Global output should increase sharply to meet the demand of emerging economies. But extraction has growing technical and geopolitical problems. The end is approaching, the hour of the relay.
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During the first 11 months of last year, and at a time of deep economic crisis, global oil production averaged 84.9 million barrels per day (Mbd), which is equivalent to more than 156,000 liters per second. A flow difficult to imagine and that, however, should increase in the next two decades by more than 20 Mbd to meet the forecasts of growing demand of the large emerging demographics. And that's not to mention that the production of the fields currently in exploitation in the world is falling at a rate close to 6.7% per year. This means that in order to meet the growth in demand and compensate for this decline, the oil industry will actually have to develop a new production capacity close to 64 Mbd by 2030. A volume that is equivalent to more than six times the current production of Saudi Arabia.
Will the oil industry be able to meet this challenge? It does not seem easy since some oil companies doubt that the bar of 100 Mbd can be exceeded in a sustained way and the average of the forecasts made by 12 of them shows the existence of a tight balance between supply and demand in the next two decades. And yet, the answer to this question is of great significance because of the close relationship between economic growth and increased oil consumption. Since 1980, for every 1% increase in world GDP, oil demand has increased by 0.3%, so that the possible existence of future supply constraints could call into question the validity of the current socio-economic paradigm, based on continued exponential growth.
The figures published to date on the availability of oil resources and reserves are very different and there is no consensus on this. But the fundamental thing is not to determine the resources and reserves with precision, but to know if their transformation into productive flows will be carried out at the necessary speed to cover the projected demand. Given the problem, the National Petroleum Council warns of a worrying reality: "The world is not running out of fossil resources, but the continued increase in oil extraction from conventional sources presents more and more risks and these constitute a serious obstacle to ensuring demand in the medium term."
Some of these risks are technical in nature. These include:
a) since the eighties the new discoveries do not replenish the extracted oil;
(b) exploration and production costs are increasing as a result of increasing work in more remote regions, in more extreme environments and drilling at greater depths;
(c) global production of conventional oil in exploited fields is experiencing an average decline of 6.7 per cent per annum, which could reach 10 per cent if investments are neglected;
(d) the oil industry suffers from an alarming shortage of personnel; and
(e) the ratio of energy obtained from extracted oil to energy consumed in the extraction process is rapidly worsening, and therefore each new barrel added to reserves has a lower net energy content.
In addition to these technical problems, there are others of clear nuance and geopolitical implications. Oil production in 30 of the 54 producing States has already exceeded its peak and in another 10 there is a trend of stagnation. Therefore, the future supply of oil will depend basically on 14 countries. On the other hand, the production of conventional oil outside OPEC is not growing and is entering into decline, with which the world will be increasingly dependent on OPEC, which implies the consolidation of an oligopolistic market.
And as if that were not enough, to all this we must add the existing uncertainties around the realization of the essential investments to increase production. Meeting the global demand forecast between 2007 and 2030 requires a cumulative investment of close to $5.9 trillion (as of 2008) and 73% of investment in exploration and production must be made in non-OECD countries. A fundamental aspect, because in many of these countries the mobilization of investments must overcome many legislative, regulatory and trade barriers. The main obstacles that could limit or delay the aforementioned investments are essentially of a geopolitical nature: the policies of control of the pace of resource extraction exercised by governments, the "petronationalism" that prevents or limits the access of international private companies to the exploitation of resources and political instability, the terrorist threats and military conflicts that often accompany the "resource curse".
In the short term, the overall balance between oil supply and demand can be calculated without too much difficulty. The main uncertainty is due to possible unforeseen events, such as delays in the inauguration of production projects and the cancellation or indefinite postponement of some of them. As a result of insufficient investment in the past, various sources point to a potential risk that supply will not meet demand in the next five years. In the current crisis situation, this danger has been postponed in time by the fall in demand, but in the coming years, the collapse of investments that the crisis itself has caused may increase this risk, especially if the exit from the crisis translates into a rapid recovery in demand.
In the longer term, there are various projections about the future of global oil supply, the result of different models based on different methodological approaches and starting data. Such projections show a marked dichotomy. On the one hand, we have those that do not see insurmountable difficulties on the horizon of 2030 and, on the other, there are more pessimistic forecasts that warn that the world is already very close to the zenith of conventional oil production (peak oil), or that it will reach it at some point in the next two decades, it would therefore be urgent to reduce demand and encourage the rapid development of substitutes.
A comparative analysis of 14 recent forecasts made between 2006 and 2008 concludes that, despite the existence of multiple uncertainties, the peak of conventional oil production is likely to take place before 2030 and that there is a significant risk that this will materialize in the next decade. it is truly worrying to note how most countries are not seriously considering implementing preventive and risk management policies.
A special issue of the journal Science, published on the occasion of its 125th anniversary under the title of What do we not know?, included in the list of the 25 issues with the greatest impact for the immediate future of humanity, the question: what can replace cheap oil and when? This is undoubtedly one of the biggest questions about our future and the data we have just presented seem to fully justify the preparation and implementation of preventive and corrective measures.
One hundred and fifty years after the birth of the oil industry, the time has come to urgently apply ourselves to the task of replacing a fuel on which about 95% of global transport depends and which, moreover, forms the basis of our socio-economic development. A task that requires the deployment of an ambitious shock plan that combines demand management measures with a firm commitment to research and development.
There are too many indications to support the theses that warn us about the end of easy and cheap oil and that we are entering the second half of the oil age – or as a joker geologist would say, in the "late Petroleocene". How to sit idly by.
Mariano Marzo Carpio is Professor of Energy Resources at the Faculty of Geology of the University of Barcelona.
Source:EL PAÍS.com
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Authors: TECNOSOSTENIBLE - Engineering of comfort and energy efficiency
