Peak Oil Ideas and Consequences, 2009

Peak Oil Ideas and Consequences
Table of Contents
HUBBERT’S “PEAK” AND BELL CURVES ....................................................................... 1
HUBBERT’S PEAK EXAMPLES ....................................................................................... 2
PEAK OIL IN THE US..................................................................................................... 3
PEAK OIL AND PRICING ................................................................................................ 4
PEAK OIL DECLINE RATE ............................................................................................. 5
HUBBERT’S PEAK & TWILIGHT IN THE DESERT ............................................................ 7
ESTIMATED ULTIMATE RECOVERY (EUR).................................................................... 8
OIL AND GAS FIELD DISCOVERIES .............................................................................. 10
DECLINING DISCOVERY RATES .................................................................................. 11
US DISCOVERY REVIEW 2009 .................................................................................... 12
EPRS OIL PRICE FORECAST CRITIQUE ....................................................................... 13
CRUDE OIL PRODUCTION COSTS ................................................................................ 13
SUMMARY .................................................................................................................. 15
REFERENCES .............................................................................................................. 16
APPENDIX 1. REVIEWS OF HUBBERT'S PEAK: THE IMPENDING WORLD OIL SHORTAGE 17
APPENDIX 2. REVIEWS OF MATTHEW R. SIMMONS’ TWILIGHT IN THE DESERT: .......... 21
APPENDIX 3: RIG COUNTS ......................................................................................... 23
APPENDIX 4: BTU CONVERSION OF FUELS ................................................................ 24
Hubbert’s “Peak” and Bell Curves
Figure 1. Schematic view of Hubbert’s bell curve incorporating production from individual wells
and/or fields, estimate of recoverable reserves, and exploitation trends in oil recovery. An
identical bell curve trend is observed in historic coal production.
M. King Hubbert was a Shell geologist who in 1956 predicted that US oil production
would peak in the early 1970s and then begin to decline. Hubbert was dismissed by
many experts inside and outside the oil industry. Pro-Hubbert and anti-Hubbert factions
arose and persisted until 1970, when US oil production peaked and started its long
Jim Myers, MPE Peak Oil Ideas and Consequences, September 2, 2009 Page 1 of 25
decline.
The Hubbert method is based on the observation that oil production in any region follows
a bell-shaped curve. Production increases rapidly at first, as the cheapest and most
readily accessible oil is recovered. As the difficulty of extracting the oil increases, it
becomes more expensive and less competitive with other fuels. Production slows, levels
off, and begins to fall. This can be observed in any sedimentary basin producing oil.
Up to 54 of the 65 largest oil producing countries have passed their peak of production
and are now in decline, including the USA in 1970 and 1981, Indonesia in 1997,
Australia in 2000, the UK in 1999, Norway in 2001, and Mexico in 2004.
Hubbert’s Peak Examples
Figure 2. Graphical Peak-Oil summary of non-OPEC & non-former Soviet Union (non-FSU)
national production rates illustrates obvious peak around the Year 2000.
www.energybulletin.net/node/2544, October 2004.
Of the 65 largest oil producing countries in the world, up to 54 have passed their peak of
production and are now in decline, including the USA in 1970, Indonesia in 1997,
Australia in 2000, the UK in 1999, Norway in 2001, and Mexico in 2004. Hubbert's
methods and newer more advanced methodologies have estimated the global oil peak,
ranging from 'already peaked' to 2035 (very optimistic).
International energy agencies rely upon many official data sources for predicting oil
production, like OPEC figures, oil company reports, US DOE Geological Survey
(USGS) discovery projections, the US DOE Energy Information Administration (EIA),
The Oil & Gas Journal, American Petroleum Institute (API), International Energy
Agency (IEA), etc.
Unfortunately, many of these data sources have been demonstrated impractical,
inaccurate, unreliable, and/or unrealistic, some perhaps scandalously so. Several notable
scientists have attempted independent studies; perhaps most famously, the UK’s Colin
Campbell of the Association for the Study of Peak Oil and Gas (ASPO). The “Critique
of forecasts by USGS, US-EIA and IEA” is thorough and informative:
www.energybulletin.net/node/2544
Figure 3. Breakdown of fossil fuel production history and projection by fuel type: “Regular” oil,
heavy oil, deepwater offshore production, polar, conventional and non-conventional natural gas.
Note that heavy, deepwater, and polar oil are included, but are very expensive ventures.
Peak Oil in the US

The US serves as a laboratory for evaluating the prospects for delaying the global peak.
After 1970, exploration efforts succeeded in identifying two enormous new American oil
provinces—the North Slope of Alaska and the Gulf of Mexico. During this period, other
kinds of liquid fuels (such as ethanol and gas condensates) began to supplement crude.
Also, improvements in oil recovery technology helped to increase the proportion of the
oil in existing fields able to be extracted, in some cases doubling it. These are precisely
the strategies (exploration, substitution, and technological improvements) that the oil
producers are relying on to delay the global production peak. In the US, each of these
strategies made a difference—but not enough to reverse, for more than a year or two now
and then, the overall 37-year trend of declining production. To assume that the results for
the world as a whole will be much different is at best unwise.
www.richardheinberg.com
In response to the oil price spike begun by the OPEC embargo of 1973, massive
investment occurred internationally to increase production in every oil producing nation.
This culminated in an oil price collapse in the mid-1980’s which lasted until world
demand caught up with production around 2000, when oil pricing began its gradual, then
steepening, increase.
Peak Oil and Pricing
The deceptive aspect of the Peak Oil movement is the temptation to view oil production
and remaining recoverable reserves as decoupled from the market aspects of capital and
technology.
 Top curve includes the

gains in refinery efficiency
beginning around 1950, plus
all contributions below:
 Second curve includes
liquid hydrocarbons from the
natural gas Industry
beginning around 1950, plus
contributions below:
 Third curve includes oil
production from Alaska,
beginning around 1960,
becoming significant around
1967, skyrocketing in 1977,
and peaking in 1988, plus
lower-48 States production.
 Bottom curve, only
production from US lower-48
States oil fields, obviously
peaked around 1970 and
again around 1985.
Figure 4. Classic case of peak oil, with 1970 peak and subsequent decline in US oil production (top
curve) with incremental contributions from refinery efficiency, NGL = natural gas liquids, Alaskan
production and production from lower-48 States, including the Gulf of Mexico (GoM) contribution to
its 1984 peak. Alaskan production peaked in 1988. GoM production peaked in 2003. Jean
Laherrere, ASPO-USE 2007 Houston World Oil Conference.
http://www.aspousa.org/index.php/peak-oil/peak-oil-202/
 Production cost includes “finding costs” for exploration, drilling wells, casing, completion,
E&P company overhead, and “lifting costs” for pumping and other lease operation expenses to
produce each barrel of liquid hydrocarbon.
