2007
Globally, nett oil reserves
will continue to decline, but production of crude plus condensate is
likely to hover around last years 73.48 million barrels a day, mainly
thanks to new offshore Angolan oil. Some projects due this year and
next (e.g.
Nigerian fields) may not be produced as hoped for political reasons.
Gulf of Mexico deep water fields due to bring 300,000 barrels of new
oil a day are now deferred due to hurricane damage.
As always, it is the massive fields and high producing giant fields
that are the key.
Russia is key to meeting demands. It is, like Saudi Arabia, a high
volume producer. If it can produce at the hoped for 11 million barrels
a day, it may at least meet current demands, so long as recession from
2006 has dropped consumption far enough for the rebound to be slow. The
concern is that Kuwaits massive Burgan field and Mexicos super-giant
Cantarell field decline may be more rapid than assumed, in worst case
removing perhaps more than nearly a million barrels a day from supply.
New Mexican
offshore fields may help alleviate this, but they are heavy oil, are
not yet in full supply. More heavy oil refineries built, and others
have been modified, others are planned. It is likely that these
refineries will pick up the diminishing light sweet crude supply.
New Angolan deepwater oil coming onstream will certainly 'hold the
line' for the moment.
'Other liquids' - natural gas liquids, condensate - have increased as
more large natural gas resources have been tapped. As crude oil
production has slid, the gap has been made up by these condensates.
The pipeline from Norway to the UK should be finished this year, easing
gas prices. In the rest of the world, lack of pipeline infrastructure
to distribute gas from Middle East and southeast Asian fields to west
and east Eurasian gas-powered electricity plants will put heavy upward
pressure on the spot market price of liquified natural gas, as well as
transport contracts for the limited number of LNG tankers. USA natural
gas production is expected to peak this year.
Oil may remain within a broad, perhaps to a
$US65-$US80 a barrel band. It will likely 'spike' on occasions, in
response to extreme weather, or extreme politics, or pipeline
disruptions.
Saudi 'sweet oil' fields are expected to decline by about 1 million
barrels a day,
to about 8 million barrels a day of sweet light crude by years end.
This may be a little optimistic. At the 8% decline rate of 2004/5, the
Gharwar field alone, packing a punch as the world's largest
oilfield, is expected to have declined to 3.5 million barrels a day by
end of 2007 (from about 4.5 mbd at the end of 2005). The shortfall may
thus be greater than 1 million barrels a day. Supposedly, Saudi will
bring in an additional 500,000 barrels
per day of from new developement in the old and erratically performing
Khursaniyah, Abu Hadriya and Fadhili fields this year. The reliability
of Saudi claims are suspect, but even if reliable, do little to alter
the supply picture. Production of heavier and sour oils may increase in
Saudi.
What can't be known is
how dramatically USA and the west reduce their petroleum use, changing
the demand picture. The
greatest gains can be made in USA where car engines are largest and
speeds highest. 1 million barrels of petroleum a day (which comes from
a larger volume of crude) could be saved in USA alone by changing
driving behaviour, and this may be accomplished if government mandates
it.
Very worst case, Saudi Arabia may realise its own technical reports
virtually require Saudi Arabia to cut back the dangerous
over-production techniques to avoid collapsing major fields, and to
maximise long term production. The result would be higher oil prices by
years end,
but greater ultimate volume of oil production.
2008 -
A crucial year to clarify what has
happened.
World crude oil plus condensate production
has peaked and is declining
It is clear that crude oil (plus
'lease' condensates - liquids from a gas stream harvested at the
oil/natural gas well-head by the well operator) peaked in 2005 at
just over 74 million barrels a day.
Current world crude oil plus
condensate production
Crude oil plus 'lease' condensate
production going into 2008 is at
about 73.3 million barrels a
day.
Current world 'Oil equivalent' liquids
harvested as a by-product from natural gas wells
The 'light' liquids processed out of the natural gas stream by the gas
refining
industry amounts to an additional almost 8 million barrels of 'oil
equivalent' a day at the beginning of 2008.
