Checking our oil: How long before we run out of sources?

by David R. Francis

Today's civilization depends on an abundant and relatively cheap supply of oil. So when experts discuss when oil production will begin to decline, the world pays heed. The question now making the rounds in energy circles: Has production already peaked?
If it has -- or if a peak lies only a few years away -- the repercussions would be huge. It could intensify a scramble by oil importers to tie up existing reserves. Decline could lead to scarcity and higher prices, possibly recession, while prompting an urgent push to alternative fuels and conservation. Some pessimists talk of production flattening about 2010; many analysts see no change until 2035.

Of course, various "experts" have been predicting the end of the oil age for more than 100 years. And even now, no one really knows how much oil is left in the ground. Estimates involve guesses of not only future oil finds but future world economic output and oil consumption.
Even calculating current reserves is tricky. Shell, one of the world's largest oil producers, shocked the financial community earlier this month when it announced it had overbooked its proven reserves by 20 % -- an indication of the fragility of such estimates.

The United States Geological Survey (USGS) puts yearly world consumption of oil today at about 30 bn barrels. That comes out of known or proven world reserves of 1.1 tn barrels, according to IHS Energy, an oil and gas information-gathering group in Tetbury, England. By adding in Canada's oil sands, the Oil and Gas Journal in Houston raises proven reserves to 1.266 tn.
"It is not an issue in which there are absolute answers," says Robert Tippee, editor of the Houston trade journal. Much depends on advancing technology and the economics of production, as well as how much oil the ground really holds.

Those who believe in an imminent production peak offer several pieces of evidence:
-- Total world oil production reached 68 mm bpd in 2003, according to a count by the Oil and Gas Journal.That's not much above the 66.7 mm bpd in 2001. Oil reserves estimated at 1.266 tn are up only a bit from 1.213 tn a year earlier.
-- Production has peaked for more than 50 oil-producing nations, including the United States (1970) and Britain (1999). China, second to the US in the consumption of oil, was a net exporter until five years ago.
-- The Department of Energy predicts world demand will reach 119 mm bpd in 2025, with huge increases in China, India and other developing nations.
-- In 2002, the world used four times as much oil as was newly found.
-- The rate of discovery of worldwide oil reserves, after declining for 40 years, has slowed to a trickle. In 2000, there were 16 large discoveries of oil, eight in 2001, three in 2002 and none last year, notes James Meyer, director of the Oil Depletion Analysis Centre in London.
-- All the giant fields, such as those in the Middle East, have already been discovered, some experts say. The last major oil field, Cantarell, off Mexico's shore, was discovered in 1976.

"The oil companies are drilling fewer and fewer wells," says Colin Campbell, founder of the Association for the Study of Peak Oil, a network of scientists, professors, and government experts. "There are fewer worthwhile prospects to test." But optimists see another picture.
For example, with scientific advances, oil companies have boosted their drilling success, which means they don't need to drill as many wells. Last year, nearly 40 % of exploration and wildcat projects located oil, gas or gas condensate, according to IHS Energy.

Besides conventional oil, there are huge amounts in Canadian oil sands, Venezuelan heavy oils and Rocky Mountain shale. If oil prices skyrocket, oil in deep offshore fields and in polar regions would become economically feasible to extract. And there's oil from natural gas, which experts see as lasting longer than conventional oil, outside North America.
The USGS added the oil sands to the world's reserves recently, making Canada the second-largest holder of reserves after Saudi Arabia. These sands are already being exploited. But they require the injection of hydrogen to make their tar oil light enough to flow in a pipe.

Meanwhile, estimates of oil reserves keep growing. For example, world oil reserves now are five times as great as at the end of World War II, says Thomas Ahlbrandt, chief of the USGS World Energy Project. And they grew 15 % in the past five years -- without adding in the Canadian oil sands -- mostly by upgrading the proven reserves in existing fields.
The world has used up about 930 bn barrels of oil since the 1800s, and has left an estimated 3 tn in the ground. That estimate includes about 732 bn barrels of not-yet-discovered oil and an assumed growth in reserves in already-discovered fields, the USGS reckons.

So by now, the world has used up about 23 % of its total available petroleum resource, Ahlbrandt calculates. Most people using USGS numbers figure world oil output will flatten in 2036-37, he adds. But non-OPEC oil output could peak between 2015 and 2020.
"I can see no peak for the next 20 or 30 years," says energy consultant Michael Lynch.

In any case, major oil importers aren't waiting around to find out who's right. The United States, Japan, Europe and China are scrambling to tie down petroleum resources in the Caspian Sea region, Russia, West Africa, Iraq, Iran and Libya.
Japan and China are competing for access to Russia's little-tapped Far East oil resources. China, which expects a quintupling of its oil needs by 2030, wants a new pipeline to go from Angarsk in Russia to inland Daqing in its north-eastern industrial heartland. Japan proposes the pipeline go rather to Vostochny, on the shore near Vladivostok. One reason Japan is sending 500 soldiers to Iraq this month is to stabilize Middle Eastern oil, the source of 90 % of Japan's oil, Japan's defence minister, Shigeru Ishiba, told.

Pundits say the United States has been especially interested in the recent election in Georgia to replacePresident Eduard Shevardnadze because that nation, though not having reserves itself, is the corridor for a $ 3 bn pipeline through which huge supplies in Azerbaijan, Turkmenistan and Kazakhstan must pass through to reach the West. A Chinese oil firm last month embarked on its first international venture by buying a 50 % stake in a Kazakhstan oil field.
The United States has just extended trade preferences to Angola, where oil giants ChevronTexaco and ExxonMobil are preparing to spend billions of dollars on deep-water developments. Other US oil firms, such as ConocoPhillips, Occidental Petroleum, Marathon Oil and Amerada Hess are looking carefully at their prospects for returning to Libya should the United States lift sanctions on that desert nation.

According to a report, a step that put Russian oil mogul Mikhail Khodorkovsky in jail was his plan to sell a major stake in his oil company, Yukos, to ExxonMobil. US oil firms would like to invest more in Russia's oil and gas reserves, if they can negotiate that country's legal and political minefield.
The competition for oil resources not fully under contract is expected to get rougher. It could be especially crucial for consumers in North America, who on average use up more than their body weight in crude oil each week.

Oil has been cited as one reason, among others, that the United States invaded Iraq. America's longstanding concern with its oil supplies is nothing new. Newly declassified British documents suggest that President Nixon was prepared as a "last resort" to launch airborne troops to seize oil fields in Saudi Arabia, Kuwait and Abu Dhabi to end the 1973-74 oil embargo by the Arab nations.
Some countries -- even some oil firms -- have decided to invest in solar and wind energy. "This reflects the realization that exploring for large new sources of oil is not a realistic way to go," Meyer contends.

Kenneth Deffeyes, a Princeton University geology professor who claims world oil production is already flat, says the United Statesshould have stepped up its research on alternative energies 15 years ago. But others don't see a crisis looming just yet. Certainly nations should be researching better sources of energy, Lynch says.
"But it should not be based on imminent scarcity."