Oil expert: Output downhill from here

Energy - Author Ken Deffeyes thinks the = depletion of=20 fossil fuels could lead to a worldwide cataclysm

Monday, February 27, 2006

TED SICKINGER

The Oregonian

Few petroleum geologists qualify as celebrities. But Ken = Deffeyes, a=20 former Shell Oil geologist who is now a professor emeritus of = geosciences=20 at Princeton University, recently sold out Portland's First = Congregational=20 Church, where he came to lecture on his latest book, "Beyond Oil." =

Before Princeton, Deffeyes worked as a researcher in the labs = of Shell=20 Oil and taught at the University of Minnesota and Oregon State = University.=20 At Shell, he worked with the now-famous petroleum geologist M. = King=20 Hubbert. Hubbert coined what is fast becoming a fixture in the = modern=20 lexicon -- "peak oil" -- when he predicted that U.S. oil = production would=20 peak in the early 1970s and decline thereafter. Widely criticized = at the=20 time, Hubbert has since been vindicated.

Building on Hubbert's hypotheses, Deffeyes recently theorized = that=20 world oil production peaked Dec. 16, 2005, and has begun its = permanent=20 decline, with economic disruptions to follow.

Deffeyes sat down with The Oregonian last week to discuss his = book and=20 the peak oil phenomenon. His comments have been edited for length = and=20 clarity.

What's the basic math behind your forecast that world oil = production=20 peaked Dec. 16?

Hubbert's theory says that the ease of finding oil depends on = the=20 fraction of oil that hasn't been found yet. It's a simple = hypothesis that=20 explained U.S. oil production, where we've already gone over the = peak and=20 we're halfway down the other side. A corollary that comes out of = the math=20 is that the peak occurs when half the oil has been produced. In = Chapter 3=20 of "Beyond Oil," I take the date these oil fields were first = discovered,=20 the first wells, and it turns out that the whole world is mature. = We've=20 found 94 percent of all the oil we're ever going to find. It's = easy to=20 extend that line down to the zero level and say that there are = 2.013=20 trillion barrels that we're on track to discover, and we've = already=20 discovered 94 percent of that. So there's not much guesswork in = that=20 number. So I divide that number by 2 and I get just over 1 = trillion=20 barrels. Then I add up the world oil production from the beginning = and=20 figure out when we're halfway, and that's where the Dec. 16 number = comes=20 from.

Doesn't a lot depend on the level of oil reserves the Saudis = are=20 sitting on?

Matt Simmons has this wonderful book called "Twilight in the = Desert."=20 It's a very detailed analysis of the Saudi fields based on papers = that the=20 Saudi Aramco petroleum engineers have published in the Journal of=20 Petroleum Geography. He says they're struggling to keep up.

In the supergiant oil fields in Saudi Arabia, the water content = is=20 going up. It's called the water cut, the percentage of fluid = produced=20 that's water. It was 30 percent when Simmons' book came out. There = are=20 rumors now that it's 55 percent. When it gets to 80, things are = largely=20 over.

What is the highest estimate of reserves out there?

Reserves are hard to estimate, but if we talk about = discoveries, the=20 biggest estimate comes from the U.S. Geological Survey, at just = over 3=20 trillion barrels. If you take their number, we have another 2 = trillion=20 barrels to produce and you get a peak in the year 2036. I could = give a 15=20 minute lecture on the flaws in the USGS survey, and I think = they're=20 beginning to back off a little bit. In order to make the USGS or = things=20 like it correct, we've got to find another Middle East plus = another North=20 Sea on top of that. I don't think there's another Middle East = lurking out=20 there.

What would drilling in the Arctic Refuge do to the estimate ? =

Prudhoe Bay, the largest oil field in the United States, kicked = in when=20 they got the pipeline finished in 1976, and it wasn't big enough = to raise=20 us back to our 1970 level of production. It put a little shoulder = on the=20 downside of the production curve, but that was it. My guess is = that in our=20 wildest dream, ANWAR (Arctic National Wildlife Refuge) will prove = half as=20 big as Prudhoe Bay. I'd have to work out the number, but if that's = the=20 case, it probably postpones the world situation for two weeks. =

What about offshore fields?

The only thing on the shelf, literally the continental shelf, = is the=20 South China Sea, which has been drilled around the edge and it's = mostly=20 natural gas. There could be oil out in the middle, but six = different=20 countries claim the South China Sea.