The amount of natural gas produced globally is increasing at the
moment, resulting in an increase in the supply of natural gas liquids.
The 'lease condensate' portion of these liquids is conventionally added
to the crude oil inventory. This will tend to 'hold up' the global
headline global 'oil' production figure.
Natural Gas Plant Liquids production is predicted to rise
steadily over
2008, with an increase of over a million barrels a day by the years
end.
Total world conventional oil and 'oil
equivalent' production
Production of total 'conventional oil and 'oil equivalent' liquids is
now sitting at about 81 million barrels a day. This is similar to
production in 2006, when the figure was about 81.3 barrels of 'oil equivalent' a day.
Total world conventional oil, conventional liquids, unconventional oil
and 'other' unconventional liquids
The figures for 2007 are not all in yet, but the 9 month figure
for crude oil, lease condensate, natural gas plant liquids, refinery
gain, ethanol, tar sands, shales, biofuel and anything else that could
be turned into a liquid fuel is 84.32 million barrels per day. The
final figure for all liquid fuel for 2006 was a bit over 85 million
barrels a day.
The final figure for 2007 may end up a little over this, but not from
conventional crude oil.
New
Fields and expansions in existing fields
Contra last years predictions,
Saudi Arabia's 'traditional'
fields carefully managed (and especially the Ghawar megafield) will
probably continue to yield around 8 million barrels of oil a day.
Saudi's Khursaniyah expansion, bringing in another 500,000 barrels a
day is due soon. The Khurais megaproject aims to bring in over a
million barrels a day by 2009. Shaybah
is due to produce an additional 250,000 barrels a day in 2008.
Even so, the Saudi stable of highly productive fields is depleting at a
significant rate. The annual decline rate of North Ghawar alone might
perhaps take around 190,000 barrels a day off its productive
capacity.
Saudis may well be able to increase production to
around the 9.5 mbd mark, plus or minus a few 100 thousand barrels a day.
It is possible the offshore Azerbaijan ACG
Megastructure project may bring in some new production this
year, as BP's Gunashli field is supposed to come on
line this year. The amount to be produced is uncertain, but the
megastructure as a whole has the potential to eventually produce around
a million barrels a day.
Similarly, BP's deep water Thunder Horse field is
due to start up late in 2008, and while ultimate capacity is around
250,000 barrels of crude a day, there is little indication of how much
oil will be produced at start up.
However, BP's Angolan deepwater projects should bring an additional
250,000 barrels of oil equivalent to the market this year.
Brazilian deep water production
due in 2008 will be helpful. The Marlim Sul stage 4
completion will ultimately bring in an additional 180,000 barrels a
day, Espadarte should increase its production rate to maximum
production of 100,000 barrels a day, and Golfinho also hits its full
production capacity of 100,000 barrels a day in 2008.
The Atlantis platform in the Gulf of Mexico
should be rapidly increasing production beyond its 10,000 barrel a day
level in late 2007. BP aims to produce 200,000 barrels a day by 2009
from Atlantis, so its 2008 production should be respectable.
Also in the Gulf of Mexico, Chevron's Tahiti platform should produce up
to 125,000 barrels a day some time after commencement in mid 2008.
Canada's Horizon Upgrader Phase 1 is expected to produce 110,000
barrels a day of synthetic crude derived from oilsands and natural gas.
Sakhalin basin phase 2 should see the new Piltun-Astokhskoye-B
platform hooked up and perhaps reaching the aimed for 70,000 barrels a
day.
There are also some smaller fields coming into play, such as the 40,000
barrel a day Vankorskoye field, due end of 2008 and
Umm Shaif, due to add 50,000 barrels a day, starting beginning 2008.
New oil production
Total new oil and expansion oil is hard to estimate. It depends on
whether these projects are on time, and what the initial start up
production rate is. A very rough guestimate would say there may be 1.5
million barrels a day of new production by the end of the year.
Decline rate in current oil fields
As noted above, conventional global oil production has peaked and is
starting to decline. The overall decline rate of oil fields is commonly
'averaged out' at around 5% a year. This means about 3.6 million
barrels a day of production will have been lost by years end.
