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The Oil Depletion Protocol. Peak Oil Opportunities and Challenge at the end of Cheap Petroleum. Richard Heinberg Scripps College September 18, 2006. Richard Heinberg Yellow Springs, Ohio September 23, 2006. Chevron: Will You Join Us?.

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Peak oil opportunities and challenge at the end of cheap petroleum

The Oil Depletion Protocol

Peak OilOpportunities and Challenge at the end of Cheap Petroleum

Richard Heinberg

Scripps College

September 18, 2006

Richard Heinberg

Yellow Springs, Ohio

September 23, 2006


Chevron will you join us
Chevron: Will You Join Us?

Oil production is in decline in 33 of the 48 largest oil producing countries, yet energy demand is increasing around the globe as economies grow and nations develop. www.willyoujoinus.com


Chris Skrebowski, Editor of Petroleum Review (London), in conversation regarding his April, 2006 study, “Oil Field Megaprojects,” said the following:

“At the moment roughly 28% of world production is coming from countries in outright decline and going down at roughly 5%/year. By 2010 this will rise to 40% of world production. There is the possibility that things could deteriorate much more quickly.


“My latest calculations show the world will develop 18.8 million b/d of new capacity in the 2006-2010 period.… Depletion will offset 9.5 Mb/d of this over the same period. This means if all goes fully according to plan … there will be 9.3 Mb/d of new capacity or just over 1.8 Mb/d each year to meet new demand. So up to 2010 we can probably muddle through with high prices and restrained demand.


“Faster depletion and project delays would obviously make the situation worse.

After 2010, however, the situation deteriorates rapidly with negative supply growth in 2011 and 2012. We don’t have any reliable data beyond 2012 but all the indications are that the situation would be getting worse quite quickly.”


Chris added when pressed
Chris added, when pressed: make the situation worse.

“I feel it is my duty, given the social and economic chaos Peak Oil will undoubtedly produce, to stick very closely to defensible assumptions. If you ask me do I personally think we'll make it to 2010 my answer is probably not. Random factors and Murphy’s law more or less rule out everything running smoothly. This however is not analysis but gut feel and hunch. On the hunch basis 2008 would probably be my answer but 2010 my analysis.”


Why have prices fallen
Why have prices fallen? make the situation worse.

  • Easing of tensions between US and Iran

  • No Gulf hurricanes

  • Speculators and hedge funds have placed their bets elsewhere

  • Lowered demand due to high prices

  • Election season


What about jack no 2
What about Jack No. 2? make the situation worse.

  • Will come on line after the peak (2012)

  • Appears big because recent discoveries have been so piddling

  • Expected to produce (perhaps) 400,000 barrels per day; the US uses 21,000,000 barrels per day and its indigenous production is declining by 5-7% per year over the long haul

  • Fifteen years from now, even with Jack 2 at full flow, the US will still be importing much more oil than it is importing today


  • Jack 2 merely illustrates the problem: the world’s easy oil has already been found.

  • One of the most technically challenging oil production environments (if not the most) the industry has ever had to confront:

  • Over a mile of sea water, then four miles of rock

  • Unless the oil is of high quality, it may not be worthwhile to extract all or even most of the resource in place, given the effort and expense entailed


What about past predictions
What about past predictions? oil has already been found.

Exxon: “Peak oil theory is garbage…. People have been predicting the end of oil since the 1920s.”


The prediction
The Prediction oil has already been found.

U.S. DOE/EIA’s International Energy Outlook 2001 stated the following concerning future U.K. oil production:

“The United Kingdom is expected to produce about 3.1 million barrels/day by the middle of this decade (~2005), followed by a decline to 2.7 mb/d by 2020.”


The reality
The Reality oil has already been found.

U.K. oil production (crude oil + condensate) achieved peak production in 1999 at 2.684 mb/d. The average production rate for the first 11 months of 2005 was 1.649 mb/d or 1.035 mb/d (38.6%) less than the 1999 average.


Is peak oil theory a ploy by the oil companies to raise prices
Is “Peak Oil theory” a ploy by the oil companies to raise prices?