 The balance between liquid hydrocarbon supply and demand is usually delicate. The
difference between those two very large quantities is usually very small, sometimes as low as
1% of supply & demand totals, and is sometimes called the “supply cushion.”
 The influence of oil pricing on oil supply. At each significant oil price decrease or increase,
thousands of E&P personnel potentially receive new guidelines, tasks, and company goals.
Capital is advanced during times of price increase; it is withdrawn as prices decline.
 Advance of capital is ultimately profound in E&P. Increased capital promotes increased
expenditures for leasing, geophysics, development geology, drilling, and production operations.
 E&P capital also commissions the research and development efforts that produce new
technologies.
 Recently introduced and especially refined techniques for 3D seismic, horizontal drilling,
and hydraulic fracturing are at the heart of projected production increases today, and other
new technologies are almost comparably promising.
Production volumes and estimated
recoverable reserves of hydrocarbon
liquids do not exist in a vacuum. Their
fundamental basis is in geology and
basic petroleum engineering.
 It is further influenced by
production costs and the advanced
geosciences and engineering which
influence these costs.
 Unlike natural gas, crude oil, as an
internationally traded commodity, sells
into markets profoundly influenced by
the World oil price.
 For example, huge investments in
offshore Gulf of Mexico and Alaska’s
Prudhoe Bay allowed reversal of US
decline in the 1970’s in response to
increased World oil pricing.
Figure 5. The interplay between the world price of liquid hydrocarbons and US production rates
can be observed directly as 20th-Century oil pricing (in 2008 $US) and production rates for liquid
hydrocarbons from various sources are overlaid.
The date for the Peak in global liquid hydrocarbon production can be extended, but only
at a global cost, including finding and lifting costs and especially by crude oil price. The
nearby Peak projected in 2006 has probably already been extended a few years by the oil
price spike of 2005-08 and the accompanying surge in unconventional recovery, heavy
oil and bitumen development, and exploration and development. Other extensions will
be possible with future price increases.
The energy-intensive processes of E&P exploration activities, the law of diminishing
returns, and principles of geology and engineering predict, however, that global oil
production will ultimately reach a final Peak, however. All but our oldest citizens will
live to see that Peak.
Peak Oil Decline Rate
ASPO's latest model suggests that regular conventional oil reached an all time peak in
2005. If heavy oil, deep-water, polar and natural gas liquids are considered (the 'all-
liquids' category), the model suggests that this peak too is behind us, in 2008. Combined
oil and gas is expected to have peaked globally simultaneously in 2008.
Princeton University Professor Emeritus Kenneth Deffeyes, senior advisor to the Iranian
National Oil Company A. M. Samsam Bakhtiari, UK Petroleum Review editor Chris
Skrebowski, energy banker and former Presidential advisor Matthew Simmons, and the
researchers at The Oil Drum, have recently reviewed the “Peak Oil” issue.
These investigators used improved and varied methodologies. They have all projected
similar peaks within the 2005-2011 range. A 2007 survey suggests that their perspective
has become the consensus among informed observers and industry insiders.
Figure 6. History, peak, and 2007 projection of deepwater offshore oil production by ASPO for
Mexico, Nigeria, oil and new US, Angola, Brazil, and the Rest of the World predicts a peak and
brief plateau about 2012. Extreme expense of deepwater operations requires development for
quick depletion and abandonment, accelerating production decline to its maximum rate. An
ASPO forecast and a forecast by TheOilDrum.com contributor “Ace” are from 2008 are overlaid,
and justifications for the two plateaus are summarized. Either of the production limits projected
will impose great financial expense upon the ventures. http://www.theoildrum.com/node/4792
Other sources supporting the view that global crude oil has already peaked globally
include a study by the German Government sponsored Energy Watch Group, oil
billionaire T. Boone Pickens, and the former head of exploration and production at Saudi
Aramco, Sadad al-Huseini, and the Wikipedia hosted Oil Megaprojects database. As of
April 2009, the peak of all-liquids production was July 2008.
Given that global oil production will eventually peak, what will be the future rate of
decline of oil production? Some form of coordinated adaptation might be possible if the
annual drop in available oil was no more severe than 1-2% a year, whereas 10% or more
would soon implode the global economy. Most models project decline rates of 2-4%.
 Nations dependent on imports are likely to find that their access to oil will fall at a far sharper
rate than the global decline rate. During global shortages, higher oil prices stimulate the
economy of exporting nations which increases their internal consumption. Many oil-exporting
countries subsidize domestic consumption at price levels fare below any defined by the world
market.
 Combined with a national peak in oil production, exports from any particular nation can drop
to zero disturbingly quickly. By 2015, Mexico (the second biggest exporter of oil to the US) may
become a net oil importer. Other nations where this may soon happen include Iran, Algeria,
Malaysia, Argentina, Bahrain, Colombia, Egypt, Indonesia, Syria, Turkmenistan, Vietnam, and
Yemen.
Hubbert’s Peak & Twilight in the Desert
Kenneth S. Deffeyes is the son of a petroleum engineer; he was born in Oklahoma, "grew
up in the oil patch," became a geologist and worked for Shell Oil before becoming a
professor at Princeton University.
In Hubbert's Peak, published in 2001, Kenneth S. Deffeyes writes with good humor
about the oil business, but he delivers a sobering message: the 100-year petroleum era is
nearly over. Global oil production will peak sometime between 2004 and 2008, and the
world's production of crude oil "will fall, never to rise again." If Deffeyes is right--and if
nothing is done to reduce the increasing global thirst for oil--energy prices will soar and
economies will be plunged into recession as they desperately search for alternatives.
It's tempting to dismiss Deffeyes as just another of the doomsayers who have been
predicting, almost since oil was discovered, that we are running out of it. But Deffeyes
makes a persuasive case that this time it's for real. This is an oilman and geologist's
assessment of the future, grounded in cold mathematics. And it's frightening.
Deffeyes used a slightly more sophisticated version of the Hubbert method to make the
global calculations. The numbers pointed to 2003 as the year of peak production, but
because estimates of global reserves are inexact, Deffeyes settled on a range from 2004 to
2008. Three things could upset Deffeyes's prediction. One would be the discovery of
huge new oil deposits. A second would be the development of drilling technology that
could squeeze more oil from known reserves. And a third would be a steep rise in oil
prices, which would make it profitable to recover even the most stubbornly buried oil.
Above summary is adapted from Scientific American review of Deffeyes’ book.
Note that when Peak was written, before 2001, the price of oil averaged only $36.4 in
2000, and pricing languished in that range for a few more years before its escalation later
in the decade. The effect of steady increases from 2003 to 2008 was to stimulate global
drilling and development programs, thus increasing estimated ultimate recoveries and
current production rates.
While exact dates are unknown, analysis of International sedimentary basins indicates
that a peak in International oil producing capacity is in the very near future, if not already
past. Simmons’ 2005 Twilight in the Desert also disturbing, and dwells on Saudi reserves
and deliverability.
