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PS-2500 model forecasts global oil demand will peak in 2033

click to enlarge ... more peak oil charts @ my SA Instablog & website

Highlights:

          Competing Peaks:  98-mbd Demand Peak 2033 vs 117-mbd Potential Supply 2041

          Post-Peak Production Decline Rate:  0.3%/yr 'til 2050

          Total 2011 Capacity:  93-mbd incl global Surplus Capacity of 5-mbd

          The year flow breaches below 2011 level of 88-mbd:  2060

          URR/EUR:  7,980-Gb  (consumed to 2010/12/31:  1,260-Gb less 4-Gb BTL)

          Depletion of URR:  16%      Annual Gross Depletion Rate:  0.4%  (Net:  0.5%)

          The year 50% of URR consumed:  2100

          The year oil (excl BTL) runs out:  2492

        Underlying Decline Rate Observed 2011 3.5% (3.0-mbd) of Worldwide All Liquids

Peak Demand expected in 2033

July 30 2011 delayed FreeVenue public release of April 29thth guidance @ our MemberVenue ~ Today's monthly update of our global oil depletion model, Peak Scenario-2500, reveals there is sufficient resource and proven capacity build for a potential All Liquids Supply Peak of 117-mbd in 2041.  Its post-peak production decline would average 1.6% per annum in the first two decades.  This projection is founded on continuance of the long-term Demand trend and annual New Capacity rising over the decades from today's 3.5-mbd/yr trend pace to an eventual 4.8-mbd/yr high.  Resource constraint becomes a factor after 2042.  The Underlying Decline Observed (UDO) generally increases from 3.0-mbd today to 4.7-mbd by 2050 and inevitably exceeds the New Capacity build rate in 2048.  But in all probability, this Supply oriented scenario will never come to fruition.

Not too long ago, Demand oriented forecasts by practitioners took a back seat to a new genre of "bottom-up" efforts when it appeared Supply could not keep up to the high magnitude numbers being forecast for medium or long term consumption.  But lately, a reversal seems to be in play.  It is apparent these recent production oriented may be greatly overstating probable Demand.  The four-decade trend of production rising by 1-mbd/yr upon which our Supply scenario is based must give way to a waning growth rate in Demand that could see production cease to rise after it reaches 98-mbd.  Because the path of production is more likely to be weighted towards this dampened level rather than create excessive surplus capacity, the preferred emphasis of our Outlook updates has reflected the Demand-inspired path since July 2010.

Today's PS-2500 monthly revision reflects three factors:  (a) increased UDRO 2050 target to 5.0% (from 4.1%); (b) the tenth run of our new Peak Demand module & (c) the projected annual New Capacity trend to Year 2100 increased to 4.0-mbd (from 3.8-mbd).

PS-2500's Peak Demand scenario projects All Liquids flow will peak @ 98-mbd in 2033 and will not fall back below this year's pace of 88-mbd 'til 2060 ... ensuring many decades of plentiful supply.  All Liquids will cross the midpoint of its 8.0-Tb URR in 2100.  With petroleum-based liquids exhausting around Year 2497, there appears to be only about 500 years of oil left!  After that date, flow will be solely dependent on renewable Biofuels.

2010 global production smashed the annual record set in 2008.  2011 has started out with a new monthly record in January & quarterly record in Q1.  Monthly flow, which had slipped from its 86.7-mbd record of July 2008 record to only 83.2 (Jan-2009) at the depth of the Recession is on a pace to break the 90-mbd threshold in Autumn 2012.  But all new records are in jeopardy due to the present price spike ... one that could break the $131/barrel high in Summer 2008.  See our World Production Records venue for higher resolution charts of current extraction.

The pause in annual global production in 2009 was the the 11th since 1975.  Business cycle patterns indicate we can expect similar softness  in 2017, 2026, 2034 & 2043 - and these potential economic downturns are reflected in the PS-2500 modelling.

A record 5.0-mbd of new facilities were commissioned in 2010.  Of this New Capacity, 2.5-mbd was required to offset loss of production due to Underlying Decline Observed (UDO).  This year will see maintenance of Global Surplus Capacity @ 6-mbd & Total Capacity rise to a record 93-mbd.

