Saturday, March 24, 2007
That said, here's my anecdotal observation. Peakoil.com seems to be the target of an increased corporate troll presence.
As part of our normal procedures we "look the other way" & tolerate a certain level of this kind of posting. It's impossible to eliminate anyway, & often has the opposite effect than was intended by the troller. But lately, we have been seeing a rash of these disinformation posts & so it hit my radar.
Now I can't share with you specifically how I know who's trolling & who's just misinformed... or where these messages originate. But I can tell you that some of these folks use some pretty elaborate techniques to prevent techs like me from tracing them.
Newsflash... I'm better at this than you are... (Anon proxy all you like... not how I'm finding you anyway. MAC Spoofers should beware though)
Anyway, I just thought it was interesting & wanted to share my observations with the community.
It's kinda funny, in a deadly serious sort of way, & is the biggest compliment I can think of to bestow on the Peak Oil movement. I promise not to do any tech evil against your trolling butts... but I'm just a guy & don't speak for the entire community. Lota pissed-off folks out there ya know?
What really amazes me is that these people don't seem to realize that the Peak Oil message puts the energy industry at the front of the line & all but guarantees massive profits for these companies... for a while anyway.
Troll on morons... troll on.
Thursday, March 22, 2007
The linked video is a presentation he gave which outlines his understanding of the challenges we face as humanity journeys into this strange new world of the future.
Basically he says that Man's biggest problem is our energy profile, & how we will meet the demands of future generations. He speculates that the difficulties expected as conventional oil peaks in production & begins declining could be met by harvesting the Terra watts of energy which fall on our Planet everyday... if only we understood the science behind this energy in greater detail.
His argument is that our technologies are so inefficient, that all of our planet's energy needs could be met through harvesting sunlight by reclaiming this wasted energy.
The central difficulty is our ability to control materials at the micron-level.
Without the technology to manufacture to this micron standard, we lose most of the energy we harvest to the inefficient nature of how the materials conduct & distribute this energy.
Dr. Smalley noted that we still use the same technology to transmit electricity as we have for 150 years... & it's terribly inefficient as a carrier. Around half the electric power we generate from any source is wasted in "leakage" from these poorly constructed materials. (Copper wire)
But if we could figure out how to manipulate these materials, we could build new systems which would be many times more efficient than today's materials.
There is plenty of primary science which lays ahead of such developments, with no clear guarantee of success. But this line of research may well represent our best hope of meeting our energy challenge.
So without further adieu, take a peek at Dr. Smalley as he explains his thoughts about our future.
* We miss you sir.
Tuesday, March 20, 2007
The man whose work inspired the recent Billary 1984 video wrote the following short story which speaks directly to our "modern" social condition.
It's about his favorite topic... groupthink.
What's most interesting of course, is the fact that we don't yet know who produced the controversial video which simultaneously makes Billary look like Hitler, & makes Obamma look like a Dyed-in-the-wool, gun-toting, tin-foil hat wearin freak for making the video.
Now who could possibly have a motive for slamming both these Democratic frontrunner's for the 08 Presidential election?
Inquiring minds want to know... & so do I.
That said, take a journey into the real world with Mr. Blair, where you have no real choice or free will, & your decisions are provided to you... by the mob.
George Orwell 1936
In Moulmein, in lower Burma, I was hated by large numbers of people – the only time in my life that I have been important enough for this to happen to me. I was sub-divisional police officer of the town, and in an aimless, petty kind of way anti-European feeling was very bitter. No one had the guts to raise a riot, but if a European woman went through the bazaars alone somebody would probably spit betel juice over her dress. As a police officer I was an obvious target and was baited whenever it seemed safe to do so. When a nimble Burman tripped me up on the football field and the referee (another Burman) looked the other way, the crowd yelled with hideous laughter.
This happened more than once. In the end the sneering yellow faces of young men that met me everywhere, the insults hooted after me when I was at a safe distance, got badly on my nerves. The young Buddhist priests were the worst of all. There were several thousands of them in the town and none of them seemed to have anything to do except stand on street corners and jeer at Europeans.All this was perplexing and upsetting. For at that time I had already made up my mind that imperialism was an evil thing and the sooner I chucked up my job and got out of it the better.
Theoretically – and secretly, of course – I was all for the Burmese and all against their oppressors, the British. As for the job I was doing, I hated it more bitterly than I can perhaps make clear. In a job like that you see the dirty work of Empire at close quarters. The wretched prisoners huddling in the stinking cages of the lock-ups, the grey, cowed faces of the long-term convicts, the scarred buttocks of the men who had been Bogged with bamboos – all these oppressed me with an intolerable sense of guilt. But I could get nothing into perspective. I was young and ill-educated and I had had to think out my problems in the utter silence that is imposed on every Englishman in the East. I did not even know that the British Empire is dying, still less did I know that it is a great deal better than the younger empires that are going to supplant it.
All I knew was that I was stuck between my hatred of the empire I served and my rage against the evil-spirited little beasts who tried to make my job impossible. With one part of my mind I thought of the British Raj as an unbreakable tyranny, as something clamped down, in saecula saeculorum, upon the will of prostrate peoples; with another part I thought that the greatest joy in the world would be to drive a bayonet into a Buddhist priest's guts. Feelings like these are the normal by-products of imperialism; ask any Anglo-Indian official, if you can catch him off duty.One day something happened which in a roundabout way was enlightening. It was a tiny incident in itself, but it gave me a better glimpse than I had had before of the real nature of imperialism – the real motives for which despotic governments act.
Early one morning the sub-inspector at a police station the other end of the town rang me up on the phone and said that an elephant was ravaging the bazaar. Would I please come and do something about it? I did not know what I could do, but I wanted to see what was happening and I got on to a pony and started out. I took my rifle, an old 44 Winchester and much too small to kill an elephant, but I thought the noise might be useful in terrorem. Various Burmans stopped me on the way and told me about the elephant's doings.