Year: 2001 2002 2003 2004 2005 2006 2007 2008 2009* 2010*
WTI wellhead price: $30.40 $30.10 $35.00 $45.40 $60.00 $67.80 $72.30 $99.70 $61.34 $79.80
In 2007 US dollars: Annual historical average prices for West Texas Intermediate crude oil, 2001-2008,
with estimated* prices for 2009-2010. The price increases since 2002 have had the effect of stimulating
global drilling for crude oil, and will extend the date of global peak production by some number of years
beyond most estimates made before this period of increased oil prices.
Stuart Staniford (Ph.D. in physics) has also been conducting a very careful and detailed
investigation of all that is publicly known about the super-giant Ghawar in Saudi Arabia.
He reports that the aquifer underlying the Arab-D zone has progressed upward toward the
top of the reservoir remarkably. This water influx threatens to reduce production rates
and EUR and shorten Ghawar’s productive life.
http://www.theoildrum.com/user/Stuart%20Staniford/stories
The American Petroleum Institute (API) estimated in 1999 that the world's oil supply
would be depleted between 2062 and 2094, assuming total world oil reserves at between
1.4 and 2 trillion barrels and consumption at 80 million barrels per day. No international
plan is in place to deal with the Peak Oil issue, much less for global oil depletion in 52-84
years, and very few nations will be prepared.
Estimated Ultimate Recovery (EUR)
Hubbert demonstrated that total US oil production in 1956 was tracing the upside of such
a curve. To know when the curve would most likely peak, however, he had to know how
much oil remained in the ground. Underground reserves provide a glimpse of the future:
when the rate of new discoveries does not keep up with the growth of oil production, the
amount of oil remaining underground begins to fall. That's a tip-off that a decline in
production lies ahead. An excellent graphical summary of 1942-2000 estimates of global
Estimates of Ultimate Recovery (EUR) are presented in Figure 7. Note that among
USGS EUR data, only their low “95%” is within remote agreement with more than 1
other investigator’s estimate.
 Much of the oil remaining recoverable globally will be produced, transported, and/or refined
at great expense. Examples of the types of expense factors involved in deepwater offshore
exploration and production include:
 Deepwater offshore development requires massive long-term investment, exploration,
planning, logistics, risk, environmental and developmental expense.
 First geophysics and rounds of exploration drilling and evaluation are followed by
development planning and construction of production platforms.
 Only then does production drilling commence; dozens of production wells are drilled from
typical platforms, pipelines are laid.
 Then production and depletion must proceed rapidly, as lives of platforms and facilities will
be limited.
 Hostile operating climates like many Asian, African, Canadian, oceanic, desert, jungle,
Arctic, and Antarctic settings and/or altitudes provide additional safety and logistical challenges
and expenses.
Figure 7. Published Estimates of World Oil Ultimate Recovery (EUR). Note that only
USGS’s lowest estimate, “95% probability” is within even remote agreement of the
consensus of more than one other recent investigator. Unfortunately, only the higher
USGS estimates of EUR are used in EIA’s oil price forecasts. www.eia.doe.gov.
 Enhanced oil recovery, using injection of CO2, chemicals, steam, etc. is conducted after
extensive office and laboratory characterization and research efforts spanning years or even
decades.
 Unconventional oil recovery, as in natural gas hydrates, heavy oil, and bitumen deposits
impose similar research and technological expense factors for environmental protection,
production, transmission, and/or refining.
 Locations like former Soviet Union (FSU), Africa, Middle East and Venezuela impose
primitive infrastructure, inadequate transmission, transportation, safety and security, unstable
governments, environmental problems, sabotage, terrorism, theft, waste, nationalization risk,
political corruption, etc., often compounded by the problems already listed.
 As demonstrated by Matthew Simmons, Deffeyes, and many others, many vital estimates of
reserves and productivity are inflated. Even if such properties and provinces are able to
temporarily rise to stated expectations, additional expenses will be involved. This factor is
especially acute if estimates like USGS 5% and USGS Mean are accepted, as in US-EIA and
IEA forecasts of production and pricing.
 For to the Falkland Islands, for example, according to USGS, the mean potential for
“undiscovered” oil is estimated to be 5,800,000,000 barrels, 5,800MMBO. This number was
calculated as the mean value assuming that at 95% probability no oil at all will be found and
with a probability of 5% about 17,000MMBO will be found.
Evaluations of World EURs is a vital portion of estimating oil and gas supplies available
in the future. For a review of USGS track record in this regard, see USGS Open-File
Report 2007-1021 An Evaluation of the USGS World Petroleum Assessment 2000—
Supporting Data, authored by T. R. Klett, D.L. Gautier, and T.S. Ahlbrandt. This report
clearly illustrates the poor foundation for USGS forecasts of EUR and new oil and gas
discoveries. Only their “95% probability” estimates are credible.
http://pubs.usgs.gov/of/2007/1021/
Oil and Gas Field Discoveries
Figure 8. Discovery of 974 giant oil and gas fields (EUR > 500 MMBO or >3TCF) by
decade since 1860, with estimate for fields discovered in decade 2000-2009. Mann, P.,
Horn, M., and Cross, I. 2007 Mann, P., Gahagan, L., and Gordon, M.B., 2001, 2004, 2006.
http://www.ig.utexas.edu/research/projects/giant_fields/
Slightly less than 1000 giant oil and gas fields have been discovered in the history of
E&P. According to analysis led by Paul Mann of the University of Texas' Jackson
School of Geosciences, almost all of these giant oil and gas fields cluster within 27
regions, or about 30 percent of Earth's land surface. The tectonic settings and discovery
trends of their sedimentary Basins is summarized in a live presentation at
www.conferencearchives.com/aapg2007/sessions/player.html?sid=070
41210.
Today about 50% of global oil and gas production comes from these giant fields.
Geoscientists believe these giants account for 40 percent of the world's petroleum
reserves. Growth of hydrocarbon reserves and production is greatly influenced by the
volume of these discoveries, which peaked around 1970. Since that time global
hydrocarbon production and pricing has benefited greatly from development of those
discoveries and their sub-basins in 1980-2000.
In the 1950’s 92 giant fields (EUR > 500 MMBO or >3TCF) were discovered. The
introduction of solid state electronics and the digital computing revolution it provided to
geophysical science, along with the plate tectonics theory revolution in the 1960’s, and
the fast fourier transform (FFT) algorithm introduced in 1965, allowed 215 such
discoveries in the 1960’s. With further digital filtering and other geophysical advances
and high oil prices added in 1973, 220 giant fields were discovered in the 1970’s.