Year-to-date stats reveal that the Underlying Decline Rate Observed (UDRO) for All Liquids is:  3.5% (3.02-mbd) worldwide in 2011,  2.7% (0.27-mbd) in Saudi Arabia & 2.5% (0.22-mbd) in the USA.  This confirms UDRO has formed a sixth cycle top since 1970 with another surge of the decline rate to 3.1% in 2008 and further builds the case in my hypothesis that UDRO is cyclical.  This past experience indicates the loss factor will see its next cycle high (3.5%) during a probable 2017 Recession.  Modelling of the general trend (including its 8.5 year cycles) suggests UDRO rises to 5.0% by 2050.

PS-2500 is a composite analysis of the 7 major components of All Liquids.  Regular Conventional Oil (RCO) is the only category that is post-Peak, down 5-mbd since 2005.  The 11 streams tracked as All Liquids include RCO, NGL, refinery gain and the non-conventionals: GTL (gas-to-liquid), Deep Sea, Arctic, Bitumen (oil sands), X-Heavy, CTL (coal-to-liquid), Kerogen (shale) & BTL (biofuels-to-liquid) ... each with its own unique production profile.

PS-2500 is a flow based bottom-up analysis by Trendlines Research energy analyst, Freddy Hutter.  It is our contribution to the 20 models that comprise the Trendlines Scenarios Avg we track each month, illustrating industry consensus on the timing of Peak Oil.


Target Extraction Rates :

  mbd  
2008 85.5 -
2009 84.3 -
2010 86.4 -
2011 87.8

pending

2033 98 Peak Year & Peak Rate
2033 98 extraction passes 2 trillion barrels
2035 97 milestone
2041 97 regular conventional drops below 50% of All Liquids
2048 95 today's 1,268-Gb of proven reserves exhausted
2050 94 milestone
2060 88 first year with flow less than today
2064 86 extraction passes 3 trillion barrels
2075 83 9.2-billion peak of global population
2090 79 regular conventional oil exhausts
2100 79 Extraction 50% of URR
2100 79 extraction passes 4 trillion barrels
2100 79 milestone
2137 76 extraction passes 5 trillion barrels
2185 44 extraction passes 6 trillion barrels

  2187

44 flow is 1/2 of today
2200 42 milestone flows limited to X-Heavy, GTL, CTL & BTL
2300 19 flows limited to CTL & BTL
2400 19 milestone
2510 6 world runs out of oil...  (excl BTL)

Toward Peak Demand

A record 5.0-mbd of new capacity was commissioned in 2010.  As shown in the chart#4 inset, this 5.5% of production pace has not been seen since 1983.  Today's Peak Demand projection of a 98-mbd 2033 Peak requires an avg 3.4-mbd/yr of new facilities to that date.  Should there be a continuation of the four-decade growth rate of 1-mbd/yr, Supply would PEAK @ 117-mbd in 2041 and require capacity build of 4.4-mbd/yr.

Peak Scenario-2500's new Peak Demand module addresses the recent deterioration of the Demand growth rate - mostly inspired by a decline in OECD consumption.  Since its first monthly run in July 2010, it has been suggesting it is less and less likely a potential Supply Peak will ever be attained.  This is welcome news from a Crude Price context as it is much easier to maintain reasonable Inventory balance & Surplus Capacity in a plateauish environment.

Our current analysis of the Demand growth rate indicates global consumption started to break away from the trend in 2004 and will level off within two decades.  With generally lower targets, the model has found it necessary to to pare back Annual New Capacity to as low as 3.4-mbd/yr in the short term to prevent an excess build of global Surplus Capacity ... down from last year's 5.0-mbd record capacity build.  To moderate Crude Price, the model found it necessary to maintain an avg Spare Capacity of 4.7-mbd thru to 2035.

Because Demand will most probably continue to wane after reaching "zero growth", post-peak production declines @ a very manageable 0.3%/yr in the two decades following Peak.  An assumption is made that Demand will decline 'til 2050.  It is our judgment today that the oil sector is on a path leading toward Peak Demand ... not Peak Supply.


