Gulf Future Visions Workshop

Donald Coventry, Convener, Conservation and Environment

and Remote and Rural Communities and Working GroupsAssociation for the Study of Peak Oil and Gas, Australia

The future ain't what it used to be. 

Virtually all modern industrial products and processes directly or indirectly involve the use of oil. It provides both the driver and much of the components of the industrial platform.

Worldwide we consume 1 thousand barrels of oil per second (160,000 litres)

In Australia this is 11.5 barrel per second (1850 litres)

Each barrel (160 litres) can produce:• 74 litres of petrol•39 litres of diesel•15 litres of jet fuel•7 litres Residual fuels • Also still gas, petroleum coke,• liquefied refinery gas, asphalt and road oil, various oils for food stocks, lubricants, special naphthas, kerosene, waxes and an assortment of other miscellaneous products

Multiply these amounts and items by 160,000, then multiply times 60 (seconds),and again times 60(minutes) and again times 24 (hours) and we begin to see the scale of what we are dealing with.

Scale

Conventional oil has a higher Energy Profit Ratio ( or EROI) as it is usually easier to find, produce, refine and resultantly delivers a greater return to the economy, in terms of available work delivered.

If we think we are going to run the same level of economy and cultural activity we are very mistaken.

Alternatives in terms of scale, energy type and use, Energy Profit Ratio and timeframes cannot replace conventional oil and natural gas.

Primary Energy Use and GDP, Australia, 1900-2000 (Poldy 2003)

There exists a direct correlation between net energy and GDP.

Hamilton, J. (2009). Causes and Consequences of the Oil shock of 2007-8. Brookings Papers on Economic Activity. D. Romer, Wolfers, J. Washington, Brookings Institute: 68.

Hirsch, R. (2008). "Mitigation of maximum world oil production: Shortage scenarios." Energy Policy 36: 881–889

•Neo-classical economics has generally been blind to the role of energy doing work in the economy. Does not deal well when dealing with depleting resources.

•The role of energy to do work in the economy (exergy) may be up to 10 times greater than traditional economics has presented.

For 100 years business-as-usual in Australia has involved the linked growth of GDP and primary (mainly fossil) energy consumption at an average rate of 3.6% per year. Poldy F., 2003.

An increasing body of literature, as well as analysis from reputable oil industry analysts points to the world being at the point of peak production of conventional oil, with heavy oils and other liquids

peaking around 2011-12.

Peak Oil

The current economic crisis will likely alter this date, is lowering the average daily consumption, but also the credit squeeze and impact on world oil price is already seeing delays and cancelation in exploration and production projects.

All oil fields rise to a peak and decline.

This can be aggregated to regional production models.

UK Energy Research Centre (2009). Global Oil Depletion. S. Sorrell, Speirs, J., Bentley, R., Brandt, A., Miller, R. London: 199.

OIL & GAS PRODUCTION PROFILES2006 Base Case

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1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

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Regular Oil Heavy etc Deepwater Polar NGL Gas Non-Con Gas

OIL & GAS PRODUCTION PROFILES2006 Base Case

0

5

10

15

20

25

30

35

40

45

50

55

1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Gb

oe

Regular Oil Heavy etc Deepwater Polar NGL Gas Non-Con Gas

Conventional Oil Peak (2006)

Oil and Gas Peak (2011)

Oil ‘Shocks’ (1970s)

Australia

Hook, M., Hirsch, R., Aleklett, K. (2009). "Giant oil Field decline rates and their influence on world oil production." Energy policy 37(6): 2262 - 2272

Hook, M., Hirsch, R., Aleklett, K. (2009). "Giant oil Field decline rates and their influence on world oil production." Energy policy 37(6): 2262 - 2272.Hook, M., Hirsch, R., Aleklett, K. (2009). "Giant oil Field decline rates and their influence on world oil production." Energy policy 37(6): 2262 - 2272.

Hirsch, R. (2008). "Mitigation of maximum world oil production: Shortage scenarios." Energy Policy 36: 881–889

It is very possible (almost certain) that we are currently upon the plateau of the peak of global oil production and that on the decline side of the curve we will see potentially overall decline rates of around 6%.

•World demand is currently fluctuating between 83-87 million barrels per day, or 31 billion barrels per annum.•World oil demand is/was expected to grow by 50% by 2025.•90% of all transport uses oil, be it land, sea or air.•95% of all goods in shops involve use of oil.•95% of all our food products require oil.

Yet…. Oil discovery peaked in the 1960’s and oil production is in decline with 4 barrels consumed for every 1 discovered. Fields are declining at rates between 3 and 9% per annum. 49 out 65 oil producing regions are past their peak point. In ten years world production could be down by 30%.

