This Paper is Issue = #3 in a Series of Studies

THE WORLD=20 PETROLEUM LIFE-CYCLE

Richard C. Duncan=20 and Walter Youngquist

Presented at the=20 PTTC Workshop "OPEC Oil Pricing and Independent Oil=20 Producers"

Petroleum=20 Technology Transfer Council

Petroleum=20 Engineering Program

University of=20 Southern California

Los = Angeles,=20 California

October 22,=20 1998

1.=20 Introduction

The world oil production = peak, we=20 assume, will be a turning point in human history. Our major goal is to = forecast=20 the all-time world oil peak, not by one heroic effort, but rather by a = series of=20 smaller efforts -- much like an experienced team of mountaineers would = climb the=20 world's tallest peak.

The main goals of this = paper are=20 sevenfold:

(1) Introduce a unique new 'tool' to = forecast=20 petroleum production, so-named the 'World Oil Forecasting Program' = ('Program')=20 and demonstrate its predicting power, versatility, and utility.

(2) Use it to predict the = peak year=20 for each of the world's top 42 oil-nations.

(3) Use it to predict the = peak year=20 for each of the world's seven regions.

(4) Use it to predict the = peak year=20 for world oil production.

(5) Use it to predict the = production=20 peaks and cross-over points of (a) the Middle East and non-Middle East, = and (b)=20 OPEC and non-OPEC.

(6) Use it to answer the = questions:=20 Can we delay the world oil peak? If so, by how much? What is the = relationship=20 between new production and peak delay?

(7) Describe how the = 'World Oil=20 Forecasting Method' ('Method') uses the Program to produce a series of = forecasts=20 which, taken together, will inevitably converge on the world peak. Show = how a=20 'phase-diagram' ensures the consistency and convergence of our=20 Method.

Some definitions will be = useful.=20 'Petroleum' and 'oil' are used synonymously to include crude oil, shale = oil, oil=20 sands and natural gas liquids (NGLs). EUR means expected ultimate = recovery. 'Qi'=20 means cumulative production to year i. 'RR' means remaining reserves. = 'G' means=20 billion (10⁹). 'b' means barrels.

2. This=20 Study

Presently the world's = favorable=20 petroleum geology is unequally divided up among some 182 nations, of = which the=20 top 42 produce more than 98% of the world's oil; the next 70 nations = less than=20 2%; the remaining 70, none. The top 42 producers are detailed in Table = 1. The=20 historic production data is from the BP Statistical Review of World = Energy=20 (1961-1998). The forecasts were generated by the World Oil = Forecasting=20 Program, described later. The numbers in Table 1 are the bedrock of our=20 study.

Table 1. Petroleum Production Summary: Nations = and=20 World. Columns, 1-to-r: Nation's number and name. Production peak = years,=20 some firmly established; others forecast, for 42 nations representing = more than=20 98% of total world oil production. Peak production rate, 1997 rate, and = forecast=20 2040 rate Cumulative production through 1997, forecast cumulative = production=20 through 2040, and expected ultimate recovery (EUR). Percent fall from = peak to=20 2040. Remaining reserves. Far right column: The telling ratio of the = remaining=20 reserves of each nation to the remaining reserves of all 42 nations. = Saudi=20 Arabia alone controls 16.3% of the world's future oil supply. = Notes: SI=20 units are used in this study where 'G' means billion (10⁹), = and 'b'=20 means barrels. '*' Designates OPEC member. '+' Indicates that relevant = figures=20 are increased by 2% top account for nations omitted from this list.

Table I Discussion: = Columns A and B give each = nation's=20 number and name. The bold horizontal lines divide the nations into 7 = regions=20 (discussed later). Column C gives each nation's peak year; some are well = established, others forecast. Fourteen of the 42 nations (33%) have = passed their=20 peaks. Most notable are the USA in 1970 and the FSU in 1987. In some = cases, of=20 course, future production may rise to surpass the old peaks; examples = are the UK=20 and Syria. However, the downward slide is likely permanent for several = nations;=20 examples are the USA, Libya, and Romania. Note too that 28 of the 42 = nations=20 (67%) have not yet reached their peaks. No doubt the last nations to = peak will=20 be in the Middle East, e.g. Iraq 2010, Saudi Arabia 2011, UAE 2017, and = Kuwait=20 2018.

Column D gives each = nation's peak=20 production rate. Increasingly it appears that the FSU will retain the = all-time=20 production record at 4.62 Gb/year. However, Saudi Arabia is may soon = exceed the=20 USA for second place. At the other extreme, Tunisia is forecast to peak = at 0.04=20 Gb/year, less than 1% of the FSU's towering peak.

Column E lists the 1997 production rate for = each=20 nation. Note that in 1997 the top four nations together (Saudi Arabia, = USA, FSU,=20 and Iran) produced over 40% of the world's oil. In contrast, the bottom = four=20 nations (Peru, Italy, Tunisia, and Papua New Guinea) managed only a = meager=20 0.05%. Column F forecasts the national production rates for 2040.

Column G records each = nation's=20 cumulative production through 1997 (Q₁₉₉₇). Motto: "The = faster you=20 pump, the sooner you peak." For example, the USA in 1997 led cumulative=20 production with 200.4 Gb, and it was also first to peak in 1970 (tied = with=20 Libya). Column H forecasts the cumulative production through year 2040=20 (Q₂₀₄₀). Column I forecasts each nation's expected ultimate = recovery=20 (EUR).

