Paper No. 160-5
Presentation Time: 2:45 PM
ARE WE ENTERING THE SECOND HALF OF THE AGE OF OIL? SOME EMPIRICAL CONSTRAINTS ON OPTIMISTS’ PREDICTIONS OF AN OIL-RICH FUTURE
Recently the world has been exposed to many quite optimistic estimates and projections for the future of oil production, and these have been eagerly picked up by the news media. For example, Magueri has stated that “by 2017 shale crude oil production in the United States could approach 5 mbd per year compared to…1.5 mbd in December 2012. Over this same period, growth in U.S. crude oil produced by conventional sources will likely stabilize or grow modestly…. “ . The International Energy Agency has said “By around 2020, the United States is projected to become the largest global oil producer .... to the extent that North America becomes a net oil exporter around 2030”. These perspectives are offered as an alternative to the “pessimistic” Hubbert curve projections that imply we are at or near maximum global production of oil. If you dig into the rationales for this optimism it is based principally on two concepts: new developments in the oil industry, specifically directional (horizontal) drilling and “fracking”, principally in the Eagle Ford play of Texas and the Bakken region of North Dakota and Montana, and (stated less frequently) the addition of other fluids to what is called oil, most importantly natural gas liquids, which are expected to increase as gas production also increases in response to “fracking” for gas. In fact there has been little, if any, increase in the global production of conventional oil since 2005, and most of that has been in the United States. Our research indicates that while there is no question that there is a very large quantity of oil in the ground it is unlikely that the majority of it can be extracted at a significant energy and hence financial profit. We present here the results of two studies: one of the global patterns of production compared to our projections of a decade previously which had projected production given three levels of EUR (ultimate extractable oil), and the second of production patterns from shale oil in the Bakken. Both of them show that despite a tripling of prices and expenditures for oil exploration and development production of nearly all regions producing oil has been stagnant at best and more commonly declining, and that at prices that do not allow for any growth in most economies. I then examine these patterns from the perspective of EROI, or energy return on investment.