So……

Our oil reserves peaked in 2000 and are currently declining, in 2007 at the rate of 11.5%*.

Strategic planning fails to recognise this fact. We continue to plan freeways and maintain our happy motoring lifestyle.

Australia

John Brack The Car 1955*EnergyQuest Report Sept. 2008

When Australia’s reserves reach around 30% remaining, with an energy return upon extraction at 1:1, it will not be economically worth the cost of production.

“What we know is that Australia’s crude oil and condensate production is declining from nearly 100 percent of Australia’s needs in 2000 to just over 60% today and, without major new discoveries, an anticipated 32% by 2017,” Australian Petroleum Production & Exploration Association (APPEA). Media release, 2008.

Major discoveries are possible, but are considered unlikely. Australia sources replacements for its declining reserves from a range of suppliers, many who are already post peak.

Energy Costs

Foran, B. (2009). Powerful Choices: Transition to a Biofuel Economy in Australia, Land and Water Australia: 291.

•An industrial economy and infrastructure not geared to a (possibly much) lower EPR situation. Problems with capacity to initiate required changes when energy/money required not available.

•A modern culture not geared to dealing with a lower EPR situation. We have been used to abundance for a long period. We will need to adapt to scarcity.

•Events will be asymmetrical not necessarily linear.

•A degraded environment and effects of climate change both reducing capacity and imposing costs at a time when societal income is declining.

(Failure of the “we need to make money to afford to fix what we have broken argument”).

We will find…

•An industrial economy and infrastructure not geared to a (possibly much) lower EPR situation. Problems with capacity to initiate required changes when energy/money required not available.

•A modern culture not geared to dealing with a lower EPR situation. We have been used to abundance for a long period. We will need to adapt to scarcity.

•Events will be asymmetrical not necessarily linear.

•A degraded environment and effects of climate change both reducing capacity and imposing costs at a time when societal income is declining. (Failure of the “we need to make money to afford to fix what we have broken argument”).

We will find…

End of long chain food production systems.•Higher energy costs. Food getting scarcer and more costly. Fluctuations vs. constant supply becomes an issue for markets and growth. •Use of energy in intensive agriculture and industrial food production – some on farm, some beyond the farm gate. (variable between farm sectors). 5 -10 calories of oil to produce one calorie of food. In the US it takes 1kg of oil to produce 1 kg of food (this is an on farm figure). Will marginal farming survive?

•Increasing climate change response costs. Carbon trading, community responses, environmental feedbacks-cyclones, drought, sea level rise etc. • System section vulnerability. Failure of transport, supplier of plastic packaging, overseas markets and air transport, etc.

•Section replacement failure. In the past if we had a problem we threw energy at it, now we will have the situation of less or more costly energy. Businesses may not be able to fill the gap. We will need to look at alternative ways of doing things.

What we may see….

We need to remember that adversity can lead to significant change and development -we need to recognise this will be happening in a new energy paradigm.

"We can't solve problems by using the same kind of thinking we used when we created them.“ -Albert Einstein

What could we be doing in response?

What could this mean for the Gulf Region?

•Increased fuel costs, shortages, maybe rationing.

• Costs of servicing the region. Freight, food, services. Vulnerability of long haul transport system. Airlines services.

•Tourism. What will fuel costs/economic issues do to grey nomad based tourism?

•Fishing. Fuel, equipment, markets.

•Mining. Economic ramifications.

•Climate change. Ability to respond to events.

What to do: National, State, Regional.

•Need to place the eventuality of Peak Oilsquarely and immediately on the strategic planning agenda. Plan for it. Is it adequately reflected in our thinking, e.g. North West Queensland Regional Plan.

•Need to undertake a analysis of what our net energy capacity is and what that realistically means for our economic and social future (for Australia).

•Need to review potential effects on communities esp. regional and rural/remote communities. Risk analysis and planning should take this event into account.

•Need to inform and educate community on energy and Peak Oil and the changes it will bring.

•Need to investigate, develop and implement adaptation and resilience building measures where possible and practical.

How to approach oil vulnerability?•Engage with the issue.

•Ensure it is squarely up there in your frontline issues.

•Form a task force in your council. Look at suitable models e.g.: Transition movement.

•Seriously start your risk management planning.

•Engage with your respective communities and stakeholders.

•Do it now.

Gulf Future Visions WorkshopThe future ain't what it used to be….

We will whether we like it or not be operating in radically hydrocarbon constrained future and we need to start retrofitting our communities to best match that situation.

…Its what we make it to be. 

Donald Coventry, Convener, Conservation and Environment

and Remote and Rural Working GroupAssociation for the Study of Peak Oil and Gas, Australia

0427 174 720ceo@southerngulf.com.au

Questions