Monday, February 23, 2015

Trouble with the curve

What goes up
Must come down
    - Blood Sweat and Tears

I'm coming down fast
   - John Lennon ( Helter Sketer)

        Ugo Bardi  has a done a few recent posts addressing his model for the decline in oil production after a peak.    He suggests that the curve may not have the same shape going down as it did going up, in line with a statement by Seneca:
"It would be some consolation for the feebleness of our selves and our works if all things should perish as slowly as they come into being; but as it is, increases are of sluggish growth, but the way to ruin is rapid."

        One real life illustration of this phenomenon can be seen in the context of fishing harvests, which go along fine, and then crash.   Bardi suggest that the the rapid decline after the peak is caused by the response of the fishing industry to m a situation where it is harder and harder to find the fish -   an increased investment in fishing  boats.  seehere  He says:
   "There are several historical examples of the Seneca cliff; in the case of fisheries, it is especially evident in the case of the Canadian cod fishery and for the Caspian Sturgeon; but it is evident also in the case of the UK fishing industry. Note, in the figure above, the steep decline of the landings of the late 1970s, it is significantly steeper than the growth of the left side of the curve. This is the essence of the Seneca mechanism. And we can see very well what causes it: the start of the decline in production corresponds to a rapid growth of investments. The result is the increase of what the authors of the paper call "fishing power" - an estimate of the efficiency and size of the fishing fleet.
        Which brings us to decline rates for oil.    The post peak decline rate of an oil field is not a fixed thing.  It is depends on the way the field is developed and operated.  Using enhanced oil recovery techniques, one can take more in the early years, but at the expense of a steeper decline at the end.    A very interesting paper  called, "Giant oil field decline rates and their influence on world oil production",  provides an excellent review of the way that decline rates may vary.
"Prolonged plateau levels and increased depletion made possible by new and improved technology result in a generally higher decline rates. Detailed case studies of giant oilfields suggest that technology can extend the plateau phase, but at the expense of more pronounced declines in later years (Gowdy and Juliá, 2007)."
      One chart , Table 4, (which i can't figure out how to copy) shows how the decline rates have increased over time.  Land based fields which plateaued in the 1960's declined at -4.2%,  in each succeeding decade the decline rate increased, and by the 2000's the rate was -10.7%..  The off shore fields were even more dramatic. see Table 5.  There was divergence between OPEC and non-OPEC fields, which was presumably caused by the difference in philosophy between for profit corporations, and state run operations.  However even OPEC fields are showing increasing decline rates in the 1990's and 2000's.     
       Thus, the fields which were developed first have lowest decline rate, once they peak.    At that point we will be relying on the growth in the later fields.    When these later fields peak , things get interesting, because their decline rates drag down the total.    We can vividly see this with the fracking, which is the only development keeping the total production from peaking.   The decline rate for fracked wells is very large, averaging between 60-90% in the first three years.l.     
      Initially, the post peak decline is slow, as it is a blend of declining fields with fields which are growing, or at least not declining.  Hirsch suggested in his report, that we could reasonable adapt to decline rate of 2%, but that 5%, would trigger a recession.    
 For perspective, it's useful to know that IEA estimates that even with additional capital spending the decline   rate for all fields is   6.7%  for post peak fields.   Otherwise it would be 9.0%
       As we know, capital spending is way down right now due to the precipitous drop in oil prices. 
I'll close with this quote from an executive at Total, the French oil company , from a few days ago.  See here
””There is a natural decline of five percent a year from existing fields around the world. That means by 2030 more than half of the existing global oil production will disappear. There is an enormous amount of money that needs to be invested to get another 50 million barrels per day of new production

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