It was not, of course, a wild elephant, but a tame one which had gone "must." It had been chained up, as tame elephants always are when their attack of "must" is due, but on the previous night it had broken its chain and escaped. Its mahout, the only person who could manage it when it was in that state, had set out in pursuit, but had taken the wrong direction and was now twelve hours' journey away, and in the morning the elephant had suddenly reappeared in the town.
The Burmese population had no weapons and were quite helpless against it. It had already destroyed somebody's bamboo hut, killed a cow and raided some fruit-stalls and devoured the stock; also it had met the municipal rubbish van and, when the driver jumped out and took to his heels, had turned the van over and inflicted violences upon it.
The Burmese sub-inspector and some Indian constables were waiting for me in the quarter where the elephant had been seen. It was a very poor quarter, a labyrinth of squalid bamboo huts, thatched with palmleaf, winding all over a steep hillside. I remember that it was a cloudy, stuffy morning at the beginning of the rains. We began questioning the people as to where the elephant had gone and, as usual, failed to get any definite information.
That is invariably the case in the East; a story always sounds clear enough at a distance, but the nearer you get to the scene of events the vaguer it becomes. Some of the people said that the elephant had gone in one direction, some said that he had gone in another, some professed not even to have heard of any elephant. I had almost made up my mind that the whole story was a pack of lies, when we heard yells a little distance away.
There was a loud, scandalized cry of "Go away, child! Go away this instant!" and an old woman with a switch in her hand came round the corner of a hut, violently shooing away a crowd of naked children. Some more women followed, clicking their tongues and exclaiming; evidently there was something that the children ought not to have seen.
I rounded the hut and saw a man's dead body sprawling in the mud. He was an Indian, a black Dravidian coolie, almost naked, and he could not have been dead many minutes. The people said that the elephant had come suddenly upon him round the corner of the hut, caught him with its trunk, put its foot on his back and ground him into the earth.
This was the rainy season and the ground was soft, and his face had scored a trench a foot deep and a couple of yards long. He was lying on his belly with arms crucified and head sharply twisted to one side. His face was coated with mud, the eyes wide open, the teeth bared and grinning with an expression of unendurable agony. (Never tell me, by the way, that the dead look peaceful. Most of the corpses I have seen looked devilish.) The friction of the great beast's foot had stripped the skin from his back as neatly as one skins a rabbit. As soon as I saw the dead man I sent an orderly to a friend's house nearby to borrow an elephant rifle.
I had already sent back the pony, not wanting it to go mad with fright and throw me if it smelt the elephant.The orderly came back in a few minutes with a rifle and five cartridges, and meanwhile some Burmans had arrived and told us that the elephant was in the paddy fields below, only a few hundred yards away.
As I started forward practically the whole population of the quarter flocked out of the houses and followed me. They had seen the rifle and were all shouting excitedly that I was going to shoot the elephant. They had not shown much interest in the elephant when he was merely ravaging their homes, but it was different now that he was going to be shot. It was a bit of fun to them, as it would be to an English crowd; besides they wanted the meat. It made me vaguely uneasy.
I had no intention of shooting the elephant – I had merely sent for the rifle to defend myself if necessary – and it is always unnerving to have a crowd following you. I marched down the hill, looking and feeling a fool, with the rifle over my shoulder and an ever-growing army of people jostling at my heels. At the bottom, when you got away from the huts, there was a metalled road and beyond that a miry waste of paddy fields a thousand yards across, not yet ploughed but soggy from the first rains and dotted with coarse grass.
The elephant was standing eight yards from the road, his left side towards us. He took not the slightest notice of the crowd's approach. He was tearing up bunches of grass, beating them against his knees to clean them and stuffing them into his mouth.I had halted on the road. As soon as I saw the elephant I knew with perfect certainty that I ought not to shoot him. It is a serious matter to shoot a working elephant – it is comparable to destroying a huge and costly piece of machinery – and obviously one ought not to do it if it can possibly be avoided. And at that distance, peacefully eating, the elephant looked no more dangerous than a cow.
I thought then and I think now that his attack of "must" was already passing off; in which case he would merely wander harmlessly about until the mahout came back and caught him. Moreover, I did not in the least want to shoot him. I decided that I would watch him for a little while to make sure that he did not turn savage again, and then go home.But at that moment I glanced round at the crowd that had followed me.
It was an immense crowd, two thousand at the least and growing every minute. It blocked the road for a long distance on either side. I looked at the sea of yellow faces above the garish clothes-faces all happy and excited over this bit of fun, all certain that the elephant was going to be shot. They were watching me as they would watch a conjurer about to perform a trick. They did not like me, but with the magical rifle in my hands I was momentarily worth watching. And suddenly I realized that I should have to shoot the elephant after all.
The people expected it of me and I had got to do it; I could feel their two thousand wills pressing me forward, irresistibly. And it was at this moment, as I stood there with the rifle in my hands, that I first grasped the hollowness, the futility of the white man's dominion in the East. Here was I, the white man with his gun, standing in front of the unarmed native crowd – seemingly the leading actor of the piece; but in reality I was only an absurd puppet pushed to and fro by the will of those yellow faces behind. I perceived in this moment that when the white man turns tyrant it is his own freedom that he destroys. He becomes a sort of hollow, posing dummy, the conventionalized figure of a sahib.
For it is the condition of his rule that he shall spend his life in trying to impress the "natives," and so in every crisis he has got to do what the "natives" expect of him. He wears a mask, and his face grows to fit it. I had got to shoot the elephant. I had committed myself to doing it when I sent for the rifle. A sahib has got to act like a sahib; he has got to appear resolute, to know his own mind and do definite things. To come all that way, rifle in hand, with two thousand people marching at my heels, and then to trail feebly away, having done nothing – no, that was impossible. The crowd would laugh at me. And my whole life, every white man's life in the East, was one long struggle not to be laughed at.
But I did not want to shoot the elephant.
