Global oil supply and Bárðarbunga

Some time ago magma started rising in the rocks near the Bárðarbunga volcano in Iceland, and after weeks of increasingly intensified earthquake activity, the first signs of eruption were found to have occurred under thick ice within the last week. These were not that visible to the general public. That eruption was followed by a second, where there were some streamers of magma across the surface, without causing any significant airborne dust to interfere with aircraft.

The delays in dramatic eruption footage, and the early decay in immediate activity has led a number of folk to anticipate that the risk has declined and for some the risks from the eruption are over, with one scientist commenting::

"If this eruption persists it could become a tourist attraction, as it will be relatively safe to approach, although the area is remote,"

Figure 1. The eruption at Bárðarbunga (from the first webcam) at 5:40 pm Aug 31.

Figure 2. The eruption at Bárðarbunga (from the second webcam) at 9:00 pm Aug 31.


The eruption is continuing and will likely continue, and potentially significantly worsen, over the next several months. Yet, in the world of instant highlights, headlines and Twitter the risks from the long-term eruption (which can be horrendously severe) are immediately glossed over as the eruption fails the “dramatic event” test.

This is uncomfortably similar to the situation that one sees when writing about “Peak Oil”. One can, on any individual day, find comforting headlines that tend to gloss over the longer-term problem that is being written, in increasingly large letters on the predictive wall of our future. But that does not hide the potential disaster that it presages, it merely conceals it from the general public.

The headlines are those that are short-term, and deal with the drivers for the daily fluctuations in oil price, rarely do they back off to look at the overall threat that the situation may presage. Similarly the eruption in Iceland looks relatively tranquil at the moment, but may be of a similar nature to that of 1783, which created, over a period of months, an absolute disaster in Europe, and may have been one of the contributing causes to the French Revolution. The problem with the oil crisis is that there is no similar history to look back on. (Not that this would matter to those “editors of the moment” who control the daily press).

If one were to step back from concerns over daily price fluctuations for oil and gasoline, and consider the import of the trend in international politics one could very easily be aghast at the situation. Not that one might tell this from the headlines.

Consider that, of the three international leaders in oil production, one – Russia – is currently set on a course that may well lead the rest of us into World War 3. As a consequence is likely to be unable to attract the financing that will allow it to even approach the current levels of oil production that it need to retain current production levels in the years to come.

The second of the three is Saudi Arabia. Glossing over any problems that the Kingdom may run into in the next couple of years with the terrorism that is sweeping though its neighbors, it is a country that has realized that today’s cornucopia is about over, and it must seriously invest in exploration and development. The KSA recognizes that if it is to have a chance at being able to even meet the bills for domestic consumption, let alone export income, as the years move onward, it must find new oil. Again it would seem that global commentators fail to realize that, while KSA is recognizing the problem, any finds of “elephantine fields” would require huge investments of money and time, given that they are now likely to be off-shore and sour (as with Safaniya and Manifa, even if such fields exist, which is very doubtful).

The Kingdom has repeatedly stated that it will not increase its production over current levels, despite the assumption of many commentators that they will have to, if global balance is to be retained between supply and demand. Put bluntly, their analysts have realized that, without new reserves that are currently still to be found, they will be unlikely to be able to meet even current targets without major new field finds. Yes, they have fields that are found and available, but in relative terms they are tiny when set against the current levels of production. (Bearing in mind that a 5% reduction in production per year from existing fields, a level now increasingly found to be overly optimistic, would still cut existing production by 450 kbd).

And so, gentle readers, as we have so often in the past, we return to prognostications of future American production. This should, realistically, be focused on the production from the USA, since that in Canada is tied to production from the oil sands and that is only likely to change at a slow (one might suggest geological, but that would be a little harsh) time frame.

And in the United States hope continues to focus on an assumed linear increase in production, month on month, from the Bakken and Eagle Ford Shales. That this is denied by even the local authorities (who also note that the Bakken is named after a local farming family). Their current estimate (assuming more than 200 drilling rigs, and there are currently only 192 is that the fields will peak in 2017, and will start to decline in around 2026. The problem with that estimate relates both to the number of rigs employed (which have to be higher) and the quality of the remaining reserve (which is highly unlikely to be of equivalent value to that which is now, or has been, developed in the past.

I would venture into the second tier producers, but they include those that lie in the MENA (such as Iraq and Libya) and are in even worse condition than KSA, and yet, as documented here repeatedly, these states seem increasingly unlikely to meet projections and thus are an ongoing and significant threat to a balance between global production and demand.

The global economy, and particularly the economies of the Western countries, are tied to a cheap source of energy and power – on which their industrial clout is based. Remove that underpinning, and the writing is clear on the wall about this, and current levels cannot be sustained.

But, as with the wish of the press to get “beyond” the “yesterday’s story" of Bárðarbunga, so the reality of the energy situation is unlikely to be recognized until, as with the Iceland volcano. its effects become too evident to ignore.

Tech Talk - Iran and a slight cough toward CNN

There has been considerable comment this week over the telephone call between President Obama and the President Rouhani of Iran. Certainly the election of a new President in Iran gives the opportunity for a fresh start, particularly given the belligerent attitudes of his predecessor. However the cynical side of me does wonder if there is more driving this than simply the change of personalities.

There are two points that need to be considered, as a possible new relationship between the two countries might slowly coalesce out of the mists of diplomatic effort. Firstly the major driver seen in moving Iran toward a more positive position is said to be the increasing bite that sanctions, and particularly oil sanctions, are having on their economy. As sanctions have tightened, so Iranian oil production has fallen, with reports suggesting that oil exports have fallen from 2.2 mbd to May’s value of 0.7 mbd. The reduction in income that this has had on the Iranian economy is significant, with the currency officially devalued to half, though the effect has been more of an 80% fall from peak, as inflation has reached 42%.

Easing sanctions to allow more oil flow would significantly improve the situation, although there is concern, expressed for example at CNN, that the increase in oil flow would weaken the positions of the Kingdom of Saudi Arabia and Iraq. They suggest that the advent of Iranian oil (presuming that they can bring 1.5 mbd to the market relatively quickly) is foreseen as having a potential impact on the United States in that it may, at least transiently, produce a glut in the market. That would drive down prices, until such time as KSA could drop production and bring the supply and demand back into balance, raising prices back to around $100.

