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August 4th, 2007

On July 18, 2007, the National Petroleum Council posted a major report on the Internet with the title "Facing the Hard Truths about Energy." The NPC report, two years in preparation, is in response to a request from the US Secretary of Energy. The report is posted at www.npc.org/Facing_Hard_Tru
ths-71087.pdf
. In its pdf format, the report runs to 422 pages and 12.59 megabytes. In the Internet version, the page numbers start anew for each chapter. In my comments below, the page numbers are the consecutive numbers in the pdf file.

Each page of the NPC report carries a heading "DRAFT - Do not quote or cite." The New York Times for July 19 carried an illicit advanced review of the seventh Harry Potter book and a Times article by Jad Mouawad that quoted and cited the NPC report. Mouawad almost made me choke on my morning coffee with his comment that the report "dismisses predictions from so-called peak oil theorists that the world's oil deposits are on the decline . . . " I've been going around calling myself "so-called Ken."

Many of the NPC report's authors are from the major oil companies. In one sense, that's an advantage. The majors are big powerful organizations and it would help all of us to know what they are thinking. (I realize the possibility that they have written what they hope we will think.) The overall chairman of the study is Lee Raymond, former chairman of ExxonMobil. The chairman of the oil supply subcommittee is David O'Reilly, CEO and Chairman of the Board of Chevron. They don't get any bigger. In addition to the major companies, the NPC sought a wide range of other opinions.

Of course, my first action was to do a Washington (DC) read: Did my name appear in the report? Yes, I'm credited with dot #99 on Figure S2-2, page 139. My estimate of the world oil endowment, two trillion barrels, is the lowest of the recent estimates. The graph doesn't point out that one trillion barrels have already been produced and burned. In my view, the halftime show is over, we're now into the second half.

In my view, the halftime show is over, we're now into the second half.

I have not done a talmudic read of the report. A first rapid scan of the oil supply section turned up some problems. I'm afraid that the NPC is "Facing Softened Truths." Here's their take on the North Sea:

"However, the North Sea has seen the evolution away from larger, depleted fields to smaller fields that can be brought online using existing infrastructure. North Sea production has actually been sustained for many years at significantly higher levels than was generally thought likely in the 1980s and 1990s. Production growth from 1990 to 2000 shows how production in mature basins can revive as a result of new technology, price, or market dynamics."

It sounds wonderful. I checked on it by updating the graph for Norway from page 156 of my 2001 book, Hubbert's Peak. The updated graph shows the Norwegian production (all of it comes from the North Sea) extending the line through the end of 2006. The best-fitting line on the new graph lowers the ultimate intercept to 27 billion barrels from the 30 billion on the 2001 graph. On the new graph, the estimate in Colin Campbell's 1997 book seems to be right smack dab on target. My conclusion is that the Norwegian sector of the North Sea peaked in 2000-2001, in agreement with the spreadsheet at www.eia.doe.gov/ipm/t11c.xls. (Microsoft Office Excel Workbook)

Norwegian North Sea Oil Production

Adding in the UK sector of the North Sea only makes it gloomier; the UK portion peaked in 1999.

The straight line on the graph says that the Norwegian oil production is tracking along a logistic curve. Reread that earlier NPC quote and ask yourself whether you can identify on the straight line a "revival as a result of new technology, price, or market dynamics."

For the North Sea, the statement in the NPC report did not cite specific data. A different style, also misleading, is to present the data but camouflage the bad news. Specifically, Figure T-VII.1 on page 262 contains historical data on oil discoveries. The NPC graph locates the peak of oil discoveries in the five years from 1960 to 1965. (Oddly, their world data excludes the US and Canada. A similar result for world discoveries including the US and Canada is on pages 48-49 of Beyond Oil.) As far as I know, this striking result was originally presented by ExxonMobil around the year 2000. In the NPC report, the oil data (shown in blue) are buried beneath natural gas discoveries on the same graph in a lighter shade of blue. Further, a second curve (shown in red) reports the number of new-field discoveries, peaking around 1985. In my opinion, the number of discovered oilfields is massively irrelevant. Is counting yet another one-well oilfield in Kansas relevant to the present debate? I tip my hard hat to the NPC authors; figure T-VII-1 is a competent job of camouflaging.

I tip my hard hat to the NPC authors . . . a competent job of camouflaging.

A truly deep misunderstanding comes up on page 178, in connection with figure S3A-26. The authors seem to think that the US and global Hubbert curves are simply enlarged versions of the production history of a typical single oilfield. A single oilfield has a production history that is asymmetric in time. It usually takes only a few years to drill up the horizontal and vertical extent of the oilfield. After the initial drilling, the time to produce the oil is measured in decades. The result is a rapid initial rise and a long slow decline.

In contrast, the Hubbert theory is basically a statement about the statistics of finding oil. The idea being tested is whether the odds on finding oil depend on the fraction of the total oil that remains undiscovered. Obviously, after you have caught almost all the fish in the pond, the fishing isn't very good. Or, in the old joke, the fishing is fine but the catching is terrible. The math behind the Hubbert theory is contained in the now-infamous three lines of high school algebra on page 38 of Beyond Oil.

If the field-discovery history fits a Hubbert logistic bell curve, then the oil production history will follow as a smoothed-out version of the discovery curve. The symmetry in time between the upside and downside of the Hubbert curve follows either from the dependence of finding success on the undiscovered fraction or from a straight line on the P/Q versus Q plot (as in the Norwegian graph above). There is nothing in the Hubbert model about an analogy between single-field production history and the statistical ensemble of discoveries.

The NPC has promised to release next September a revised version of the report and the supporting data. They might want to remove their sunset picture on page 262. "Sunset" has become a metaphor for declining oil production. Both of my books have sunset covers; Matt Simmons uses the title "Twilight in the Desert."

It wasn't all quibbling. There are points in the NPC report that have my wholehearted agreement. An example was their strong statement that half of the professionals in petroleum engineering and petroleum geology will reach retirement age within ten years. This is something that the major oil companies really understand. However, I spent almost forty years in front of freshmen geology classes. What could I say today that would induce massive numbers of students to choose careers in petroleum geology? The NPC and the major oil companies could help. They could start the trend that would make petroleum geologists better paid than neurosurgeons.


 
 
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