URR/EUR

7,980-Gb All Liquids URR/EUR  2011/4/30 98mbd PEAK 2033 2011 flow: 88-mbd
2,059-Gb Regular Conventional Oil 68-mbd  2005 63-mbd
801-Gb Bitumen/X-Heavy 21-mbd  2115 3-mbd
1,746-Gb NGL-GTL-Ref/Gain 23-mbd 2053 11-mbd
902-Gb Kerogen 20-mbd  2057 0-mbd
235-Gb Deep Sea & Arctic 15-mbd 2028 9-mbd
2,237-Gb CTL 14-mbd 2046 0-mbd
1,260-Gb PAST to 2010/12/31 2-BTL

Peak Scenario-2500 is constructed on a 7,980-Tb URR platform that spans over six centuries.  Six of All Liquids seven main components will probably have exhausted presently economic resource by Year 2497.  After that date, All Liquids is limited to BTL sourcing unless there are significant technologic advancements, or the Crude Price rises sufficiently to convert more OOIP (original oil in place: 19-Tb) to economically feasible resource.  The April PS-2500 revision reflects less than 5-Gb decrease in our URR estimate.  This URR/EUR platform assumes an ultimate recovery rate of 42% by Year 2500.

One reason McPeaksters have been successful with their 23-year scare campaign is 'cuz most folks have little appreciation of the magnitude of Proven Reserves (1,268-Gb).  As can be seen in the table above, this is equal to all the oil consumed over the past 150 years + January, February & March 2011. In other words, if no further discoveries were made after today's date, present Proven Reserves of 1,268-Gb wouldn't be fully consumed 'til 2048.  For the past three decades the oil sector supply chain has operated within a regime which assumes a 40-yr Reserve/Production ratio.  To maintain this metric, the industry has added an avg 50-Gb annually to the Proven Reserve tally over the last ten years.  This more than covers present Consumption of 32-Gb/yr.  The McPeakster hypothesis that Peak Oil occurs 40yrs after Peak Discovery is utter nonsense considering supply chain realities and industry practices.  Proved Reserves have doubled since 1978.  URR has doubled since 1991.  Remaining Resource has doubled since Y2k.

Due to the enormous time span over which economic resource is spread, it is more than probable that Demand projections and perhaps the Peak itself will be substantially reduced due to technologic obsolescence long before any resource constraints kick in ... akin to the stone age, coal and whale oil dependence - the reality of demand destruction.  The adoption of hybrid, electric, natural gas & fuel cell vehicles will lead the transition away from gasoline/diesel dominance as a transportation fuel.  Analysis by our long-term Barrel Meter model suggests this weaning off gasoline/diesel must be substantially complete by 2030 ... upon Crude Price surpassing $213/barrel - and the Light Vehicle Sales Collapse Threshold.

As a renewable fuel, BTL has virtually no end point.  PS-2500 projects BTL will attain an ultimate and permanent Peak Plateau of 5-mbd in 2035 and will consume a cumulative 931-Gb to Year 2500 (excluded from URR/EUR tally).

The All Liquids Demand Peak (2033) will occur at 25% depletion of presently-economic resource.  The midpoint of URR will be crossed in 2100.  Exhaustion of the first trillion barrels of reserves occurred in 2002.  The second trillion will have passed by 2033; and then the third by 2064.

Due to the 600+ year time line and our 4.0-Tb of liberal augments to Heavies/Bitumen/Kerogen/GTL/CTL, PS-2500's 8.0-Tb URR varies immensely from the 4.0-Tb Avg found in our 20-model TrendLines Scenarios.  And admittedly, the latter is much remarkably more in line with the last update of our URR Composite Estimates Study with its slightly different mix of practitioners and also sporting an average of 3.99-Tb URR.


Underlying Decline

In a typical profile, annual production builds over time, attains a peak, maintains a plateau, then declines.  Because fields and petroleum provinces are developed over years or decades, some of the wells of a field, or fields within a province, or ultimately provinces within global production ... can be in decline or retired while others are still in growth stage or plateau.  This annual loss factor is the field/province/world's Natural Underlying Decline.

IEA calculates the annual Natural Underlying Decline Rate is 5% in post-peak Regular Conventional Crude fields, and as much as 15% in non-conventional post-peak Deep Sea fields, with a weighted avg of 9%.  A Producer's EOR activity can improve extraction results and diminish this loss factor.  After general EOR activity, IEA calculates the annual loss is 6.7% for Conventional & Deep Sea crude categories that represent 83% of global production.