In a peaceful world such a scenario might have some viability, but consider what is really happening in the world of global supply. Instead of the KSA moving toward a supply of 12.5 mbd (which was only a capacity number in the first place) they have backed this down to 12 mbd and have talked recently as lowering that number further as they hire more and more rigs to help sustain existing production at just under 10 mbd. Iraq, which was promising to rapidly increase production toward a target of 11 mbd, is instead considered by the IEA likely to reach no more than 6 mbd by 2020. Further with the ongoing increase in violence in the country being able to sustain current production at around 3 mbd and increase it beyond 3.5 mbd as the Majnoon field comes on line. However Shell’s target for the field is already below initial estimates for this year, and it is discussing lowering the 2017 target from 1.8 mbd to 1.0 mbd. There has recently been an outbreak of violence in Kurdistan, which might portend that even in this relatively stable part of the country oil production and security is becoming a greater target.

These events suggest that future increases in production from around the region are not as assured as one might hope. At the same time, while there are those who continue to expect the United States to become oil-independent in the next few years, the reality is somewhat different, and further increases in production much above current figures become more difficult to justify. If Russia, similarly, is unlikely to increase production – which it is not – then the questions that should be asked are rather where is the world going to get the additional 1 mbd that it requires every year to balance increasing demand against supply.

Over the course of this year Saudi Arabia has had to increase production from 9.1 to 9.96 mbd to keep supply in balance, and prices stable. At the same time production from Libya, which has run at around 1.6 mbd had fallen to 150 kbd at the beginning of this month. Hopes that this could be increased back up to 700 kbd rely on tribal militias that control strategic parts of the country, and their long term co-operation is dubious, while the fields and pipelines in the east remain shut down. It seems reasonable to anticipate that there will be at least a million barrels a day of Libyan production held off the market for some time.

If one goes around the world one sees that Brazilian promises of production increase are behind schedule, as are promises of production increases from countries such as Veneuela. And suddenly one is left with not much in the way of places left to balance off the current declines in supply and increases in demand.

At this point that 1.5 mbd of potential supply from Iran starts to look a little more promising as an answer. It might allow KSA to ease back on production levels that might be starting to impose a little strain on their infrastructure. It would help to provide balance if production increases around the world fail to show on time. One should recognize that negotiations to bring Iran back into the fold are going to take at least a year or two before it is realistic to anticipate full return to supply, but even the easing of sanctions a little might cause the flow to China, India and Asia to increase to meet the burgeoning demands that they have, and oil is still to some degree fungible.

But in that regard, Iran has also just recently reached 100% output from the first of the nuclear power stations at Bushehr and is about to start construction of the second unit. Nuclear fuel will be provided by Russia, and spent fuel returned to Russia. It is a 1,000-megawatt unit, and since the unit was built under supervision by the International Atomic Energy Agency it is not subject to sanctions.

Figure 1. Bushehr Nuclear Plant

If the protocols that worked to make this happen can be expanded, then it is possible that, though negotiation, the tension in the region can be eased. This could well have benefits all around, most particularly for ensuring that, for at least a sadly few more years, there will be enough oil on the market to meet demand at a reasonable price.

Figure 2. Location of the Bushehr Plant

OGPSS - OPEC and EIA short term projections

Just this month Saudi Aramco announced that production had begun at their Manifa oilfield, and by July would be supplying up to 500 kbd to the new refinery that is being built at Jamail with the collaboration of Total. The first oil from the refinery is expected to ship in August, and both projects are currently ahead of schedule. Manifa will further increase in production next year, to 900 kbd, with the additional flow going to the Yanbu refinery being built with the collaboration of Sinopec. Both these refineries are designed to take heavy crude, and can also accept oil from the ongoing projects to expand production at Safaniya. Collectively this is said to ensure that the company will be able to achieve a maximum sustainable production of 12 mbd.

The gains in available reserves are required as the current production from Ghawar and the other major fields in the Kingdom continue to decline in production, as was discussed last year. I remain relatively convinced that Saudi Aramco will not increase their crude oil production above 10 mbd, despite the wishes and projections of others that they will end up doing so. By the time that their domestic consumption reaches the point that it lowers exports to a level that would hurt the KSA economy at current prices, the shortages globally will have raised the price sufficiently that the available production at that time will continue to suffice to meet their needs. (This is, however, a projection only for this decade).

This month’s OPEC Monthly Oil Market Report continues to anticipate a significant increase in available crude over the next three years, although this is indirectly recognized through the growth in crude distillation unit (CDU) capacity around the globe in that interval.


Figure 1. Increase in crude distillation capacity by regions in the near term. (OPEC April MOMR.)

Given that the world must increasingly deal with a heavier crude supply, the need for new refineries, as exemplified by the new Saudi construction, is evident. Increased demand to absorb this supply will come, in part, by an increase in the growth rate of the GDP of the BRIC nations, although the poor growth in the developed nations continues to hamper their export markets.

Overall demand is still anticipated to increase by around 0.8 mbd, with half of that coming from China and the rest of the non-OECD nations contributing an additional 0.7 mbd, offset by a decline in demand from the OECD nations of around 0.3 mbd, taking global demand, by the end of the year to nearly 91 mbd. Internal demand in the Middle East will continue to sap a fraction of this relative to exports. Overall the Middle East demand is anticipated to increase by 280 kbd, though the impact of the turbulence in various nations is hard to estimate.


Figure 2. OPEC estimate of global demand for 2013. (OPEC April MOMR.)

Virtually all the growth in supply is anticipated to come from North America, with a slight increase in production from South America coming from Colombia and Brazil. There is some concern, however, over the impact of attacks on the energy structure in Colombia.


Figure 3. Anticipated regional change in supply in 2013. (OPEC April MOMR.)

For the US the OPEC report has the following projection:

The expected growth in 2013 is supported by the anticipated supply increase from shale oil plays in North Dakota and Texas, as well as by minor growth from other areas in Oklahoma, Kansas, Colorado and Wyoming. The infrastructure situation is improving in North Dakota, with reports suggesting that the railroad loading capacity will reach 1 mb/d. Eagle Ford oil production in January continued to increase from the same period a year earlier. On a quarterly basis, US supply is expected to average 10.57 mb/d, 10.62 mb/d, 10.56 mb/d and 10.55 mb/d respectively.

Canada is expected to reach a production total of 4 mbd by the end of the year, with the largest impact coming from the Kearl Oil Sands production anticipated to bring 110 kbd to market in the third quarter. (This is not dependent on the Keystone pipeline.) Mexico will see a slight decline in production though the Kambesah field (at 13.7 kbd) and increased production from Tsimin will offset most of that.