Uncertainties in decline rates
Decline rate is assessed following the known history of mature fields
once they have peaked. This is the 'Hubbert Peak'. However, because
most fields are now automatically pressurised from first production,
the Hubbert curve is artificially 'hung up' until a pressurised field
goes into precipitous decline. The Cantarell megafield has been
nitrogen gas pressurised to 'rejuventate' the field, but has now
reached its limits, and the gas is being re-allocated to nearby fields
to 'juice up' their production rates. So relatively sudden decline in
megafields may distort the 'normal 4-5% annual decline.
Unfortuneately, we don't know when this might happen until it has
happened. Cantarell looks as if it is declining at around 15% per annum
at the moment, not 5%. Canterell now produces around 1.5 million
barrels a day. But it is likely to progressively drop in monthly
production over 2008, and end the year producing around 225,000 fewer
barrels of oil per day.
Balance of new production versus
decline
By years end, there may be an overall drop in global production of
crude oil of about 1.5 million barrels a day. However, 'oil equivalent'
gas liquids increases of about a million barrels a day leaves a
shortfall of about 500,000 barrels.
Increasing production from tar sands, plus oil substitution from
ethanol and biodiesel will easily make up the difference, and may make
2008 a year when total liquids were higher than 2007, even when global
crude oil production fell.
Uncertainties in production
There are uncertainties in the order of 100,000s of thousands of
barrels a day in how much new production will actually make it
'on-line' and when. There is simply no easily found information on the
production expansion for 2008 for some potentially very large supplies
from the Caspian Sea area, in particular. It is possible that
production by end 2008 might be several hundred thousand barrels of
oil/oil equivalent higher than end 2007. Just where this production is
consumed is another matter.
Uncertainties in above ground factors
Politics
Sabotage, particularly in Nigeria, has the ability to shut in up to
almost 500,000 barrels a day of oil production.
An unprovoked USA unilateral declaration
of
war against Iran is now off the table. The Middle East oil producing
regions are less volatile for a variety of reasons, and major
disruptions to oil supply are now unlikely. Indeed, 1998 may be a
crucial year for consolidation of the USA's Iraqi oil, with the
possibility of the beginning of the beginning of expansion and
characterisation of what they have got.
Weather
Storms in the USA Gulf of Mexico can shut in 1.5 million barrels a day,
storms in Mexico can shut in over a million barrels of oil a day,
storms in the North Sea can shut in around 400,000 barrels a day.
Recent history suggests that at least 1 million barrels a day will be
shut in due to storms in the Gulf of Mexico this year. Shut ins can
last from weeks to months.
Economics
USA will likely slide into a recession in 2008. The first quarter of
the new year will see the USA bank credit
inflation unwind. The inevitable result will be inflation, increased
unemployment in the building and service sector, no real growth, a
rapidly weakening dollar, and the beginning of the return of gold to
its proportional parity to oil.
Oil will increase in price to the same extent that the US dollar drops
in value. Increased
gasoline prices due to an unfavorable exchange rate may deepen the USA
recession, dropping demand further, ratcheting the further weakening of
the dollar, and ratcheting the dollar-denominated price of oil up
further. The value of the dollar has fallen by roughly 24% in the last
5 years. It is likely to slip by around 10% this year. However, it is
fundementally backed by USA, Canadian, Mexican, and Iraqi oil. The euro
may be increasingly strengthened as it becomes a currency of oil
pricing, but it has little practical global effect on preventing
currency-value related oil price rises. Except that oil becomes cheaper
for europeans, and more expensive for Americans.
The real question is whether or not slow economic conditions and
unemployment will reduce USA (in particular) gasoline consumption. At
about $US3 per US gallon, the USA pump price is one of the cheapest in
the unsubsidised world. Most European countries pay the equivalent
of from US$4 to US$7 per gallon. Recession
in USA, for the moment, is unlikely to cut fuel consumption,
although it will likely stall growth in gasoline use.