  • Most reserves and production are in the hands of national oil companies, not multinational corporations

  • Most of the oil companies are officially dismissive of Peak Oil

  • Most oil depletion analysts are either scientists retired from the industry or independent researchers


Is Peak Oil raise prices?

a fringe idea?


London Daily Telegraph, June 6, 2006 raise prices?

Russia: ‘Era of cheap fuel is over'

Viktor Khristenko, Russia’s energy minister … declared that motorists and business would have to learn to live with expensive fuel....

“One can say with certainty that the era of cheap hydrocarbons is over.”


China forecasts peak oil
China forecasts Peak Oil raise prices?

CNOOC Chief Economist Predicts $90 Oil

By Erik Dahl06 Sep 2005 at 09:00 AM EDT

SHANGHAI (Interfax-China) -- CNOOC Dep. Chief Economist Zhang Weiping said at a conference discussing China's energy needs in Beijing on Monday [that he expects] global oil production to peak at 94-100 mb/day during the next five years.

"High oil prices will have adverse effects on China's economy," said Zhang.


Oil companies at peak
Oil Companies at Peak raise prices?

Business Week of May 15th:

“Although major oil companies are making record profits from high prices, their actual production is close to peak and their reserve replacement is slipping to negative.”


“We may be at a point of peak oil production. You may see $100 a barrel oil in the next two or three years.”

— Former US President Bill Clinton (March 28, 2006, London Business School)


New york times editorial march 1 2006
New York Times editorial see $100 a barrel oil in the next two or three years.”March 1, 2006

“The concept of peak oil has not been widely written about. But people are talking about it now. It deserves a careful look—largely because it is almost certainly correct.”


Summary
Summary see $100 a barrel oil in the next two or three years.”

  • Oil and gasoline supply problems and high prices are here to stay, and will likely increase in severity as time goes on;

  • The economic, social, and political consequences will be severe;

  • There are no easy or quick fixes.


2. Options and Strategies: see $100 a barrel oil in the next two or three years.”

The Oil Depletion Protocol


History of the oil depletion protocol
History of the see $100 a barrel oil in the next two or three years.”Oil Depletion Protocol

  • Proposed by Dr. Colin Campbell in 1996, presented in 2002 at first ASPO conference in Uppsala, Sweden

  • Has been known as “Uppsala Protocol” and “Rimini Protocol”

  • Initiation of the Oil Depletion Protocol Project in July, 2006 by Post Carbon Institute


Without a protocol
Without a Protocol see $100 a barrel oil in the next two or three years.”

  • Extreme price volatility will make planning and investment difficult

  • Conflict over remaining oil reserves will hinder their development and divert resources from the energy transition

  • Lack of foresight, planning, and preparation will leave societies vulnerable to economic collapse

  • Efforts to produce oil at maximum rates will damage reservoirs


The general direction
The General Direction see $100 a barrel oil in the next two or three years.”

  • We need an agreement to gradually reduce oil consumption in order to discourage competition, stabilize prices, aid with planning and preparation, and protect the resource base

  • The rate of reduction should be pegged to some objective datum so as to avert lengthy negotiations


“The overwhelming thing we need is a national plan to deal with oil depletion.”

—Christine Milne, member of the Australian Senate


“Foreign oil’s undeniable ties to terror, to global instability and to continued environmental degradation make immediate, decisive action to reduce our petroleum consumption absolutely critical.”

—George Pataki, Governor of New York State


“We’ve got to wean ourselves off of petroleum.” instability and to continued environmental degradation make immediate, decisive action to reduce our petroleum consumption absolutely critical.”

—George W. Bush


The oil depletion protocol
The Oil Depletion Protocol instability and to continued environmental degradation make immediate, decisive action to reduce our petroleum consumption absolutely critical.”

  • The world and every nation shall aim to reduce oil consumption by at least the world depletion rate.

  • No country shall produce oil at above its present depletion rate.

  • No country shall import at above the world depletion rate.