Columns J through L = provide an=20 overview of future trends. Column J predicts the percent decline in = production=20 for each nation from its peak to year 2040. Note that the maximum = decline is=20 Mexico's 92%; the minimum decline is Kuwait's 44%. But by 2040 all = nations will=20 be in steep decline. Column K forecasts the remaining reserves (RR) for = each=20 nation (RR =3D EUR =96 Q₁₉₉₇)- Saudi Arabia owns the lion's = share of=20 reserves at 189.4 Gb. In contrast, Papua New Guinea is running dry with = a scant=20 0.8 Gb.

Column L, far right, gives = the=20 revealing ratio of each nation's remaining reserves to the 42 nation's = remaining=20 reserves. These ratios are useful indicators of each nation's importance = to the=20 future oil supply. But caution is needed. Example: In column L, = the USA's=20 ratio is 6.1% (=3D 70.8/1160). Kuwait ratio is 6.3% (=3D 73.6/1160), = close to that=20 of the USA. However, direct comparison of the ratios is complex because, = for=20 instance, the USA has null surplus oil for export but vast military = power. Just=20 the opposite, Kuwait has vast surplus oil for export but null military = power.=20 Nonetheless, the ratios in column L are telling. And it is no surprise = that=20 Saudi Arabia's oil reserves at 16.3% rank first in the=20 world.

With the data and = forecasts of the=20 world's top 42 oil producers handy in Table 1, we now transform some of = the=20 numbers into an eye-friendly overview in Figure 1=20 following.

Figure 1. World, OPEC, and non-OPEC Oil = Production Life=20 Cycles. Oil production curves for years 1960-2040 are graphed. Years = 1960-1997 are historic data. Years 1998-2040 are forecast by use of the = World=20 Oil Forecasting Program. World production peaks in 2006, key to this = study=20 (curve 1, a k a the 'base-line' curve), OPEC and non-OPEC production are = shown=20 (curves 2 and 3) for comparison to the world curve. The cross-over point = when=20 OPEC production exceeds non-OPEC production is 2007 (discussed later in = Section=20 4 and detailed in Figure 10).

Figure 1 shows three oil = production=20 curves ranging from 1960 to 2040. Historic production data is plotted = from 1960=20 through 1997, and forecast values from 1998 through 2040. Curve 1 shows = that=20 production of the 42 top nations was 26.0 Gb/year in 1997 and it is = forecast to=20 peak in 2006 at 31.0 Gb/year, thereafter decreasing to 11.5 Gb/year in = 2040, a=20 fall of 63% in 43 years. OPEC and non-OPEC oil production (curves 2 and = 3) are=20 also shown for comparison to world production. They will be discussed in = a later=20 section.

We have grouped the = world's=20 oil-producing nations into seven oil-producing = regions.

3. Seven Oil=20 Regions

The top 42 oil-producing = nations are=20 grouped into seven geographical regions to get a better, more general = picture of=20 the world oil situation. The regions are: 1 North America, 2 South & = Central=20 America, 3 Europe, 4 Former Soviet Union, 5 Middle East, 6 Africa, and 7 = Asia=20 Pacific. The historic production data, production forecasts, and key = indicators=20 for each region are summarized in Table 2.

Table 2. Seven Oil Regions. Columns, = 1-to-r: Region=20 number and name. Peak year (data or forecast), and peak rate. Production = in=20 1997, forecast in 2040. Cumulative production through 1997 = (Q₁₉₉₇),=20 forecast cumulative production through 2040 (Q₂₀₄₀), and = expected=20 ultimate recovery (EUR). Production decline from peak to 2040. Remaining = reserves (RR). Far right column: The revealing ratio of the remaining = reserves=20 for each region to the remaining reserves for all 42 nations. NB: The = Middle=20 East now controls 46% of the world's future oil supply. (The bold = horizontal=20 lines in Table 1 identify the nations in each of the 7 regions.)

Table 2 Discussion: = Columns A and B give each = region's=20 number and name. Column C gives the region's peak year (some historic, = others=20 forecast). North America was first to peak in 1985, followed by the FSU = in 1987.=20 Then four regions peak in quick succession: Europe 2000, Asia Pacific = 2002,=20 Africa 2004, and South & Central America 2005. Last to peak is (you = guessed=20 it!) the oil colossus Middle East in 2011.

Column D gives the = magnitude of each=20 region's oil peak. The Middle East towers at 12.1 Gb/year, compared to = Europe's=20 modest 2.4 Gb/year. Column E records the 1997 oil production rates, = wherein the=20 Middle East ranks first at 7.9 Gb/year. Column F forecasts the 2040 = production=20 rate for each region. The Middle East by 2040, with over 50% of the = world's=20 production, is likely to be the world's only oil-exporting=20 region.

Column G records each = region's=20 cumulative production through 1997 (Q₁₉₉₇). North America is = still=20 leading, but the Middle East is closing in fast. Column H forecasts = cumulative=20 production through 2040 (Q₂₀₄₀) when the Middle East will = have=20 exploited 664 Gb of its original endowment, or nearly twice that of = 'second=20 place' North America. Column I forecasts the expected ultimate recovery = (EUR)=20 for each region. The Middle East has a fat 747 Gb. Europe a lean 98=20 Gb.