I call this net absolute figure, more applicable to our depletion studies, Underlying Decline Observed (UDO).  It is expressed in millions of barrels per day (mbd) per annum.  More commonly, analysis of RCC or All Liquids is conducted in percentage terms per time interval - and the Underlying Decline Rate Observed (UDRO) is appropriate.  To maintain a production plateau, Production Capacity must be incrementally increased each year to match UDO loss.

Within a typical petroleum province, roughly a third of fields & wells are relatively recent and are annually ramping up their production rate.  Another third are in plateau.  And the balance are the mature and near-retired wells & fields where significant depletion is reflected by production decline within.

Since November 2007, Peak Scenario 2500 has uniquely provided stakeholders with regular monthly reporting of Global UDO/UDRO status, along with progress alerts on the two key mature provinces (Saudi Arabia & USA).

My March 2009 analysis revealed that Global UDO first became significant during the 1970 American Recession.  Chart#4 illustrates long term global annual UDO (red line), but it is the Underlying Decline Rate Observed (UDRO) inset showing annual rates that is most instructive.  I have found that UDRO exhibits a tendency to ebb and flow.  These cyclical (8.5-yr) crests correlate with all six USA Recessions since 1970.  The cycle tops appear to reflect reduced EOR activity during economic contractions, no doubt due to capital & cash flow challenges amid a reduced Demand environment.

These crests (bold red line) further coincide somewhat with depletion rate peaks of  the major petroleum provinces:  the Persian basin (Iraq/Iran) in 1977, USA/Russia All Liquids in 1984, the North Sea in 2001 & the present deterioration in Mexico.  The highest annual surge for UDRO was 6.3% of All Liquids production in 1984 in the wake of the double-dip 80's Recessions.  The cycle top of the 2001 Recession was followed by an UDRO trough of 1.9% in 2006, then the 3.1% high during the 2008 Recession.  The loss factor is projected to see its next cycle high (3.4%) during a probable 2017 Recession.  Modeling of the general trend (including its 8.5 year cycles) suggests UDRO will rise to 5.0% by 2050.

Extension of the business cycle pattern may induce further crests in 2017, 2026, 2034, 2043, 2051 & 2060.  I am extremely comfortable with such a bold forecast 'cuz incredibly, these dates fall in line with our forecast for peak-related heavy depletion associated with Saudi Arabia (2019), Deep Sea (2028), NGL/GTL (2053) & global RCO (2057).

Analysis by Trendlines Research reveals that over the last 40 years, UDRO has averaged 2.7% annually.  From 1970, this necessitated the construction of 119-mbd of new facilities:  76 to address UDO & 43-mbd to raise Extraction Capacity from 49 in 1969 to 92-mbd by December 2009.  In short, the oil sector has been adding 3-mbd/yr ... or a new Saudi Arabia every three years for four decades!  Terminal global production decline will commence shortly after Annual New Capacity no longer exceeds the UDO trend line.  This intersection is crossed in 2048.

In a more recent context, the industry commissioned 36-mbd of new capacity from 2001 to 2010.  During that ten year span, a full 24-mbd was applied against this Underlying Decline challenge; and the remaining 12-mbd serviced new Demand & added to Surplus Capacity.  This impressive task (3.6-mbd/yr) was equivalent to a new Russia coming on stream every three years.  Visually, the bold red line in charts #3 & #4 tracks annual Underlying Decline Observed.

Cycles aside, the magnitude of loss will generally rise as Peak  approaches.  Viewing the future by our measure, 94-mbd (3.8/yr) of new capacity will be required to attain our 2035 target of 97-mbd.  There will be an 12-mbd increase in capacity and the other 82-mbd addresses UDO loss over the next 25 years.  Added to the 76-Gb to cover 1970-2009 decline loss, we calculate a total 158-Gb of Capacity will have been dedicated to this loss phenomenon over the full six and half decades.