Europe has excellent public transport and high gasoline prices. There
is probably not much room for drops in consumption there. Europeans
also use far more fuel conservative vehicles than Americans, reducing
the impact of price rises.
Relatively little fuel is used for
personal transport in China and Japan. China, in particular, will be
increasingly exposed to the full (international) price of oil as it
increases imports to compensate for its fading giant Daquing field.
Domestic subsidies will likely continue to drop, and the trajectory of
increasing oil use stall, especially as USA demand for Chinese imports
slows due to recession.
Saudi Arabia, China, Mexico, Iran and some other countries subsidise
the cost of gasoline. The subsidies are increasingly burdensome.
Although their populations are growing, it may be that some increases
in price are passed through to limit demand growth for discretionary
travel. On balance, a differentially impacting global
recession this year is unlikely to do more than stall demand.
Demand
Demand will take all liquid fuels available at a price the buyer can
afford. That portion of the world that can afford fuel will get it,
those who cannot afford fuel won't. Production is demand.
Availability
The world is divided into those who produce some of their own liquid
fuel needs, and those who don't. Saudi Arabia produces all its domestic
liquid fuel needs, France produces none.
Exports of all liquids (crude, condensate, natural gas plant liquids,
refinery gain 'other' liquids) in 2006 was 39,325,000 barrels a day.
The major producers are also increasingly their own best customers. The
more oil consumed internally, the less available for export. The trend
is to higher and higher internal demand in the important oil exporting
countries. Estimates vary, but are currently estimated at between 2%
and 5%. This is an annual reduction of between 786,500 and 1,966,250
barrels of oil and oil equivalent a year. Taking the mid point, if
about 1.3 million barrels a day is taken off the 'for sale' shelf, then
this means tar sands, ethanol, and uncertainties in new production from
large projects coming on line will have to make up the difference. This
remains to be seen, but the full 1.3 mbd is unlikely to be compensated
for.
Price
Speculations on price are increasingly pointless due to the large
number of important uncertainties affecting supply and willingness to
buy.
The highest internal consumption by major exporters comes in the last
third of the year. This is also the hurricane season, but it is also
when the greatest new supply from megaprojects is likely to arrive.
Demand and supply are tight under these conditions. Therefore, there is
no fundemental reason for crude prices to fall.
The greatest adjustment is likely in the first third of 2008, when the
banking debacle unwinds and the US dollar will fall most steeply. Crude
may rise to around $US105, with sweet crudes in some regions hitting
$US110 to compensate for a 10% fall in the USA dollar (i.e. no
fundemental rise in price over late 2007).
Mid year may see enough increased internal consumption by exporting
countries to have an effect on price if mega projects are slow in
bringing in extra crude. Crude could be bid up by a small amount,
perhaps to $US110 to $US115.
The end of the year is too hard to call. Supplies may comfortably match
demand and crude fall back to $US105, or mid year prices may form the
new floor.
Oil prices are expected to be volatile, with temporary spikes both up
and down.
2009
Supply and demand mismatch is much more likely this year if it hasn't
happened yet.
The large Mexican Ku-Maloob-Zaap field may now be on-line with 800,000
barrels a day, but this is heavy oil, requiring specialist refineries -
which are already fully engaged in dealing with heavy oils from Saudi
fields. The massive Cantarell field may now be producing less than this
itself, adding up to a shortfall of about 1.5 million barrels
of oil a day from Mexico alone (over 2005 production), with much of
this consumed within Mexico.
The Middle East Gulf states as a
whole (including Iraq) are probably at
or near peak of production by now, the region possibly producing 20
million barrels a day, a little more than 2004.
The actual production levels from newly reworked large Saudi fields can
now be
measured.
If the new Saudi projects don't fulfill their promise, Ghawar
is now confirmed as a slow producer, (2006 Saudi Arabian total
production of less than 8 million barrels a day being the 'new
reality') and Saudi Arabia produces a nett of around 7 million barrels
a day.
