Supply or production peak - Paul Mobbs

[tristan]

Paul Mobbs raised an interesting point in the PO event on Tuesday, he said (as I understood) that we could experience supply peak before production peak, caused by two things - the reduction of drilling and refining capacity, sepcifically Iraq, Nigeria and areas affected by hurricane Katrina, and the over-supply of poor quality crude now that sweet light brent is less available.

What do people think? What effects could this have? Will it mean the peak arrives sooner but we have a larger plateau as Nigerian and Iraqi oil comes back online and refineries are retrofitted to cope with heavy crude?

[skeptik]

Sorry...dont get it. In what way is 'supply' not synonymous with 'production' in this context.

DO you mean a temporary decline in global output which is not due to depletion i.e. the ultimate geological constraint which no ammount of effort can overcome? Yes of course - all sorts of reasons why that can happen. Look at the years '80 to '83.That seems to have been caused by a market panic as much as anything else.

[mobbsey]

Sorry...dont get it. In what way is 'supply' not synonymous with 'production' in this contect.

It dpeends upon your interpretation of the "Hubbert Peak", and whether it's strictly a geological phenomena or whether it includes the socal, political and economic factors that influence the supply chain.

The peak in production represents a change in the capacity of oil to come out of the ground. But ultimately, if you look at the production from various oil fields, the ceiling on production is the bore of the pipeline/capacity of the shipping chain that brings the oil to market. Once at the market, for crude to be usable we need sufficient refining capacity, and at the moment there are problems here too -- both in developed states where environmenbtal regulation has restricted refinery development, and in emerging markets such as India and China where domestic refining capacity can't keep up with the growth in consumption.

Obviously if certain states such as Nigeria and Iraq, or difficult to produce provinces such as the Gulf of Mexico or the Alaskan ridge, don't produce at full capacity then less oil flows to the market and supply is restricted. More interestingly, if we can't fully utilise the oil that comes out of the ground because the global refinery capacity is skewed towards the use of light crude for road fuel production then supply is also restricted ('peak oil' is the total conventional oil peak, not just light crude!). If you look as Chris Skrebowski's mega-projects list the supply capacity is as critical as the pumping capacity. So in terms of USABLE oil supply, is the limitation what comes out of the ground, or the size of the pipe.

If the limit is the size of the pipe then the "peak" of conventional production will become a much longer-term "plateau". Supply capacity will choke off production and create a plateau until such time as production falls below the level that can be reliably delivered. Consequently as the supply, particularly Saudi's role as the swing producer, has become a significant restriction on production we may be, as Deffeyes claims, at the peak now -- especially now that some of the small but geographically significant producers such as Mexico have now "gone over the hill". But for me that's not a Hubbert peak based upon how much oil you can squeeze out of the boreholes -- it's a "supply peak" based on the capacity of the supply chain.

Or -- the ultra-condensed analysis -- logically it can't be a "Hubbert Peak" since if the industry got it's act together it could pump more!


Clearer?


P.

[Bandidoz]

"Constrained Production" and "Unconstrained Production" may be better terms to use. Hubbert Peak is a model of Unconstrained Production, after all.

[dr_doom]

Sorry...dont get it. In what way is 'supply' not synonymous with 'production' in this contect.

Or -- the ultra-condensed analysis -- logically it can't be a "Hubbert Peak" since if the industry got it's act together it could pump more!


Clearer?


P.

So what your basically saying is that the actual peak of physical extraction from the ground
will probably be less important to the world than when the oil industry peaks in its ability
to deliver the oil-derived end products to the world market. Which will depend on its
refining capacity, which hasn't been built to adequate capacity for heavy oil.

Seems to be the same thing that many have been saying all along, i.e. as we go down the
back-side of hubbert's peak not only will the remaining oil be harder and more expensive
to extract. It will be harder and more expensive to refine.

We're going to be doubly screwed.

As far as I understand it the reason the oil industry hasn't "got it's act together"
building refineries is that the economics don't or didn't make logical sense.
The difference between the price of a barrel of heavy crude and the end-products
needs to increase before more get built.

EROEI probably enters into the equation as well somehow but I'm not sure on the specifics.