What do the oil companies say?

With the oil companies, you have to watch what they do and not = what=20 they say. What they're doing is taking in $10 billion and $20 = billion a=20 quarter in profits and handing it out as increased dividends, = buybacks of=20 their stocks, giving it to their executives. They're not drilling, = they're=20 not building new pipelines and not building new refineries. If = there were=20 good prospects out there, they'd be out there drilling like crazy. =

Is there a portfolio of alternative energy that makes sense =

It's those things that we have the technology and engineering = ready to=20 go right now. At the top of my shortlist are the high-efficiency = diesel=20 automobiles being marketed in Europe right now that get 100 miles = to the=20 gallon. Nuclear and wind are things we have engineered right now = that are=20 ready to roll. Wind, even in your wildest dreams, is not going to = be a=20 very big part of the answer, but every little bit helps. Nuclear, = we know=20 how to build and operate safe nuclear power plants. Coal = gasification,=20 where you react the coal with steam and a little bit of air and = get a=20 little gas, would be a win.

What about oil shale and tar sands?

Oil shale is the fuel of the future and it always will be. In = the case=20 of tar sands, they're very heavy users of natural gas right now, = for heat=20 to melt the tar and to upgrade the oil so it will travel through a = pipeline in a Canadian winter. Alan Greenspan told us more than a = year ago=20 that the North American gas market was gassed out. So they're = going to be=20 natural gas limited or having to compete with other users of = natural gas.=20 There's talk about building a nuclear plant up there, and that's a = good=20 idea, but it'll take 10 years to get a plant in there.

Biofuels?

There are both people and cows lined up for soybeans, and it's = at least=20 a factor of 2 more expensive than oil right now. Palm oil may be = the=20 closest to being the one ready to go to market right now. Ethanol = from=20 corn is close to being a tossup. You may use the same amount of = energy=20 when you burn the ethanol as goes into the fertilizers, the = tractors, the=20 trucks to haul it around. In Brazil, they're doing well with sugar = cane.=20

Where is the economic impact of peak oil going to be felt = acutely and=20 when?

Geologists like to look back in time, and I'm not that good at=20 futurology. I borrow the analogy of the Four Horsemen of the = Apocalypse:=20 war, famine, pestilence and death. Famine because particularly = fertilizer=20 is very energy intensive. The green revolution was based on better = seed=20 varieties, heavy use of mineral fertilizers, pesticides. Well, = pesticides=20 are all petrochemicals, so fertilizer is going to get much more = expensive=20 cause they use a lot of energy.

So famine and pestilence really are threats down the line. And = if you=20 look up Amos Nur's Web site at Stanford, he thinks the first Gulf = War, the=20 Trade Center attacks and the second Gulf War are the first three=20 skirmishes in the oil war.

Do you envision problems gradually getting worse, or some = sudden shock?=20

What I've heard from a lot of people is that it will take = something=20 terrible to get people's attention. You mean the World Trade = Center wasn't=20 big enough? The Iranian situation, that could trigger it. The = hurricanes=20 nearly triggered it. Really abnormally cold winters in the = northeastern=20 U.S. and Europe could trigger it. If we got a civil war in Saudi = Arabia,=20 you could kiss your lifestyle goodbye. The public will probably = say after=20 the fact that XYZ triggered it. That's the naming rights = phenomenon, and I=20 can't say which one is going to win.

By the end of this decade, we'll be down about 5 percent from = the peak=20 production, and demand in China and India is moving up fast, and = someone's=20 going to come up short on their ambitions.

So you really believe the Four Horsemen scenario is somewhat = likely?=20

We're not doing much about it. We could have had a soft landing = if we=20 had listened to Jimmy Carter and started 20 years ago. But in the = absence=20 of a Winston Churchill or John Kennedy, I'm not sure we're going = to get in=20 gear fast enough to avoid this. The mildest form of the disaster = is a=20 global recession worse than the Great Depression, and that's a = form it=20 could take rather than war, famine, pestilence and death.

How would you prepare for this?

What I'd like to have is farmland on volcanic rich soils so = that it=20 doesn't require fertilizer. And I need a place where there's = enough=20 rainfall. Maybe this could be in Oregon. Owning something that's=20 relatively energy independent and supplies food for the survivors = to eat=20 would be the sweetest target.