I watched him beating his bunch of grass against his knees, with that preoccupied grandmotherly air that elephants have. It seemed to me that it would be murder to shoot him. At that age I was not squeamish about killing animals, but I had never shot an elephant and never wanted to. (Somehow it always seems worse to kill a large animal.) Besides, there was the beast's owner to be considered. Alive, the elephant was worth at least a hundred pounds; dead, he would only be worth the value of his tusks, five pounds, possibly. But I had got to act quickly. I turned to some experienced-looking Burmans who had been there when we arrived, and asked them how the elephant had been behaving. They all said the same thing: he took no notice of you if you left him alone, but he might charge if you went too close to him.It was perfectly clear to me what I ought to do. I ought to walk up to within, say, twenty-five yards of the elephant and test his behavior.
If he charged, I could shoot; if he took no notice of me, it would be safe to leave him until the mahout came back. But also I knew that I was going to do no such thing. I was a poor shot with a rifle and the ground was soft mud into which one would sink at every step.
If the elephant charged and I missed him, I should have about as much chance as a toad under a steam-roller. But even then I was not thinking particularly of my own skin, only of the watchful yellow faces behind. For at that moment, with the crowd watching me, I was not afraid in the ordinary sense, as I would have been if I had been alone. A white man mustn't be frightened in front of "natives"; and so, in general, he isn't frightened.
The sole thought in my mind was that if anything went wrong those two thousand Burmans would see me pursued, caught, trampled on and reduced to a grinning corpse like that Indian up the hill. And if that happened it was quite probable that some of them would laugh. That would never do.There was only one alternative. I shoved the cartridges into the magazine and lay down on the road to get a better aim.
The crowd grew very still, and a deep, low, happy sigh, as of people who see the theatre curtain go up at last, breathed from innumerable throats. They were going to have their bit of fun after all. The rifle was a beautiful German thing with cross-hair sights. I did not then know that in shooting an elephant one would shoot to cut an imaginary bar running from ear-hole to ear-hole. I ought, therefore, as the elephant was sideways on, to have aimed straight at his ear-hole, actually I aimed several inches in front of this, thinking the brain would be further forward.
When I pulled the trigger I did not hear the bang or feel the kick – one never does when a shot goes home – but I heard the devilish roar of glee that went up from the crowd. In that instant, in too short a time, one would have thought, even for the bullet to get there, a mysterious, terrible change had come over the elephant. He neither stirred nor fell, but every line of his body had altered. He looked suddenly stricken, shrunken, immensely old, as though the frightful impact of the bullet had paralysed him without knocking him down.
At last, after what seemed a long time – it might have been five seconds, I dare say – he sagged flabbily to his knees. His mouth slobbered. An enormous senility seemed to have settled upon him. One could have imagined him thousands of years old.
I fired again into the same spot.
At the second shot he did not collapse but climbed with desperate slowness to his feet and stood weakly upright, with legs sagging and head drooping. I fired a third time. That was the shot that did for him. You could see the agony of it jolt his whole body and knock the last remnant of strength from his legs. But in falling he seemed for a moment to rise, for as his hind legs collapsed beneath him he seemed to tower upward like a huge rock toppling, his trunk reaching skyward like a tree. He trumpeted, for the first and only time. And then down he came, his belly towards me, with a crash that seemed to shake the ground even where I lay.
I got up.
The Burmans were already racing past me across the mud. It was obvious that the elephant would never rise again, but he was not dead. He was breathing very rhythmically with long rattling gasps, his great mound of a side painfully rising and falling. His mouth was wide open – I could see far down into caverns of pale pink throat. I waited a long time for him to die, but his breathing did not weaken.
Finally I fired my two remaining shots into the spot where I thought his heart must be. The thick blood welled out of him like red velvet, but still he did not die. His body did not even jerk when the shots hit him, the tortured breathing continued without a pause. He was dying, very slowly and in great agony, but in some world remote from me where not even a bullet could damage him further.
I felt that I had got to put an end to that dreadful noise. It seemed dreadful to see the great beast Lying there, powerless to move and yet powerless to die, and not even to be able to finish him. I sent back for my small rifle and poured shot after shot into his heart and down his throat. They seemed to make no impression. The tortured gasps continued as steadily as the ticking of a clock.In the end I could not stand it any longer and went away. I heard later that it took him half an hour to die. Burmans were bringing dash and baskets even before I left, and I was told they had stripped his body almost to the bones by the afternoon.Afterwards, of course, there were endless discussions about the shooting of the elephant.
The owner was furious, but he was only an Indian and could do nothing. Besides, legally I had done the right thing, for a mad elephant has to be killed, like a mad dog, if its owner fails to control it. Among the Europeans opinion was divided. The older men said I was right, the younger men said it was a damn shame to shoot an elephant for killing a coolie, because an elephant was worth more than any damn Coringhee coolie. And afterwards I was very glad that the coolie had been killed; it put me legally in the right and it gave me a sufficient pretext for shooting the elephant.
I often wondered whether any of the others grasped that I had done it solely to avoid looking a fool.
Wednesday, March 14, 2007
Dr Ali Morteza Samsam Bakhtiari, the recently retired senior adviser for the National Iranian Oil Company.
Photograph: Michelle Ward
Peak oil. Two words to strike fear in the heart of our oil-addicted globe. But how real is the risk that oil production is in decline, outstripped by demand and our inability to discover new deposits? Are we on the slippery slope to oil oblivion?
Bruce Madden explores the peak oil phenomenon and its potential implications for the global economy, markets and investors.
If you believe a number of growing voices on the subject, our industrialised, oil based global economy teeters precariously on the verge of a spectacular crisis. If you believe the peak oil theorists, 2006 marks the year of peak oil, the global peak of crude oil production.
For the peak oil set, the theory is simple. For six generations, the world has gorged on a ready supply of cheap oil. This fundamental commodity has proven to be in abundant supply – augmented in times of high demand by the seemingly endless supply of sweet light crude pumped effortlessly from the mega oil fields like the Saudi Arabian Ghawar field. Those days are gone, the theory contests. A new era with a different set of rules means there will be nothing like business as usual.
Such views belong to a small but growing league of global oil experts like the Tehran based Dr Ali Morteza Samsam Bakhtiari.