Declining Discovery Rates
Despite high oil prices in the beginning of the 1980’s and further geophysical advances,
only 95 and 97 giant fields were discovered in the 1980’s and 1990’s respectively. With
79 giants discovered between 2000 and 2007, benefiting from technology and pricing for
oil and gas, the decade of the 2000’s is on-track for about 100 giants to be discovered.
The most recent history of

E&P shows the influence
of geosciences, especially
geophysics in the late
1930’s, demand,
especially in the late
1940’s, and the avalanche
of science, engineering,
and market demand which
combined in the 1950’s
and 1960’s, and the oil
pricing revolution of the
1970’s and early 1980’s
had on the overall field
discovery rate and the
frequency of discovering
giant oil and gas fields
globally. The effect of of
the price collapse of the
1980’s and 1990’s is also
clear.
Figure 9. Decline in the frequency of new oil and gas field discoveries is sobering, especially
taking into account the hugely enhanced geophysical technologies available to explorationists.
Of those 79 recent discoveries, 26 of these giant field discoveries are in Asia and nearby
Oceania, 13 in South America, 12 in the Middle East, 10 in Africa, 10 in Eastern Europe
and the former Soviet Union (FSU), 6 in North America and 2 in Western Europe.
Among these giants, the 5 largest oil fields and the 2 largest gas fields are in the Persian
Gulf region. The remaining 3 of the 5 largest gas fields discovered since 2000 are in
Western Siberia.
Giant fields are clustered 36% in passive margins (Gulf of Mexico, Persian Gulf, etc.),
30% in continental rift settings (North Sea, Black Sea) with overlying sag basins, 19% in
continent-continent collision settings (Urals, Permian Basin...). 8% of the giant fields are
in strike-slip settings (Southern California, East China), 6% in settings of accretion,
shallow subduction, and/or continental collisions with arcs or terrain (South America,
Southeast Asia), and rarely (1%) in subduction zones (Indonesia). In the 2000’s most of
the giant discoveries have been in passive margins and rift basins.
New discoveries near existing giants clusters are sought by basin infill, along-strike
extension, deep-water offshore, and updip exploration. New giant basin clusters may
emerge from frontier exploration. Giant oil fields are especially clustered in the Persian
Gulf, locations with potential political instability, unfriendly diplomatic attitudes toward
the US, and/or logistical or geopolitical problems.
Many are optimistic that the recent regime replacement in Iraq, with the World’s 2 nd-
largest estimated ultimate recovery (EUR) and an abundance of giant and super-giant
fields already discovered, will provide temporary enhancement to those statistics.
Through nationalization of their oil industry in 1966-1972, Iraq had previously been
closed to the international E&P community, and experts are very optimistic that abundant
supplies recoverable at low costs will be forthcoming. Iran may offer some similar
promise for discoveries, since the track record of national oil companies in E&P is very
poor internationally.
Of course, securing and tracking crude oil through the processes of production, gathering,
and transmission in Iraq will be another story... Iraq is one of the World’s most positive
resources in the coming battle to postpone the date of Peak global oil production.
US Discovery Review 2009
The trend of declining US crude oil production may be temporarily reversed in 2009
and/or in 2010.
Anticipated US production gains in 2009 and 2010 are not due to national patriotism or
oil company epiphanies. This resulted from healthy, relatively steady oil prices
averaging $69.04 from 2004 to 2008 and averaging $99.70 in 2008. All these oil prices
are in 2007 dollars from publications of US Department of Energy (DOE) Energy
Information Agency (EIA).
One of the newest producing fields is Chevron’s newest offshore producer:
Chevron just began pumping oil on May 5 from its new Tahiti platform in the Gulf of
Mexico, which is operating in 4,100 feet of water and lifting oil from 26,700 feet below
the seabed, making it the deepest well in the Gulf. The cost of the first phase of the
project is $2.7 billion, and the platform is expected to ramp up to a daily flow rate of
approximately 125,000 barrels of crude oil and 70 million cubic feet of natural gas before
the end of the year.
The biggest oil play in the Lower 48 States is now development of the Bakken formation
in the Williston Basin in Montana and North Dakota. Using horizontal drilling,
measurement while drilling (MWD), uncemented slotted production liners and external
inflatable packers, new staged hydraulic fracturing techniques are achieving great
success. Excellent production of a light sweet crude is being established despite the
Bakken’s very low primary porosity and permeability. Various huge estimates for
Bakken recoverable reserves and production are available. The 2008 peak of about $140
oil pricing would today be a godsend to the operators of those expensive projects.
EIO’s LOW oil price forecast, shown along with Reference and
HIGH Cases in the bottom chart, is completely unfounded.
 The recent decades of low oil prices, especially 1984-2004,
benefited from the increasing oil productions in numerous producing
provinces and globally, as shown the top chart. Such increasing
production period is not forthcoming in the period beginning in 2010,
except as may be orchestrated by high oil prices in the sense of the
Reference and High Cases. That increasing production benefited
from high oil prices between 1973 and 1984, when massive
investment in international production financed discovery of new
fields and redevelopment of old fields. High oil prices will be
required to repeat that.
 The second chart illustrates that international demand for liquid
hydrocarbons was increasing, as will continue in the future.
 Between 1960 and 1980, 435 giant oil and gas fields were
discovered globally. Science, technology, and economics combined
to lay groundwork for increasing production in the following
decades. The third chart illustrates that such volume of discovery
has not and will not be repeated without high exploration and
development costs supported by high oil prices, again in the sense
of the Reference and High Cases.
 In sharp contrast, global oil demand continues to increase,
production is either flat or in decline, and the discovery of the large
fields which set up previous global production increases in in the
1960’s and 1970’s has been cut in half for the 1980’s, 1990’s, and
2000’s.
Figure 10. 1980-2030: Histories and projections of International hydrocarbon production,
energy consumption, and discovery of new oil and gas fields combine to preclude outlook for
low oil prices in the future. www.eia.doe.gov/oiaf/ieo/world.html
Texas’ biggest oil play today is concentrated in the West-Central Sprayberry and
Wolfcamp fields.
EPRS Oil Price Forecast Critique
Natural gas is currently competing with gasoline as a motor fuel. Propane has similarly
competed for decades. Emerging environmental resistance to coal-fired electric power
plants and the emerging liquified natural gas (LNG) market are trends, which will
ultimately add US and global consumption. Natural gas is, based on BTU content,
underpriced compared to crude oil, which will ultimately provide upward price pressure.
Examination of the various quantitative historical and projected factors in Figure 10
demonstrates how unrealistic the US DOE’s Energy Information Agency’s recent
“LOW” case of future crude oil price forecasting really is. This error is probably caused
by use of the USGS “Mean” value for Global EUR. EIA’s “Reference” and “HIGH”
cases are realistic, however.
Crude Oil Production Costs
How Is Crude Oil Produced?