The oil sector presently maintains a seven-year trend for New Capacity of 3.5-mbd/yr, thus when combined with idle capacity, is already on track to attain our 2035 target.  And, perhaps even a less difficult task considering the record breaking 5.0-mbd new capacity installed in 2010!  Based on present URR Estimates and subject to capital availability, the Industry can maintain this activity level until inevitable resource constraints begin to restrain new development after 2057.

Below, PS-2500 is compared to the short time frame practitioner estimates for All Liquids UDRO:

   1.9% - Adam Brandt (2007 - sole peer-reviewed contribution)

   2.0% - IEA (2010-2035 avg)

   2.1% - CERA (2009-2030 avg)

   3.5% - Hutter Peak Scenario-2500 (2011, rising to 4.5% by 2050)

   4.1% - Matt Simmons (2009-2030 avg)

   4.2% - EIA (2009-2030 avg)

   4.2% - Jeff Rubin (2009)

   4.5% - OPEC (2008)

   4.7% - Chris Skrebowski (2010)

   5.0% - Total (2009)

   5.0% - Deutsche Bank (5% in 2009, rising to 8% by 2030 ... 6.7% avg)

   5.2% - Schlumberger (2009-2030 avg)

   5.25% - Sadad al Husseini (2009)

   6.0% - PFC (by 2030)

   7.0% - UK Energy Research Centre (2009)

   9.0% - consensus at theOilDrum & PeakOildotcom (2009)

The PS-2500 findings surrounding the nature of Underlying Decline vary considerably from the consensus McPeakster hypothesis.  Chatter at PeakOildotcom & theOilDrum proposes All Liquids UDRO rose fast & furious from 0% in 2002 to 9% in 2009.  Their simplistic musings are void of any explanation for the above mentioned 76-mbd of new facilities built from 1970 to 2009 that failed to increase production!  The 7% figure adopted last Summer by the UK Energy Research Centre is similarly a figure fabricated from thin air.  Acknowledgment by McPeaksters that their scary scenarios are groundless will not occur anytime soon.  These groups are agenda-driven and facts just get it in the way...

Finally, let's give this loss factor some overall context.  The USA sports a 2.5% All Liquids UDRO as an 86% depleted petroleum province in 2010.  Less mature Saudi Arabia at 40% Depletion, sports a 2.7% All Liquids UDRO this year.  Both are reasonably good proxies as to what will be faced on the global scale in the domain of Underlying Decline.  With worldwide Depletion at a mere 16%, it is almost certain the trend of global UDRO will not exceed 5% 'til mid-century on its journey to ultimate exhaustion after Year 2500.

All Liquids 2011 (year-to-date) Underlying Decline Rates Observed:  3.5% (3.0-mbd) and rising Worldwide;  2.7% (0.27-mbd) & rising in Saudi Arabia;  2.5% (0.22-mbd) and rising in the USA.


2035 Outlook

The higher resolution of our PS-2500 "2035 Outlook" (chart#3 above) allows an illustration of two controversial scenarios:

(a) an ultra conservative All Liquids trajectory with an apparent 91-mbd Peak in 2012, declining to 28-mbd by 2035 ( hashed lime line)) and assuming an avg 3.3% Underlying Decline Rate Observed (UDRO).  As a Worst Case Scenario, it assumes the oil sector will never augment today's announced-to-date MegaProjects to 2018.

(b) the more plausible production profile wherein a Megaproject trend of 3.4-mbd/yr avg is assumed and UDRO undulates in correlation with GDP growth rates.  Note that this optimistic trajectory has been altered in the past year to track estimated Demand ... not (much higher) Potential Supply or Capacity - reflecting a recent waning Demand growth rate rather than the historic 1-mbd/yr trend (since 1970).  Record Surplus Capacity of 6-mbd in 2011 wanes over the time line to an avg 4.7-mbd.  Under this scenario, there are no resource constraints to impede annual Supply growth 'til 2057.  Demand peaks in 2033 @ 98-mbd.  Should Demand resume its 1-mbd/yr trend, resource constraints stymie Production in 2042, hence Production peaks @ 117-mbd in 2041 (see chart#1).