Ted Sickinger: 503-221-8505; tedsickinger@news.oregonian.com =




Oil expert: Output downhill from here Energy - Author Ken Deffeyes thinks the = depletion of=20 fossil fuels could lead to a worldwide cataclysm Monday, February 27, 2006 TED SICKINGER The Oregonian Few petroleum geologists qualify as celebrities. But Ken = Deffeyes, a=20 former Shell Oil geologist who is now a professor emeritus of = geosciences=20 at Princeton University, recently sold out Portland's First = Congregational=20 Church, where he came to lecture on his latest book, "Beyond Oil." = Before Princeton, Deffeyes worked as a researcher in the labs = of Shell=20 Oil and taught at the University of Minnesota and Oregon State = University.=20 At Shell, he worked with the now-famous petroleum geologist M. = King=20 Hubbert. Hubbert coined what is fast becoming a fixture in the = modern=20 lexicon -- "peak oil" -- when he predicted that U.S. oil = production would=20 peak in the early 1970s and decline thereafter. Widely criticized = at the=20 time, Hubbert has since been vindicated. Building on Hubbert's hypotheses, Deffeyes recently theorized = that=20 world oil production peaked Dec. 16, 2005, and has begun its = permanent=20 decline, with economic disruptions to follow. Deffeyes sat down with The Oregonian last week to discuss his = book and=20 the peak oil phenomenon. His comments have been edited for length = and=20 clarity. What's the basic math behind your forecast that world oil = production=20 peaked Dec. 16? Hubbert's theory says that the ease of finding oil depends on = the=20 fraction of oil that hasn't been found yet. It's a simple = hypothesis that=20 explained U.S. oil production, where we've already gone over the = peak and=20 we're halfway down the other side. A corollary that comes out of = the math=20 is that the peak occurs when half the oil has been produced. In = Chapter 3=20 of "Beyond Oil," I take the date these oil fields were first = discovered,=20 the first wells, and it turns out that the whole world is mature. = We've=20 found 94 percent of all the oil we're ever going to find. It's = easy to=20 extend that line down to the zero level and say that there are = 2.013=20 trillion barrels that we're on track to discover, and we've = already=20 discovered 94 percent of that. So there's not much guesswork in = that=20 number. So I divide that number by 2 and I get just over 1 = trillion=20 barrels. Then I add up the world oil production from the beginning = and=20 figure out when we're halfway, and that's where the Dec. 16 number = comes=20 from. Doesn't a lot depend on the level of oil reserves the Saudis = are=20 sitting on? Matt Simmons has this wonderful book called "Twilight in the = Desert."=20 It's a very detailed analysis of the Saudi fields based on papers = that the=20 Saudi Aramco petroleum engineers have published in the Journal of=20 Petroleum Geography. He says they're struggling to keep up. In the supergiant oil fields in Saudi Arabia, the water content = is=20 going up. It's called the water cut, the percentage of fluid = produced=20 that's water. It was 30 percent when Simmons' book came out. There = are=20 rumors now that it's 55 percent. When it gets to 80, things are = largely=20 over. What is the highest estimate of reserves out there? Reserves are hard to estimate, but if we talk about = discoveries, the=20 biggest estimate comes from the U.S. Geological Survey, at just = over 3=20 trillion barrels. If you take their number, we have another 2 = trillion=20 barrels to produce and you get a peak in the year 2036. I could = give a 15=20 minute lecture on the flaws in the USGS survey, and I think = they're=20 beginning to back off a little bit. In order to make the USGS or = things=20 like it correct, we've got to find another Middle East plus = another North=20 Sea on top of that. I don't think there's another Middle East = lurking out=20 there. What would drilling in the Arctic Refuge do to the estimate ? = Prudhoe Bay, the largest oil field in the United States, kicked = in when=20 they got the pipeline finished in 1976, and it wasn't big enough = to raise=20 us back to our 1970 level of production. It put a little shoulder = on the=20 downside of the production curve, but that was it. My guess is = that in our=20 wildest dream, ANWAR (Arctic National Wildlife Refuge) will prove = half as=20 big as Prudhoe Bay. I'd have to work out the number, but if that's = the=20 case, it probably postpones the world situation for two weeks. = What about offshore fields? The only thing on the shelf, literally the continental shelf, = is the=20 South China Sea, which has been drilled around the edge and it's = mostly=20 natural gas. There could be oil out in the middle, but six = different=20 countries claim the South China Sea. What do the oil companies say? With the oil companies, you