Oil: "There Is No Evidence That a Peak Will Occur In the Next 10 to 15 Years"

There is a widespread controversy about the so called Hubbert’s Peak Theory. What does this theory state?

Hubbert was a geologist who, in the mid-1950s, evaluated the future of oil production in the USA, using a graphical, analytical technique to try to predict the future of oil production in the Lower 48 States. He predicted then that the peak of US production would happen around 1970. That estimate was reasonably accurate in terms of the timing of the highest level of US Lower 48 production , but had some serious shortcomings in terms of the scale of the production and the future of production past the peak.  Some analysts have used this technique more recently to predict that global production will peak early in early the next decade and decline very rapidly thereafter.

You recently published an article entitled, “Why the ‘Peak Oil’ Theory Falls Down”.  So what is your opinion on that?

The peak oil theory predicts that we are at the peak now or about to experience a global peak in production, after which production will decline very rapidly.  CERA has done a very detailed analysis of the oil producing countries around the world which reviewed field-level data and projections for existing fields, new oilfields about to start production, and field appraisal projects. We also included a factor for production yet to be found through new exploration. Importantly, this analysis also included both conventional liquids as well as unconventional components including ultra heavy oils, gas related liquids, biofuels and GTL/CTL projects.

There is no evidence that a peak will occur in the next ten to 15 years, nor if we look out to approximately 2030.  CERA believes that we will see an undulating plateau of global production starting sometime after 2030, which is likely to last for a number of decades.  Towards the end of the plateau period, we envisage that global production will decline more gently compared to the very rapid production decline predicted by the peak oil lobby. Very importantly, CERA believes that the duration of the undulating plateau will be determined by above ground factors – such as levels of investment, economics and geopolitics - rather than the scale of below ground resources.

What can we expect from new technologies of oil extraction? 

The application of new technology is not the only factor that will influence the rate at which we can grow and sustain productive capacity in the long term. Using existing well-tried technologies enables us to improve the recovery efficiencies of field developments, both old and new, that are happening worldwide. Each oilfield is unique and needs a very carefully selected combination of technologies to optimize its productivity.  Yes, I expect breakthrough technologies to continue to occur in the area of drilling and reservoir management, for example, but these will only be a part of the story.

What do we know about potential untapped oil reserves?

At the core of our analysis we include the reserves of existing fields and the potential for the reserves of existing fields to expand beyond initial estimates as better technology is used during production. The US Geological Survey conducted a very detailed study about seven  years ago of undiscovered exploration potential which indicated that there is probably 750 billion barrels of undiscovered oil yet to be found. Beyond the oil from conventional sources, we need to look at what is called unconventional resources – such as the extra heavy oils in places like Canada and Venezuela and the potential of shale oil as major contributors to global production.  We should remember, of course, that these sources are not going to become available on a large scale in the short term.

Do we have a clear view of today’s known oil reserves?

I believe we still do not know the scale of the global resource base very accurately. However, including both conventional and unconventional sources such as oil sands and shale oil, I believe that well over 4 trillion barrels of resource remain – that’s about four times as much as has been produced thus far in the history of the world.

Coming back to the plateau you were describing, would you say that there is a wide consensus right now?

I would say this issue continues to be extensively debated.  There is no consensus. And CERA’s view is in the minority if one merely counts those who have voiced opinions, as opposed to properly informed opinions. 

Would you say that oil will be the energy of the 21st century?

I think oil certainly will contribute to the core of our energy needs in the early decades of the 21st century. Of course, there is a lot of emphasis these days on looking beyond the point at which cheap plentiful conventional oil will be available.  We anticipate a lot of attention will be paid to making best use of the existing inventory of conventional oil reserves. Global oil supply has been relatively tight in recent years, but CERA predicts that productive capacity will grow very quickly in the next few years. Unconventional oils such as ultra heavy oils in Canada and Venezuela are the focus of considerable investment at present. We also see gas-to-liquids projects springing up, in the Middle East for example, and coal-to-liquids projects being planned in quite large numbers in South East Asia and Australia. Interestingly, there’s a lot of biofuel being produced in the US and Brazil at the moment,and the proportion of biofuel is likely to expand quite considerably, over the coming decades.    So a gradual evolutionary process is going on. There is plenty of scope for these unconventional oils to replace the conventional inventory and help meet our oil and liquid fuel needs for many years to come.

Thank you very much Peter.

Interview by Gilles Prigent