Oil and gas production

[Laurent]

Peru - gas expansion in Amazon 'indigenous reserve'
http://www.theecologist.org/News/news_analysis/2236832/peru_gas_expansion_in_amazon_indigenous_reserve.html

[johnm33]

Sign of peak oil?  http://www.testosteronepit.com/home/2014/1/24/outrageously-ballooning-costs-hit-major-oil-companies.html

[Buddy]

Nice post John.  Interesting article indeed.  The "low hanging fruit" in the oil industry was picked long ago....and the present and future oil resources require substantially more $$$ to find and exploit.

This will CONTINUE to be good for alternative energy over coming years and decades.  The long term "math" is obviously on the side of sustainable resources.  Who would have guessed that in a "finite world"......that energy needs to be "sustainable".

As Thomas Edison said:

“We are like tenant farmers chopping down the fence around our house for fuel when we should be using Nature’s inexhaustible sources of energy--sun, wind and tide. I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.”

[JackTaylor]

Nice post John.  Interesting article indeed.  The "low hanging fruit" in the oil industry was picked long ago....and the present and future oil resources require substantially more $$$ to find and exploit.

This will CONTINUE to be good for alternative energy over coming years and decades.  The long term "math" is obviously on the side of sustainable resources.  Who would have guessed that in a "finite world"......that energy needs to be "sustainable".

Agree with Buddy, THANKS for the post johnm33.........

As added cost of producing oil escalates we can all sit back and enjoy a version of
"Trickle Down" -- over the years IIRC, some prognosticators have gone out on a limb that it will require about Ten Dollars ($10.00 USD) Per Gallon for gasoline to become an event significant enough to get the general population in an uproar.

If $100.00 bbl oil has a nominal $3.50 p/gal gasoline
what does $150.00 p/bbl to $200.00 p/bbl or 'gasp' even higher do to the "lifestyle" budget of the per capita income people
(USA 2012 = $42,693.00) http://bber.unm.edu/econ/us-pci.htm

Four, five, or six tankful purchases per month is not uncommon in our driving "economy."

15 gal x $10 x 5 /mo x 12 mos = $9,000.00 of "After Tax Income" ~ 25%
Add in a doubling of food prices due to oil for production and distribution - transport.

YES, The long term "math" is obviously on the side of sustainable resources.

[JimD]

Jack

Over on the various Peak Oil blogs if you search around a bit you can find a number of very thoughtful pieces of work on this issue of what prices per barrel the world economy can tolerate.  Previous to the great run up to about $140/bbl many thought that prices like 200-300/bbl were feasible.  Subsequent to the $140/bbl a lot of work went into studying the effects of such prices and I would say that the consensus at this point is that any time prices approach somewhere near $150/bbl in real dollar terms it will dump the global economy into recession.  Thus bringing the prices back down.  YMMV on this idea of course and there are arguments against it.  But so far the data seems to align with there being some form of a ceiling which our system of debt and finances place on real prices for crude.  Your figures would support that point as your typical American could not handle the numbers you calculated.

[Buddy]

<<I would say that the consensus at this point is that any time prices approach somewhere near $150/bbl in real dollar terms it will dump the global economy into recession.  Thus bringing the prices back down.>>

I agree with that in the INTERMEDIATE TERM.  But remember....oil was $10 - $11 a barrel in 2000.  Here we are in 2014 and it is $100 a barrel (10 times what it was 14 years ago).  Who would have thought in 2000.....that any economy could withstand $100 a barrel (let alone $147 at its peak).

There are two sides to the equation:  Supply and demand.....and they BOTH depend on "costs":  The cost to bring it to market......and the cost to buy it at the pump.  Oil companies will not drill for oil they can't sell for more than they drill it for (at least in the intermediate term they certainly won't).  And consumers will look to other means (using less gas, using more efficient vehicles, using electric vehicles, living closer to work ala Europeans, etc).

I believe we are either "in" or "close to" a critical tipping point that is IRREVERSIBLE.  Conservation will help to put a temporary "lid" on supply costs......as will continued movement to more efficient vehicles.  But nobody is making any more oil.  The cost to obtain INCREMENTAL OIL is going to go up.  That is the "math" that I referred to in my earlier post.

Just as the tobacco companies acted in their own "self interest" (as humans do)....so has the oil and gas industry.   And they will continue to.  But the "math" is against them in the long term (and I'm talking about NOW and the next 10 years....I'm not talking about VERY LONG TERM).

The only real "interesting" oil company now is TOTAL.....the large French oil company.  They bought 50% of Sun Power (SPWR listed in the US on Nasdaq) about 2 years ago or so.  Total has also refused to drill in the Arctic....where other big oil companies (like Shell) seem all too eager to.  Total seems to have taken a longer term view....and what I perceive as a MORE REALISTIC VIEW of the overall landscape of both (a) what supply and demand will permit, and (b) what appears to "many of us" to be the most viable option over the next 10 - 20 years (meaning a continued movement TO alternative energy like solar and wind).

 

[JimD]

Buddy

I agree with some of what you stated, but there are also some different looks that need to be kept in mind.