Columns J through L give = an overview=20 of future oil trends. Column J forecasts each region's decline in = production=20 from its peak to year 2040. North America falls 84%. The Middle East = 52%. The=20 average is 63%. Column K gives each region's remaining reserves (RR). At = the=20 start of 1998 the Middle East had a hefty 528 Gb remaining. Europe a = slim 65 Gb.=20 Column L gives the telling ratio of the remaining reserves for each = region to=20 the remaining reserves for all 7 regions. At present the Middle East has = 46% of=20 the world's remaining reserves. And with only 4% of the world's = population, the=20 Middle East has even a much larger percentage of the world's remaining = oil=20 surplus (e.g. perhaps 70-80%), potentially available for future = international=20 export.

The world's seven = oil-producing=20 regions are graphed in Figures 2-8 following.

Figure 2. North America Oil Production. = This includes=20 Canada, United States, and Mexico. United States passed its peak in = 1970, but=20 the later development of the offshore Mexican fields along with Canadian = exploration successes moved the regional peak to 1985. This region, = dominated by=20 the United States, reached its peak the earliest of the seven regions. = The=20 United States was the first nation to substantially exploit its oil = resources,=20 and reach its production peak. This early exploited abundant and cheap = oil=20 helped to rapidly propel the United States to its high 'oil standard' of = living=20 enjoyed today, but maintained now only by increasing oil imports.

Figure 3. South and Central America Oil = Production.=20 This includes all countries south of Mexico. We forecast that the recent = growth=20 trend will continue to the all-time peak in 2005, due to recent = successes and=20 developments along the eastern margin of the Andean fold belt, the = privatization=20 and increased activity in the Argentine oil industry, and more = aggressive=20 development programs in Venezuela, which country now accounts for over = 53%=20 (Table 1) of this region's production.

Figure 4. Europe Oil Production. This = region's=20 production is now chiefly from the North Sea, where Norway and United = Kingdom=20 (Great Britain) are dominant. Other European oil production is minor. = The curve=20 reflects a steady, orderly growth, and then a decline, with the regional = peak at=20 2000. Decision by the Norwegian Government to -limit production in order = to=20 flatten and lengthen their production peak, may move the 2000 peak to = slightly=20 later. Countering this move however, United Kingdom production declined = during=20 1996 and 1997.

Figure 5. Former Soviet Union (FSU) Oil = Production.=20 Since the break-up of the USSR, this region now has diverse political = and=20 economic agendas. The previous production peak reached by the unified = USSR in=20 1987 seems unlikely to be surpassed. The Russian oil fields are in an = aging=20 phase. Further, the now independent republics are not coordinated in = their=20 efforts to secure needed financing and technology for oil development, = and will=20 not achieve a unified peak production time. We do project a secondary = peak in=20 the year 2009, but it will be much lower that the earlier 1987 USSR=20 peak.

Figure 6. Middle East Oil Production. This = region=20 holds the bulk (46%, Table 2) of the world's remaining oil reserves. = Because of=20 political and religious considerations, and the production quota system = which is=20 met with intermittent and uneven success, production here is the most = difficult=20 of the seven regions to forecast. However, the practical political = necessity for=20 these governments to continue to finance their variety of social = programs,=20 combined with the rapidly growing population, suggest that future = production=20 will continue to approach the classic bell-shaped curve of a finite = resource.=20 Even allowing for some intermittent production distortions, such as the = United=20 Nation's oil sale curtailment imposed on Iraq, the curve seems = established long=20 enough to be projected with some confidence to 2040. It is clear this = region=20 will be the last to reach peak production; our forecast is 2011. And by = the year=20 2020, when oil prices are likely to be much higher relative to today's = prices,=20 this region will have the bulk of the world's remaining oil reserves -- = a large=20 international economic and political advantage.

Figure 7. Africa Oil Production. Order of = importance=20 in this region is Nigeria, Libya, Algeria, Egypt, and Angola. Other = production=20 is minor. This rank of importance is not likely to change, except that = Angola=20 could move up ahead of Egypt. Therefore, the production curve data = controls=20 already in place probable will not be significantly altered. With the = peak year=20 forecast at 2004, the curve is already well established.

Figure 8. Asia Pacific Oil Production. This = region=20 includes China, Indonesia, India, Australia, and Malaysia as the = principal oil=20 producers. It produces about 10% of present world oil supplies (Table = 2). But=20 with some 60% of the world's population, it has been endowed with only = 8% of the=20 world's remaining oil reserves (Table 2). If Asian nations become more=20 motorized, as is their plan, their oil demands will add significant = strain to=20 the world's production capacity. China is seeking joint ventures with = Caspian=20 Sea area oil operations, and has already bought into some U. S. oil = production=20 in the Gulf of Mexico.

4. Geographic and Organizational=20 Comparisons

The world's oil-producing nations can be = categorized=20 in several ways. Here we choose two: (1) geographic: Middle East and = non-Middle=20 East, and (2) organizational: OPEC and non-OPEC. These categories, and = their=20 potential importance, have been widely discussed since the so-called = 'Arab oil=20 embargo' in 1973. Table 3 gives details.

Table 3. Geographic and Organizational = Comparisons.=20 Columns, 1-to-r: Category number and name. Cross-over year when = categories la=20 and 2a begin production dominance. Forecast peak year, forecast peak = rate.=20 Production in 1997, forecast in 2040. Cumulative production in 1997=20 (Q₁₉₉₇), forecast cumulative production in 2040 = (Q₂₀₄₀),=20 and expected ultimate recovery (EUR). Production decline from peak to = 2040.=20 Remaining reserves (RR). Far right column: The important ratio of the = remaining=20 reserves for each category to the remaining reserves for all 42 nations=20 [(RR,C)/(RR,42N)]. Worth note is that virtually all 'swing producers' = are in the=20 Middle East and OPEC (i.e. categories la and 2a). Swing producers have=20 production capacity to spare beyond their domestic needs, i.e. oil = available for=20 international export. This vast capacity for oil export represents more = than=20 just chemical energy; it is potential international political and = economic=20 power.