OPEC is anticipating that Norwegian production will fall 110 kbd this year, with a small decline of 40 kbd in UK production. OPEC expects that Russian production will increase to average 10.43 mbd in 2013, slightly down from first quarter numbers, while, in anticipation of Kashagan production, OPEC expects Kazakhstan to increase production to 1.67 mbd. The decline in production from the Azeri-Chirag-Guneshli field is expected to cause a slight ( 50 kbd) reduction in Azerbaijan production. There is, as previously, some difference between the production that the individual nations of OPEC report each month and that reported by secondary sources.


Figure 4. OPEC crude production from secondary sources.(OPEC April MOMR.)


Figure 5. OPEC crude production based on national direct reporting.(OPEC April MOMR.)

In short, over the course of this year OPEC remains relatively complacent that North American production gains will continue to meet the global demand, and that OPEC (i.e. largely the KSA) can back away from full production in order to balance supply and demand at a price level that keeps the OPEC bankers happy.

Back in March the EIA TWIP noted the change over the years, not only in amounts, but also in the sources of US imports, which remain significant. There has been quite a bit of change since 2005, when imports were at their highest level (10.1 mbd).


Figure 6. Change in the countries and volumes for the ten largest suppliers of crude to the USA. (EIA )

The EIA anticipates that US liquid fuels consumption will remain sensibly stable through the end of 2014, ending that year at 18.61 mbd. At this time production is expected to rise to 11.75 mbd.


Figure 7. EIA estimates of US liquid fuels production through 2014. ( EIA)

In that interval they anticipate that the price of gasoline in the United States will slowly decline. In contrast with the reports by the major oil companies that were discussed recently, these forecasts are short enough that it will be fairly quickly evident how accurate they are.

OGPSS - The EXXonMobil future - a review

It is the time of year when the major oil companies issue their predictions for the future, and h/t Art Berman, ExxonMobil just released their view of the world, looking forward to 2040. And this is downloadable. If I remember correctly, I first viewed their future projections back in 2011, and with a 2-year step it might be more interesting to see how differences in their world view have evolved in that period.

By 2040 EM anticipates that the global population will be approaching 9 billion, up by around 25% from current numbers. Of that nearly 2 billion additional folk most are expected to be born in the developing countries such as India and in Africa, with the former gaining 300 million and the latter 800 million. Because the majority of the growth occurs in these countries, and the improvement in living standards and working conditions are more energy intensive, (whether air conditioning or iPhones) from a lower base and demand growth is concentrated more in electrical energy demand than that of transportation fuels.

EM continues to believe that, while the economies of the OECD nations will contribute significantly to global growth, with economic output increasing by 80% over the 27-year period, energy demand will remain stable. Growth in demand for power will come from the rest of the world, powering an average 2.8% growth in the global economy over that interval.

Perhaps the greatest change has been in the amount of energy that the company anticipates will not now be needed in that future, as improving energy efficiency cuts back the amount that must be supplied. If we look at the energy projections through 2030 that were made by BP and EM back in 2011, the total growth was expected to continue in an almost linear mode through 2030.



Figure 1. Projections of growth from BP and EM in 2011, looking to 2030.

If one now looks at the shape (the units differ) of the new EM curve there is a dramatic emphasis on a continued improvement in energy efficiency particularly as we get further into the out years. (Note the remaining illustrations all come from the EM document “The Outlook for Energy: A View to 2040”).


Figure 2. Current EM projections for global energy demand in the years to 2040.

The report breaks down the growth in demand into several sectors. And this, at first, is a little irritating. The reason is that, in describing, for example, the growth in residential/commercial energy demand, the track-back on the power sources stops at the point where electric current comes out of the wall. Given that it is the growth in electricity consumption, projected to grow overall by 85%, that is the greatest contributor over the period this is a little disingenuous. Now it is true that there is a whole section devoted to electricity generation, but the lack of the source fuel portrays a little bit of sleight of hand.


Figure 3. Projected residential/commercial energy growth through 2040, by power source.

There is a similar restriction in source categories for the suppliers of industrial power:


Figure 4. Projected residential/commercial energy growth through 2040, by power source.

However, as recognized, the document does have a chapter that deals with the generation of electrical power. EM anticipate that coal will continue to gain market until 2025, but from that point forward, its share will decline as the main competitors, renewables, nuclear and natural gas take an increasing part of the supply.


Figure 5. Change in the source of electrical power and its growth.


Figure 6. The breakdown of electric power fuel sources between OECD and non-OECD countries

One of the reasons for the change, particularly the change to natural gas from coal, comes with the increasing burden of carbon costs, as EM projects.


Figure 7. Anticipated fuel source costs for electricity in 2030.

The low price that is anticipated to continue for natural gas makes it therefore the growth fuel, as figure 5 suggests. When this is combined with the anticipated changes in liquid fuels for transportation, which will see a 40% growth overall, with heavy duty transportation showing the greatest growth, investors in oil and natural gas should be reassured. Cars are expected to achieve an average performance of 47 mpg, which is achieved with the anticipated mix being:


Figure 8. The anticipated growth in automobile performance through the years

Nevertheless the increasing growth of personal transportation in the developing countries is expected to continue to increase demand for oil. With the growth in power generation from natural gas, the two combine to paint a glowing picture of the future of the hydrocarbon industry.

EM project that overall the demand for liquid fuels will rise to 113 million barrels of oil equivalent (mboe) per day by 2040, a 30% growth over 2010 with most of the demand remaining with the transportation needs. The company seems comfortable with industry being able to achieve that level of supply, although the mix will change considerably from that which currently prevails.


Figure 9. Change in the liquid fuel sources that are anticipated over the coming years.

And it is here that I fear that the report becomes overly optimistic. By looking at the relative size of the remaining resource, relative to the production achieved to date, EM foresee no problem in providing the supply targets that are shown in the above figure. EM expect that technical innovation will continue to dramatically improve production from the United States and North America in total. Supply growth is anticipated from tight oil in places such as the Bakken, Deepwater from the Gulf and the tar sands. They project that these will combine to lift North American total liquids production by another 40%. When the production from the offshore Brazilian fields and the heavy oil sands of Venezuela are added, then this reinforces the view that they hold of an achievable target.


Figure 10. Growth in supply of liquid fuels in North America

Yet it is in the Middle East, a region they hardly discuss, that they see the largest growth.


Figure 11. Sources of future growth in liquid fuel supply.