In practical terms, recent history (since 1970) has shown the pessimistic projection line ( hashed lime line)) incrementally rises thru time to meet the production trend line.  Hence The Wedge as shown continually gets pushed back to "next year".  Viewing the future by our measure, 94-mbd of new capacity will be required to attain our 2035 target of 97-mbd.  Total Capacity rises 12-mbd to 103-mbd in 2035, so 82-mbd will address the UDO loss over the next 25 years.  Added to the 76-mbd to cover 1970-2009 decline loss, we calculate a total 158-mbd of Capacity will have been dedicated to this loss phenomenon over the full six and half decades. (see chart#1)

It takes up to 7 years to bring to fruition very large (MegaProject) capacity facilities.  The Autumn 2008 Credit Crisis jeopardized some planned ventures and may have deferred what were imminent announcements as stakeholders used the opportunity of a Recessionary environment to rewrite contracts and MOUs in a deflated pricing regime.

To prevent Terminal Decline in the coming two decades, Producers need only monitor the UDO trend and commit to a New Capacity construction program that consistently matches or exceeds that loss.  As seen in Chart#4, Industry has generally and stalwartly installed sufficient New Capacity to meet this challenge ever since 1970.  From a recent low of 2.6-mbd installed New Capacity in Y2k, this metric has been on a steady rise, culminating in 5.0-mbd of facilities in 2010.

Resource availability for capacity additions poses no constraint before 2058.  With 1,268-Gb of proved reserves, the Industry doesn't need a newly discovered barrel of oil 'til Year 2048.  For three decades the sector has relied on a supply chain that pre-supposes a 40-yr reserve/production ratio.  This means the exploration segment need only convert from resource to proved reserves an amount slightly in excess of the amount it consumes ... 32-Gb per year.  The performance over the past ten years has actually been 50-Gb/year!

Actual annual production will be affected by Price & Demand forcings, sometimes influenced by natural and geopolitical events.  We have attempted to account for these nuances by adjusting for future economic Recessions and high price periods.  Recent record 6.2-mbd of global Surplus Capacity in early 2010 will generally decline but still average 4.7-mbd over the next 25 years to maintain reasonable pricing.


the Peak ... & Terminal Decline

Continuing Production growth versus a reversal into terminal decline is completely dependent on the delicate balance between Annual Underlying Decline Observed (UDO) and Annual New Capacity.  To complicate matters, we have shown that UDO does not rise incrementally each year as universally assumed.  UDRO rocketed to a 6.3% high after America's double-dip 80's Recessions, but then drifted way down to 1.7% by 1999.  Add unpredictable OPEC interference to the fray and Producers have their work cut out in monitoring quota & UDO losses and stalwartly making up the difference ... and more.

Over the past four decades, new installations have averaged 3.0-mbd/yr.  The current (7-yr) trend rate is an even better 3.5-mbd/yr.  2010 performance was a record 5.0-mbd in newly commissioned facilities.  OTOH, the long term Avg for UDO is 1.9-mbd (2.5-mbd in 2010).  The balance of 1.1-mbd/yr increased capacity from 49 in 1969 to 92-mbd in 2009.

Presently, Producers can extract at will from any of seven categories of conventional & non-conventional resource.  Terminal Decline can be averted so long as New Capacity out paces Underlying Decline.  But, it appears that this competition ends in 2048 when the secular trend of rising Underlying Decline Observed finally surpasses the sector's maximum ability for annual new installations (5mbd).  UDO is forecast to rise to 4.7-mbd/yr by 2050.

On a second battle front, Producers must face inevitable resource constraints.  The first stream to peak was Regular Conventional Oil in 2005.  A second stream, Arctic & Deep Sea extraction starts terminal decline in 2029.  Dwindling proved reserves will one day reach the point where our attributed Annual New Capacity ceiling (5-mbd) is in jeopardy and can no longer be developed at desired levels.  We calculate that event will occur in Year 2058.

Thus at this point in time and because it is the earliest of the two junctures, the UDRO forced decline in 2048 should be the determinant of Peak Date.  It therefore came as quite a surprise when our Peak Demand module waved its arms at the back of the room and declared Demand will pre-empt the normally expected course of events and we won't make it to that date.  Until last month (March 2011), the module had only been dampening Peak Rate and terminal decline was ultimately determined by one of the two forcings (UDO vs resource constraint) discussed.