Wells are drilled into oil reservoirs to extract the crude oil. "Natural lift" production
methods that rely on the natural reservoir pressure to force the oil to the surface are
usually sufficient for a while after reservoirs are first tapped. In some reservoirs, such as
in the Middle East, the natural pressure is sufficient over a long time. The natural
pressure in many reservoirs, however, eventually dissipates. Then the oil must be
pumped out using “artificial lift” created by mechanical pumps powered by gas or
electricity. Over time, these "primary" methods become less effective and "secondary"
production methods may be used. A common secondary method is “waterflood” or
injection of water into the reservoir to increase pressure and force the oil to the drilled
shaft or "wellbore.” Eventually "tertiary" or "enhanced" oil recovery methods may be
used to increase the oil's flow characteristics by injecting steam, carbon dioxide and other
gases or chemicals into the reservoir. In the United States, primary production methods
account for less than 40% of the oil produced on a daily basis, secondary methods
account for about half, and tertiary recovery the remaining 10%. Extracting oil (or
“bitumen”) from oil/tar sand and oil shale deposits requires mining the sand or shale and
heating it in a vessel or retort, or using “in-situ” methods of injecting heated liquids into
the deposit and then pumping out the oil-saturated liquid.
What Affects Production Costs?
Reservoir characteristics (such as pressure) and physical characteristics of the crude oil
are important factors that affect the cost of producing oil. Because these characteristics
vary substantially among different geographic locations, the cost of producing oil also
varies substantially. In 2007, average “lifting” costs (all the costs associated with
bringing a barrel of oil to the surface) reported to EIA by the major private oil companies
participating in the Financial Reporting System (FRS) ranged from about $3.87 per barrel
(excluding taxes) in Central and South America to about $10.00 per barrel in Canada.
The average for the U.S. was $8.35 per barrel (an increase of 18.5 percent over the $7.05
per barrel cost in 2006).
http://www.eia.doe.gov/neic/infosheets/crudeproduction.html
Lifting costs in oil and gas accounting are those costs incurred to operate and maintain an
enterprise’s wells and related equipment and facilities, including depreciation and
applicable operating costs of support equipment and facilities and other costs of operating
and maintaining those facilities.
Fundamentals of Oil & Gas Accounting, 1008, Charlotte J. Wright, Rebecca A. Gallun.
Besides the direct costs associated with removing the oil from the ground, substantial
costs are incurred to explore for and develop oil fields (called “finding” costs), and these
also vary substantially by region. Finding costs averaged over 2005, 2006, and 2007,
ranged from about $4.77 per barrel in the Middle East to $49.54 per barrel for the U.S.
offshore. While technological advances in finding and producing oil have made it
possible to bring oil to the surface from more remote reservoirs at ever increasing depths,
such as in the deepwater Gulf of Mexico, the total finding and lifting costs have increased
sharply in recent years. Much of this recent increase is attributable to the rapid expansion
of the world economy and is likely to reverse direction as the economic growth has
slowed or declined in 2008/2009.
http://www.eia.doe.gov/neic/infosheets/crudeproduction.html
Figure 11. History of World oil pricing, US lifting cost and finding cost per barrel, and the
portion of the US Rig Count devoted to drilling for oil. Note that the oil rig count has remained
low for 30 years despite several recent years of high oil prices.
Summary
A huge volume of discussion and information on Peak oil is available. The question of a
final Peak in global liquid hydrocarbon production is one of “When?”, not one of “If?”
This final Peak will probably occur after a few preliminary Peaks. Whether a temporary
Peak has already occurred is an academic question.
The actual final Peak date and the commodity prices which influence it are not academic,
however; they are matters of huge international and US priority for national defense and
domestic quality of life. They are potentially matters of survival: Life and Death.
Let us take steps to manage the entire inevitable affair and survive in dignity and safety.
References
Hubbert's Peak: The Impending World Oil Shortage, Kenneth S. Deffeyes, 285 pages,
Princeton University Press (October 1, 2001).
Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy - Matthew
R. Simmons, 448 pages, Wiley (June 10, 2005)
Peak Oil:
1. Various Peak Oil bibliographies may be found online; for example:
http://globalpublicmedia.com/content/peak_oil
2. Kenneth Deffeyes “Current Events: Join us as we watch the crisis unfolding” Beyond
Oil (11 Feb. 2006) http://www.princeton.edu/hubbert/current-events.html (accessed 18
Feb. 2006)
3. “Henry Groppe Talks about Peak Oil During ASPO USA Conference,” Global Public
Media, 11 November 2005 http://www.globalpublicmedia.com/interviews/597
4. Bakhtiari, Ali Samsam. “World Oil Production Capacity Model Suggests Output Peak
by 2006-07” Oil and Gas Journal (26 Apr. 2004)
5. Duncan, Richard. “Heuristic Oil Forecasting Method #4 Forecasting Paper" (17 June
2001) http://www.mnforsustain.org/oil_duncan_r_heuristic_oil_forecasting_paper.htm
(accessed 18 Feb. 2006)
6. ODAC. “Oil field mega projects” E&P Review (2004) http://www.odac-
info.org/bulletin/documents/MEGAPROJECTSREPORT.pdf (accessed 18 Feb. 2006)
7. Campbell, Colin. “Peak Oil: an Outlook on Crude Oil Depletion”
http://www.greatchange.org/ov-campbell,outlook.html (accessed 18 Feb. 2006)
8. Koppelaar, Rembrandt. “Oil Production Outlook 2005-2040” Foundation Peak Oil
Netherlands (6 Sept. 2005)
http://sydneypeakoil.com/downloads/oil_production_outlook_2005-2040.pdf (accessed
18 Feb. 2006)
9. Laherrère, Jean. “Hydrocarbons Resources Forecast of oil and gas supply to 2050”
Petrotech conference, New Delhi (2003)
http://www.hubbertpeak.com/laherrere/Petrotech090103.pdf (accessed 18 Feb. 2006)
Track oil pricing and the value of the US dollar at
http://stockcharts.com/charts/performance/perf.html?$USD,$WTIC
Appendix 1. Reviews of Hubbert's Peak: The Impending World Oil
Shortage
232 pages, September 29, 2008
These several reviews can be found on Amazon.com.
From Scientific American
You have to wonder about the judgment of a man who writes, "As I drive by those smelly
refineries on the New Jersey Turnpike, I want to roll the windows down and inhale
deeply.” But for Kenneth S. Deffeyes, that's the smell of home. The son of a petroleum
engineer, he was born in Oklahoma, "grew up in the oil patch," became a geologist and
worked for Shell Oil before becoming a professor at Princeton University. And he still
knows how to wield a 36-inch-long pipe wrench.
In Hubbert's Peak, Deffeyes writes with good humor about the oil business, but he
delivers a sobering message: the 100-year petroleum era is nearly over. Global oil
production will peak sometime between 2004 and 2008, and the world's production of
crude oil "will fall, never to rise again." If Deffeyes is right--and if nothing is done to
reduce the increasing global thirst for oil--energy prices will soar and economies will be
plunged into recession as they desperately search for alternatives.