EM don’t actually say where that great growth is likely to come from, but it is very likely heavily weighted towards the most optimistic of estimates for the future production of Iraq, with the ongoing turmoil of the “Arab Spring” being totally discounted.

Well it makes a nice pipe dream, as, I’m afraid, is their anticipation that industry will be able to produce and distribute the target volumes of natural gas that they anticipate will come to save us all from the increasingly higher costs of power. Dare one gently cough and mutter "decline rates"?

If I can put it another way. At the beginning of the report, after projecting a reasonable estimate of global growth over the next 25 years, EM put in a very optimistic level of improvement in energy efficiency in order to significantly lower energy demand. Then, to balance supply to that lower level of demand, they seem to have picked the most optimistic of assumptions about potential growths in that supply. I rather suspect that they are seeing the writing on the wall, but obfuscating it with optimism beyond the bounds of realistic expectation.

Libya, oil production, OPEC responses, Saudi Arabian capabilities and the SPR.

The impacts of the disruptions in the Middle East are now starting to become evident as supplies no longer flow into the delivery pipelines that carry fuel from countries such as Libya to their European Customers. It is now considered likely that the 1.6 mbd that Libya delivers to the world market will not be available for some time. Ireland, for example, which has had other problems with the banks in the recent past, is now faced with the loss of perhaps 23% of its fuel supply, which while only 14 kbd is, for that country, likely to be very significant. For while the Libyan shortage at present may be just due to Gadhafi orderig the ports closed, if he is also ordering the destruction of facilities, as is rumored, then the consequences may be more long term. ENI has reported that the Libyan shortfall is currently 1.2 mbd.

It is in this context that the world turns to OPEC, which has stated that it has enough oil in reserve to stabilize deliveries, and looks to see a compensating production increase from those nations with that potential. And here is the rub, for some OPEC countries are themselves in a little political difficulty which might negatively impact their own production, while those that can, in the short term, increase flow volumes to match the shortfall are likely all called Saudi Arabia.

So the next questions become – first can Saudi Aramco now bring that oil to market, and then second, will they? It is actually not that simple because the oil that will be marketed is likely to be the heavier crudes that Saudi has more difficulty in selling in normal times – since the higher quality Arabian Light has an established market. As I mentioned in a post earlier all oils are not created equal, and not all refineries are set up to easily switch from light to heavy. KSA has said that they can immediately increase the output from Khurais from 1 mbd to 1.4 mbd but that, in itself, will not be enough. Bear in mind that the oil has to be not only produced, but also shipped, and so there will be an additional delay as tankers are chartered and a new delivery line is established. It might also be remembered that there is often confusion about which volumes that KSA are talking about when they mention increasing flow. If we assume total liquids, then KSA has been producing at around 10.2 mbd. They have stated that they can produce up to 12 mbd, if they are still counting oranges – this gives a cushion of around 1.8 mbd (and if some of that is really counting Manifa it is not really there). We will have to see what they have in mind.

This is the time of year when demand is normally low, as heating needs become less critical, yet it is too early for the summer driving increase. But that fall has not been as evident this year. OPEC produced at a two-year high of 29.85 mbd in January. Because of the increase in demand from China and India overall demand has been increasing, and prior to the current situation, had been anticipated to rise an additional 1.5 mbd this year.

Which brings up another concern, since much of the current debate seems to assume that the current events will have a transitory impact, but I cannot see the justification for that assumption. Were the countries involved in the position where there was a clear opposition with a history of government, then a transition might have limited impact. The problem is that in most of the countries that are now in turmoil the outgoing Administrations in general were able to keep power for the decades that they did by ensuring that there was no effective opposition, or alternate ruler that could replace whoever the “Leader” was. The example of places such as Iraq shows the difficulty in establishing a functional new government and getting oil and natural gas supplies flowing at historic levels (they are almost but not yet there).

Changes in philosophy, and the need to switch to providing more to the general populace is likely to reduce funds available for continued development of oil and natural gas. This will affect much more than just the immediate oil flow from Libya. OPEC themselves currently purport not to see a problem since, by their numbers, there is more supply available (by about 700 kbd) than demand. However as the Libyan change has shown, supply to greater levels than this can go off-line relatively quickly, and probably take a lot longer to get back into production after the turmoil is over. Which is a finite period in its own right.

For the very short term the governments of Europe have pointed to their stored volumes to explain why they don’t need to worry, and certainly the US has the ability to release some of the Strategic Petroleum Reserve which is currently as full as it has ever been. At what point that might become an issue is yet too early to tell, but with a growing concern that ever rising oil prices might drive the world back into a similar recession to that which followed the last visit to $147 a barrel oil, that option is likely to be increasingly considered.

The BP Energy Outlook to 2030 - a review

There is a significant reliance, among those who write on fossil fuels, on the statistics that BP annually compile on global energy production. For example it provides underlying information for Energy Export Databrowser, as well as many of the posts at The Oil Drum. And so when BP just released their forecast for Energy for the next 20 years (Energy Outlook 2030) it is worth having a look at to see what they predict. Bear in mind that this is only one company prediction, yet nevertheless it is an influential one.

The report is very briefly summarized in the introductory speech by Bob Dudley, the Chief Executive, who chose the following highlights:
• Global energy growth will average 1.7%, but will be generated by non-OECD nations, while demand from OECD will remain relatively stable.
• Oil supply will grow at around 1% per year, with major increases in supply coming from OPEC, particularly Saudi Arabia and Iraq.
• Coal use will grow at an average of 1.2% per year, largely through demand for power from non-OECD nations.
• Natural gas will be increasingly used as a power source, with demand growing at 2.1% per year.
• Renewable energy sources will continue to be favored, with growth being at around 8% per year, and with demand for biofuel tripling over the two decades.
• Deeepwater production of oil will rise from 7% of the global demand to 9% by 2020.

Those were the initial highlights, and there is slightly more detailed summary at the BP website. Since the booklet that summarizes the data is some 30 pages long, but uses a considerable number of graphics to show the projections, let me borrow some of these to summarize what I see as some of the critical points (and I will add a few editorial comments as I go).

The review (which is the first of its type that BP has released) recognizes that the face of energy consumption is changing. As the world population continues to grow, the shift in energy intensive industries to the developing countries has shifted the locations where demand will grow. Since industrialization also increases the energy use by their populations, there is a compounding rise in their energy use.

