10 July 2007

Boom boom boom boom

Canada's oil boom has legs, IEA says

Surging demand in the developing world and oil-addicted consumers in the West will ensure at least five more years of tight petroleum markets, maintaining the boomtown momentum of Canada's oil patch, the industrial world's energy watchdog predicts. Unlike in the past, sharply higher oil prices have not dampened global demand, nor brought on sufficient new supplies of crude oil to offset declines in more mature fields, the International Energy Agency said yesterday. “Despite four years of high oil prices, this report sees increasing market tightness beyond 2010,” the IEA concluded in its medium-term forecast, released yesterday. The agency increased its five-year forecast for global oil demand from the one released six months ago, and reduced its expectation for more supply from non-members of the Organization of Petroleum Exporting Countries. As a result, the energy agency is forecasting “substantially higher cash returns to shareholders” of global oil companies, whether those owners are governments or private investors.

The IEA said the Canadian oil sands are among a few notable exceptions to the general trend of declining production outside of OPEC, with others including the former Soviet Union, Brazil and the deep waters in the Gulf of Mexico. Those four regions will account for the bulk of non-OPEC growth in crude supply over the next five years, offsetting steep declines in the North Sea, Mexico and the continental US. Peter Tertzakian, chief energy economist with Calgary-based ARC Financial, said the IEA outlook was extremely bullish for Canadian oil and gas producers, and underscores the ever-increasing appetite for oil sands production, even as costs there soar. “This report confirms what the market is already starting to believe,” Tertzakian said. “There had been a sense of complacency [about abundance of cheap energy], and that complacency should end.” The IEA noted that the demand for petroleum products continues to climb around the world, even though crude prices have tripled in the past four years. While growth in demand has slowed in the developed world, booming economies in Asia and the Middle East have taken up the slack. Indeed, Asia and the Middle East are expected to account for three-quarters of the demand growth between now and 2012. Globally, the IEA forecasts demand for crude oil products will grow 2.2% a year on average to 95.8 million barrels a day in 2012. It expects 1.3% average annual growth in North America, and 0.7% in Europe. But the agency forecasts 3.6% yearly growth in demand in emerging economies and developing world. At the same time, the agency is forecasting only modest growth in crude oil supplies, as producers struggle to offset declines from existing fields. While there will be some spare capacity among OPEC members in the next few years, that cushion will drop to “minimal levels” by 2012, it said. The IEA does not include a specific price forecast in its outlook, but with crude prices hovering above US$70 a barrel, it provides little hope for a significant easing.
(Globe and Mail, National Post 070710)

“There had been a sense of complacency [about abundance of cheap energy], and that complacency should end.”

...and we've built our entire society on this complacency. What is going to happen when our huge energy requirements aren't so cheap and plentiful anymore? Your guess is as good as mine. The effects will most likely differ in different parts of the world. I think North America, with it's huge oil overreach and personal mobility addiction is particularly vulnerable to the implications of expensive energy. In fact, since most Western countries import most of their oil, this is a huge point of concern for most.

I think to get over this hurdle is going to require a massive global efficiency and conservation effort.

Hopefully new supplies offset the rapid declines in such previously productive non-OPEC areas as Cantarell in Mexico, the North Sea, and OPEC areas like Kuwait's Burgan fields and the proposed possible plateau in Saudi Arabia's Ghawar (the mother of all megafields). I think some of the concern lies in the fact that traditionally, tapped out conventional fields decline very rapidly, especially if they have had remedial extraction techniques applied, and no one knows for sure how quickly some of the megafields, from which we get a large chunk of our global supply, will dwindle or how many years they have left in them. Many of the new fields are (currently) expensive or unprofitable to develop right now and are in the most remote regions of the planet. Many of the non-conventional fields require huge energy inputs to get any final-product processed oil out of which lowers their EROEI even further and makes them expensive - financially, environmentally, technologically.

