Swedish scientist predicts 'Peak Oil' to occur between 2008 and 2018

The idea that 'Peak Oil' is closing in on us, is of course highly relevant to the future of biofuels. When the era of cheap petroleum is over, our heavily oil-dependent economies face serious risks, and the planet's environment is set to suffer. Biofuels offer a way out.

However, predicting the arrival of 'Peak Oil' remains a largely speculative affair that has long been the terrain of amateurs, obscure oil experts, marginal pseudo-scientists and shrude entrepreneurs looking to write bestsellers on the topic to cash-in on peak oil panic. But gradually, the topic has come out of its shadows, and credible voices are now having their say about it.

Fredrik Robelius, researcher at Uppsala University's, Department of Nuclear and Particle Physics, wrote his PhD thesis on the subject, titled "Giant Oil Fields - The Highway to Oil: Giant Oil Fields and their Importance for Future Oil Production". In it, he takes the analysis of the depletion trend in the largest oil fields as a starting point for a prediction about Peak Oil. Robelius made four scenarios for the arrival of the peak, which he situates anywhere between 2008 and 2018 (see graph, click to enlarge).

Looking at giant oil fields offers more reliable indicators than analysing the mere price of oil. The reliability of the oil price as a single parameter can be questioned, as earlier times of high prices have occurred without having anything to do with a lack of oil.

So what is a 'giant' oil field? It is a field that contains at least 500 million barrels of recoverable oil. Only 507, or 1 % of the total number of fields, are giants:

Although the number of giant oil fields is very limited, only 507 out of some 47 500, their contribution is far from limited. About 65 per cent of the global ultimate recoverable reserves (URR) is found in them. Historically, giant fields have been the main contributor to global oil production and in 2005, their share was over 60 per cent. Thus, giant oil fields are and will continue to be important for global oil production. However, the largest giantfields are old and many of them have been producing oil for over 50 years.

The greatest number of giant fields were discovered during the 1960s. This decade also proved to be the time when the largest URR in giant fields were discovered. Since then, both the number of giant fields discovered and the reserves discovered in giant fields have been declining. Although indications of two possible giant field discoveries during 2006, the last confirmed giant oil field discovery was in 2003.

At a first look, the importance of this might not be obvious, but the crucial point is the oil production rate in giant fields compared to smaller fields. In general, giant oil fields can sustain a high oil production rate for a long time. Even a large amount of small fields might not be enough to offset declining production from a giant field. This is the case with Norway,where the giant fields peaked a few years before the total production peaked. On a larger scale, the same is true for both Europe and North America. Consequently, this in combination with the declining discovery trend, strongly suggests a concept of peak oil governed by giant oil fields.

By looking at the investment patterns of the largest oil companies into advanced technology involved in deepwater exploration, Robelius found that in all likeliness the good prospects have already been drilled:

The declining trend in giant field discoveries suggests the good prospects are already drilled. Studying the four largest private oil companies and their effort in exploration and production during a 10 year period of both high and low prices should indicate the role of the oil price. Although their investments in exploration and production has increased, the companies have not succeeded in increasing neither production nor reserves despite an increase of the oil price. On the contrary, from 2003, reserve additions have decreased below annual production and the companies have produced oil from old discoveries, a situation which also applies on the global scale.

Robelius then created four scenarios around his giant oil field model, which show different dates for the arrival of Peak Oil:
biomass :: bioenergy :: energy :: sustainability :: petroleum :: Peak Oil :: biofuels ::

The giant oil field model is based on past annual production, URR and three different assumed decline rates. The results from the modeling of 333 giant fields are used in combination with the other forecasts in order to predict future oil production. Four different scenarios have been modeled and peak oil governed by the giant oil fields is a common result for the scenarios. The worst case scenario shows a peak in 2008, while the best case peaks in 2013 although at a higher production level. The production in the best case scenario increases more rapidly than a future demand growth of 1.4 per cent. Therefore the production can be adjusted to follow the demand growth, resulting in a postponed peak oil to 2018. Thus, global peak oil will occur in the ten year span between 2008 and 2018.

Analysing the economic, social, political and geopolitical effects of Peak Oil for the world economy is a highly controversial, difficult and complex affair. The concept also puts investors before great difficulties and unknowns: to invest in biofuels today without knowing for sure whether oil prices will remain high, is risky. Some bioenergy investors, like Vinod Khosla, have even asked for some kind of government intervention in the form of bottom price guarantee, to protect biofuels investments against a potential collapse of oil prices. The perception that Peak Oil is real may drive investments into bioenergy, but as long as Peak Oil is not 'real' enough, strong doubts remain and the fear for falling prices stiffles further investments.

One thing is certain, though, if Peak Oil were to arrive and show itself clearly, then the rush towards biofuels will be unstoppable. Only biofuels can immediately supply liquid fuels that can be used in existing infrastructures and vehicles, trains, airplanes and ships. However, the consequences of such a massive rally around biofuels could be disastrous for the environment, as the easiest lands and biofuel sources would be used up first (this could mean rapid deforestation for the production of annual crops like soy and semi-perennials like sugarcane).

It is therefor important to start to invest in biofuels today, but in places where production costs are low (that is in the subtropics and the tropics). This way, biofuels investors are guaranteed a return, and will invest more, which results in the gradual build up of a global 'green reserve' that is economically and environmentally sustainable. Such a broadly defined investment strategy may push back the actual Peak Oil date and give us more time to invest in advanced technologies and science (such as cellulosic ethanol and new crops).


More information:
Robelius, Fredrik, Giant Oil Fields - The Highway to Oil: Giant Oil Fields and their Importance for Future Oil Production [*.pdf], Uppsala: Uppsala University, Interfaculty Units, Acta Universitatis Upsaliensis, March 30, 2007.