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PS-2500 oil depletion model projects PEAK Demand in 2029

click to enlarge ... more peak oil charts @ my SA Instablog & website
8,007 Gb All Liquids URR/EUR  2011/8/18 98 Mbd PEAK 2029 2011 flow: 88 Mbd
2,058 Gb Regular Conventional Oil 69-mbd  2005 64 Mbd
801 Gb Bitumen/X-Heavy 21-mbd  2115 2 Mbd
1,708 Gb NGL-GTL-Ref/Gain 17-mbd 2040 11 Mbd
938 Gb Kerogen 20-mbd  2058 0 Mbd
266 Gb Deep Sea & Arctic 15-mbd 2028 9 Mbd
2,236 Gb CTL 14-mbd 2046 0 Mbd

1,256 Gb  PAST  (excl 4Gb BTL, to 2010/12/31)

2 Mbd BTL

Highlights:

          Competing Peaks:  98 Mbd Demand Peak 2029 vs 115 Mbd Geologic Peak 2039

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

        2011 Capacity:  93 Mbd incl global Surplus Capacity of 5 Mbd

          The year flow breaches below 2011 level of 88 Mbd:  2059

          URR/EUR:  8,007 Gb  (consumed to 2010/12/31:  1,261-Gb incl 4-Gb BTL)

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

          The year 50% of URR consumed:  2103

          The year oil (excl BTL) runs out:  2497

        Underlying Decline Rate Observed 2011 3.4% (3.0 Mbd) of Worldwide All Liquids

Peak Demand (98 Mbd 2029) Truncating Geologic Peak (115 Mbd 2039)

Aug 18 2011 ~ Today's monthly update of our global oil depletion model, Peak Scenario-2500, reveals there is sufficient Proved Reserves and demonstrated capacity build for Geologic Peak of 115 Mbd in 2039.  Production would suffer an average 2.5%/yr post-peak decline rate during the following decade.  This scenario assumes extrapolation of the long-term Supply-Demand trend (1 Mbd/yr) and annual New Capacity averaging 3.1 Mbd to 2050.  The Underlying Decline Observed (UDO) generally increases from 3.0 Mbd today to 3.7 Mbd by 2050, inevitably exceeding the New Capacity build rate in 2040 (hence Peak in the preceding year).  Resource constraint (the inability to draw upon Proved Reserves at will) becomes an additional factor for accelerating the decline rate in 2046.  But in all likelihood, this growth-as-usual oriented scenario will never come to fruition.

Starting in 2004, Demand oriented medium-term extraction forecasts began to take a backseat to a new breed of practitioners using a new genre of "bottom-up" flow efforts.  They were inspired by the realization actual Production could not attain the high magnitude numbers being forecast on the journey to future consumption as high as 126 Mbd.  But lately, an ironic reversal seems to be in play.  It is increasingly apparent these (bottom-up) flow determined targets are now themselves significantly over-estimating probable production.

New Demand modules are currently re-stating projections to take into account the reality of demand destruction in an environment where there exists the potential of future spiking of Crude Prices to as high as $379/barrel by 2034.  The four-decade 1 Mbd/yr Demand trend (upon which our Geologic Peak scenario is based) is giving way to a waning growth rate in Demand that could see it cease to rise after attaining the 98 Mbd level (in 2029).  Because production is more likely to take this dampened path rather than one creating excessive surplus capacity, the emphasis of my monthly Outlook updates have since July 2010 reflected the more conservative Peak Demand inspired scenario.  The March 2011 model run was the first to indicate production will PEAK due to Demand rather than geologic constraints.

Today's PS-2500 monthly revision of the Peak Demand Scenario reflects four factors:  (a) target for Underlying Decline Rate Observed (UDRO) in 2050 decreases to 4.0% (from 4.5%);  (b) the projected annual New Capacity trend to Year 2100 decreased to 3.3 Mbd (from 4.1 Mbd);  (d) to maintain the integrity of supply chain realities the model assumes Proved Reserves will continue to be developed from available resource at a rate consistent with the historic 40-yr Reserves/Production ratio; (e) in a quest to preserve the aspirational soundness of price discovery, global Surplus Capacity is prevented from dipping below 3 Mbd throughout the timeline;  & (f) 48 Gb increase in URR/EUR.

PS-2500's Peak Demand scenario projects All Liquids flow will peak @ 98 Mbd in 2029 and will not fall back below this year's pace of 88 Mbd 'til 2059 ... ensuring many decades of plentiful supply.  All Liquids will cross the midpoint of its 8.0-Tb URR in 2103.  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.