Projections of population and Energy Growth (BP Energy Outlook)

What is more interesting to me is how they see how this energy will be supplied. The overall projection is shown in this chart:

Projected future source of Energy Supplies (BP Energy Outlook)

The fastest growing of these segments is that of renewables (which includes biofuels). This can be seen more explicitly in this graph from the report:

Sources of Future Energy Supply (BP Energy Outlook)

The growing impact of renewable energy production will affect both electricity generation, and transportation (the latter mainly through biofuel growth).

Looking specifically at the different fuel sources, the report anticipates that oil growth, will be some 16.5 mbd over 20 years, but that this will have to also compensate for about 4.5 mbd of declines in non-OPEC producers. Non-OPEC will, however, see an increase in overall production, the gains coming from about 2 mbd of increased production from oil sands (with the assumption that this is Canadian, since it is not credited to OPEC, of which Venezuela is a member), from the FSU, and from a significant increase in biofuels, only some of which is anticipated to come from the sugar-based ethanol of Brazil.

Sources of future liquid fuel supply (BP Energy Outlook)

In looking at the above chart it is important to recognize the distinction between the FSU and Russia itself, since that country may well start into a decline in production within the year. The increased production will come from places such as Azerbaijan and Kazakhstan.

The second point is that relating to biofuels, where BP note that renewables currently provide 3% of liquid fuel for transport, but that this is expected to rise to 9%. (Within the next 20 years increased rail, electric, hybrid and CNG are not expected to make a material contribution, though CNG use is expected to be about 2%). The concern with biofuel production is that it is virtually all anticipated to come from ethanol. And, as we have just seen with the closure of the Range Fuels plant in Georgia this week, the commercial viability of cellulosic ethanol has yet to be established, challenging not only the BP view of the future, but also that of others. The practicality of further increase in corn ethanol production in the United States is doubtful, giving the rising cost of the raw feed stock (corn). However this is the projection, and increasingly BP expects that biofuels will meet increases in liquid fuel demand (rising to meeting 60% of the growth by 2030). There is, however, an allocation of 1 mbd for increases in refinery gains (which I have discussed earlier) and from natural gas and coal, which perhaps gives some indication of their opinion of this latter effort.

Anticipated size and source of Biofuel production (BP Energy Outlook)

It is the dramatic increase in transport demand, particularly in Asia, that will drive the increased demand for liquids, China alone is expected to pass the United States in oil consumption within this time frame. To further supply that growth, NGL increases of more than 4 mbd from OPEC, and crude oil production growth mainly from Saudi Arabia and Iraq is projected. (In this regard it should be noted that a year ago BP were anticipating that Iraq might be producing 10 mbd by 2020 – the current more realistic target is 5.5 mbd by 2030. And while Iraq has stated it may be able to reach 12.5 mbd by 2017, the condition of the infrastructure in the country, among other issues, would suggest that BP are now more likely correct). Whether Saudi Arabia will rise to the challenge of producing (and likely more critically exporting) at the levels BP projects, given the current age and production history of its main fields is a question, since recent pronouncements from that country suggest a more conservative production capacity of 12 mbd and a disinclination, perhaps, to produce at even that level. (BP assume that both Russia and Saudi Arabia will retain their market share of 12% over the two decades, which, with an assumed total of over 102 mbd would give them each an assumed production of over 12 mbd). To reach the Saudi target BP expect them to expand production capability after 2020.

The major change in fuel use over the next two decades is expected to come in the increasing move from coal to natural gas as the primary source for electricity generation. Because of overall increases in power demand absolute demand for both fuels will increase, but increasingly the demand will shift to NG.

Thus, for example, Chinese growth in demand will rise at 7.6% pa to 43 bcf/day, though this will still only be 9% of their total energy consumption. It is the BRIC countries, which include Brazil, Russia, India and China (and now South Africa) (H/t KLR) whose overall growth in demand, with that in the Middle East, will likely prove greatest over the next two decades.

Expected growth in NG demand in the next 20 years (BP Energy Outlook)

By 2030 BP project that most use of oil for power generation has been displaced, with coal and NG being the primary fossil sources. NG use will increase to about 40% of the market, outside of Europe, where it rises to 65%, given the European concern over climate change. However, in terms of the absolute market, Europe will see a much greater impact from renewable resources generating power, so that the percentage that NG provides will only rise to 24%. Over half the NG supply in North America will come from shale gas and coal bed methane (CBM), elsewhere the impact from those resources will, within this time frame, be much less. Whether or not these unconventional resources reach the 57% market supply by 2030 will likely depend on the development of at least one new technological breakthrough that lowers cost while increasing long-term yield from the wells, but that is a quite feasible assumption.

Electric Power generation by source (BP Energy Outlook)

The market for LNG is anticipated to grow significantly (4.4% pa), particularly in Europe and Asia. Supply is initially seen as coming from the Middle East, but this will be followed by production from Australia which will overtake Qatar by 2020, and then African deposits will come on line providing 41% of the supply by 2030. It is interesting to note the caveat that BP introduce into this projection.

We assume that policy supports the continued rapid growth of non- fossil power generation – especially renewables, which attain a global share of 10% by 2030. Where gas is available at a competitive price, it continues to displace coal.

Regional demand growth for LNG (BP Energy Outlook)

It is the response that China makes in changing their primary source of power as they continue to expand production, and thus energy demand, that will decide how far, and how fast the transition from coal will occur. BP anticipate that the market overall will continue to rise until just before 2030, at which time it will flatten. But whether that happens will likely depend on availability and price, of both coal, and its potential replacements. (Hence the caveat).

BP recognize that this is only a base case projection, and that there are many different factors that will likely change the final results. That is likely to be particularly true if there is an upsurge in interest in climate change legislation and regulation. I have made some comments on how accurately I think that the models have been developed, but that should not detract from the value of this particular document which, being freely downloadable, is well worth getting and saving.

Saudi Oil Production - read Minister Al-Naimi's small print

Yesterday the Saudi Arabian oil Minister, Ali Al-Naimi, commented that the days of easy oil are not over, and that there remain at least 88 billion barrels in the Saudi oilfield of Ghawar, let alone the rest of the fields in that country. Well before that sends you out to buy a fleet of Hummers, you might want to take a wee bit closer look at some of the other things that he said, or did not say. For the future is not quite as rosy as his remarks might, at first, make you think.

Let’s start with the “days of easy oil are not over.” That is a somewhat egregious remark. It is relatively easy for the Kingdom of Saudi Arabia (KSA) to brag that it is still not that expensive to produce oil. Given the size and extensive development of their fields that is, at present, still to a large extend true for them. But Aramco have carried out extensive research into modeling their fields and developing technologies such as maximum reservoir contact (MRC) on order to get the maximum amount of oil out of their fields. (And I’ll get around to that in a minute). But the KSA only produce a fraction of the increasing amount of oil that the world needs every day. And it is the cost of the oil at the margin (that which balances oil supply with need) that to a much greater degree controls the price.