Dr Bakhtiari’s analysis paints a bleak shopping list of potentially catastrophic threats and impacts: ageing oil wells; over-estimated reserves; limited new discoveries; growing demand and dwindling supply; soaring prices; underinvestment; poor alternatives; geopolitical tensions; suburbia in turmoil and a disbelieving world watching and waiting rather than reacting and planning.
“We are a couple of hurricanes or some geopolitical problems or a war away from having a worse problem than we have today,” says Dr Bakhtiari, the recently retired senior adviser for the National Iranian Oil Company and author of several books and more than 65 papers on the oil and gas industry. His current analysis forecasts periods of high volatility with oil prices rocketing up to $300 a barrel. Then, once the price explodes, it will become a question of availability countries may be desperate enough to pay any price, but there will not be any oil.
Certain experts believe the situation is so dire that petrol may hit five dollars a litre within five years. But society’s addiction goes beyond the petrol bowser. Computers, televisions, telephones, pens, deodorants, shampoos, razors, toothbrushes and painkillers, to name a few, are all made with oil. As are food storage systems, farm equipment and pesticides.
According to the experts, aircraft will be the first casualty because, unlike petrol which has hidden subsidies the price of jet fuel is directly proportional to increases in crude oil.
Dr Bakhtiari says the decline of global oil production appears irreversible and will occur over a number of transitions, the first of which he labels Transition One (T1) a benign, barely noticeable gradient of decline which began this year, 2006.
However, in Dr Bakhtiari’s peak oil vision it is Transition Two which will deliver a far steeper and more pronounced impact. Worse, neither investment nor new technology will have any significant impact.
During Transition One, mega projects should not be undertaken because they may take up to 25 years and “we do not know exactly where we are going,” he says, citing the 2,600km European freight train line from Barcelona to Kiev. The idea is fine, but simply too late.
“I do not think such a project will ever be finished, because the high oil prices will trigger price rises in prices for all other commodities,” Dr Bakhtiari told the Australian Senate’s rural and regional affairs and transport references committee in July this year.
“You already see that steel is way above usual prices. Copper has hit between $7,000 and $8,000 and it will go much higher than that. Nickel is $22,000.
“All these commodities and all these metals will go very much higher, because it is the crude oil price which dictates the prices. Sugar is going up, orange juice is going up – everything is going up – because the price of crude oil is going up.”
In other words, as a base commodity, crude oil is a fundamental price input to all other commodity prices, which can reasonably be expected to rise.
The world would never see US$30 a barrel again unless a bird flu epidemic wiped out millions of people or something hit the planet that disrupted all calculations, Dr Bakhtiari told the committee. He cannot foresee anything below even US$50 a barrel.
“That in my opinion would be very bad news because if it goes back to, say, US$50 per barrel for some reason and for a short period of time, people will think, ‘Ah! So US$75 was just a spike and now we are back to the good old days and we can begin consuming again. Let’s go and buy that big SUV that we were looking at.’ You then lose two or three years at least. So US$30 in my opinion is absolutely impossible.” In the future, expect up to $300 a barrel. Political tension and the threat of terrorist activity in Saudi Arabia, Nigeria, Iraq and Iran will only add to the fragile supply.
Based on his bottom-up analysis of world oil supply over the next 14 years, he believes present global production of 81 million barrels a day will decrease to 79 million by 2009 and to about 55 million barrels a day by 2020.
“Thus, in the face of peak oil and its multiple consequences, which are bound to impact upon almost all aspects of our human standards of life, it seems imperative to get prepared to face all the inevitable shockwaves resulting from that. Preparation should be carried out on individual, familial, societal and national levels as soon as possible. Every preparative step taken today will prove far cheaper than any step taken tomorrow.”
Dr Bakhtiari’s estimates vary widely from those of other leading international oil advisers, Cambridge Energy Research Associates (CERA) and the International Energy Agency, which foresee production levels of more than 100 million barrels a day and up to 120 million in 2020-25.
Some of the views on the peak oil theory are blunt – for example a recent report in BusinessWeek quoted a senior CERA executive denouncing the peak oil theory as “garbage”. Robert W Esser, a director of CERA, told BusinessWeek: “peak oil theory is garbage as far as we are concerned.”
BusinessWeek also reported CERA as predicting world oil and natural gas liquids capacity to increase by as much as 25% by 2015.
Dr Bakhtiari says he is stunned by such bullish forward predictions, saying there is no doubt “one of us is totally wrong. I am quite sure of my prediction… because I have added every single oilfield that I believe could come on stream…”
Most of the super giant oilfields, which supply 40% of world production, are ageing, with some entering terminal decline. The last super giant to be discovered was the Kashagan oilfield in the north Caspian Sea in 1999. The three largest, Saudi Arabia’s Ghawar, Mexico’s Cantarell and Kuwait’s Greater Burgan, are declining steadily.
Dr Bakhtiari was proved right when in August the Kuwait Oil Company declared that the Burgan field was past its peak output (ref: kuwaittimes.net, Thursday, 24 August). The revelation also gave credence to claims by energy investment banker Matthew R Simmons, author of the seminal book Twilight in the Desert, that the world may have passed peak oil. Simmons asserts that sudden, sharp oil-production declines, especially at ageing Saudi fields, may happen at any time.
Even more disturbing, oilfields such as Ghawar, Cantarell and Samotlor in Russia appear to have been pushed unadvisedly rather than rested. “There is nothing worse for an oilfield than to be pushed,” Dr Bakhtiari adds. If Cantarell collapses, it would be a catastrophe for Mexico, which would lose its income, and also for the United States, “because what they lose from Cantarell, they will have to make up from somewhere else”.
Annual oil finds have plunged to between four and six billion barrels a year and only five major fields started up this year, he says. “There is little hope that this trend will be reversed in the near future because most of the planet’s petroleum provinces have been explored and there is only one last frontier area remaining – that of Antarctica, with its pristine wilderness and its population of some 20 million penguins.”
Environmental issues aside, Antarctica may not be the solution because conditions may simply be too difficult. It is dark for seven months of the year, it is tough to drill in ice and there is an icecap of at least 2,000m before you get to the lower tectonics. But when the price of oil goes to $300 a barrel, some oil companies may try their hand. “I hope it will not happen. But some governments will have their backs to the wall and in suburbia there will be unrest over petrol.”