Global production has increased dramatically from the Recession low of 83.1 Mbd (Jan/2009), setting yet another monthly record (88.8 Mbd) in July 2011.  The oil sector is on pace to shatter last year's annual record and monthly production is poised to break the 90-mbd threshold in January 2013, the 95 milepost in 2019 & geologic peak should be pre-empted by Peak Demand of 98 Mbd in 2029.  International Inventories are well above the 5-yr avg and 5% of global capacity is presently idle eagerly awaiting new Demand.

See our World Production Records venue for higher resolution charts of current extraction.  Historical analysis of Crude & Gasoline Price components & future target prices (out to 2035) can be viewed via our Gas Pump & Barrel Meter charts.

It is little known the pause in global production seen in 2009 was actually the 11th annual decline since 1975.  Applying my study of North American business cycle patterns, it is almost certain similar softness can be expected from 2017, 2026 & 2034 contractions - and these potential economic downturns are indeed reflected in the PS-2500 modelling.  As BRIC nations become more prominent on the global scene, USA Recessions should have reduced influence over the decades. 

A record 5.0 Mbd of flow from new facilities was set in 2010.  A sign of the health and robustness of the sector is evident in that after addressing Underlying Decline loss and higher production, global Surplus Capacity is only a tad lower this year @ 5 Mbd & Total Capacity is a record 93 Mbd.

Year-to-date stats reveal Underlying Decline Rate Observed (UDRO) for All Liquids is up modestly @ 3.4% (2.98 Mbd) worldwide, up as well to 3.2% (0.33 Mbd) in Saudi Arabia & steady @ 2.5% (0.22 Mbd) in the USA.  In keeping with its cyclical nature, the loss factor should see its next high during a probable 2017 Recession.  Modelling of the secular trend (including its 8.5 year cycles) suggests UDRO will rise to 4.0% by 2050.

Due to the limited horizon of accurate Demand projections, the post-2050 production profile still reflects available flows from prudent Proved Reserves development ... not Demand.  To maintain the integrity of supply chain realities the model assumes Proved Reserves will continue to be developed from available resource at a rate consistent with the historic 40-yr Reserves/Production ratio.

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 over 5 Mbd from 69 Mbd in 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 study as constrained by Demand realities by Trendlines Research energy analyst, Freddy Hutter.  It is our contribution to the 17 models that comprise the TRENDLines Depletion Scenarios Avg we track each month, illustrating industry consensus on the timing of Peak Oil.


Target All Liquids  Extraction Rates :

  Mbd  
2008 85.6 -
2009 84.4 -
2010 86.9 -
2011 87.7

(pending)

2029 98 Peak Year & Peak Rate  (Demand)
2033 96 extraction passes 2 trillion barrels
2035 96 milestone
2039 92 regular conventional drops to 50% of All Liquids
2050 91 today's 1,256-Gb of proven reserves exhausted
2050 91 milestone
2059 87 first year with flow less than today
2065 83 extraction passes 3 trillion barrels
2075 78 milestone
2100 74 milestone
2124 72 regular conventional oil exhausts
2103 74 Extraction 50% of URR
2103 74 extraction passes 4 trillion barrels
2145 64 extraction passes 5 trillion barrels

   2174

43 flow is 1/2 of today
2200 33 milestone ~ flows limited to X-Heavy, GTL, CTL & BTL
2216 32 extraction passes 6 trillion barrels
2300 31 milestone ~ flows limited to CTL & BTL
2400 20 milestone ~ flows limited to CTL & BTL
2497 5 world runs out of (NYSE:CTL) oil ...  (excl BTL)

Toward Peak Demand

It is has been my judgment since July 2010 that the oil sector is on a path leading toward Peak Demand ... not Geologic Peak.  A record flow of 5.0 Mbd from new Capacity was set in 2010.  As shown in the chart#4 inset, this 5.5% of production pace had not been seen since 1983.  Today's 98 Mbd 2029 projection of Peak Demand mandates a construction pace of 3.0 Mbd/yr of new facilities to that date.  On the contrary, should there be a continuation of the four-decade growth rate of 1 Mbd/yr, Production would PEAK @ 115 Mbd in 2039, requires a capacity build of 3.7 Mbd/yr & assumes 4 Mbd of Surplus Capacity at Peak.

PS-2500's 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 resource constrained geologic peak will occur.  This is welcome news from a Crude Price context as it is much easier to maintain reasonable Inventory balance & Surplus Capacity in such an environment.

My current analysis of the Demand growth rates indicates global consumption started to break away from the long-time 1 Mbd/yr growth trend in 2004 and will level off by 2029.  With generally lower targets on that journey, the model found it necessary to pare back Annual New Capacity by 19% to prevent an excess build in global Spare Capacity.  To moderate Crude Price thru to 2035, the model found an avg Spare Capacity of 4.8 Mbd will be sufficient ... somewhat less than the recent April 2010 high (6.1 Mbd) and comparable to today's status of 4.6 Mbd.

End of Highlights - balance & original article