At the moment the countries that make up OPEC can increase production at need, beyond the current levels of demand. As long as they can do this they can impose controls on the price. This is because the rest of the world is producing just about as fast as it can and there is some doubt, despite some rosy predictions, that they will be able to raise levels above those currently produced. If the price falls too much, then some of the more marginal oil, that is more expensive to produce, might drop off the market. At that point, if OPEC cannot make up the difference, and I would argue that beyond a certain relatively low volume (4 mbd) it no longer can, then prices will rise again. There is an effective lower bound on price now, significantly higher than OPEC costs.

Last week at the ASPO-USA Conference Michael Klare commented on the amount of money that this will bring to the nations that produce oil much cheaper than the global price (which KSA is happy to keep at around $80 bbl) but to keep that price it relies on the make-up oil that is not “easy” at all. This includes oil sand and deepwater production.

Now let me turn to some of the more worrisome part of what he said. Until recently it has been assumed that KSA was going to raise production to levels of 12.5 mbd as part of the balancing act to match declines in other fields and meet supply. (And some time before that there was talk of Saudi production levels of up to 15 mbd). However the KSA has a problem. To get the maximum recovery from their fields they have to control the interface between the waterflood and the oil., and move it relatively slowly and evenly through the reservoir. They are quite good at this, and likely getting better. But it means that they produce the oil at, for them, relatively slow rates. And they are slowing these down a bit. As a result the maximum that they are now talking about is 12 mbd. Which means if you are looking at the global balance over the next few years you have just had to take an eraser and remove 500,000 bd from the available supply. Note that this is not quite 50% more than current production.

Why is this? Well that comes to another part of the remarks that the Oil Minister made. The next major plan for production of oil is the development of the Manifa oilfield. It was, at one time, scheduled to produce a million bd, but this is now dropped to 900,000 bd. But there is a greater concern.

Manifa is a heavy, sour (i.e. high sulfur), vanadium contaminated deposit. It requires a special refinery to process the oil, and these don’t exist. The KSA has had plans in the works for some time to build two refineries in the Kingdom that will refine this oil. There have, however, been delays in construction. It appears that these are getting worse, or, for other reasons, have been further postponed. Without the refineries the ability to produce the oil is meaningless. The original date at which these facilities were supposed to be on line was within the next two. It is now, apparently, been moved to 2024. Presuming that this is not a misprint (since the last target was 2013) it means that KSA has changed its strategy and is not looking to ever produce above the 12 mbd current target as we move into the future.

Naimi said the kingdom has sufficient production capacity at 12 million barrels per day (bpd) and has a strategy of preserving its resources and developing new sources of energy.

"We have the production capacity and we don't have to deplete our reservoirs as fast as someone who's just there for investment...so we don't really have to pull our reservoirs as hard as we should," Naimi said.

With their internal consumption continuing to rise, and with increasing sales to China, the amount of that oil which is going to be available to the West is going to go down.

Whether and when they will get to 12 mbd now becomes more of a question. Given current levels, and the income that they are getting from them, it is hard for me to see production rising to even 11 mbd. (subtracting the volume from Manifa). And if world consumption is rising at around 1.5 mbd per year, for the sake of discussion, then we are going to see an imbalance between production and supply needs, in just about 2 years.

Given that this was the message from the ASPO_USA conference, it is interesting to see the Saudi Oil Minister so rapidly confirm it.

So I’m afraid the difference between the headline of his remarks and the small print of his text are enough apart to be disturbing.

And I must apologize in that this was written on the train from Vienna to Graz and I don't have access to all my usual references, which I would insert.

George Will is afloat in a sea of fuel

Last Sunday George Will wrote about the abundance of fossil fuels in his column for the Washington Post. He began by surmising that Titusville, PA might have a claim to being most responsible for the modern world through the contribution of oil to world wealth. He then went on to list some of the many folk that have predicted (falsely) the arrival of a peak in oil production and the amount of reserves that are available.

In 1977, scold in chief Jimmy Carter predicted that mankind "could use up all the proven reserves of oil in the entire world by the end of the next decade." Since then the world has consumed three times more oil than was then in the world's proven reserves.

He does not see that America, or the world for that matter, can wean themselves from a dependence on hydrocarbons, and quotes Keith Rattie, the chief executive of Questar, from a commencement speech as well as Edward Morse, from a story in Foreign Affairs in which Morse states that there is plenty of natural gas available – perhaps a hundred years at the present rate of consumption, and that the deep water fields just beginning to be exploited are significantly larger than thought. And he includes Daniel Yergin as stating that" the resource base of the planet is sufficient to keep up with demand for decades to come.”

From all this he concludes that it is only the environmentalists that are going to ensure scarcity for the planet. So where does one begin to disassemble what would appear, at first sight, to be a rational argument based on the utterances of three prominent individuals?

To pick the last first, it has unfortunately not been that long since I last wrote about Dr Yergin and CERA. Earlier this month I noted, after giving a number of occasions in the past that CERA had been wrong, that some of the assumptions that they were currently using to project future oil production were likely to be wrong also.

The most obvious immediate reason is the collapse of the oil industry in Mexico. Having fallen from the projected 4 mbd to potentially only 2.7 mbd next year, global supply is going to have to find another source for that 1.3 mbd. Bear in mind that Mexican production has been falling as fast as 100,000 bd per month at Cantarell and the magnitude of this problem becomes apparent. The current hope of seeing 10 mbd from Iraq by 2020 is, I would suggest, also perhaps more than a little optimistic.

So let’s tick Dr Yergin from the list, and move on to Edward Morse and the prediction of natural gas production from fields such as the Marcellus and from the deep waters of the world. This case is a little more tricky to argue, but only in the sense that there are considerable resources in both these regions of the world and that they will continue to produce significant quantities of fuel for some considerable time. The questions that are being raised are, however, more along the lines of how much and for how long will they produce and at what cost?