Figure 9. Middle East and non-Middle East = Comparison.=20 The Middle East includes nine Persian Gulf nations (#17-25, Table 1). = Middle=20 East production peaks in 2011 (curve 1). Non-Middle East production = peaks in=20 2003 (curve 2). Middle East production exceeds non-Middle East = production in=20 2025 (i.e. the Middle East cross-over point). Thereafter the Middle East = dominates world oil production. In the global context, the Middle East = nations,=20 with only 4% of the world's population, own 46% of the world's = oil=20 reserves (Table 3, far right column). In contrast, the non-Middle East = nations,=20 with 96% of the world's population, own only 54% divided unevenly = among=20 them (Table 3, far right column). Moreover, the Middle East production = itself is=20 dominated by the 'Big Five': Iran, Iraq, Kuwait, Saudi Arabia, and = United Arab=20 Emirates which together own 94% of the Middle East's oil reserves. The = Earth is=20 well explored so this geographical disparity is not likely to change. = However,=20 by 2025 both Middle East and non-Middle East oil production will be in = steep=20 decline. Thus it is hard to predict what the global impact of the Middle = East's=20 oil reserves might be, but it could be significant indeed.

Question 1: = How about the Middle = East's oil=20 exports? Response 1: The Middle East's oil production could soon = be=20 overshadowed by its oil exports because most of the world's = 'swing=20 producers' are located there. In fact, Middle East exports averaged = 43.4% of the=20 world's export trade from 1982 through 1997. And despite OPEC production = 'quotas' and U. N. export sanctions against Iraq, by 1997 Middle East = exports=20 had increased to 45.3% of the world total. Moreover, their installed = plant has=20 surplus capacity to immediately increase their exports far above 50% of = the=20 world total.

Question 2: = So who imports the Middle = East's=20 oil? Response 2: The Middle East exported 6.6 billion barrels = (Gb) in=20 1997. Of that total, the USA imported 9.6%, Europe 20.8%, Japan 24.2%, = other=20 Asia Pacific nations 32.8%, and Asia Pacific total (including Japan) = 57.0%. (BP,=20 1998)

Question 3: = The Middle East in 1971 = reached 32%=20 of the world's oil production. When will this happen again? Response = 3:=20 It's forecast to occur again in 1999 (Figure = 9).

Next OPEC and non-OPEC = comparisons=20 are shown in Figure 10 following.

Figure 10. OPEC and non-OPEC Comparison. = Eleven=20 nations are OPEC members: six in the Middle East, three in Africa, one = each in=20 South America and Asia Pacific (asterisks, Table 1). Middle East nations = now=20 control 76% of OPEC's remaining reserves, African nations 11%, Venezuela = 10%,=20 and Indonesia a scant 3%. OPEC production peaks in 2009 (curve 1). = Non-OPEC=20 production peaks in 2003 (curve 2). OPEC production exceeds non-OPEC = production=20 in 2007 (the OPEC cross-over point) and thereafter OPEC dominates world=20 production. By 2007 almost all OPEC production will be in the Persian = Gulf area.=20 Some nations may drop out of OPEC when their domestic demand exceeds = production,=20 with no surplus to export. OPEC itself could disintegrate and dissolve. = On the=20 other hand, OPEC could soon become a wider, more effective organization = by=20 adding new members such as Mexico and Norway. This uncertainty makes it = hard to=20 predict OPEC's future, but its potential influence on future world oil = prices is=20 significant, to say the least.

Question 4: = OPEC in 1971 reached 50% = of the=20 world's oil production. When will this happen again? Response 4: = It's=20 forecast to occur again in 2007 (the OPEC cross-over point, Figures 1 = &=20 10).

Next we test the = possibility of=20 delaying the world oil peak.

5. Can We Delay the World = Oil=20 Peak?

Optimists see at least = several=20 decades more of unfettered world oil production--but a growing number of = realists conclude that world oil production is nearing its all-time = peak,=20 perhaps within 10 years. The optimists, mostly economists, believe that = new oil=20 discoveries and enhanced recovery from old fields will delay the world = peak=20 beyond 2040. The opposition, mostly geologists, argue otherwise. (Kerr,=20 1998)

In this section we use the = World Oil=20 Forecasting Program to answer the questions: Can we delay the world oil = peak? If=20 so, by how much? This is done by two simulation tests; each test builds = on the=20 'base-line' world oil production profile (e.g. curve 1, Figure 1). Then = discrete=20 increments of new production are added to the baseline production = curve to=20 delay the world peak (i.e. postpone it) by 1 year, 2 years, ..., n = years, ....=20 The increments of new production consist of so-called 'Norway = Equivalents'=20 (abbreviated 'NE'). Each NE is defined as a symmetrical production curve = with=20 EUR =3D 42.4 Gb (i.e. see Norway's EUR, Table = 1).