Then there is the matter of over-estimation of supply. Dr Bakhtiari has studied oil reserves for the past 40 years and bases his modelling on the reserves of specialist Dr Colin Campbell, who has researched almost all the oil provinces on the planet. “Most reviews of the reserves of the major Middle East countries today, especially the BP Statistical Review of World Energy, mention reserves amounting to between 600 billion and 700 billion barrels,” he told the Senate committee. “These are official figures – in other words, the countries involved say that they have so much oil reserves available. The Oil and Gas Journal and BP take these reserves at face value.”
In the 1980s, gas reserves were revised upwards. Saudi Arabia, which has reserves of 160 billion barrels, suddenly had 260 billion barrels. “Since 1989, it has kept this number of 260 billion barrels; there has been no change to it up to this day. So, for 17 years, it’s as if they have not produced anything.” He shares Dr Campbell’s view that the reserves of the Middle East are about half of the official figures: 300 billion to 350 billion barrels of oil.
“Every institution gives its own numbers, and we can only compare theirs to ours. You can see that the reserves given by the USGS (United States Geological Survey) for the world of over 3,200 billion barrels of reserves, is much higher than the numbers we are using, of only 1,900 billion. Of course, we cannot accept such reserves as realistic, as we cannot accept the projections of certain institutions like the International Energy Agency in Paris, which predicts that the world will be consuming 118 million barrels per day in the year 2030 as realistic because I cannot see how the world can get over 81 or 82 [m/bd] per day right now, let alone in the future.” At the 25th CERA energy conference in Houston earlier this year, it was revealed that virtually all oil basins in the world had gone through one round of exploration and were delivering fewer reserves than in the past. From 1999-2002, Russia contributed 47% of world oil production growth. In 2003, it was 14%; in 2004, 13%; and in 2005, a modest 2.4%. The conference was also told that a lost generation of petroleum engineers needed to be filled. Only 300 petroleum engineers, compared with 44,000 law graduates, graduated in the US last year.
Asia offers further challenges. Experts agree that the most
dramatic event in post-peak oil will be when the effects hit
China, the second-largest consumer (after the US) of oil.
In the past ten years, China’s gross domestic product has tripled.
India is also entering a serious growth phase. Jane Henderson,
portfolio manager, North America, Walter Scott & Partners,
says if history repeats itself, consumption for China and India
is headed one way as individuals seek to better their livelihoods
and discard bikes for cars.
Are there alternatives?
Shale oil is touted as a saviour. But while it may be plentiful, it is a messy, difficult industry, Dr Bakhtiari says. In Canada, about
1.1 million barrels a day of synthetic crude oil is produced; 3 million will be the limit.
“About two tonnes of shale oil is needed to make one barrel of synthetic crude oil, which takes its toll on the environment. Already, Canadian rivers are so polluted that fish are dying and it will soon be impossible to clean all the rivers. There is heavy oil in Venezuela, with 600,000 barrels of capacity and potential for up to about 1.2 million, but the difficulty is in transforming its potential into production,” Dr Bakhtiari says.
In Dr Bakhtiari’s opinion, there is no panacea, no alternative to crude oil. Gas to liquid (GTL) is not a consideration because capacity is just 85,000 barrels a day, a drop in the ocean. Coal to liquid (CTL) is messy and inefficient energy-wise. The world’s only CTL plant in Secunda, South Africa, produces 150,000 barrels a day. China is trying to produce up to one million barrels a day of CTL, a target it will take time to achieve.
Ethanol and biodiesel are simply not sustainable. For every litre of ethanol, between three and four litres of water is needed to produce it. Sugar cane is the best option. “That is what the Brazilians are doing today. With sugar cane, you need one square kilometre of cane to produce 3,800 barrels of ethanol a year. It is not easy and it is inefficient.”
Solar power will have a small role to play, especially in Australia where there is plenty of sun and land to develop it. Ditto for wind power. But their roles will amount to 2-4% of oil consumption over the next 15 to 20 years.
Gas is another option but peak gas is not too far away, based on Dr Bakhtiari’s prediction for 2008-09. Peak gas and peak oil are two totally different things because oil is such a special commodity. For example, you cannot just put gas in a ship. “You either have to consume it locally, pipe it to some other country or put it in a LNG tanker.”
Australia’s huge reserves of gas will be a bonus. “I think that Russia does not have much gas anymore, although it is the
“A decline in the Saudi Arabian field Ghawar may not be sudden and sharp but gentle and prolonged, allowing the Saudis to develop new fields.”
largest producer in the world. I am worried for the Europeans… if this winter is harsh, you will have thousands of people dying because the Russians simply do not have enough gas to provide to Europe. According to my statistics, at least 900 people in eastern European countries froze to death last year. This year it is going to be double or triple that amount. When there is a real crisis, how are they going to react?
“For one week in March this year, the British did not have enough gas and the price of gas shot up to $258 per barrel oil equivalent. And we are in a very normal situation now; we are not at peak yet. So you can imagine how it is going to be when it is at peak, with the panic in all those countries because of the winter months.”
Still time to act
Not everyone shares Dr Bakhtiari’s view. CERA’s Peter Jackson said in The Economist in April (20 April 2006) the price signals that would foreshadow any ‘peak’ would encourage efficiency, promote discovery and speed investment in alternatives. The metaphor of peak was therefore misleading. “The right picture is of an undulating plateau,” he said.
A decline in the Saudi Arabian field Ghawar may not be sudden and sharp but gentle and prolonged, allowing the Saudis to develop new fields. Saudi Arabia’s oil minister, Ali Naimi, outlined in the same issue of The Economist (20 April 2006) an unexplored area on the Iraqi-Saudi border the size of California.
Even Dr Bakhtiari believes there is time to be prepared, to avoid costly panic, because the world is not too far down the T1 slope. Free public transport, improved rail, and steering committees packed with bright young things to set up priorities for the use of petrol are crucial. In this arena, Western Australia has been at the forefront, with Perth’s free rounding bus transport system carrying people from their homes to train stations. Its light rail services about 140km of coastline, linking all suburbs.