Because Northern Alberta's sands are easier to process than central U.S oil shale or Venezuela's Orinoco Basin sands, it is a prime development target. Especially because of Canada's location and political and economic stability, it is being eyed with hungry eyes by all the U.S. majors. How much you're willing to give up to promote this development is a personal issue, but there's no doubt the boom in Calgary will most likely continue for some time to come. The chances of something happening in the next five years to seriously impact global demand are remote.

As for the alternatives....

Biofuel targets doubted by energy agency

The International Energy Agency questions the ambitious targets set by governments around the world to use ethanol and other biofuels to reduce oil imports and cut greenhouse gas emissions. In a report released yesterday, the agency said it is maintaining a cautious forecast on the production growth of biofuels, at least compared to some of the more aggressive promises of ethanol promoters. The agency, which monitors energy markets for the developed world, expects global biofuels production to double over the next five years, led by the US and Brazil. But most of that increase will come before 2010, and growth will then level off. The report says rising feedstock prices – including corn, sugar, wheat and oilseeds – and inadequate infrastructure for distribution remain serious impediments to their wholesale adoption. “Despite political support and enthusiasm for what is seen by some to be an important but only partial solution to the dependence on imported oil, the depletion of liquid hydrocarbons and growing carbon emissions, the economics of first-generation biofuels are still uncertain and raise doubts about whether the ambitious supply growth scenarios some sketch will be realized,” the report concluded. It forecast the biofuels will account for 13% of the overall growth in transportation fuels over the next five years, and 27% of growth in gasoline consumption. But they will still represent less than 2% of the total market for petroleum products.
(Globe and Mail 070710)


doug said...

Reid....lets do a reality check here. Oil isn't running out tomorrow or probably in our life time. No matter when - the only thing of which we can be 100% certain in that as sure as god made little green apples we will burn every f*ucking drop. Whats happening now, is that the easy, cheap stuff is going fast (and maybe gone alread?). Guess what the world will go on and NO people aren't going to give up their cars either. The future will likley look a little like this: ELECTRIC friggin everything. Yes, cars (hydrogen or otherwise), trains, boats, heating. Planes may well be the only hydrocarbon form of transportation left in 200 years? How will we make all this electricity you say? Try coal, nuclear, solar, geothermal, bio,.....and whatever else we happen to invent in the next 100 years. We will find new ways. The bottom line the that change is coming not doom and gloom. Like the Borg we will adapt! I think its easy to point out humanities shortcoming and much tougher to find solutions. So why am I taking the time to say this.....well I'm probably not the only one who is starting to think you might be a bit obsessed with all this.....you told me yourself that worrying doesn't pay off. Well, maybe on vacation you should consider how you can focus your energy on positive change.....even if its just one small thing at a time.......Doug

RD said...

I didn't say anything was running out. I've never said that -- ever. I've simply said repeatedly that energy is going to get more expensive, in all its forms. I've also said that we're soon going to be seeing less fossil fuels coming out of the ground, not more. Those are givens. It's also a given that we've designed and shaped our complex and extensive modern society on the premise that our fuel inputs will remain forever cheap. The implications on many facets and institutions of our daily lives are going to have to change to adapt to a more expensive energy future. That's it. I can't tell you what that future is going to look like of course, or whether we'll be consuming energy at the rates we are now, but I realistically don't think we're going to have the luxury of flying off to Vegas for the weekend twenty years from now.

That, of course, is based on the premise that our numbers and demand rates continue on the path they've been on for the past x years. The Chinese and Indians have seen what 'the good life' looks like, and they're hungry to get their share of the pie as well. And they're a lot more voracious and numerous than we ever have been.

Of course there will also be economy and growth created by the development of these new energy-producing industries, and there will definitely be new technologies and efficiencies developed to add to the fray.

All I'm saying is that we've put a lot of our eggs in one basket, and now we're praying for a host of technological fixes to allow us to continue our high-energy lifestyles as they currently are. Status quo, baby. In fact, we're hoping that we will end up with a combination of things that will generate even more energy than we generate and use now, since our economic system depends on it.