PEAK DELAY SIMULATION:=20 TEST = SERIES #1.=20 Given the base-line world oil production profile from 1960 to 2040, by=20 simulation we bring four discrete increments of new production on-stream = on 1=20 January 1998. Note that the on-stream date is exactly 8 years before = the=20 base-line world oil peak in 2006. The results of Test Series #1 are = graphed in=20 Figure 11.

Figure 11. Peak Delay Simulation: Test Series #1: = The=20 'base-line' world oil curve is our reference (curve 1, peak 2006). = Curves 2-5=20 are peak delay tests which add increments of new production to the = base-line=20 curve. The increments come on-stream on 1 January 1998, 8 years = before=20 the 2006 base-line peak. New production is measured in 'Norway = Equivalents',=20 or 'NE', defined as a symmetrical production curve with EUR =3D 42.4 Gb = (Table 1).=20 Curve 2 shows that an increment of 3.5 NE delays the world peak by 1 = year, from=20 2006 to 2007. Curve 3 shows that 7.0 NE delays the peak by 2 years, from = 2006 to=20 2008. Curve 4 shows that 8.2 NE delays the peak by 3 years, from 2006 to = 2009.=20 Now a shock! Curve 5 shows that 8.8 NE delays the peak by 16 years, from = 2006 to=20 2022. Summary: Curves 2 and 3 each give a peak delay of 2.5 days per Gb = of new=20 production. Curve 4 gives 3.1 days delay per Gb. Curve 5 gives 15.7 days = delay=20 per Gb. Clearly the peak delay is a highly nonlinear function of new=20 production.

Curve 1: This is the = base-line world=20 oil production curve with peak in 2006. Four discrete increments of new=20 production are then added to the base-line curve.

Curve 2: By cut-and-try, = 3.5 NE=20 (i.e. 3.5*42.4 Gb =3D 150 Gb) of new production were required to delay = the peak by=20 1 year, i.e. from 2006 to 2007. This gives to 2.5 days delay per Gb of = new=20 production.

Curve 3: Similarly, 7.0 NE = of new=20 production were required to delay the peak by 2 years, i.e. from 2006 to = 2008.=20 This (again) gives 2.5 days delay per Gb. Curve 4: Continuing the tests, = 8.2 NE=20 of new production were required to delay the peak by 3 years, i.e. from = 2006 to=20 2009. This gives 3.1 days delay per Gb.

Curve 5: Now the big = surprise! It=20 took 8.8 NE to delay the peak by 16 years, i.e. from 2006 to 2022. In = other=20 words, curve 5 required only 0.6 Gb more new production than did curve = 4, but=20 this relatively small increase delayed the world base-line peak by 15.7 = days per=20 Gb. Note well that no intermediate peak occurred between the peak of = curve 4=20 (2009) and the peak of curve 5 (2022). A quantum leap, so to=20 speak.

Summary: Test Series #1. = Relative to=20 the 2006 base-line peak, curves 2 and 3 each give a peak delay of 2.5 = days per=20 Gb of new production. Curve 4 gives 3.1 days delay per Gb. Curve 5 gives = 15.7=20 days delay per Gb. Test Series #1 (above) demonstrates that the peak = delay is a=20 highly nonlinear function of new production.

PEAK DELAY SIMULATION:=20 TEST = SERIES #2:=20 Starting again with the world base-line curve, we add the same = increments of new=20 production as previously, except this time they come on-stream on 1 = January=20 2015, 8 years after the baseline world peak in 2006. The = results of=20 Test Series #2 are graphed in Figure 12.

Figure 12. Peak Delay Simulation: Test Series #2: = The=20 base-line world oil curve is again our reference (curve 1, peak 2006). = Curves=20 2-5 result from the same four increments of new production used in Test = Series=20 #1, except that here in Test Series #2 the new increments are brought = on-stream=20 on 1 January 2015, 8 years after the base-line world peak in = 2006. As=20 seen in Figure 12 above, none of the four increments of new production = cause any=20 delay whatsoever to the base-line world oil peak in 2006 because the = amounts of=20 new production are 'too little, too late' to compensate for the rapidly = falling=20 base-line production. For instance, even the huge increment of 370 Gb of = new=20 production (curve 5 above) does not stop the overall fall in world oil=20 production. Summary: Even if large amounts of new oil production are = brought=20 on-stream after the 2006 base-line world oil peak, they are not = likely to=20 reverse the downward trend in production, to say nothing of creating a = later and=20 higher peak.

Curve 1: The base-line = world oil=20 production curve with peak in 2006.

Curves 2-5: We add the = same four=20 increments of new production as in Test Series #1, except here in Test = Series #2=20 the increments come on-stream on 1 January 2015, 8 years after = the world=20 base-line peak in 2006. Clearly seen in Figure 12, the base-line world = oil peak=20 in 2006 remains the all-time world oil peak, unchallenged by any of the = four=20 increments of new production (curves 2-5).

Summary: Test Series #2. = None of the=20 four increments of new production (ranging from 150 to 370 Gb) brought = on-stream=20 8 years after the base-line peak cause any delay whatsoever in = the 2006=20 base-line world oil peak. In other words, the four heroic amounts of new = production are simply 'too little, too late' to compensate for the = rapidly=20 falling base-line world oil production.

