The End of the First Half of the Age of Oil

1. The End of the First Half of theAge of Oil by Colin Campbell ASPO IRELAND

2. Outline 1. Geological Reality “You have to find it first” 2. Discovery & Production starts & ends • growth is followed by decline 3. Explanation of Confusion 4. Consequences 5. Reactions

3. PETROLEUM GEOLOGY in3 Minutes

4. On a mule in Colombia in 1960

5. Extreme Global Warming gave excessive Algal Growths 90 & 150 million years ago Rifts formed as the Continents moved apart Organic debris

6. And then came the rains Rifts filled by sediment washed in from borderlands Chemical reactions converted organic debris into oil when buried & heated

7. N.W EuropeOil GeneratingZones-Where oil is and where it is not

8. Water well Critical Temperature 60-120 0C

9. Depletion is Easy to Grasp As every beer drinker knows: “Glass starts full, and ends empty” • The quicker you drink it, the sooner it is gone • The same principle applies to oil and gas How has this self-evident reality been concealed ? • It is so obviousyet it is a DEVASTATING REALISATION

10. A Fixed Quantity Oil was formed in the geological past • We can’t “grow” more Are we Running Out? – • We started running out with the first barrel • The last barrel is far in the future But production begins to decline when half is gone - THAT IS THE ISSUE

11. Why we need to know Oil & Gas now dominate our lives 40% of traded energy is oil >90% transport fuel is oil • Trade depends on transport Much electricity is made from gas Critical for agriculture - people eat • Fuels the tractor, transports the produce • Gives synthetic nutrients and pesticides

12. Why were n’t we told? Oil companies reported Commercial Reserves to meet strict Stock Exchange rules They under-reported discovery & revised upwards • A comforting but misleading image of steady growth • No conspiracy - just simple commercial prudence OPEC over-reported PUBLIC NUMBERS ARE VERY UNRELIABLE • and difficult to decode

13. What the oil companies say Denial gives way to Confession Exxon-Mobil publishes the true position Chevron-Texaco speaks of “inflection” Shell’s admission caused a financial furore • Failed to obscure reality by merger But Lord Browne of BP deliberately misleads • Reserve/Production ratio

14. OPEC Reserve Reporting Competing for Quota Kuwait 1984 Produced = 23 Gb Remaining = 64 Found = 87 (~90)

15. Reality and Illusion Illusion Reality Inflexion due to falling Discovery Actual As Reported

16. A few Examples The same pattern everywhere • but for minor variants Production mirrors discovery

17. US-48 Peak to Peak 40 years Peak Discovery

18. Egypt Peak to Peak 30 years

19. Indonesia Peak to Peak 32 years

20. Russia Peak to Peak 27 years

21. China Peak to Peak 44 years

22. United Kingdom Peak to Peak 25 years

23. United Kingdom Published by Dept. of Trade & Industry

24. Real Discovery Trend Past discovery by ExxonMobil Past after ExxonMobil

25. “Draining the tanks” 130 Yet-to-Find Surprise Filling at 5 p.a ? 945 Produced 1720 DISCOVERED 775 Remaining Total would fill Lake Geneva Emptying at 25 p.a. Billion barrels One in - Five out

26. Where is it?Regular Conventional Oil

27. All Oil & Gas All boundaries fuzzy

28. The Illusion of new Technology Oil industry uses very advanced technology • No major breakthrough in sight Technology holds production higher for longer • increasing profit • accelerating depletion • Does not add Reserves • save in special cases

29. 1977 Internal Estimate : 12.5-15 Gb Reported : 9 Gb Technology added nothing Prudhoe Bay 1989 1977

30. First Half of Oil Age Oil Age is a Single Cycle • First half lasted 150 years, stimulating • Industry • Transport & trade • Agriculture • Population • Financial Capital GE = GE Growing Energy equals Growing Economy

31. Financial Capital Banks created money out of thin air • by lending more than they had on deposit • Collateral was confidence in expansion • fuelled by cheap oil-based energy Prime benefit of Empire was financial rent Previously British £ : now US $ Wars had a financial subtext

32. Population ? First Oil Well Equally depicts “Financial Capital” from oil-based energy

33. Dawn of Second Half of Oil Age World enters Uncharted Waters • Oil Price Shocks & Economic Recessions Destruction of Capital to match energy supply We face the “End of Economics” • Resource limits anathema to classical flat-earth economists, living in past • But new economic thinking emerges • The banks begin to understand

34. Price Shocks - the first signs Five times what it costs to produce Shocks as production capacity limits breached But prices crash with recessions

35. The Second Great Depression CE = CE Contracting Energy equals Contracting Economy Past debt losing its collateral • heralding an unprecedented collapse of the Financial System • USA - technically bankrupt

36. Survival Strategies. 1- Inform Stop giving false advice • The IEA has been a political curtain behind which its member governments hid • But is now forced to change its tune Provide valid public information “Put your trust in the People” said Winston Churchill

37. 2- Depletion Protocol Cut oil imports to match world Depletion Rate. • World price would moderate • allowing poor countries to buy minimal needs • avoiding profiteering by oil companies & M.East • Force consumers to face reality Proposal gaining momentum Let this be the prime message from this conference

38. 3- Stop waste: many easy steps • Domestic & commercial Energy Audits Variable charges to reward savings & penalise waste Disallow energy costs as a charge against tax • Stop tax-free aviation fuel More public transport : car pooling, hitch-hiking New behaviour & attitude

39. 4- Turn to Renewables A solar collector on every roof Capture massive tidal and wave energy Wind-power and hydro-power Fuel crops (supplies 30% in Brasil) Geothermal Re-assess nuclear energy New small fail-safe plants

40. But……….. Economic Recession suppresses oil demand Oil prices sensitive to small imbalances • may crash too Unconventional Oil and Renewable Energy do not compete with cheap oil An added argument for the Protocol to make sure they are competitive

41. Silver Linings A new regionalism with local markets New attitudes : non-consumeristic society People learn to live in better harmony with • themselves • each other • the Environment in which Nature has ordained them to live But the transition will be tough

42. Thank You and Good Luck