The March 2011 model run also introduced the concept that once the Demand growth rate reaches "zero", it will turn negative ... not maintain a plateau.  This means the decline profile will take on a bell curve path rather than await resource constraint and "plummet over the precipice" when R/P 9 is finally achieved as occurs in the Potential Peak Supply scenario.

This presents two very different scenarios for the down slope profile.  The status quo history-driven Potential Peak Supply projection would lead to a somewhat concerning 1.6% annual production decline to 2060 starting in 2042.  The Peak Demand scenario forecasts a gentler 0.3%/yr decline, but one that is accelerated by nine years (2034).

Despite its earlier date, the Peak Demand scenario presents stakeholders and policy makers with a much more manageable situation than the calamitous alternative.  None-the-less, the pressure to have substitutions, infrastructure & conservation measures in place in 22 years is of greater importance than appears.  Coinciding with this event is the very real likelihood Crude Price will permanently breach the Light Vehicle Sales Collapse Threshold.  The Trendlines Barrel Meter warns that prudent mitigation should guide the transportation sector to significantly wean itself off gasoline/diesel based fuels by this episode.

The Trendlines Research 2007 submission to the USA's National Petroleum Council promoted the advantages of engineering a plateau versus allowing a high peak followed by calamitous decline.  Those scenarios can now be seen visually in Chart#1, where we can see via the Potential Supply Peak scenario how the post-peak track for All Liquids collapses upon Regular Conventional Oil (RCO) commencing its R/P 9 (Reserve/Production Ratio ~ 10%) environment caused by the inability of the sector to any longer replenish proven reserves at will.  The RCO drop-off is virtually unnoticeable in the Peak demand scenario.

The same chart illustrates how the down slope is shaped by the harmonics of the underlying unique production profile of each All Liquids stream.  Present data indicates Regular Conventional Oil (light sweet crude) will exhaust in 2090, the Arctic/Deep Sea resource in 2099, Kerogen in 2196, Heavies/Bitumen in 2252, NGL/GTL in 2265 & CTL in 2497.

Per capita consumption is eased somewhat with information from the UN that global population will finally commence a decline from its peak of 9.2 billion in 2075 to 8.3 billion in 2175.  Due to potential technologic obsolescence, long-term Demand is unpredictable.  But should there be ample and insatiable Demand, All Liquids supply is indeed calculable.


Saudi Arabia

Russia & Saudi Arabia have enjoyed a friendly rivalry for the title of World's leading All Liquids Supplier nation for three decades.  OPEC mandated restrictions on member quotas since Autumn 2008 have enabled Russia to slip ahead once again.

Saudi Aramco starts 2011 with an unrivalled 4.05-mbd Surplus Capacity and 12.25 MSC.  As OPEC relaxes quote restrictions with time, Aramco can use this spare capacity to ramp up production; even the remote possibility of new records.  "Remote" because this huge surplus capacity is masking the reality that the Kingdom passed a major milestone:  the Peak of its Maximum Sustainable Capacity (NYSEARCA:MSC).  KSA MSC reached a record 12.5-mbd in 2009.  MegaProject analysis indicates that there are insufficient new facilities planned in the visible horizon to outpace the Underlying Decline factor.

My estimate of the Kingdom's URR has been drastically reduced over the past two years ... to 292-Gb.  The discrepancy between this linearization-indicated potential versus the 900-Gb resource base touted by the Kingdom is rather disturbing.

Trendlines Research calculates Saudi UDO to be 0.25-mbd/yr (2.7% of 2010 All Liquids).  Even assuming this to be a stable metric, the completion of announced MegaProjects would mean MSC of only 12.0-mbd by the end of 2015.  Saudi Arabia must install an additional 0.6-mbd in unannounced new facilities before 2016 to avoid 2009 being deemed its MSC Peak ... an almost impossible task at this juncture considering lead times.

This historic event is consistent with our analysis that KSA will cross the midpoint of its URR shortly (in 2019).  Regardless, its reserves are quite large and the nation will continue to be the globe's number one (or two) All Liquids supplier for two generations.  Production Capacity will not breach below the 8-mbd threshold 'til 2038.  The unrivalled Surplus Capacity makes it impossible to forecast Saudi peak production.  Aramco has many strategic options and is vulnerable to OPEC mandates.