Fossil fuels are the richest, most energy-dense, most portable, cheapest source of energy we have ever had, and possibly ever will have. I don't think we realize how awesome and potentially unique this natural endowment is....we're burning it up as quickly as we can, apparently without consequence.

We also don't realize that the bounty of fossil fuels cannot be made up by the combination of all these other alternatives, not by a long shot. At least not with implications on other aspects of society. Hmmm....would I rather use this land to grow food to eat or to grow a crop to convert into fuel to drive my car to the Kwik-E-Mart? We've become so detached from the physical limitations of our world that we can't even make rational decisions anymore. Sure, we could cultivate every remaining hectare of land for biofuels, but at what expense to our biosystem, our bodies?

Will we only realize the implications of this unique fossil-fuel gift when we're on the downslope, when things aren't so easy and cushy anymore? Hindsight seems to be the folly of man.

Until they discover how to make energy out of sea water, right? Easy squeezy. Coming soon to a power plant near you.

We were guaranteed that technologies like fusion and hydrogen (which is a bogus claim anyways - hydrogen is an energy transmitter, not an energy source) would become commercialized in 30 years 30 years ago, and now they're saying it will still be another 30 years. Where are these magical technological fixes that we've been promised? They've never come to play in the profitability zones our economic system expects them to - long story short, the promises of "free energy" have always, always fallen short. Boy, I gotta start praying harder for the real one! It's gotta come sometime!

Even if something large-scale does get discovered in some underground university accelerator somewhere in the next few days, how long to you think it will take to get it developed on a large enough scale to provide energy needs for the world? Ten years? Twenty years? If the experts I've read (a lot of them, as you know) even say we reach peak oil extraction in the next five or ten years (even the conservative USGS says it will be upon us by around 2020 at current consumption rates), are we going to be able to coordinate the development of alternatives on the same scale in the proper time frame? Sure, we'll find the next megafield out in the middle of the Arctic Ocean, but it sure isn't going to be as cheap to get to the soccer mom's SUV in Florida as that oil that basically freeflows out of the sand in Saudi Arabia. And even they're having a hard time getting the spigots wide open, despite the sound bites you might hear on Fox News.

What if the global powers think those increasingly expensive and increasingly scarce fossil fuels are better used for military adventures to secure access to what's left than for you or me to get to work, to run the equipment to build new power plants or hydrodams, or get our Wal-mart thingies brought in by container ship?

So if we start using coal to heat all the homes in North America, Europe and Asia again to replace the natural gas shortages, is that not to say that our consumption rates of coal go up by a gross amount, thus bringing the day that that starts to run out even closer? Same with nuclear. Same with biofuels. Wind and tidal generators require a lot of fossil fuel inputs to make. So do solar collectors. Do those become more economical to implement on a large scale when the raw inputs to create them in the first place become prohibitively expensive?

Sure it's a complicated situation, but I think we're terribly deluded if we think we're going to be able to run things lazy-daisy just like we do today. Reality check, indeed. The only way we can extend the lifespan of these cheap energy supplies is by using them more efficiently and resisting the temptation to fill in the released efficiencies with more useless energy-gobbling shit we don't really need, or simply getting used to using less of them, period. Simple as that. These are the conversations no one wants to have because it requires thinking outside of the status quo, which for most of us in Western society is pretty damn comfortable. If we don't have a 'reality check' soon, this may well be the straw that breaks the camel's back. Those are the realities I pose to you.

doug said...

The realities I pose to you are that if you are passionate about the future of humanity, our environment and the planet as a whole - quit bitching about it and start doing something! Do some scientific research into new technologies, get into politics, anything really. I think some people, especially those who don't know you as well as me, might percieve that the sole purpose of your blog is to paint a bleak picture of our future and to Bitch. I know that you have positive energy and intelligence that can be channeled into good things, so make it so; becuause nobody really wants to hear more doom and gloom - we all have access to CNN.


Ps give some of us credit as I'm well aware that hydrogen isn't an energy source and that bio-fuel has negative returns- these are all well documented facts.