Russia is unlikely to have achieved its goal of producing 11 million
barrels of
oil a day (surpassing Saudi Arabia as the worlds largest producer).
Larger fields coming on-stream will only have added maybe 1.5 million
barrels a day, but the decline in the very large mature fields will
almost certainly cancel the new production out. Russia's overall
decline rate is likely to be steeper than Saudi Arabia - when is very
uncertain, with a thin possibility it may be showing now.
The world decline in production of oil plus condensate remains around
to 4%. This
means that only the increasing production of liquids in 'wet' natural
gas might prevent an actual overall decline in available fuels.
Worst case 'light'
- Saudi
fields lose more pumping capacity than
anticipated (for example, Ghawar might fail rapidly), and the extra
supply is in heavy oils, not light oils.
Drop in
available
supply of at least 100 million tonnes a year triggers a 50% a barrel
price
increase, perhaps to a rather volatile band of $US125 to $US175 (in
depreciated USA dollars).
- Russian giant fields also commence to fade, no increased is available
on the world markets.
There will be no unused capacity
to increase supply to
compensate. Speculators may 'spike' it higher on the futures
market.
Countervailing this, price-based cuts in oil consumption, plus liquids
from large new central Eurasian gas fields help dampen price swings.
Norwegian gas production might increase by about half (delays at Norways Snohvit gas field in the
Barents Sea, Corrib field in Ireland, and at the Irania South
Pars field may reduce this projection), but decline in
oil production is more important - Norway is the worlds third biggest
oil exporter after Saudi Arabia and Russia.
Imported overseas LNG may make up the shortfall in USA and Canadian gas
consumption by this date, but this is extremely unlikely as urgent
government action would have to have been undertaken at least 5 years
ago. But if USA does not yet have major LNG
terminals in place to compensate for declining US and Canadian natural
gas production used in gas fired electricity generation plants,
electricity interruptions may be a fact of life, with serious effects
on the economy.
Worst case 'heavy'
- the
Canterell fields oil cap shrinks to the point where underlying water
floods the horizontal wells that have been holding up high volume
production. Production would then 'fall off the cliff-face'. As Mexico
currently (2006) sends about 1.7 million barrels a day to USA (and with
trends in mid 2006 to suggest it may be diverting an increasing
proportion of national oil output to USA), the USA could experience a
10% shortfall in its 'requirements'. This would have to be made up from
the world market. USA is unlikely to find a replacement supplier for
1.7 million barrels a day, and if it did, it would be by outbidding
others. If Canterell fails, it will have a dramatic effect on oil
prices and affect both the velocity and impact of recession in the USA,
- Saudi fields are producing a nett of around 7 million barrels a day
as the Ghawar megafield fading is finally revealed.
- a similar
effect may occur with Russias aging, water
re-pressurised, giant fields at the same time. This would tip the world
into 'instant depression'. When slashed demand equilibriated with
supply, there would still be no relief.
The price band for oil under these conditions is not likely to be much
different than worst case light, as depression in oil economies
destroys jobs and slashes private car use, making petroleum
unaffordable for many people and holding the price at the pump. There
is a possibility that petroluem products may rise less in price than in
the 'worst case light' scenario, perhaps to 'only' $US75 - $US95 band.
2010
Oil is still king, and natural gas is not easily transportable, and
does not become a cheap substitute. Infrastructure
to deliver liquified natural gas - everywhere, from the export dock to
the consumers car engine - is so tiny that the vast reservoirs of
natural gas cannot substitute for petrol. USA will have to have major
large diameter natural gas supply pipelines from Alaska or the Canadian
Arctic in place to fuel
its electricity generation, or declining US and Canadian supply will
see electricity shortages. Such major and expensive projects would have
to have been started in 2000 to be providing gas now. They weren't.
USA
alone may have to import around 14 billion cubic feet of natural gas a
day (2006 consumption is around 62 billion cubic feet a day, of that 51
bcf is 'home grown'). Domestic USA gas will be in overall
decline. Even with the pipelines in place, there may
be interruption. Global warming is melting Arctic permafrost, causing
significant local landslips, which may endanger security of supply.