[Billhook]

Mobbsey - should you happen to read this -

Given that the oil industry has been increasingly convinced of Hubbert's Peak since the '50s,
(when methanol-from-wood was referred to as the 'backstop' option)

and had untill the '90s diligently maintained the growth of 'delivery' capacity (in the form of growing tanker & refinery capacity)
to meet expected annual demand growth,

but then simply allowed this basic business strategy to lapse,

might we agree that Occam's preferred explanation is that PO was foreseen, and limiting 'delivery' capacity was initiated as a means to provide a plateau,
rather than investing in plant whose costs would not get amortized ?

regards,

Bill

[clv101]

See this graph lifted from Transition Culture


It suggests (roughly) a plateau of some 30 years. Maybe 30 years is the average lifetime of oil infrastructure. Had more infrastructure been built to get us up to 40GB/year after a few short years it would be sitting idle. Not a smart economic move. I guess the graph only shows regular oil as defined by Campbell which is currently ~67mbpd (24.5mbpd) and not total liquids but it makes the point of a plateau cutting the top off the curve.

[skeptik]

Clearer?

Thanks explaining how you use the terms. The ambiguous use of language still concerns me. So long as you dont mind explaining the difference in how you use the words 'production' and 'supply' everytime you go into the subject, thats fine. Alternatively as Bandidoz suggests you might consider finding some more obvious terminology.

[RogerCO]

Thats a very interesting graph Chris (clv101) - the source you give doesn't immediately make it clear where the data comes from, in particular what is the basis for the "unconstrained" curve.

If the area under the unconstrained curve represents the total recoverable oil then shouldn't the actual-projected curve plateau extend further to the right (to about 2040 on a quick mk1 eyeball estimate) before falling away at the same rate to give the same area under the curve.

If this is at all correct, it gives some creedence to the BAU camp declaration that we don't have a problem (in production, not supply terms) for another 30 years...

RogerCO

[mobbsey]

Thanks explaining how you use the terms. The ambiguous use of language still concerns me. So long as you dont mind explaining the difference in how you use the words 'production' and 'supply' everytime you go into the subject, thats fine. Alternatively as Bandidoz suggests you might consider finding some more obvious terminology.

My use of words has developed as a result of doing workshops/lectures with the general public (about 100 last year, but only about 15 so far this year as I'm trying to cut down!).

The public don't get ideas like "constrained supply", "supply-side", "demand-side", etc. But from trial and error I've found that they do understand the distinction between a "geological" Hubbert's peak and a peak created by the limitations in the supply system, a "supply peak". So that's the way I explain the concept now.

For me, communicating the structure of the concepts that define our current predicament is far more important than the semiotic tags that the more cognisant among us use to define it.

[skeptik]

My use of words has developed as a result of doing workshops/lectures with the general public (about 100 last year, but only about 15 so far this year as I'm trying to cut down!).

The public don't get ideas like "constrained supply", "supply-side", "demand-side", etc. But from trial and error I've found that they do understand the distinction between a "geological" Hubbert's peak and a peak created by the limitations in the supply system, a "supply peak". So that's the way I explain the concept now.

For me, communicating the structure of the concepts that define our current predicament is far more important than the semiotic tags that the more cognisant among us use to define it.

Absolutely. It's a pity Tristan didnt express himself quite in those terms in the first post of this thread - i.e. "we could experience supply peak before production peak" without the context of your explanation of what that actually means just strikes me as confuseypants use of English

[Billhook]

Roger & Clv -

I put an enquiry about the graph on transitionculture and have just got a rather apologetic reply -

Apparently the graph is essentially artistic in origin rather than reflecting any scientific projections of potential yields.

Yet it is striking how the rise of extraction meets with a bell curve up to the early '70s - and just what a transformation in growth has occurred since that date.

regards,

Bill

[clv101]

I put an enquiry about the graph on transitionculture and have just got a rather apologetic reply -

Apparently the graph is essentially artistic in origin rather than reflecting any scientific projections of potential yields.

That doesn't mater - I posted it as an example of a plateau clipping the theoretical Hubbert curve i.e. potential geological production being limited by some practical reason.

[Bandidoz]

My use of words has developed as a result of doing workshops/lectures with the general public (about 100 last year, but only about 15 so far this year as I'm trying to cut down!).

The public don't get ideas like "constrained supply", "supply-side", "demand-side", etc. But from trial and error I've found that they do understand the distinction between a "geological" Hubbert's peak and a peak created by the limitations in the supply system, a "supply peak". So that's the way I explain the concept now.

Well tristan obviously didn't quite get it.....

[DamianB]

Paul Mobbs raised an interesting point in the PO event on Tuesday, he said (as I understood) that we could experience supply peak before production peak, caused by two things - the reduction of drilling and refining capacity, sepcifically Iraq, Nigeria and areas affected by hurricane Katrina, and the over-supply of poor quality crude now that sweet light brent is less available.

I've been a supporter of a similar 'twin peaks' idea for a while. The theoretical production peak is being/will be constrained by an inadequate production, refining and transport infrastructure. The failure of 'big oil' to collectively invest in the capacity to deliver 90mbd is a BFI (big flashing indicator) that says they know about peak oil.