It's tempting to dismiss Deffeyes as just another of the doomsayers who have been
predicting, almost since oil was discovered, that we are running out of it. But Deffeyes
makes a persuasive case that this time it's for real. This is an oilman and geologist's
assessment of the future, grounded in cold mathematics. And it's frightening. Deffeyes's
prediction is based on the work of M. King Hubbert, a Shell geologist who in 1956
predicted that US oil production would peak in the early 1970s and then begin to decline.
Hubbert was dismissed by many experts inside and outside the oil industry. Pro-Hubbert
and anti-Hubbert factions arose and persisted until 1970, when US oil production peaked
and started its long decline.
The Hubbert method is based on the observation that oil production in any region follows
a bell-shaped curve. Production increases rapidly at first, as the cheapest and most
readily accessible oil is recovered. As the difficulty of extracting the oil increases, it
becomes more expensive and less competitive with other fuels. Production slows, levels
off, and begins to fall.
Hubbert demonstrated that total US oil production in 1956 was tracing the upside of such
a curve. To know when the curve would most likely peak, however, he had to know how
much oil remained in the ground. Underground reserves provide a glimpse of the future:
when the rate of new discoveries does not keep up with the growth of oil production, the
amount of oil remaining underground begins to fall. That's a tip-off that a decline in
production lies ahead.
Deffeyes used a slightly more sophisticated version of the Hubbert method to make the
global calculations. The numbers pointed to 2003 as the year of peak production, but
because estimates of global reserves are inexact, Deffeyes settled on a range from 2004 to
2008. Three things could upset Deffeyes's prediction. One would be the discovery of
huge new oil deposits. A second would be the development of drilling technology that
could squeeze more oil from known reserves. And a third would be a steep rise in oil
prices, which would make it profitable to recover even the most stubbornly buried oil.
In a delightfully readable and informative primer on oil exploration and drilling, Deffeyes
addresses each point. First, the discovery of new oil reserves is unlikely--petroleum
geologists have been nearly everywhere, and no substantial finds have been made since
the 1970s. Second, billions have already been poured into drilling technology, and it's
not going to get much better. And last, even very high oil prices won't spur enough new
production to delay the inevitable peak.
"This much is certain," he writes. "No initiative put in place starting today can have a
substantial effect on the peak production year. No Caspian Sea exploration, no drilling in
the South China Sea, no SUV replacements, no renewable energy projects can be brought
on at a sufficient rate to avoid a bidding war for the remaining oil."
The only answer, Deffeyes says, is to move as quickly as possible to alternative fuels--
including natural gas and nuclear power, as well as solar, wind and geothermal energy.
"Running out of energy in the long run is not the problem," Deffeyes explains. "The bind
comes during the next 10 years: getting over our dependence on crude oil."
The petroleum era is coming to a close. "Fossil fuels are a one-time gift that lifted us up
from subsistence agriculture and eventually should lead us to a future based on renewable
resources," Deffeyes writes. Those are strong words for a man raised in the oil patch.
For the rest of us, the end of the world's dependence on oil means we need to make some
tough political and economic choices. For Deffeyes, it means he can't go home again.
Paul Raeburn covers science and energy for Business Week and is the author of Mars:
Uncovering the Secrets of the Red Planet (National Geographic, 1998). --This text refers
to the Hardcover edition.
Review
"Deffeyes has reached a conclusion with far-reaching consequences for the entire
industrialized world.... The 100-year reign of King Oil will be over." -Fred Guterl,
Newsweek "Deffeyes makes a persuasive case.... This is an oilman and geologist's
assessment of the future, grounded in cold mathematics. And it's frightening."
Paul Raeburn, Scientific American "Deffeyes writes with the taut reasoning of a scientist
and the passion of someone raised in the industry. His background is ideal for this
subject, and the book is a gem...
Read Hubbert's Peak-it's better to know what lies ahead than to be surprised too late to
respond." -Brian J. Skinner, American Scientist
The wolf is at the door, November 2, 2001, By Dohn K. Riley (Tahoe City, CA United
States)
Deffeyes hits the nail on the head when he clearly details what petroleum industry
insiders already know - it's not "if" global oil production will peak, it's "when.” After
years of warning about the imminent demise of cheap oil supplies, experts are now
splitting hairs about whether or not inexpensive oil production will peak in this decade or
the next. The author's easy-going, occasionally humorous prose makes the bad news
easier to take, but either way, a serious global oil crisis is looming on the horizon.
Deffeyes energizes his readers by sweeping us easily through the denser strata of the
complexities and developmental progress that built "Big Oil," but he also warns of
relying on technology to save us in the future. Unlike many technological optimists, this
life-long veteran of the industry concludes that new innovations like gas hydrates, deep-
water drilling, and coal bed methane are unlikely to replace once-abundant petroleum in
ease of use, production, and versatility. The Era of Carbon Man is ending.
A no-nonsense oilman blessed with a sense of humor, Deffeyes deftly boils his message
down to the quick. Easily produced petroleum is reaching its nadir, and although they are
clean and renewable, energy systems like geothermal, wind and solar power won't solve
our energy needs overnight. "Hubbert's Peak" represents an important aspect of the
energy crisis, but it is only one factor in this multi-faceted problem that includes
biosphere degradation, global warming, per-capita energy decline, and a science/industry
community intolerant of new approaches to energy technology research and
development. An exciting new book by the Alternative Energy Institute, Inc., "Turning
the Corner: Energy Solutions for the 21st Century," addresses all of the components
associated with the energy dilemma and is also available on Amazon.com.
Anyone who is concerned about what world citizens, politicians, and industry in the
United States and international community must do to ensure a smooth transition from
dependence on dangerous and polluting forms of energy to a more vital and healthier
world, needs to read these books. Future generations rely on the decisions we make
today.
The Story of Oil, The End of Oil, September 18, 2001, by Ron Patterson (Huntsville, Al
USA)
Kenneth Deffeyes, Princeton professor and former oil field geologist, tells the story of
oil, right up to the beginning of the demise of oil. He takes the methods developed by M.
King Hubbert, the man who accurately predicted the peak in US oil production, and
applies them to world oil production. The book makes absolutely riveting reading. The
first few chapters deal entirely with the source and production of oil. I kept wondering,
as I was reading these chapters, what has this to do with Hubbert's Peak and the coming
decline in oil production? Then it began to dawn on me, one has to know everything
about oil to accurately predict the future production of oil. Deffeyes is that man and he
covers every possible base. Many say "Just drill deeper" or "There is oil in the deep
ocean", but Deffeyes shows why drilling deeper can yield natural gas but not one drop of
oil and why oil from deep ocean sediments is impossible. Deffeyes leaves no stone
unturned and covers every possible source of oil.