But he warned the Senate committee: “Get prepared for any eventuality. Have a special committee for that now… so that when the crisis really hits, you have something to fall back on; you have a team that is already prepared and who has thought these problems through.”
www.samsambakhtiari.com www.simmonsco-intl.com www.suncor.com www.hubbertpeak.com
Copyright 2006. Macquarie Bank Limited and/or their subsidiary/group companies (“Macquarie”). Used with permission. Macquarie is the owner of the copyright material in this article unless otherwise specified. Macquarie accepts no liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this article.
The equity investor
One way financial advisers can prepare clients for the arrival (or not) of peak oil is to stay close to fund managers that scrutinise the interplay between commodity supply and markets. Managers like Jane Henderson, portfolio manager with Edinburgh based Walter Scott & Partners.
For the first time, she says, the opportunity to continue to supply cheap oil to meet demand is being questioned.
“We’ve assumed that Saudi Arabia can turn the taps on and be the swing producer and use this light, sweet crude at five dollars a barrel in infinite supply, and clearly that’s not the case anymore,” she says.
“I personally don’t think we’re going to run out of oil. However, I think the days of cheap and easy access are being challenged.”
One of the biggest problems has been low investment in the oil industry for the past 30 years and the resultant side effects are being experienced today. “Countries cannot start imposing heavy taxation on this system. If you look back at the history and times when countries have imposed windfall taxes on the industry, it just does one thing: it stifles investment.”
Volatility is another factor. If the world was calm, Iran, Iraq and Nigeria could be relied on to be pumping at full capacity, easing the tight excess supply situation. While the geopolitical perspective adds another dimension to investments, underpinning the Walter Scott & Partners Limited investment rationale has to be a good, solid, well managed company with great growth assets that have strong production profiles or that have the necessary technology to improve profitability.
A recent addition to the portfolio is Suncor, the Canadian company outfitting the Athabasca Tar Sands. “There actually isn’t any exploration risk in the Athabasca Tar Sands,” Henderson says. “The stuff is there. It’s difficult to quantify the exact amount, but many people have it at multiples of Saudi Arabia in terms of total potential supply. I believe the Chinese are constantly in Calgary, trying to work out some deals with the current incumbents to get just that regular and consistent source of supply.”
The commodities investor
For Robert Holroyd, Director of Commodity Strategies Limited, the notion of peak oil is problematic. In simple terms, nothing is certain. He says there will always be claim and counter claim regarding world energy resources.
His job, running CSL investment management strategy, is to keep an eye out for immediate market risk and to respond accordingly.
Thus, one thing he does know is that commodity prices have fallen, with the exception of metals, in recent times by some 20%. For financial advisers, this may provide a brief period of reflection to look at the totality of commodities which, in Holroyd’s words, have “come off the boil”.
“And they’ll be saying, ‘okay, well, it looks like this bull run’s over, we can relax a little bit.’”
“And what we’ve seen
is basically quite a lot of
speculative money coming
into this market, and
some people have had
their fingers burnt. The
volatility of these markets
has been pretty high, and
there have been a number
of commodity funds that
have actually closed down
because of the volatility that
we’ve seen in the last few
months,” Holroyd says.
Holroyd’s fund has remained overweight cash (just 26% exposure to markets, September 2006) during this period of market volatility, a position he regards as prudent for the times.
On oil, he regards pricing risk as erring on the upside due to supply/demand imbalances.
Is peak oil really a threat? “The first thing you must do as an investor is to look at the probability factor: can this peak oil theory eventuate?
“I guess there are a number of things at play. One is that the argument is that the bulk of the readily available oil that has been found in the world has basically been found, and there isn’t a great deal more of it that’s easily or readily accessible. So that’s the first issue.
“And then the second one is, when we’ve got the easily accessible oilfields out there that are producing currently enough oil to be able to supply the world what is the chance that these things are going to start running out and creating a real problem?
“The other thing we do know though is, that if the oil price starts to go up, various different oilfields that have previously been uneconomic to extract oil out of, all of a sudden become economic again.”
Sunday, March 11, 2007
The title of the article referred to recent increases in oil extraction from older oil fields, noting: “Within the last decade, technology advances have made it possible to unlock more oil from old fields, and, at the same time, higher oil prices have made it economical for companies to go after reserves that are harder to reach. With plenty of oil still left in familiar locations, forecasts that the world’s reserves are drying out have given way to predictions that more oil can be found than ever before.” As is the case with much of what gets published in The New York Times, some of the information in the article is true. But then again, to the well-trained and highly polished Peak Oil mind, the article has a lot of disinformation in it about what is the long-term state of the oil patch. In a not-so-subtle manner, the Times article appears to diminish the credibility of the Peak Oil argument. Specifically, the Times article focuses on allaying any Manhattanite fears of future scarcity of conventional oil by suggesting that “new technology” will locate and extract immense volumes of oil with which mankind will, to all intents and purposes, power its way into a brighter future.
It is as if we can now all kick back, pop a beer, wipe the sweat from our collective brow, and say, “Whew, we dodged that Peak Oil bullet.” Porosity, Permeability, Rocks, and Reserves The “world’s reserves are drying out,” states the article. I would not put it quite that way. Oil reserve estimates are a complex mixture of science and art, but the aggregate number depends in large measure on price. Reserve estimates do not really “dry out.” Estimates or volumes or quantities may rise or fall, but there is nothing dry about them, except for the Securities and Exchange Commission rules that govern how publicly traded oil companies have to do the underlying engineering-based accounting.
And is it true that, as the article states, “more oil can be found than ever before”?
No, not exactly.
The oil in older oil fields has, of course, by definition, already been found. The oil may or may not have been extracted and recovered, but it has been found. Getting it out is the problem, and for that we have to drill holes into the rocks. Always have, and always will. Oil, and associated natural gas and water, accumulates in what are known as “reservoir” rocks over periods of geologic time, meaning very long time periods often as not measured in millions of years. Reservoir rocks are almost always sedimentary rocks that have a fortuitous combination of what is called “porosity” and “permeability.” (In rare locales, such as offshore Vietnam, metamorphic, and even igneous, rocks serve as reservoir rocks. The oil originated elsewhere, and has migrated into porous, permeable metamorphic or igneous rocks. We will address the migration process shortly.)