SUMMARY: PEAK DELAY TESTS #1 AND = #2. The=20 world oil peak delay time per Gb increment of new production is neither = constant=20 nor linear. Rather it is a highly nonlinear function of four factors: = (1) shape=20 of the base-line production curve, (2) the shape of the added new = production=20 curve, (3) the area under the new production curve, i.e. the total new = EUR, and=20 (4) the date the new production is brought on-stream. The average delay = for Test=20 Series #1 is 6.0 days per Gb of new production brought on-stream 8 years = before the base-line peak. The average for Test Series #2 is 0.0 = (zero!)=20 days per Gb increment brought on-stream 8 years after the = base-line peak.=20 The average delay for Test Series #1 and #2 combined is 3.0 days per Gb = of new=20 production.

CONCLUSION: The headline = of this=20 section asked, "Can we delay the world peak?" Our response is, "Yes, new = production brought on-stream well before the 2006 base-line peak = can=20 delay it, but only by a few days per Gb of new production. However, even = large=20 increments of new production brought on-stream after the peak are = not=20 likely to have any effect whatsoever on delaying the base-line world oil = peak.=20 Although we can't precisely predict when the peak will occur, we are = assured=20 that it is not a 'moving target'. In fact the world peak is probably = fixed by=20 the most recent production trends of the top 42 oil-producing nations = included=20 in this study (Table 1)."

6. The World Oil = Forecasting=20 Method

Webster's dictionary = defines=20 method as, "a way of doing anything; mode; procedure; process;=20 especially, a regular, orderly, definite procedure or way of teaching,=20 investigating, etc." Our Method amounts to an ongoing series of 'squeeze = plays'=20 that constrains our forecasts and increases their certainty. Each new = forecast=20 starts with the latest oil production data and then goes through three = regular,=20 orderly, definite steps to produce 42 national oil forecasts, 7 regional = forecasts, and a world forecast. These steps are repeated until the = world oil=20 peak is identified and verified. It may take ten years or longer, but = inevitably=20 it gets the right answer.

Step 1: This step = constrains=20 (restricts) each nation's future oil production between a minimum curve = and a=20 maximum curve, i.e. lower and upper bounds. To accomplish this, each = nation is=20 modeled separately by a 'numeric-heuristic' model, 'N-H' for=20 short.

First the numeric (N) = part: Each=20 nation's oil production data is analyzed by a special numeric technique = to=20 establish a lower boundary forecast ('LB -forecast') for its = future oil=20 production. (Duncan, 1996)

Second the heuristic (H) = part:=20 Heuristic means, "a method of solving a problem for which no algorithm = exists.=20 It involves trial and error, as in iteration." From a search of the = petroleum=20 literature, we use the maximum estimated ultimate recovery (EUR, the = estimates=20 vary widely) together with a computer tool called a 'graphical input = device' to=20 construct an upper boundary forecast, ('UB-forecast') for each=20 nation'.

We next use our heuristic = knowledge=20 and the LB- and UB-forecasts to construct the heuristic forecast=20 ('H-forecast') for each nation. The H-forecast always (1) is = constrained=20 by (i.e. constructed to lie between) the LB-forecast and the = UB-forecast, and=20 (2) extends each nation's most recent production trend for at least a = few years=20 into the future. Thus the oil production data are seamlessly joined = with the=20 H-forecast to give the oil production lifecycle for each nation = from 1960=20 to 2040. (Both the LB- and the UB-forecasts are then discarded.) Finally = the 42=20 national life-cycle curves are summed (as needed) to get the world oil=20 production life-cycle (Figure 1), the seven regional life-cycles = (Figures 2-8),=20 the Middle East and non-Middle East life-cycles (Figure 9), and the OPEC = and=20 non-OPEC life-cycles (Figure 10). (Duncan 1997; Duncan & Youngquist=20 1998)

Step 2: Although the = world's oil=20 discovery peak occurred in the 1960's, some new fields are still = being=20 discovered and oil technology advances. So the question arises anew each = year,=20 "Can new oil discoveries and enhanced oil recovery from old fields delay = the=20 world peak?" Our response is, "Yes, but not by much," as was = demonstrated in the=20 previous section. Thus the world oil peak, we believe, is constrained to = occur=20 within approximately the next 10 years.

Step 3: We check to see that our = series of=20 forecasts (each produced with the simulation Program) are consistent and = are=20 also converging on a specific peak year, even though we don't yet know = what that=20 year will be. 'Encircling' we call it. Of course encircling does not = mean an=20 exact Euclidean circle, but it does mean that we can map our route by a = series=20 points (forecasts) connected by lines (arrows) depicting our progress = towards=20 the world peak. Like mountaineering, however, our route to the world oil = production peak may be subject to some irregularities along the way. To=20 facilitate our climb we 'map' our route anew each year by a 'phase = diagram',=20 Figure 13.

Figure 13. Encircling the World Petroleum = Peak. The=20 'phase diagram' depicts on the x-axis the range of likely peak years, = 2004=20 through 2008. The y-axis depicts the range of likely peak rates, 28 to = 32 Gb per=20 year. For our example, assume that the actual peak will be in 2006 and = that=20 three years of falling production will be necessary to verify the peak. = START at=20 the first point in the lower left corner of the diagram: Issue #1 of the = World=20 Oil Forecasting Program, 'WOFP'. That study was done in 1996 and = predicted the=20 peak in 2005 at a rate of 29.0 Gb/year. The Issue #2 study (rightmost = point) was=20 done in 1997 and predicted the peak in 2007 at 30.6 Gb/year. The Issue = #3 study=20 (topmost point, this paper) was done in 1998 and predicted the peak in = 2006 at=20 31.6 Gb/year. Issue #4 was done in 1999 and predicted the peak in 2005 = at 29.8=20 Gb/year. The studies continue from Issue #5 through Issue #11; all = predict the=20 world peak in 2006, but with different rates of production. Then the = actual=20 production rates fall from 2007 through 2009 (i.e. during Issues = #12-14). Thus=20 after three downward years, the production data verifies that the world = oil peak=20 occurred in 2006. STOP. Note that (in this hypothetical example) it took = 14=20 forecasts, 14 issues, 14 years to finish the job.