The production peak of crude oil plus condensate that occured in
late 2007/ beginning 2008 now slides into production decline. More
importantly, the state-owned Saudi fields start their slow production
decline. In a very best
case, Libyas opening up to exploration may add 2 million or more
barrels a day of new oil by now, but this is likely to best offset by
declines in Libyas existing fields. Smaller middle east Gulf states
continue a gentle overall decline in production of conventional cheap
oil.
Russia, one of the most important volume producers, may have static or
declining oil production (and with more used domestically, less is
available for export), and Saudi Arabia, the other
big player, may have added an extra half million barrels a day.
Angola may have almost doubled its production (relative 2005) to nearly
3 million barrels a day.
New oil production from the Gulf of Mexico may be an additional 400,000
barrels a day by now.
USA oil field production is likely to have declined by a bit less than
a million
barrels a day by now.
Norways production drop will be similarly
severe, at maybe 800,000 barrels a day less.
Mexico's nett production
is
likely to be down by at least 600,000 barrels a day (and if decline
rates have been severe, may even be a nett oil importer and with export
volumes dropping by maybe 20% a year or more from here on), UK down by
around
500,000 barrels a day (if the 2006 decline rates held, North sea oil -
Norway, Denmark and UK-
may be down to around 3 million barrels a day of oil and condensates,
a 1 million barrel a day drop in capacity relative 2006).
Irans
production is likely to have dropped by
300,000 barrels a day (unless aggressive pressurisation has now
commenced), and China's production is also likely to be down
by a similar amount.
Nigeria's production may be down by 200,000
barrels a day.
Overall, once increased production from newly developed oilfields and
decreased production from older oilfields are added up, there is likely
to be about 5 million barrels a day less oil being produced in the
world relative to 2005 (roughly 15% less). Projected increased
deepwater and gas liquids production may make up for this loss. If not,
unless global recession has
destroyed this demand totally, an unmet demand for oil and oil products
will likely keep prices high, if seasonally volatile.
Speculators aside, if prices increased in $50 increments
with each 100
million
tonne annual shortfall, crude might go to $US150 barrel in 2010 - in
reality recession will drop demand and price. Oil might reach around
$US100 a barrel, but it is more likely to remain around $US70 to $US90.
Plummeting
consumption is likely to stabilise the price, at that price band.
Fundamental 'base-line' consumption for essential services and
functions (agriculture, food distribution, civil services) will always
be there almost no matter what price the fuel. 'Luxury' demand all
but disappears. Infrastructural and economically viable industry
demand alone supports it. What that price might be can only be guessed
at; it might be
in a range between $US70 to $US90 with political and weather
'scares' spiking it to around $US120.
We are discussing
the end of cheap oil, which has, in this worst case scenario, arrived
about 2010. Recession,
interspersed with brief recoveries, is inevitable under these
assumptions.
If the deepwater plays and gas liquid increases from new gas fields
reach hoped for levels, 2010 will be the final 'plateau' year before
the long decline.
Beyond
2010
2011
By the end of 2011, world nett crude oil (plus condensates) production
may be down to around 70
million barrels a day.
Huge effort is expended on energy efficiency, conversion of vehicles
to
LPG and CNG, in particular. Gas reserves begin to be fully exploited.
Norways gas production reaches its peak in 2011, a level twice that of
2005.
Alaskan gas may provide the USA with a temporary respite from its
gas/electricity shortfall crisis. Canadian gas may not be available in
the high volume existing in 2006 as Canada both diversifies its
customers to include China, and begins to conserve gas resources for an
uncertain future.
Many countries will be hugely
gas-dependant as time goes by. UK gas fields in the North sea will now
be producing only a third the amount of gas they did in 2005. But UK
hopes to generate 70% of its
electricity from gas by 2020.
Liquification of gas, liquification of coal reserves,
expansion of extraction from non-conventional and remote oil sources is
intensified.