Evidence to date (that I am trying to explain in the tech talks, but haven’t got to the downside talks yet) is that by using new technologies these fields can be produced with very high initial yields from slickwater, multi-frac’ed horizontal wells, but that these wells have a much shorter life and faster decline rate than was predicted when the production from these fields were estimated. The deepwater fields require dramatically higher investment costs and while the technology and equipment is available, to some limited degree, there aren’t that many rigs that can be mobilized to drill in these conditions. Further continued production from some of the weaker rocks that the oil lies in, at these depths, is going to continue to be a technical challenge, driving costs higher and higher and further limiting levels of production available. Yes there will be oil, but it will be more expensive and there won’t be nearly as much as one might think at any one given time (the production rate) to even maintain current levels of production very much longer.

Which brings me to look at Mr Rattie’s speech, which is one that I have considerable agreement with. Except for the assumption that we can continue to grow our way into the future in terms of increasing supplies to meet an increase in global demand for energy that will increase by 30 – 50% over the next two decades. He lists some of the anticipated growth:

The Salt Lake Tribune recently celebrated the startup of a 14 MW geothermal plant near Beaver, Utah. That‟s wonderful! But the Tribune failed to put 14 MW into perspective. Utah has over 7,000 MW of installed generating capacity, primarily coal. America has about 1,000,000 MW of installed capacity. Because U.S. demand for electricity has been growing at 1-2 % per year, on average we’ve been adding 10-20,000 MW of new capacity every year to keep pace with growth. Around the world coal demand is booming – 200,000 MW of new coal capacity is under construction, over 30,000 MW in China alone. In fact, there are 30 coal plants under construction in the U.S. today that when complete will burn about 70 million tons of coal per year.

Mr Rattie also points out something that is sometimes missed in the debate about coal and natural gas fired power plants:

America has about one million MW of installed electric generation capacity. Forty percent of that capacity runs on natural gas – about 400,000 MW, compared to just 312,000 MW of coal capacity.

But unlike those coal plants, which run at an average load factor of about 75%, America’s existing natural gas-fired power plants operate with an average load factor of less than 25%. Turns out that the market has found a way to cut CO2 emissions without driving the price of electricity through the roof – natural gas’s share of the electricity market is growing, and it will continue to grow – with or without cap and trade.

That is surely true in the short term, but the questions about natural gas production, and the fact that if natural gas were, for example, to be used at double the current rate (i.e. to produce 50% of the nation’s electricity) then even if the current prediction of 100 years of gas at current levels of consumption were true, then at double the rate, the lifetime of the reserve would be cut to 50 years. Given the questions on production referred to above, it may, be quite likely that estimates are at about twice reality, and thus there might be 50 years of supply, but this is likely to be consumed at somewhat higher rates than current, so that the effective lifetime is going to be closer to 25 – 30 years, I would suspect. (And don't forget that Questar is one of the largest natural gas producers, who may be vulnerable in the fight to retain market share as the increased availability of natural gas from conventional sources struggles against supplies from the gas shales and from LNG supplies - in the short term).

Oh I anticipate that there will be adjustments in the fuel mix in the future, the decline in oil’s share of the market will have to be replaced with some alternate fuel, and natural gas will have to carry some of this burden. I tend to see that there will be problems in getting an adequate amount of energy supplied from renewable sources, as the scale of their use grows, and the realistic availability of good sites for development of new farms reduces. (It is all too easy to just say we need the equivalent of say half of Utah, without recognizing just what percentage of Utah is actually available – just to pick some numbers for the sake of discussion).

Put this all together, and in an ideal world, when gold, oil and natural gas production could continue to increase in availability every year, then George Will’s suggestions might well come to pass. Unfortunately when there is a realistic limit to the actual volumes available, as we are now seeing with gold, so shall we soon see with oil, and before then I would suggest that Mr Will seek additional advice from elsewhere – perhaps here?
.

Time and the latest CERA report

One of the features of many models that are used to predict future events is that they focus on target years. Decadal years are the most common target years, so that whether talking of climate or the amount of oil or natural gas available, models focus on, for example, the amount that will be available in 2030. The problem with this approach is that it leaves the public to think that a problem is not yet serious. For example if the prediction is that the production of oil will only be 75 mbd, in 2030 then there is an implication that until 2030 that the situation will remain fine.

However the world does not reach those levels by continuing in the business as usual mode for the next 21 years, and then suddenly have production drop off a cliff one Friday night. Rather it is a problem that inexorably will grow, year on year, between now and then. I was struck by this thought as I looked through the latest comments from CERA/IHS on their view of the future of oil supply. Their view, as we have come to expect, is an optimistic one, and though we are not still living in the days of $30 oil that they had, at one time predicted, it is worth looking into so as to provide some explanation of the difference between their view and mine.

Let me begin with a reason why I tend not to be immediately and totally swayed by the thinking behind the CERA report, and their conclusion that:

Global oil productive capacity will grow though 2030 with no evidence of a peak of supply before that time.

It has not been that long since we were assured that production of oil from Mexico would be maintained at levels of 4 mbd through 2015. In 2005 we have:

CERA said that oil from non-conventional sources would widen to 35% of capacity in 2015 compared with 10% in 1990. The research points to growth in output from ultra deepwater drilling in the U.S. Gulf of Mexico, Brazil, Angola and Nigeria; 250% more heavy oil production capacity from Canada and Venezuela; and the expansion of condensate and natural gas liquids to 23 million barrels per day from 14 million barrels per day currently.

The EIA is anticipating that Mexico will produce an average of 2.9 mbd in 2009, falling to 2.7 mbd in 2010. And the latest chart from CERA (downloadable at their site) shows a much reduced increase in production of the heavy oils by 2015, for a start.
.
CERA has, unfortunately, not only continued to shine an overoptimistic light on future production, but has also tended (as sadly it has also done in the past) to gloss over some of the problems – vide:

Though a peak in global production is not imminent, there are major hurdles above ground to negotiate.”

These surface hurdles no doubt include the minor details as to how to get significantly more production out of Iraq. It is all well and good to read reports such as:

Iraq is planning to increase its production capacity to approximately six million barrels per day within 80 months, following the signing of service contracts with a number of major international oil companies. This is in addition to the other agreements which are expected to be reached by next December, whereby Iraq’s production capacity may be increased to reach around 10 million barrels per day at the end of the next decade, compared to 2.5 million barrels per day at present. The overall cost that will be borne by the international companies investing in developing the Iraqi oil fields will amount to about one hundred billion dollars. Needless to say, these agreements are considered to be a historic event (both economically and politically), not only for Iraq, but also for the oil industry itself in the Middle East, and for the global oil industry.