  • The depletion rate is defined as annual production as a percentage of what is left (reserves plus yet-to-find).

  • The preceding provisions refer to regular conventional oil—which category excludes heavy oils with cut-off of 17.5 API, deepwater oil with a cut-off of 500 meters, polar oil, gas liquids from gas fields, tar sands, oil shale, oil from coal, biofuels such as ethanol, etc.


“The proposal to cut oil imports to match depletion rate seems to be simple common sense.”

—The Right Honourable Michael Meacher, Member of Parliament, UK


Dealing with seems to be simple common sense.”

Diminishing Oil:

Options and Strategies


A few suggestions
A few suggestions… seems to be simple common sense.”

Substitution: Develop renewable sources including wind, solar, and biomass


Conservation efficiency and curtailment
Conservation: seems to be simple common sense.” Efficiency and Curtailment

  • Like alternative energy sources, conservation (efficiency) requires investment

  • Investments yield diminishing returns

  • However, at least in the initial stages, efficiency is almost always cheaper than new supply options

  • Curtailment is the cheapest option of all, but requires changes in habits and expectations


Agriculture: seems to be simple common sense.” transition from oil-based industrial model to more labor-intensive, localized, organic model


Transportation: seems to be simple common sense.” Rail and light rail—the best long-term options for motorized transport of freight and people


Short term transport strategies
Short-term transport strategies seems to be simple common sense.”

  • The Smart Jitney (communitysolution.org)

  • Car co-ops, ride-share, and carpooling

  • Community-supported hitchhiking


Domestic implementation rationing
Domestic Implementation: Rationing seems to be simple common sense.”

  • Some form of rationing is inevitable—by price or by quota

  • Quota rationing works well in case of shortages of essential goods

  • David Fleming’s proposal for Tradable Energy Quotas (teqs.org)


Emissions based and depletion based protocols
Emissions-based and Depletion-Based Protocols seems to be simple common sense.”

  • How are they different?

  • Are they mutually reinforcing?


How Can the Oil Depletion Protocol Be Adopted? seems to be simple common sense.”


Countries in full or partial de facto compliance with the protocol
Countries in full or partial de facto compliance with the Protocol

  • Sweden

  • Iceland

  • Cuba

  • Kuwait (?)

  • Declining producers (Indonesia, etc.)

  • Poor nations unable to afford oil at $70+


Municipal efforts
Municipal Efforts Protocol

  • San Francisco, CA

  • Bloomington, IN

  • Sebastopol, CA

  • Denver, CO

  • Plymouth, NH

  • Portland, OR

  • Tompkins County, NY

  • Willits, CA


Municipal efforts cont d
Municipal Efforts, Cont’d Protocol

  • Burnaby, BC, Canada

  • Hamilton, ON, Canada

  • Kinsale, Ireland

  • Brisbane, Australia


Personal implementation of the oil depletion protocol
Personal Implementation of the ProtocolOil Depletion Protocol

  • Assess current oil consumption: gasoline, food, plastics

  • Plan to reduce the total by 3% per year

  • Reduce transportation energy

  • For most people in industrial countries, food accounts for about 30% of petroleum consumption; to reduce this, eat locally, buy organic, and garden!

  • Publicize personal and group efforts


“The very idea of accepting oil depletion protocols and treaties to guard against irresponsible levels of emissions may not be popular or easily endorsable. Yet, in the annals of history it is clear that epochal crises must be faced. The question is whether they are met with intelligence, resolve, and sacrifice or whether decision makers procrastinate to everyone’s eventual peril and suffering.”

—The Rt. Hon. Edward Schreyer, former Premier of Manitoba,Governor General of Canada, and High Commissioner to Australia and the South Western Pacific


Oildepletionprotocol org richardheinberg com

oildepletionprotocol.org treaties to guard against irresponsible levels of emissions may not be popular or easily endorsable. Yet, in the annals of history it is clear that epochal crises must be faced. The question is whether they are met with intelligence, resolve, and sacrifice or whether decision makers procrastinate to everyone’s eventual peril and suffering.”richardheinberg.com


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