As was mentioned, a phase = diagram is=20 very useful to ensure the consistency and convergence of the forecasts. = Just=20 follow the arrows closely in Figure 13 and you'll see how it works. Of = course=20 the example is over-simplified. So expect that the actual phase diagram, = when=20 completed several years hence, will look somewhat more complex than the = example=20 given above.

Following, we review our = progress=20 during the past three years.

7. Progress En=20 Route

Here we extend the = analogue of oil=20 forecasting and mountain climbing to include verification along the = way=20 that our predictions seem to be leading toward the world oil peak. = We=20 consider four predictions that were made in Issues #1 and #2 of the = World Oil=20 Forecasting Program and continued in Issue #3. These predictions are now = verified or at least consistent with recent trends and supported by = published=20 data.

Prediction 1 -- Asian = Economic=20 Crisis: Issue #1 of=20 the Program was presented at Princeton University on 9 May 1997, a full = 6 months=20 before the Asian economy began to melt. It warned that the Asia = Pacific=20 region had 60% of the world's population, but less than 8% of the = world's oil=20 reserves. Our conclusion: "Asian Tigers? In terms of oil = resources, the=20 so-called 'Asian Tigers' -- such as China, India and Indonesia w are = just=20 pussy-cats in disguise." (Duncan 1997, p. 268)

Our warning about Asia = Pacific's=20 lack of resources was repeated in Issue #2. "Compounding world energy = demands=20 will be the increasingly industrialized nations (particularly SE Asia, = China,=20 and India) wanting more energy per capita. China, Southeast Asia, and = India now=20 with some 60% of the world population are getting motorized wheels. If = China=20 used oil on a per capita basis as does the United States, China alone = would=20 account for approximately 14 million barrels a day more than the present = entire=20 world oil production.^''(Duncan & Youngquist 1998, p.=20 5)

This caveat was again = repeated in=20 Issue #3, "Asia Pacific includes China, Indonesia, India, Australia, and = Malaysia as the principal oil producers. It produces about 10% of = present world=20 oil supplies (Table 2). But with some 60% of the world's population, it = has been=20 endowed with only 8% of the world's remaining oil reserves (Table 2). If = Asian=20 nations become more motorized, as is their plan, their oil demands will = add=20 significant strain to the world's production capacity. China is seeking = joint=20 ventures with Caspian Sea area oil operations, and has already bought = into some=20 U. S. oil production in the Gulf of Mexico." (this paper, p.=20 9)

Now daily issues of The = New York=20 Times, The Wall Street Journal, or The London Times verify = the Asian=20 economic crisis.

Prediction 2 -- Non-OPEC = Peak:=20 Issue #1 = of the=20 Program predicted the non-OPEC peak in 2003. (Duncan 1997, p. 270) Issue = #2=20 predicted it in 2001. (Duncan & Youngquist, p. 22b) Issue # 3 = predicted it=20 (also) in 2003. (this paper, p. 9-10)

"A recent analysis by the = Centre for=20 Global Energy Studies (CGES), London, using a technique called logistic = curve=20 analysis, created one scenario in which, even if non-OPEC countries = discovered a=20 further 500 billion barrels of oil, non-OPEC production would peak in = about 2002=20 at 50 million barrels per day and decline more rapidly than under = conventional=20 analysis." (Knott 1998)

We are in full agreement = with the=20 CGES about the nearing non-OPEC peak.

Prediction 3 -- World=20 Peak = Delay: Issues=20 #1 through #3 of the Program predicted the world peak in the tight range = of 2005=20 to 2007. However, Issue #3, Section 5 entitled "Can We Delay the World = Oil=20 Peak?" further investigated this contentious issue by a series of eight = peak=20 delay tests. We concluded, "Yes, new production brought on-stream = well before=20 the 2006 base-line peak can delay it, but only by a few days per = billion=20 barrels (Gb) of new production. However, even large increments of new=20 production

brought on-stream after = the=20 peak are not likely to have any effect whatsoever on delaying the = base-line=20 world oil peak. Although we can't precisely predict when the peak will = occur, we=20 are assured that it's not a 'moving target'. In fact the world peak is = probably=20 fixed by the most recent production trends of the top 42 oil-producing = nations=20 included in this study (Table 1)." (this paper, p. = 14)

CGES also investigated the = possibility of delaying (i.e. postponing) the world oil peak. "CGES = starts its=20 review with the comforting thought that oil production was once expected = to peak=20 in the late 1980s, but that has been successively pushed back into the = first=20 decade of the next century. However, CGES concludes that the peak may = not be=20 pushed back much further." (Knott 1998)

We are in full agreement = with the=20 CGES about the inertia of the world oil peak.