Adding 7.5 mbd to existing world supplies would certainly go a substantial way toward meeting the existing and well documented declining production from so many of the major fields of the world. But is that target a realistic one – let me sound perhaps a little more cynical than some and raise a slight modicum of doubt. While it is nice to be optimistic, the reality still fills the headlines of too many papers and news reports.

Of course, it is expected that these companies will face some obstacles and delays as a result of terrorist attacks against their employees and sabotage against its installations. Also, the need arises to increase export capacity that can accommodate the ensuing increase in production, in addition to attracting a sufficient number of professionals and technicians to work in Iraq under the current circumstances, and procuring the necessary machinery and equipment on time. Despite all these potential obstacles, the delays in these projects are not expected to be significant, since similar experiences in other oil producing countries have shown that such delays only cost a relatively limited and not long amount of time.

Thus even though there are some big players moving into that game it is a little premature to be optimistic.

In other aspects of the report the average field decline rate, which CERA ties to 4.5% - but includes fields with rising production in the calculation, masks the reality of an increasing level of decline in fields that are past peak. As we saw with Cantarell, post-peak collapse can come more rapidly and severely than earlier forecast.

At the same time the move to produce alternate fuels, such as cellulosic ethanol for vehicles, seems to have hit more technical and economic snags that may well considerably delay the target production that has been anticipated for this alternate fuel, feeding into an overall reduction in “other” fuels beyond the level that CERA still optimistically holds to (raising unconventional liquids, in their view, from 14% of global capacity today to 23% by 2030).

It is notable that in the version of the report I got, while CERA lists three scenarios, Asian Phoenix, Global Fissure and Break Point, it only briefly mentions the assumptions and impacts that the different scenarios will have on both demand, and thereafter supply. Given that I noted just recently that China is signing up for another 1 mbd delivery from Saudi Arabia, and that sales of cars in both countries are rising at significant rates, one can anticipate that that market is likely to develop into the Asian Phoenix that one might imagine is presaged by the title of the CERA scenario.

The growth of that new market is recognized with the opening of the new port of Kozmino by Russia with the potential for shipping up to 1 mbd of oil, with China as a major customer. (Which raises a question for another post on which customers will lose out as China gains.)

But to now get to the nub of my point; this is that there is already a changing market and demand for oil and its products that is developing in the short term. The longer term view of potentially available resources that are not yet found, does not address the problem of how big a tap can be made available to meet demand over the next six years. There are serious questions, within that time frame, of the ability of some of the largest fields in the world to sustain production at their current levels.

Longer term forecasts will be forgotten long before they are called to face reality, unfortunately the optimism they project can lead people astray in the shorter terms, where the conditions have been glossed over.

Future Projections of Oil Demand and the IEA WEO

Exasperated sigh! Well there is this story in the Wall Street Journal that has also been picked up over at the Financial Times that deals with a “leak” of the predictions that will come out of the International Energy Agency next week, with their new World Energy Outlook. (Thanks, Leanan) The story begins:

The International Energy Agency next week will make a "substantial" downward revision to its long-term forecast for global oil demand, a person familiar with the matter said, marking the second year running the group has slashed its view of the world's thirst for oil.

Now this is where we start to get a little argumentative. Not because the amount of oil will actually reach 106 mbd as the WEO suggested last year, but rather because of the reasons for the actual number likely not being that high. (And there is a caveat to this – shades of Daniel Yergin – in that I am talking about fossil fuel and not what might, by then, be available from biofuels, since in that time frame algae may be a practical source of significant volume.) Every month I write a post on what is happening with the nations driving habits, and tie it into gasoline demand. The last curve shows that, even though we are have been in an economic slowdown for over a year that the nation’s driving level has already returned (on a 12-month cumulative value) to the point it was in 2004.

2 month running total of vehicle miles driven in the USA. (FHWA)

Given that a majority of the crude oil produced goes into transportation fuels, and that those demands are likely to see an increase, other conditions being equal, from the increased market for cars in Asia, initially demand will not reduce because of conservation.

Ford just announced that Chinese sales in October were 20,027 cars, up 80% over a year ago. For the year so far they have sold 188,244 cars up 40% on the same period last year. Increasingly new car volumes are being driven by sales in the emerging markets of Asia Suzuki profits are four-times higher than anticipated because of sales in India. They sold 85,415 units there in October, and a growth rate of 20%. Overall sales for the year are expected to be around 1.8 million vehicles. Part of the sales have been driven by the Indian equivalent of “Cash for Clunkers” but it is also moved by the desire for vehicles and the ability of manufacturers to now start to provide them.

Tata Motors reported a 28% increase at 22,232 units, the highest this fiscal. Ford India and General Motors India also showed significant growth in October 2009. Ford saw a 98% jump in sales at 3,458 units, primarily triggered by growth in Fiesta sales. Riding high on the success of the Chevrolet brand, General Motors India registered a record growth of 15% in sales at 7,413 units in October 2009.

The size of the demand, therefore, could have been expected, were there copious amounts of fuel to be available, or even just adequate amounts at a reasonable price, to may well have continued to increase to the level that the WEO will predict. The problem will come, not from that part of the equation, but rather from the supply side. And here, I would suspect, since I haven’t seen the report yet, that the WEO will continue to obfusticate around the issue.

To reiterate, we know that non-OPEC global production has now fairly evidently peaked and is in decline. OPEC retain the capability to increase production by perhaps 2-3 mbd, at best, and face, well within the period to 2030, the likelihood of dropping production from their major fields. The number of countries that can produce at 1 mbd now just about fits on a single slide for one of my lectures:

World’s largest Oil producers (production in parentheses is from 2004, and red highlights shows those declining in production).

I see that at the end of the article Daniel (Yergin) is finally admitting that there is a peak production coming in the future

There is a market assumption today that we will head back to the old days of rapid oil demand, but we think we are heading into new days," in which the growth in consumption will be more subdued, said Dan Yergin, chairman of IHS Cambridge Energy Research Associates.

Hard to back away from those cornucopian dreams, isn’t it, Daniel?

No, the sad fact is that the limited availability of crude is going to drive up the prices within a couple of years, so that it will be this that limits and changes demand, rather than the impacts of those driven by the desire to guard against Climate Change by moving toward a more energy efficient future. Not that energy efficiency has anything wrong with it, just that the incentive for change is going to come from an unavailability of oil at a reasonable price – so that both price and production limits will constrain use in the 2030, to levels well below those of today, rather than higher, and we need to be working on alternative replacement strategies a lot harder than we currently are. The IEA WEO will not, unfortunately, provide much ammunition for that argument, as it would appear.