Deffeyes expects the peak in world oil production at around 2005 but says it could come
as early as 2003 or as late 2006. There is a fair amount of jitter in the year-to-year
production so picking the exact peak is difficult. But he reminds us that the center of the
US Best-fit curve was 1975 and the actual peak came in 1970. He says however, there is
nothing plausible that could postpone the peak until 2009.
Of course Kenneth Deffeyes is not the only oil field geologist that is predicting an
impending peak in world oil production, Colin Campbell, Jean Laherrere and several
others have been doing that for several years. The data supporting the impending peak
and decline is sometimes difficult to interpret but Deffeyes lays the data out in undeniable
terms and in such a manner that the average layman can understand it.
The only problem I had with the book was I felt Deffeyes was overly optimistic as to the
effects of the coming decline in world oil production. He sees only a decade or so of
difficulties until we get over our dependence on crude oil. Many others however, who
have looked more closely at the possibility of alternate sources of energy to replace cheap
portable oil, find no possible replacement. And....most of these see nothing short of a
worldwide holocaust a few years after the peak. They say the world's six billion people
are supported by a network of food production and transport that will be impossible to
maintain when oil production begins to drop and the price of the remaining oil begins to
rise dramatically.
But by all means, BUY THIS BOOK. Not only will it convince you of the inevitability
of the impending peak and decline in oil production, but also it will give you the
ammunition and data to convince those around you, to convince them and give them time
to make preparations for....for something I find too hard to even imagine.
Only one more oil crisis, but it'll be a doozy, February 27, 2002, By Royce E. Buehler
"figvine" (Cambridge, MA USA)
While millions of environmentally concerned Americans are ready to vilify on reflex
what Molly Ivins flippantly dubs "the oil bidness," Kenneth Deffeyes thinks of the
petroleum fields as a place of high spirits and high romance. But, having spent half his
life working for Shell, and half of it training later generations of fossil fuel hunters, he is
here to break the bad news to us gently. And the news is, the party's over. The days of
derring-do among the derricks are just about done.
Thirty years ago, US oil production peaked, and has been declining ever since. Shortly,
world oil production will hit the same peak, and begin to decline. That doesn't mean
there will be no oil left; thirty years after hitting its own peak, the US is still the second
largest oil producer in the world. But it does mean that demand will outstrip supply, and
that means the economic dislocations of the late 70s - the spiking prices, the long gas
lines, the deep recession - will become permanent. Eventually, other sources of energy,
both renewables and plentiful fossil fuels like natural gas, will fill in the breach. But it
will be a long and painful process, requiring a ton of capital investments in research and
in infrastructure that a suddenly poorer first world will be ill able to afford.
"Shortly,” Deffeyes argues, means in one to six years, and probably in the early part of
that range. One can quibble with some of his arguments for that timing. With luck, he
acknowledges, there may be one significant set of oil fields yet to be discovered, in the
South China Sea (unexplored so far because the competing jurisdictions of the several
nearby island nations have made contracts hard to nail down.) And I don't think he's
given sufficient weight to the fact that all the oil recovery in the Middle East (ME) is still
"primary,” using old-fashioned pumping technology. But if all the quibbles are granted,
it only affords the world economy another five or ten years of grace.
So, if Deffeyes is wrong, the time to start making those massive investments and changes
is today. If he is right, the time to start making them is ten years ago, and all we can
accomplish by swift action is to make the period of intense pain a decade or two shorter.
Though Professor Deffeyes isn't political enough or impolite enough to say so, Clinton
(for all his green talk) failed to provide any leadership to reduce our dependence on
petroleum. And his successor, of course, is providing energetic leadership, but all of it is
geared to marching us all double-time into still more rapid consumption of what little oil
is left. History will remember neither President Slick, nor President Oil Slick, any more
kindly than it now remembers Herbert Hoover for fiddling while the fuse that would set
off the Great Depression burned.
The book is an easy read, short and set in a conversational style that permits the reader to
glide through the more technical portions if so inclined. The technical details and the
mathematical arguments could be tighter, and the folksiness, which would be delightful
in a lecture room, is occasionally a bit much on the written page. For those reasons, it
would be easy to give the book only four stars. But those faults are inseparable from the
book's virtues. They're compromises Deffeyes chose to make in order to be accessible to
a wide audience, and his book deserves to reach one.
If environmentalists take Deffeyes' message seriously, they'll realize that we will soon be
so starved for oil that ANWR is certain to be plundered, and that nuclear plants are
certain to sprout across the landscape like, well, like mushrooms. If Deffeyes is on or
near target, nothing can prevent those developments. Greens today should be using
ANWR and an expanded nuclear industry as bargaining chips, to be traded for strict
CAFE standards, investment in renewable technologies, non-industry oversight of
nuclear safety, and (since the near term alternative will be coal) investment in natural gas
pipeline infrastructure.
Appendix 2. Reviews of Matthew R. Simmons’ Twilight in the Desert:
The Coming Saudi Oil Shock and the World Economy
464 pages, Wiley; illustrated
Investment banker Simmons offers a detailed description of the relationship between
Saudi Arabia and the US and our long-standing dependence upon Saudi oil. With a field-
by-field assessment of its key oilfields, he highlights many discrepancies between Saudi
Arabia's actual production potential and its seemingly extravagant resource claims.
Parts 1 and 2 of the book offer background and context for understanding the technical
discussion of Saudi oil fields and the world's energy supplies. Parts 3 and 4 contain
analysis of Saudi Arabia's oil and gas industry based on the technical papers published by
the Society of Petroleum Engineers.
Simmons suggests that when Saudi Arabia and other ME producers can no longer meet
the world's enormous demand, world leaders and energy specialists must be prepared for
the consequences of increased scarcity and higher costs of oil that support our modern
society. Without authentication of the Saudi's production sustainability claims, the author
recommends review of this critical situation by an international forum. A thought-
provoking book. Mary Whaley
Copyright © American Library Association.
bad news from the SPE, via a Texas investment banker, June 16, 2005 (excerpts)
By R. Hutchinson "autonomeus" (a world ruled by fossil fuels and fossil minds)
Matthew R. Simmons analyzes the technical papers of the Society of Petroleum
Engineers (SPE) on Saudi oil, shining a light behind the veil of secrecy that has shrouded
it since OPEC stopped reporting oil production data in 1982.
In short, what the SPE reports reveal is that the official Saudi claims for reserves and
production capacity are vastly overstated. Further, tragically, it seems that the fields have
been mismanaged, making it unlikely that all the oil will ever be recovered.
Are there vast untapped reserves in Saudi Arabia? According to the SPE data, the answer
is no. No giant fields have been discovered since 1968, despite intensive exploration.
Here is a list of crisp facts about world oil, according to Simmons (p. 331):
 Only a handful of super-giant oilfields have ever been discovered in Saudi Arabia and the
ME -- they represent a very significant portion of all ME oil, and they are all very mature.