have to watch what they do and not = what=20 they say. What they're doing is taking in $10 billion and $20 = billion a=20 quarter in profits and handing it out as increased dividends, = buybacks of=20 their stocks, giving it to their executives. They're not drilling, = they're=20 not building new pipelines and not building new refineries. If = there were=20 good prospects out there, they'd be out there drilling like crazy. = Is there a portfolio of alternative energy that makes sense = It's those things that we have the technology and engineering = ready to=20 go right now. At the top of my shortlist are the high-efficiency = diesel=20 automobiles being marketed in Europe right now that get 100 miles = to the=20 gallon. Nuclear and wind are things we have engineered right now = that are=20 ready to roll. Wind, even in your wildest dreams, is not going to = be a=20 very big part of the answer, but every little bit helps. Nuclear, = we know=20 how to build and operate safe nuclear power plants. Coal = gasification,=20 where you react the coal with steam and a little bit of air and = get a=20 little gas, would be a win. What about oil shale and tar sands? Oil shale is the fuel of the future and it always will be. In = the case=20 of tar sands, they're very heavy users of natural gas right now, = for heat=20 to melt the tar and to upgrade the oil so it will travel through a = pipeline in a Canadian winter. Alan Greenspan told us more than a = year ago=20 that the North American gas market was gassed out. So they're = going to be=20 natural gas limited or having to compete with other users of = natural gas.=20 There's talk about building a nuclear plant up there, and that's a = good=20 idea, but it'll take 10 years to get a plant in there. Biofuels? There are both people and cows lined up for soybeans, and it's = at least=20 a factor of 2 more expensive than oil right now. Palm oil may be = the=20 closest to being the one ready to go to market right now. Ethanol = from=20 corn is close to being a tossup. You may use the same amount of = energy=20 when you burn the ethanol as goes into the fertilizers, the = tractors, the=20 trucks to haul it around. In Brazil, they're doing well with sugar = cane.=20 Where is the economic impact of peak oil going to be felt = acutely and=20 when? Geologists like to look back in time, and I'm not that good at=20 futurology. I borrow the analogy of the Four Horsemen of the = Apocalypse:=20 war, famine, pestilence and death. Famine because particularly = fertilizer=20 is very energy intensive. The green revolution was based on better = seed=20 varieties, heavy use of mineral fertilizers, pesticides. Well, = pesticides=20 are all petrochemicals, so fertilizer is going to get much more = expensive=20 cause they use a lot of energy. So famine and pestilence really are threats down the line. And = if you=20 look up Amos Nur's Web site at Stanford, he thinks the first Gulf = War, the=20 Trade Center attacks and the second Gulf War are the first three=20 skirmishes in the oil war. Do you envision problems gradually getting worse, or some = sudden shock?=20 What I've heard from a lot of people is that it will take = something=20 terrible to get people's attention. You mean the World Trade = Center wasn't=20 big enough? The Iranian situation, that could trigger it. The = hurricanes=20 nearly triggered it. Really abnormally cold winters in the = northeastern=20 U.S. and Europe could trigger it. If we got a civil war in Saudi = Arabia,=20 you could kiss your lifestyle goodbye. The public will probably = say after=20 the fact that XYZ triggered it. That's the naming rights = phenomenon, and I=20 can't say which one is going to win. By the end of this decade, we'll be down about 5 percent from = the peak=20 production, and demand in China and India is moving up fast, and = someone's=20 going to come up short on their ambitions. So you really believe the Four Horsemen scenario is somewhat = likely?=20 We're not doing much about it. We could have had a soft landing = if we=20 had listened to Jimmy Carter and started 20 years ago. But in the = absence=20 of a Winston Churchill or John Kennedy, I'm not sure we're going = to get in=20 gear fast enough to avoid this. The mildest form of the disaster = is a=20 global recession worse than the Great Depression, and that's a = form it=20 could take rather than war, famine, pestilence and death. How would you prepare for this? What I'd like to have is farmland on volcanic rich soils so = that it=20 doesn't require fertilizer. And I need a place where there's = enough=20 rainfall. Maybe this could be in Oregon. Owning something that's=20 relatively energy independent and supplies food for the survivors = to eat=20 would be the sweetest target. Ted Sickinger: 503-221-8505; tedsickinger@news.oregonian.com = =A92006 The=20 Oregonian