot banging on about the importance of peer review? Strange then that he should gush that this report was “published by Harvard University” but fail to mention it had not appeared in any peer reviewed journal, and worse, had been funded by BP. I suspect both those organizations may live to regret their involvement. What about Monbiot? If he is as intellectually rigorous as he likes to make out, he will perform not one peak oil u-turn this month, but two.
Thursday, 16 August 2012
David Strahan On Monbiot's Peak Oil U-Turn
Thursday, 5 July 2012
Monbiot says he was wrong on peak oil but the crisis is undeniable
In the run-up to credit crunch of 2007, whistleblowers were warning that an incumbency, the financial-services sector, had its asset assessment fundamentally wrong. The incumbency poured scorn on this, many of them professing that they had invented a new asset class – mortgage-backed securities and related complex derivatives – that represented an entirely new method of generating wealth.Ugo Bardi at Cassandra's Legacy also has some thoughts on the error of George's ways - Enough fossil fuels to fry us all.Today, rather more whistleblowers are saying that another incumbency, the oil and gas sector, has its asset assessment fundamentally wrong. The incumbency pours scorn on this, insisting that they have opened up another new asset class – unconventional oil and gas – and that it represents another unforeseen road to riches. Some go so far as to say that North America is en route to being self-sufficient in hydrocarbons.
The first incumbency illusion proved to be a deadly bubble, the legacy of which still threatens to torpedo the global economy five years on. We will find out about the second within a few years. The UK industry taskforce on peak oil and energy security, which I convened, is among many groups forecasting a global descent in oil production by 2015 at the latest, notwithstanding all the incumbency rhetoric.
Ahead of the credit crunch, commentators echoed the incumbency mantras right across the media. Ahead of the oil crisis, the same is happening. Just Google "peak oil myth" and see what comes up. Yesterday George Monbiot joined this group with an article entitled We were wrong about peak oil. There's enough to fry us all.
The many misunderstandings he relays begin with the title. There is more than enough potential oil resource below ground to create the climate disaster he refers to. Peak oil is not about that. It is about when global production falls never again to reach past levels: a disaster, if the descent hits an oil-dependent global economy years ahead of expectations. This descent depends on flow rates in oilfields, not the amount of oil left. What worries those who believe the global oil peak is imminent is the evidence that the oil industry will not be able to maintain growing flow rates for much longer.
The whistleblowing in the run-up to the credit crunch involved a few maverick economists and some far-sighted financial journalists. The peak-oil whistleblowing is different. Many within the incumbency itself are sounding alarms. Every year, when the Association for the Study of Peak Oil (ASPO) meets, recently retired oilmen queue to give their latest assessments of how their industry is getting its asset assessment wrong. The latest ASPO event was held a few weeks ago in Vienna, which I attended.
There has been "a boom in oil production" of late, Monbiot says. Wrong. Global production has been essentially struggling along a plateau since 2004, as Bob Hirsch, an ex-Exxon advisor to the US Department of Energy describes. Hirsch expects the descent to begin in one to four years.
Monbiot is correct that there has been a small increase in oil production in the United States in recent years. But can that continue, as he infers? Gas-industry whistleblower Art Berman describes how the shale gas gold-rush of recent years, now extending into shale oil, may well be a giant ponzi scheme: decline rates in wells are unexpectedly fast, meaning more and more have to be drilled at ever more expense, meaning ever more money has to be borrowed against cash flows from production that fall ever further behind. He looks at the resulting disaster in the balance sheets of oil and gas companies, and expects the bankruptcies to start any time soon. John Dizard has also warned of this particular bubble, in the Financial Times.
Even if oil production in America could somehow grow all the long way back to self sufficiency, what of the global picture, when conventional oil peaked back in 2006, as the International Energy Agency (IEA) has shown? The six Saudi Arabias of new production that would be needed to lift production to 100m barrels a day by 2030, according to the IEA, are a laughable prospect to the whistleblowers of ASPO, as many presentations in Vienna showed. The IEA clearly does not believe it is feasible. Neither do many still active in the incumbency, not least Total's head of exploration, who recently warned that peak is just around the corner.
Society ignores such warnings, and listens to potential bubble-backers like Monbiot, at its peril. Like his conversion to nuclear power during the Fukushima disaster, Monbiot has chosen an interesting time for a change of mind.
Will peak oil save us from global warming? Can it be that the decline of oil production caused by scarcity will be more effective than the (feeble) attempts made by governments to reduce greenhouse gas emissions?This point was debated briefly this year the conference of the Association for the Study of Peak Oil (ASPO) in Vienna. It is a typical controversy of ASPO conferences: some people seem to be so oil centered that they think that the climate models of the International Panel on Climate Change (IPCC) are all wrong because they don't take into account the ASPO data. The latest manifestation of this peculiar delusion comes from George Monbiot who decided that peak oil is not coming so soon, after all, and so concluded that "We were wrong about peak oil, there is enough to fry us all."
Now, we can say that Monbiot is wrong: first of all because he gives too much credit to an optimistic recent study on oil production (and even misinterpreting it - if you read it carefully, the data of the study are not so optimistic. See here and here for a critical assessment)
But the real mistake made by Monbiot is to over-emphasize the importance of peak oil for climate change. So far, the vagaries of oil production haven't affected so much the trend of the emissions of greenhouse gases. Today, even though crude oil production has been flat for several years, carbon dioxide emissions keep increasing.
That's what you'd expect: oil is just one of the sources of extra CO2 in the atmosphere and the increasing costs of extraction are pushing the industry to use dirtier fuels. In other words, we are seeing a trend towards using fuels which release more CO2 for the same amount of energy generated. In this sense, tar sands, heavy oil, oil shales, and the like are all dirtier than oil. Coal is even worse and it is also the fastest growing energy source in the world. To say nothing of the emissions of methane by fracking, (methane is a much more powerful greenhouse gas than carbon dioxide).
So, why should we expect peak oil to make a difference? Paradoxically, if peak oil were to come tomorrow, we might see CO2 emissions increase even more as that would cause an even more massive use of coal, tar sands, and other dirty sources. It is true that, eventually, the declining energy yield (EROEI) of fossil fuels will cause a general decline of greenhouse gas emissions; but we shouldn't expect that to be very soon and it won't be the immediate consequence of peak oil.
If we continue with the present trends of fossil fuel production, we risk to make climate change irreversible if we pass the "tipping point", the point of non return, which we may well have passed already. If peak oil had to have an effect on climate (maybe), it should have come at least 20 years ago when CO2 concentrations were still around 350 ppm, said to be the upper limit to avoid irreversible climate change. Now, at 400 ppm and growing, peak oil is not enough to stop global warming.
So, in the end George Monbiot is wrong on peak oil, but right on his general conclusion. We only have to modify it a little, as "Peak oil or no peak oil, there are enough fossil fuels to fry us all".