 All mature giant oilfields peak and decline (production profiles showing the peaks are shown
for 8 fields in Texas, Alaska, the North Sea, and Russia). Implication: sophisticated new
technology will not prevent or forestall this from happening.
 There do not seem to be many giant oilfields left to be discovered in Saudi Arabia or the ME.
 Non-OPEC oil, excluding the FSU (former Soviet Union) seems to be peaking, or has
already peaked.
Another dire warning that we must develop energy alternatives, March 28, 2006
By Dennis Littrell (SoCal)
Kenneth S. Deffeyes warned us that peak oil is upon us and that what is left in the ground
is just about the same as what we have already used. He pointed to Thanksgiving Day,
2005 as the day oil hit its peak. Now another world renowned expert on oil, Matthew R.
Simmons in this densely considered book, is advising us that the estimates of oil left in
the ground by the largest producer of oil, Saudi Arabia, are probably inflated, and at any
rate cannot be independently confirmed.
Furthermore, it is supposed that estimates by almost all oil producing countries are
inflated since such inflation improves their ability to influence the market while allowing
them (OPEC members at least) to produce more.
A question that might be asked is how do we know that there are not great fields of oil
somewhere waiting to be discovered? Certainly if there are, the twilight of the oil-based
world economy is pushed further into the future leaving us with much less to worry about
now. Simmons answers this question for Saudi Arabia at least. He makes it clear that the
possibility of any great discoveries on the Arabian peninsula "must now be deemed
remote" since the land has been so thoroughly explored. (See Chapter 10 "Coming Up
Empty in New Exploration.")
Deffeyes answered this question in another way. Using logic from his mentor M. King
Hubbert who predicted with startling accuracy when US production would peak (early
1970s) Deffeyes argues that what's left can be inferred from current production curves.
Because oil exploration and production has been so extensive worldwide, if the oil were
there, it would have been discovered and drilled for. This is not to say that there are not
some (small) fields left undiscovered. There are some, no doubt, but like puddles added
to a great lake, they won't affect the overall picture.
This same sort of logic can be applied to Saudi Arabia, and Simmons does indeed use
such logic. However, he goes beyond that because he believes that oil prediction
simulation models (see Chapter 12, "Saudi Oil Reserves Claims in Doubt") can fail.
Typically, he writes, an oilfield will yield about 75 percent of its oil during the first half
of its producing life. (p. 278) Almost all of the great Saudi fields are decades old.
The strange thing about this book is that while it is touted as another book predicting the
end of oil, it actually argues that the situation is not entirely clear. It is possible that there
is still a lot of undiscovered oil left in Saudi Arabia in places such as "the land along the
Iraq border, an unexplored area almost as large as California" and a couple of other
places. (p. 243) World wide such unexplored places are many. Nonetheless even if a lot
of oil is discovered say in the middle of the Pacific Ocean or deep in the Antarctic, the
cost of producing that oil will be greater than the cost of producing oil from say the great
Ghawar field in Saudi Arabia where the oil gushes out of the ground almost effortlessly.
Actually, according to Simmons "effortlessly" is no longer the correct adjective to use.
As oil fields grow old some help is needed to get the oil to rise to the top and flow.
Water is typically pumped into the field to get the oil to elevate. Simmons reports on the
extensive use of saline water in Saudi Arabia--more evidence that there is not as much oil
left as the Saudis would like us to believe.
Also a distinction must be made between pure "reserves" (actual oil in the ground) and
"recoverable reserves" (oil that is cost-effective to produce). And a further distinction
must be made between grades of oil. It may be cost-effective to pump the sweetest,
purest grade of oil out of a field whereas lesser grades would not be worth the expense.
A weakness of the book is that, despite the words "and the World Economy" in the
subtitle, which suggest an exploration of consequences and what to expect, there is next
to nothing about the effect less oil (than expected) will have on the world economy.
Clearly, of course, and in the broadest sense, our standard of living will go down as our
energy costs rise. The subtitle is probably just a book biz editor's attempt to gain a larger
readership.
Twilight in the Desert is long and extraordinarily detailed and gives the typical reader
more information than perhaps would be desired. This reader came away convinced that
Simmons's main argument, that Saudi oil reserves have been exaggerated, is probably
correct, but curiously his extremely balanced and careful delineation left me feeling that
there is still plenty of doubt about both Saudi reserves and those world wide. Stay tuned.
Regardless, one thing is clear, soon or late, within twenty years or fifty, we will have to
retool our economies to run on something other than fossil fuels. The sooner we get
started on that, the better. If we wait too long the sudden economic shock is likely to be
catastrophic.
Appendix 3: Rig Counts
International and US rig utilization, day rates, and contracting counts can be viewed at
http://www.wtrg.com/rotaryrigs.html
http://tonto.eia.doe.gov/dnav/pet/pet_crd_drill_s1_m.htm
Appendix 4: BTU Conversion of Fuels
In San Angelo, TX, in 2006 household monthly average kilowatt-hour usage in was lowest in
November at 700 and highest in July at 1,400.
Electricity 3,412 Btu kilowatt-hour
Natural Gas 1,028 Btu cubic foot
(U.S. Consumption 2006)
Coal 20,169,000 Btu short ton
(U.S. coal consumption in 2007)
Propane 91,333 Btu gallon
Wood 20 million Btu cord
Crude Oil 4.8 million barrel of crude oil
Motor Gasoline 124,262 Btu gallon
(U.S. Consumption 2007)
Fuel Ethanol 84,262 Btu gallon
Fuel Oil No.2 138,690 Btu gallon
Convert short tons to metric tons by multiplying the number of short tons by 0.907184
For example: 12,300 short tons X 0.907184 = 11,158 metric tons.
Convert metric tons to short tons by multiplying the number of metric tons by 1.10231
For example: 11,158 metric tons X 1.1023 = 12,300 short tons.
One barrel (42 gallons) of crude oil, when refined, yields approximately 19.6 gallons of finished
motor gasoline.
Tons, barrels, cubic feet--how do you compare apples and oranges? To make meaningful
comparisons of energy commodities, you must convert physical units of measure (such as weight
or volume) and the energy content of each fuel to comparable units. One practical way to
compare different fuels is to convert them into units of heat content, such as British thermal
units (Btu), joules, or calories. The Btu is the measure of thermal energy used most frequently
in the United States. The following factors may be used to convert U.S. thermal energy units
to metric energy units (joules):
U.S. Units Equivalent Metric Units
1 British thermal unit (Btu) = 1,055.05585262 joules (J)
1 calorie (cal) = 4.1868 joules (J)
1 kilowatthour (kWh) = 3.6 megajoules(MJ)
Appendix 5. Map of Eastern Hemisphere giant fields, including the 5 largest oil
fields and the 5 largest gas fields discovered between 2000 and 2007.

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