Will the Sydney Morning Herald tell the truth about oil?

By Matt Mushalik
2 June 2005

This week, Robert Whitehead, editor of the Sydney Morning Herald, went on a crusade. The paper presented us with a Sydney-in-crisis that we experience every day: water restrictions, high cost of land and homes, pollution, public transport in disarray, clogged roads, increasing energy consumption, you name it.

But growth must go on, it seems.

It will therefore be interesting to watch whether the SMH will manage to confront us with what is – along with the water resource problem – our most serious limiting factor: declining Australian oil production and the global oil peak.

There’s a continuing (and unenlightening) debate about remaining oil reserves and resources. The Herald’s April article “Running on empty” (By Christopher Kremmer, 02/04/05) was as non-committal as last week’s publication of the Bureau of Transport and Regional Economics’ (BTRE) Working Paper Number 61 entitled “Is the world running out of oil? A review of the debate”. If you thought the paper would give you some sort of answer you’d be disappointed.

The most detailed and methodologically reliable analysis of the oil supply situation for the approaching years comes from Chris Skrebowski, member of the London based Oil Depletion Analysis Centre (ODAC) and editor of the professional oil and gas journal Petroleum Review.

He considers 2004, with a daily production of 82.4 million barrels, as the base year for which there was virtually no spare capacity. From now on, he calculates, every new oilfield project coming on stream must both offset decline in existing fields and provide for the expected demand growth.

As of 2004, 18 oil supplying countries are in decline at 1.1 million barrels/day per year. In the coming years, this group of declining countries will be joined by six more – accelerating the rate of decline to 1.6 megabarrels per day, per year, by 2009. This decline acts as if it were new demand in the world’s oil market.

The ODAC keeps a database with new oilfield projects, their scheduled start-up years, together with daily production capacities and proven reserves. A list of these projects was published in the April issue of Petroleum Review. When comparing the new capacities year by year with decline figures and demand growth, there are three important conclusions:

1. In the next three years to 2008, the new oilfields can hardly provide for a demand growth of 2 per cent per annum. If there is project slippage or any other disturbance, and 2 per cent were indeed the underlying demand requirement for the whole of that period, physical oil shortages may emerge.

2. After 2008, the oil production curve slips off the 2 per cent growth path and heads downwards, forcing the world to physically reduce demand growth.

3. By around 2010, oil production turns horizontal and enters a production plateau. That’s the start of Peak Oil.

This scenario is almost pre-programmed. Nowadays, most oil projects are offshore and offshore oil takes six to seven years from discovery to production of the first drop of oil. So even if a major discovery happened today, it would hardly affect the situation over the next five to seven years.

At present, ODAC’s forward-looking oilfield project list ends in 2012 but will no doubt be updated regularly. You can get these by visiting the web site of the Energy Institute (www.energyinstitute.org.uk) where you’ll find Chris Skrebowski’s monthly editorials or by reading the Petroleum Review in the NSW State Library.

AND SEE ALSO >>>

We’re not running out of oil … yet
(but we’re running out of time to prepare for Peak Oil)
10 May 2005
Sydney civil engineer MATT MUSHALIK takes a cool, rational, look at the world’s rapidly-approaching energy crisis.
Not a week passes without media reports on rising petrol prices and tight oil supplies. Often the impression is given that we’re dealing with a temporary coincidence of unrelated events and that oil prices will go back to “normal”. Few of these articles analyse the situation in enough detail to explain the root cause – the successive and continuous peaking of oil production in many oil producing countries. READ THE FULL ARTICLE >>>