The porosity of a rock is a measurement of the volume of the (usually) microscopic “pore” spaces between the mineral grains that make up the bulk of the rock. And the permeability of a rock is a measurement of the ability of a fluid to flow through these small pore spaces. (Just to be clear, oil is not located in big, empty voids deep within the earth. There are no natural “pools” of oil, like gigantic underground swimming pools, waiting for someone to drill and pump the oil out.) But a reservoir rock also needs some sort of “cap,” or trapping mechanism, to hold the oil inside its pore spaces. Over geologic time, even very minor leaks (along, say, fractures or faults) can allow essentially all of the fluids, and certainly the valuable ones like petroleum, to drain out of a rock formation. Rock formations such as salt beds or tight, very impermeable shales often serve as cap rocks, keeping the petroleum fluids sealed within the reservoir rock. And all of this assumes that somewhere nearby is a “source” rock, from which the oil and natural gas originated.
Usually, the source rocks are located in close proximity to the reservoir, but not always. In some of the conventional oil fields of Western Canada, for example, the source rocks are as much as 100 miles from the reservoir rocks, indicating quite a long migration to their ultimate resting place. So the oil that lubricates and powers the world originated during various geological periods of the past and came to be formed in source rocks. Eventually, and subject to a multitude of geologic forces and phenomena acting over relatively long periods of time, the oil migrated from the source rocks into permeable reservoir rocks. As the oil flowed through these reservoir rocks, it came to occupy the pore spaces within the grains that make up the underground oil reservoir. Some sort of cap, or other lithologic seal, kept the oil in the reservoir rocks, awaiting discovery in the years since Col. Drake ushered in the modern Age of Petroleum, starting in 1859 at Titusville, Pa. This oil in the ground is usually called the “original oil in place” (OOIP). Gushers and Blowouts While we are on the subject of oil in the reservoir (or OOIP), I should mention that in order for the oil to be able to migrate into a drill hole, there is a requirement for “reservoir energy.” That is, some form of energy has to be present within the reservoir rock to cause the OOIP to move from the pore spaces where it has resided for these many years into a hole in the ground. Reservoir energy can be present due to the fact that most oil contains dissolved natural gas, usually under pressure, and in some locales under great pressure. (I write from personal experience on this one.) So the oil, with the “higher pressure” gas dissolved within, tends to flow, via that above-noted permeability, through the pores of a rock formation and into the “lower pressure” hole that the drillers have put down into the ground. The aboveground analogy would be the carbon dioxide (CO2) gas dissolved in a bottle of soda pop. When you remove the cap from the bottle, the dissolved gas starts to fizz towards the low-pressure open end of the bottle.
In the olden days, when people who drilled for oil did not quite understand the process, they would drill down into a rock formation and the reservoir energy would overwhelm the hole in the ground. This ofttime led to a rapid explosion of pressurized oil from the ground, famously known as a “gusher.” The old movies and photos show people acting happy, and even dancing with joy when a well “gushed.” But unbeknownst to the early oil pioneers, this was a disastrous waste of the reservoir energy of the oil field, because it caused the dissolved gas rapidly to exit from the reservoir rock and leave much of the otherwise recoverable oil behind. Thus, much of modern petroleum engineering has to do with monitoring and maintaining reservoir pressures as high as possible for as long as possible during drilling and producing operations, so as to recover as much of the OOIP as is possible. And yes, things like gushers can still happen in today’s highly engineered world, but we call them “blowouts.” They are not happy occasions. Neglected Resources: 2 out of 3 Barrels The New York Times article further discussed the process of oil recovery, stating: “Typically, oil companies can only produce one barrel for every three they find. Two usually are left behind, either because they are too hard to pump out or because it would be too expensive to do so. Going after these neglected resources, energy experts say, represents a tremendous opportunity. “‘Ironically, most of the oil we will discover is from oil we’ve already found,’ said Lawrence Goldstein, an energy analyst at the Energy Policy Research Foundation, an industry-funded group.
‘What has been missing is the technology and the threshold price that will lead to a revolution in lifting that oil.’” This description makes it seem like oil companies have always had more control over what happens than is actually the case. “Too hard to pump out,” states The New York Times article. Well, sort of. What the article is attempting to describe is the process whereby, over time, about one-third of the conventional oil in a given reservoir migrates from its geological location to the drill hole. The reason that it migrates is because of that above-noted reservoir energy. Think of the high pressure oil (or at least, the “higher” pressure oil) moving towards the low-pressure drill hole. This migrating oil is that one barrel out of three, on average. (Some oil fields yield higher percentages of the original oil in place. Other oil fields yield far lower percentages.) By the time that the one barrel makes its way to the borehole, the reservoir energy has diminished to the point that it is not sufficient to mobilize the other two barrels. So that oil remains behind, in the reservoir rock formation.
For most of the history of the oil industry, oilmen have been at the mercy of the reservoir energy in the rock formations deep beneath their feet. If you were fortunate enough to locate low viscosity oil with a high measure of reservoir energy, then you could extract a high percentage of the OOIP. Col. Drake’s first well at Titusville, for example, produced a “Pennsylvania” grade of crude oil that was exceedingly slippery (i.e., low viscosity, such that it feels smooth like hand lotion) from a thin, porous sandstone with excellent permeability, and the reservoir energy that benefited Col. Drake was what is called “water drive.” That is, ground water was essentially pushing the oil from the rock formation into Drake’s 69-foot-deep hole in the ground. Under these circumstances, recovery of OOIP from the sandstones beneath the Titusville region was relatively high over the years.
