Plan now for a world without oil
This article originally appeared in The Financial Times
Four months ago Britain's oil imports exceeded exports, heralding the decline in North Sea oil already well under way. North Sea oil output peaked at about 2.9 million bpd (barrels per day) in 1999, and has been predicted to nearly halve to only 1.6 million bpd by 2007. Even the latest discovery of the new Buzzard field, the biggest British oil find in a decade with a total of 0.4 million barrels recoverable, won't alter much the overall picture.
This prospect might not be so bleak were it not that similar trends are now becoming manifest across the world. The three main oil-producing regions are OPEC, the former Soviet Union, and the rest of the world. Modelling OPEC's future production is open to some question, but it is expected to peak in 2020 at about 40-45 million bpd. The under-production in the former Soviet Union in the 1990s following the Soviet collapse is now leading to a new surge in East Siberia and Sakhalin and new discoveries in the Caspian, which will yield a peak of about 10 million bpd in 2010. For the remaining 40 or more major oil-producing countries around the world as a whole, the broad overall pattern is similar, with some local variations.
Combining the three crude oil models for OPEC, the former Soviet Union and the rest of the world puts ultimate world oil recovery at some 2,200 billion barrels, with a peak at about 80 million bpd between 2010 and 2020. To this may be added non-conventional oil and other liquids brought into commercial production by the rising oil price as oil scarcity tightens. This includes oil from coal and shale, bitumen and derived synthetics, heavy and extra heavy oil, deep-water oil, polar oil and liquids from gas fields and gas plants. These sources, though at very much greater cost, could provide an ultimate recovery of about 800 billion barrels, and might peak in 2050 at around 20 million bpd. The combined model for all sources suggests a peak of about 90 million bpd around 2015.
This global capacity is the likely maximum on the supply side. Today we have a daily production of 75 million bpd. But to meet projected demand in 2015, we would need to open new oilfields that can give an additional 60 million bpd. This is frankly impossible. When the top production in the North Sea was 6 million bpd, it would require the equivalent of opening ten new regions the size of the North Sea. Maybe Iraq with enormous new investments might increase production by 6 million bpd, and at an extreme the rest of the Middle East might be able to do the same. But to suggest that the rest of the world can produce an extra 40 million bpd is just moonshine.
This is the oil crunch at 2010-15, perhaps earlier. The world's super-giant and giant oilfields are declining at an average rate of 4-6% a year. No more major frontier regions await to be explored apart from the north and south poles. The production of non-conventional crude oil has already been initiated at enormous cost in Venezuela's Orinoco belt and Canada's Athabasca tar sands and ultra-deep waters. And yet no major primary energy rival can replace oil and gas in the short-to-medium term. Mankind is headed for a dislocation of historic proportions.
The implications of this are mind-blowing since oil provides 40% of all traded energy and no less than 90% of transport fuel. But not only are the motor vehicle and farming industries dependent on it, so is national defence. Oil powers the vast network of planes, tanks, helicopters and ships that provide the basis of each country's armaments. It is hard to envisage the massive effects of a very much reduced oil supply on a modern economy or society. Yet it is staring us in the face.
The world faces two stark choices. One is to continue down the existing path of rising oil consumption, trying to pre-empt available remaining oil supplies if necessary by military force, but ultimately inviting an even sharper dislocation as global capacity is steadily exhausted. The other is a decisive switch to renewable sources of energy, much more stringent standards of energy efficiency, and a steady reduction in oil use. The latter would involve huge new investment in energy generation and transportation technologies.
The US response to this dilemma is very striking. Cheney's National Energy Policy report of May 2001 proposed the exploitation of untapped reserves in protected wilderness areas within the US, notably the Arctic National Wildlife Refuge in north-eastern Alaska. The rejection of this extremely contentious proposal then forced President Bush, unwilling to curb America's ever-growing thirst for oil, to decide, contrary to White House rhetoric, to increase the flow of oil from foreign suppliers.
It was a fateful decision. It means that for the US alone oil imports, or other sources of oil such as natural gas liquids, will have to rise from 11 million bpd to 18.5 million bpd by 2020. And securing that increment of imported oil - around 7.5 million bpd or the equivalent of total current oil consumption by China and India combined - has driven an integrated US oil-military strategy ever since.
There are however two fundamental weaknesses in this policy. One is that the most countries targeted to increase oil supplies to the US are riven by deep internal conflicts or a strong anti-Americanism, or both. Facing down the likely violent resistance that will develop in many key oil-producing regions would require a level of expenditure of both revenues and soldiers' lives, of which Iraq is only the first example, which even the US may find unsustainable. Secondly, it is a very short-sighted policy doomed to failure within the medium term. If global oil production peaks at 2010-15, the only way the US can continue to extract a growing increment from a reducing global availability is through resource wars on a scale that would rapidly prove insupportable, even despite the top priority the Bush Administration has given to enhancing US power projection forces.
There is therefore no avoiding the utterly stark dilemma of shrinking world oil supplies, probably within a decade. If we do not immediately plan to make the switch to renewable energy within a shorter timescale and with far greater investment than anything yet envisaged, then civilisation faces the sharpest and perhaps most violent dislocation in recent history.