I recently read a retranslation of Antonio Turiel's post in “The Oil Crash” (if you read Italian) as offered at “Cassandra's legacy” reviewing the International Energy Agency (IEA) 2012 World Energy Outlook published in November of last year. I commented back in early January on the same thought thread.
Turiel points out that IEA's optimistic projection that world energy production will increase 15% by 2035 as measured by the accumulative volume of all the oil products produced is seriously flawed, both in basic assumptions and in analysis.
In his article Turiel adjusts the IEA data with more realistic production estimates, and then converts the production volumes to energy flow equivalents and accounts for the effect of EROEI to project net equivalent energy production. He projects that the world net equivalent energy product will fall 40% by 2035.
That difference can be catastrophic.
Turiel identifies three significant problems with the IEA report:
the IEA projection is for volume rather than equivalent energy flows (for example, energy content of an equivalent natural gas volume is less than that of light, sweet crude).
the IEA is overly optimistic about the production potential for current fields and most of the newer petroleum sources (in some cases the IEA discounts current experience).
the IEA does not take into account the energy it costs to obtain the energy that will be delivered to the final consumers (the factor called EROEI).
It is useful to look at the various ratios used in this analysis. As the article states, one can use different numbers to understand the effects of various conditions. Back in my early years, we called this sensitivity analysis.
Use a ratio of 0.7 to convert volumes of non-conventional oil (all of them) to the energy equivalent of crude oil. This accounts for the relative energy density of the different products.
Refining improvements mean that energy from some other source like natural gas is used to extract more energy from crude. At the very best, thermodynamics would not allow any real refining improvements to show up in future energy equivalent production – in fact, the net energy available would be less than the sum of the parts being combined to make the “improvement.”
An EROEI of 20 for current crude oil production matches data available for our current world. This means the net energy from current crude oil is only 95% of its measured production.
An EROEI of 5 is a good figure for crude oil we have found but are not producing for some reason. This means the net energy available from a “field-yet-to-be-developed” will be only 80% of its measured production.
The cost of exploration for new oil is climbing exponentially, so an EROEI of 3 should apply to a “field-yet-to-be-found.” This means the net energy from such crude oil is only 66% of its measured production.
Turiel assumes an average EROEI of 2 for non-conventional petroleum, including shale oil and gas and oil shale as well as bio-fuels (some known to have EROEIs less than 1). Only 50% of the gross energy from these sources can be used as net energy.
The IEA report is based on an assumed production decline of 3.3% for crude oil wells currently in production. Other industry experts say this figure is nearer to 5%, and the data should be adjusted accordingly.
Turiel reduces IEA's estimated volume of petroleum from current wells that are not being exploited by 50%. He reduces the volume from reservoirs yet to be discovered by 25%.
Turiel says only one third of natural gas liquids can be used as petroleum substitues, allowing them to be used as fuel for present cars. I do not understand just how this will affect the overall picture, but the effect seems small.
The volumetric production from shale oil is reduced by 50%.
The IEA projected that 22 years from now, in 2035, world oil production will approach 100 Mb/d, up from their 2011 figure of 87 Mb/d.
After applying the adjustments listed above, Turiel concludes that in 2011 the world energy flow measured in “energy equivalent” barrels to customers amounted to only about 69 Mb/d, not the volumetric 87 MB/d stated in the report.
Looking into the near future, he concludes the terminal decline of net energy is already upon us. In the next 22 years, the net production of energy equivalents will fall by nearly 45% to around 40 Mb/d. This is a far different picture from the IEA's estimate of a volumetric increase of energy products of 15%.
So, where do we stand? Do we really believe the IEA that we are looking at an increasing energy supply to match the increasing population of the earth, or are we looking at the eminent decline in the availability of energy?
To me, the answer is obvious. I agree when Turiel says the world will not recognize that net energy from petroleum is falling until they see a real fall in the actual volume.
By then, it is too late.
Finally, he says, “Petroleum will continue to be available for many decades but always in lesser quantities and in the end it will become a luxury good. Our epoch of accelerated economic development based on inexpensive petroleum is already over.”
So what to do, what to do?