Enhancing the Reservoir Energy At the other end of the oil patch spectrum, however, the Kern River oil field, discovered in 1899 near Bakersfield, Calif., yields a highly viscous sort of oil, loosely described as “heavy oil.” There was never all that much reservoir energy to begin with, so the original rates of recovery of OOIP were in the range of perhaps 10%. In other words, nine out of 10 barrels of OOIP were left in the rock formation. But in recent years, as The New York Times notes in its article, Chevron has been using steam-flood technology and computerized 3-D reservoir modeling to boost the output of the Kern River field’s heavy oil reserves.
For something over two decades, Chevron engineers have injected high-pressured steam into the oil reservoirs, to enhance the reservoir energy and to mobilize the oil. This has allowed Chevron to pump out more oil. Production from the Kern River field had slumped to about 10,000 barrels a day in the 1960s, but with the steam flood, it now has a daily output of about 85,000 barrels. And even after a century of production, Chevron engineers say there are many more years of productive life left in the field, and much more oil to be pumped from Kern River, although all the steam in the world will not prevent the inevitable phase of irreversible decline in production over time.
According to The New York Times article: “At the Kern River field…millions of gallons of steam are injected into the field to melt [sic] the oil, which has the unusually dense consistency of very thick molasses. The steamed liquid is then drained through underground reservoirs and pumped out by about 8,500 production wells scattered around the field, which covers 20 square miles. “Initially, engineers expected to recover only 10% of the field’s oil. Now, thanks to decades of trial and error, Chevron believes it will be able to recover up to 80% of the oil from the field, more than twice the industry’s average recovery rate, which is typically around 35%. Each well produces about 10 barrels a day at a cost of $16 each. That compares with production costs of only $1 or $2 a barrel in the Persian Gulf, home to the world’s lowest-cost producers.” While there is nothing objectionable about what The New York Times article states, the article misses an important point with those “millions of gallons of steam.”
There are immense amounts of energy involved in generating the steam that goes into the ground, and this is one of the reasons why Kern River oil is up to 16 times more costly to produce than Persian Gulf oil. And not to quibble, but pumping steam is not exactly new or revolutionary technology. Oil well drillers near Titusville were documented as pumping steam down well bores as early as 1862, at first in an effort to remove the paraffin wax that built up inside the well casings. Then, over time, people noticed that a “steam bath” tended to give a kick to subsequent production. These old drillers may not have understood the engineering aspects in any detail, but they knew what worked out in the field.
Then as now, making steam required boiling water, which required more capital investment, equipment, energy, and labor, so it drove up costs. Plus, making and pumping steam added to the danger of working in the oil patch, and it was dangerous enough to work just around oil wells with no hot steam pipes crisscrossing the landscape. So the steam-pumping process added even more potential for leaks, sparks, and explosions. Thus, for many years steam pumping was used only in exceptional circumstances. As long as oil was cheap and relatively available from other oil fields in other locales, there was no particular incentive to add more layers of complexity to a process that was difficult enough on good days. But above a certain price for a barrel of oil, the extra cost of steam, or other methods of enhanced oil recovery, can pay for itself.
The New York Times article noted that the Kern River is… “Littered with a forest of wells, with gleaming pipes running along dusty roads. Seismic technology and satellites are now used to monitor operations, while sensors inside the wells record slight changes in temperature or pressure. Each year, [Chevron] drills some 850 new wells there… “There are very few workers in the field. Engineers in air-conditioned control rooms can get an accurate picture of the field’s underground reservoir and pinpoint with accuracy the areas they want to explore. None of that technology was available just a decade ago.” What a Difference a Decade Makes No, a decade ago, oil was selling for as little as $10 per barrel. And the Kern River field was a high cost outpost of marginal wells that produced viscous oil that was (and still is) hard to handle and refine. But things have changed, and now the place is booming. Worldwide, reserves of conventional oil, also known as the “easy” oil, are declining and not being replaced. Oil companies, from the likes of large majors like Chevron to the national oil companies (NOCs) of many nations, are looking further afield for oil supplies, and are also looking at older areas to attempt to recover what they left behind the first time around.
In some areas, old oil fields that were long ago abandoned and plugged with concrete are being drilled again. “There are finite resources in the ground, but you never get to that point,” states Jeff Hatlen, an Chevron engineer, in a discussion with the reporter from The New York Times. “Peak Oil is a moving target,” Mr. Hatlen said. “Oil is always a function of price and technology.” Price, Technology, Time, and Depletion Yes, oil is a function of price and technology. But oil is also a function of time and depletion. So over the long term, and as existing reserves deplete, we have to ask the question, “What price and what technology?” That is, how much are people willing to pay, and for what kinds of equipment, to recover oil from the ground? Of course, every good business student learns early to ask, “What is the return on investment?” But the next question, that far fewer people even understand how to ask, is “What is the energy return on energy investment (EROEI)?” How much can anyone pay, and what measure of resources is it worth to get to that last marginal barrel? And the ultimate question is, “Can price and technology move the marketplace for energy faster than oil reserves are declining in the face of depletion?” We are, of course, all going to find out, should we live so long.
Until we meet again… Byron W. King
Saturday, March 10, 2007
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Even worse... as farmers switch to corn crops because of growing profits & government subsidies, other crops they were growing become less available & therefore more expensive.
Think Illegal immigration is a problem for the US today? Just wait till we make Mexico's staple food item too expensive for millions of Mexicans to afford.
I personally welcome our new impoverished Mexican Overlords, despite the fact that these new visitors will drain billions out of America's tax-base in education & health-care alone. And all of this is subsidized by your tax dollars America.
You are literally paying companies to harvest the flesh from poor folks, to fuel your Hummer obsession. It's obviously immoral & wicked... but worse... it's very stupid.
Since Ethanol & other Bio-Fuels are an EROEI joke compared to conventional oil, the only beneficial impact of all this bio-misery will be to boost some rich guy's stock portfolio a quarter of a percent. The kicker is... there isn't a damn thing we can do about this evolving tragedy.
A politician or business executive's shelf-life could be measured with an egg timer after proposing any actual solutions to rising energy costs, because those solutions will necessarily involve making do with less. How much wood can a woodchuck chuck?
The answer is obvious... All of it.
Warlarity ensues. The Dude abides.