You mention that oil was $10/bbl in 2000 (actually 1999 I think) but what really counts when measuring the impact in historical terms is what the costs were in real dollars.  The previous peak before the $140/bbl in 2008 (actually $134 by what I just looked up) was in 1979 when it hit $115/bbl.  We know what happened then.

There is certainly a very short-term spikiness that could result in numbers above $150/bbl real dollar terms but it is not clear that they could stick due to their impact on the global economy. 

This actually supports your arguments to a great extent.  It feeds back to the EROEI calculation.  Two things limit what will happen with oil production.  First, is the cost (not in EROEI terms but in financial terms) to get the oil to the consumer and the price the global economy can tolerate.  As you say, there must be profits.  Secondly, when the energy returned from production gets very close to the energy used by production you reach a hard limit. The two are related of course and do not operate in isolation.  You mention Total being involved in the alternative energy business.  Many of the big oil companies like Shell and Exxon have dabbled there and it is certain that they keep a close eye on the potential profit numbers. It is all about profits to them.  When they can clearly see a path to big profits with alternatives they will expend some of that giant capital to move into the industry.  After all , they have more money to do this than anyone.  But they also want to get a good return on their investments (trillions of dollars) and they will fight tooth and nail to make sure that happens. 

When you say that you think we are close to the tipping point where we will start a wholesale change over to non-fossil fuels occurring in about 10 years (that is what you are saying??) I think you might be quite a bit early.  Ten years to oil companies is short term, 20 is medium term.  If they were intending to make the switch that soon we would already know it as they would already be changing their long-term capital investment commitments - and they are not yet doing that as they are still spending hundreds of billions of dollars that there will not be full return on for a good 20 years.  As you point out there are a lot of efficiencies that consumers and industry can exercise which will likely stretch the tipping point out a long ways and the EROEI global average is still likely to be in the 10-15 range 20 years from now.   My estimation is that the big driver triggering wholesale changeover will be the effects of climate change vice Peak Oil issues.   

[Buddy]

<<When you say that you think we are close to the tipping point where we will start a wholesale change over to non-fossil fuels occurring in about 10 years (that is what you are saying??)>>

When I say "tipping point"....I don't mean that all of sudden.....there will be a wholesale conversion.   The energy market in the world is LARGE....LARGE....LARGE...and the "conversion" will be MULTIPLE DECADES long.  Clearly there are applications that can't transform now......and may not for 50 years or more.

And the "conversion" will indeed (as you intimated) be due to TWO THINGS:  (1) cost, and (2) the climate.  I ABSOLUTELY believe that ice sheets will keep melting, glaciers will keep melting, oceans keep rising, and the many "feedback effects" now ongoing will continue and SLOWLY intensify.  So it is DEFINITELY a combination of both the cost AND the climate changes.

I DO believe that some applications will change much more quickly than many expect.  Others....will take much longer.

http://climatechangegraphs.blogspot.com/

[JackTaylor]

Jack

Over on the various Peak Oil blogs if you search around a bit you can find a number of very thoughtful pieces of work on this issue of what prices per barrel the world economy can tolerate.  Previous to the great run up to about $140/bbl many thought that prices like 200-300/bbl were feasible.  Subsequent to the $140/bbl a lot of work went into studying the effects of such prices and I would say that the consensus at this point is that any time prices approach somewhere near $150/bbl in real dollar terms it will dump the global economy into recession.  Thus bringing the prices back down.  YMMV on this idea of course and there are arguments against it.  But so far the data seems to align with there being some form of a ceiling which our system of debt and finances place on real prices for crude.  Your figures would support that point as your typical American could not handle the numbers you calculated.

JimD,
I do believe you're mis-characterizing the reply I made to Buddy along with my meager & simple calculations about money - costs - dollars (figures right or wrong, will bet they're immaterial). Shucks, I would even bet the UNM.edu "per-capita" income figures I used may not agree completely with UN Census Data.

Please with the original by Buddy, which I include in the reply:

"This will CONTINUE to be good for alternative energy over coming years and decades.  The long term "math" is obviously on the side of sustainable resources.  Who would have guessed that in a "finite world"......that energy needs to be "sustainable".

Notice his Upper Case and Quotation marked words = emphasis.
 
Do we have any hope at all for getting the majority of the population in the USA weaned from FF-Consumption, even when FF's are available?

There seems to be what is now a large and widespread movement for renewable's, but is it a "majority."

#1.  Will the rising cost of FF production be good for renewable's?
Or, what's it going to take for the majority to demand lifestyle changing action?

I am not a "self-appointed authority" but have been following and worked some, off-n-on, within the petro-chemical industry during the past 40 years (since first Arab Oil Embargo of 1973) and since it had an effect on my wallet have been following various "bulletin-boards" since "compuserve" - before Windows-95.

I believe it is coming, but:
Who is right about Peak-Oil?

[Buddy]

At SOME point.....China will have to get serious about reducing coal.  I won't PRETEND to "know" when that is.  But it is coming......

http://www.huffingtonpost.com/2014/01/27/beijing-pollution_n_4672222.html?utm_hp_ref=green