‘Oil is the most important source of primary energy on the planet, but wit ...

‘Oil is the most important source of primary energy on the planet, but with the International Energy Agency (IEA) reporting a 4% rate of depletion, demand needs to reduce to allow time to implement strategies to cope with the shortfall in oil supplies,’ said Chris Skrebowski FEI, Editor of Petroleum Review, at the annual oil depletion conference held on 14 November by the Energy Institute (EI). This event could hardly have been more timely, with the subject of peak oil hitting the headlines in the previous two weeks, bolstered by the release of a documentary entitled ‘A Crude Awakening’, which tells the story of ‘civilisation’s addiction to oil’. October 2007 also saw two new interesting twists in the ‘peak oil’ debate, with the Energy Watch Group (EWG) and the legendary Texas oilman T Boone Pickens both offering the view that peak oil has already occurred. EWG’s report indicated that world oil production peaked in 2006 and that it will now start to decline at a rate of several percent per year. However, the argument about when oil runs out has become secondary. The urgent and bigger question is that of demand and whether there is the flow of supply to satisfy it. If this analysis proves to be accurate, that the world is close to or at peak oil, this will create a huge supply gap, which contributions from other fossil, nuclear or alternative energy sources are not expected to meet in this time frame. Skrebowski, who is also one of the founder members of ASPO (the Association for the Study of Peak Oil), believes the peak is still yet to be reached and said: ‘Assuming all of the large new projects come onstream when scheduled and are fully utilised, peak oil does not have to occur until 2011. For peak to occur earlier, a combination of higher depletion rates, large production delays/shortfalls, vigorous demand and a reluctance by Opec to fully use its installed capacity will be necessary.’ Over 60 countries are already past their oil production peak. However, there may be additional capacity that has not yet been realised, particularly in countries such as Iraq and Saudi Arabia. In parallel to conventional oil exploration and production, there is also significant growth in non-conventional oil which includes oil sands, bitumen and oil shale. There are already many heavy oil/bitumen projects in Canada and Venezuela, both countries having great potential. Nevertheless, there are significant issues to consider concerning the economic and environmental costs of extraction. Additional challenges to consider are the increasing shortage of a skilled workforce, and the growth in demand from India and China. Travel demand is growing and as a result there has been a steady increase in petrol, diesel and jet fuel sales. UK prices at the petrol pump are currently over £1/litre. These high prices are important in reducing demand and providing incentives to develop both oil and alternative energies. The transport industry is making progress in future vehicle technologies, specifically in hybrids, biofuels, fuel cells and hydrogen, but the timescale for these to become mainstream is still 15 to 25 years. Skrebowski concluded: ‘Oil production is expected to peak sooner rather than later and it is encouraging to see the government recognising these issues and engaging in today’s debate. There is no doubt that a huge amount of investment is needed as well as improvements in energy conservation and it is critical that we act now. Oil will reach a production peak, but whilst industry works on various technical measures to delay this and make the most of what capacity is left, similar measures must be applied to transport whilst government and industry must influence consumer behaviour to encourage the take-up of more energy efficiency measures.’