Prediction 4 -- = Caspian "Bonanza" Modest: = Although=20 in our Program the Caspian Sea republics are included in the Former = Soviet Union=20 (FSU), their contribution to future FSU oil production is still clearly = marked.=20 Specifically: Issue #1 predicted the FSU expected ultimate recovery = (EUR) at 305=20 billion barrels (Gb). (Duncan 1997, p. 268-269) However in 1997, one of = us=20 (Youngquist) cautioned that the conventional Caspian oil forecasts were = probably=20 much exaggerated, so in Issue #2 we reduced the FSU forecast EUR to 264 = Gb.=20 (Duncan & Youngquist 1998, p. 22a) In Issue #3 it is 265 Gb. (this = paper, p.=20 5)

A recent Wall Street = Journal article=20 (October 12, 1998) updated the oil prospects in the Caspian area. "A = growing=20 number of wells are coming up dry in the Caspian Sea, raising questions = about=20 the reserves in a region that some have promoted as a potential Middle = East of=20 the next millennium .... In the six years since this chunk of the former = Soviet=20 frontier opened to outside investment, major oil companies have spent = billions=20 of dollars drilling for oil, and haven't yet hit a new discovery = significant=20 enough to repay the investment .... In a report last year, the U.S. = State=20 Department estimated that the Caspian region's possible oil reserves = could reach=20 178 billion barrels, ... [But] several independent consulting firms now = place=20 total probable reserves in the Caspian region at about one-tenth the = original=20 U.S. government estimates .... at between 15 billion and 31 billion = barrels of=20 crude, ... That would be a good strike, but even at the high end of that = range,=20 the Caspian would contribute about 3% of the world's oil supply. By = contrast,=20 the Middle East holds about 60% of the world's known reserves." (Cooper = &=20 Pope 1998)

8. Summary and=20 Conclusions

The main goal of this = paper is to=20 predict the world oil production peak. To accomplish this goal we use a = unique=20 new procedure based on oil production data, data analysis, conventional=20 formulas, and heuristic knowledge. It comprises (1) the World Oil = Forecasting=20 Program, and (2) the World Oil Forecasting Method.

The Program analyzes the = historic=20 oil production data and predicts by statistical and heuristic techniques = future=20 production from 1998 to 2040 for the world's 42 top oil-producing = nations, seven=20 regions, and the world. The Method is to build up a series of forecasts = which,=20 taken together, will inevitably converge on the peak. This paper = presents the=20 third in this series of forecasts, or simply 'Issue = #3.'

Table 1 gives the peak = production=20 year, expected ultimate recovery, remaining reserves, decline from the = peak to=20 2040, percent of the world's remaining reserves, et cetera, for each = nation and=20 for the world. Table 2 gives similar information for each of the seven = regions.=20 Figure 1 graphs the world oil production life-cycle from 1960 to 2040 = with the=20 peak in 2006. Figures 2 - 8 graph the oil life-cycle and peak year for = each=20 region: North America 1985, Former Soviet Union 1987, Europe 2000, Asia = Pacific=20 2002, Africa 2004, South & Central America 2005, and Middle East=20 2011.

Table 3 compares the = Middle East=20 & non-Middle East oil production, and the OPEC & non-OPEC oil=20 production. Figure 9 shows that the non-Middle East peaks in 2003, the = Middle=20 East peaks in 2011, and then after 2025 the Middle East dominates world = oil=20 production. Figure 10 shows that non-OPEC peaks in 2003, then OPEC = dominates=20 world production after 2007, but soon OPEC itself peaks in=20 2009.

Simulation is used to = answer the=20 contentious and important question, "Can new oil production delay the = world oil=20 peak?" Our answer is, "Yes, new production brought on-stream well = before=20 the 2006 base-line peak can delay it, but only by a few days per = billion=20 barrels of new production. However, even large increments of new = production=20 brought on-stream after the peak are not likely to have any = effect=20 whatsoever on delaying the base-line world oil peak. Although we can't = precisely=20 predict when the peak will occur, we are assured that it is not a = 'moving=20 target'. In fact we believe the world oil peak is fixed by the most = recent=20 production trends of the top 42 oil-producing nations included in this = study."=20 Not to be missed are Figures 11 & 12. We hope this simulation = technique will=20 be a useful addition to oil forecasting.

A base-camp and a series = of higher=20 camps will be necessary before finally ascending to the summit. = 'Encircling' we=20 call it, as illustrated by the three forecasts we've made so far. = Specifically,=20 Issue #1 put the peak in 2005; Issue #2 put it in 2007; Issue #3 (this = paper)=20 put it in 2006. Figure 13 is a 'phase diagram' that assures the = consistency and=20 convergence of our ongoing forecasts. Each forecast (Issue) is shown as = a point,=20 and arrows connect successive points. The arrows map our crooked and = tedious,=20 but inevitably successful, route from Issue #1 to the world oil summit. = This is=20 our Method.

En route to the summit, = four of our=20 predictions have since been verified or at least they have proved = consistent=20 with recent trends and events: the Asian economic crisis, the nearing = non-OPEC=20 peak, the inertia of the world oil peak, and the six-year string of dry = holes in=20 the Caspian Sea.

BIBLIOGRAPHY

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Campbell, C. J. (1991) The = Golden=20 Century of Oil 1950-2050: Kluwer Academic Publishers, = Dordrecht/Boston/London,=20 345 p.

Campbell, C. J. (1997) The = Coming=20 Oil Crisis: Multi-Science Publishing Company & Petroconsultants S. = A.,=20 Essex, England, 210 p.

Cooper, C. and Pope, H. = (1998) Oil=20 Wells in Caspian Sea Still Come Up Dry: Wall Stree Journal, Oct. = 12, p.=20 Al3.

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