While conversion to CNG and LPG has a relatively short lead time, most
other projects have a very large lead time, and require massive amounts
of capital in a world economy hit by recession. For example, the USA
obtains 3% of its gas supply as LNG, but by 2020 around 25% of
USA gas will 'have to be' LNG imports from overseas. The vastly
expensive
terminals and distribution networks must be in place before domestic
shortfall in natural gas becomes critical.
The vast Middle East Gulf fields probably have started their slow
decline around
2008, and production now is likely to be not much less than 2004
(19.4 million barrels a day), but decline rates of perhaps 3% year on
year are likely to follow. The biggest possible field that 'might' be
found near or soon after 2010 might be offshore Saudi Arabia, at
posssible reserves of 2.2
billion barrels. Far below the reserves of the worlds largest field,
Gharwar, at 115
billion barrels, but obviously still useful.
Looking ahead (from the vantage point of the year 2006), there may
be around 20 million barrels a
day less cheap, regular, (not deepwater, arctic, or oilshale) crude
available relative to the amount burnt in 2006. Allowing for increasing
amounts of gas liquids and
condensate, the shortfall may be in the region of 10 million
barrels a day by about 2010. This is around 12.5% less
cheap oil than was available
in 2005, an economic boom year.
Recession has followed every significant oil mismatch beween supply
and demand. This is a huge
mismatch.
The 1974 recession was quite severe, but relatively short lived when
oil supplies returned to normal from an OPEC engineered 7% oil supply
shortfall.
The 2008 USA and UK banking fiasco and financial melt-down will have
triggered a mild but endless recession, primarily in USA, the UK, and
to lesser extent, Europe, China and Japan. Consumption demand may
flat-line. Slide into global recession looks like it might be on the
back of
about 10% shortfall relative 2005. It may be quite severe right
from
the point of
first inflection around 2010. Demand should both dampen
and now fall due to reduced economic activity, as it did in the early
'70's. The
difference this time is that there is no increase in supply to draw the
world back out of a deepening recession.
Historically, recessions in the eighteen hundreds have lasted for a
long as several decades, until new energy forms transformed technology
and production. This will not happen this time - at least in the sense
we expect.
It would be reasonable to suppose that recession and then depression
will drag on for
the forseeable future, interspersed with small rallies as gas
infrastructure finally comes widely available.
2014
Norways ability to
be the most important contributor to meet even static UK gas
needs decline severely after 2014.
2020
But UK
hopes to generate 70% of its
electricity from gas by 2020. Almost all that gas will be imported -
mainly from Norway, Qatar, Algeria and Russia. But Norways ability to
be the most important contributor to meet even static UK gas
needs declined severely after 2014. Norway would have to supply UK
with 50 billion cubic metres of gas a year at a time its fields are
diminishing. This may not be possible, or even politically desirable
(from Norways point of view, looking ahead). UK's gas needs at this
time will not be able to be met. Norway gas, domestic fields,
and LNG
imports will not be enough. There is unlikely to be other supply,
unless UK has a large share of control of Iraqi (or Iranian) gas. At
the same time, there will be
intense global competition for LNG, both for electricty generation
and for domestic cooking. Long term contracts signed earlier in the
decade will have long since locked up much of the high volume supply.
Ultimately, economies will likely become localised. Distances will
expand as transport beds down into slower forms. Many things will
happen more
slowly as labour becomes more cost effective than machinery for some
jobs. Societies around the world will critically focus on the energy
and transport cost of all goods and services. Society will seek small
scale, distributed, and localised sustainable energy sources alongside
large national non-renewable energy projects.
The adjustment will take several generations, but with the pain and
despair will undoubtedly come challenges met with education, critical
thinking, innovation, enterprise, imagination, and determination.
Dictatorships, quasi dictatorships, and weakly democratic countries
will fare worst in the long term. Engaged, truly fully representative
democracies will tend to cope best in the long run.
In those democracies, as the ultimately unsustainable fossil
hydrocarbon economy fades and
dies, the mixed energy sustainable economy will be born - and in time
grow both strong, and forever young.
©
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2005 Sustainable Living Organisation
Version 19 2008
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