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Global hydrocarbons peak

It’s worse than you think: Predicting the collapse of our energy resources
By Matthew Wild

More than 90 per cent of the world’s energy comes from non-renewable sources – and its coming collapse can be projected as a Hubbert bell curve.

Hubbert’s model proves versatile. Essentially, exploitation of any non-renewable resource – from oil to uranium – follows similar patterns. Extraction increases over time, as the infrastructure gets put into place, and then falls away after the easy-to-obtain reserves have gone. What’s left tends to be lower grade and harder to access. And, assuming the market remains the same, costs the consumer more due to supply and demand. Peak is the time of maximum extraction, the last of the low prices. And it’s fair to talk about peak coal, peak natural gas and peak uranium, along with anything else non-renewable.

It’s just that we are more familiar with the concept of peak oil. After all, oil is the world’s largest source of energy, and the size and immediacy of the problem tends to overshadow debate on the remaining energy sources. But experts in the fields of coal, natural gas and nuclear power are beginning to talk of resource depletion within the next two decades.

This, if it comes about, would involve our main sources of energy declining drastically, all within a relatively short timeframe. Each individual element has the power to destroy economies and have people going hungry, of course. But together. . ? It’s hard to imagine the changes anyone living through the next 50 years will see if the projections here prove valid.

But first, some background. Using heavily rounded figures, global energy supply can be broken down as follows: oil currently supplies 36 per cent of our needs, coal 28 per cent, natural gas 24 per cent, nuclear 6 per cent and hydroelectric 6 per cent. Solar and wind are less than one per cent so don’t figure in this kind of broad-brush approach – the aim here is to establish the ratios.

It’s not just the global demand for oil that keeps rising – it’s all energy sources. Rising energy use is inextricably linked to rising GDP, which is essential both for developing nations to improve their quality of life and for our debt-based economies to function. According to the US Energy Administration Information’s (EIA) International Energy Outlook 2009, “total world consumption of marketed energy is projected to increase by 44 percent from 2006 to 2030,” from 472 quadrillion Btu in 2006 to 678 quadrillion Btu in 2030. (See diagram, below.)

But where is this energy going to come from? How secure are the supplies? A number of geologists are starting to talk about coal, natural gas and uranium using familiar peak oil terms such as vastly inflated reserves figures, and suggesting that the choice pickings are gone.

Of course, coal and natural gas, along with nuclear energy, are touted as “bridge fuels” that will get us over our oil dependence, and enable us to do futuristic things like making a viable hydrogen economy and improving the output of renewables like solar and wind. Suggested peaks in these areas deserve our immediate attention. These are vital to our energy security, and you would think a lot has been written about them. You’d be wrong, of course. (It’s a hard enough sell to get the media to report on peak oil, let alone expand the story to look at other finite resources.)

Looking at this by fuel, in order of importance:

Peak oil

I’ve looked at peak oil elsewhere, but that debate frames this discussion. It’s difficult to examine other resources without also considering oil. In the first instance, mining machinery runs on oil. Massive strip mines, in which relatively low concentrations of minerals and metals can be extracted profitably due to the economies of scale, start to become unviable if the cost of fuel spirals.

The beginning of 2010 has seen a slew of reports pointing to the immediacy of peak oil. It saw the British government meeting to discuss the predicted energy crunch that’s five years away, and the US Joint Forces command issuing a report suggesting that the military needs contingency plans as surplus oil production capacity could disappear within two years, with serious shortages by 2015.

It’s also beginning to be clear that the massive reserves of unconventional oil that the oil deniers constantly point to are not living up to their hype. Reports are indicating that the Canadian oil sands are falling well behind projected outputs – in some places, it will take a further seven years before the projected 2011 output can be reached. And deepwater drilling is emerging as the risky, expensive venture we’ve always known it to be. The explosion of the Deepwater Horizon rig in the Gulf of Mexico may have a long-term impact on the industry, according to those watching the politics - but those with an eye on the money say deepwater is here to stay as we've nowhere else to go. According to an item in the May 9 British Independent newspaper, Oil production hit for decades after BP spill:
The rising backlash against deepwater drilling – anything over 500 meters, far too deep for divers to work should anything go wrong – is unlikely to damage the industry as much as the noise on Capitol Hill would suggest, because it is too vital to the oil supply. According to analysts Douglas Westwood, deepwater oil production has soared from under two million barrels per day in 2000 to eight mb/d in 2010, almost 10 per cent of global consumption, and must rise further as onshore and shallow offshore production declines. "They can't ban deepwater because the industry has nowhere else to go", says chairman John Westwood.
The fact that we are so desperate to find reserves itself speaks volumes about the reality of peak oil (Al Gore likened the oil sands to the last vein the junkie finds in his big toe).

Even a rogue slide from a 2009 EIA PowerPoint presentation has recently become an internet sensation. The diagram, World’s Liquid Fuels Supply, projects oil output peaking in 2012 and immediately declining sharply – which is vividly contrasted against a line showing rising demand. The widening distance between the two is marked ‘unidentified projects.’

The diagram does include non-Opec unconventional supplies such as the much-hyped oil sands, so unidentified means unknown.

According to this projection, by 2016 there will be a gap between supply and demand of 10 million barrels per day. And the EIA has absolutely no idea how that shortfall will be met.

Peak coal

Hubbert examined US coal output before looking at oil. He suggested the US would hit peak coal in 2150, but others have brought that date forward quite alarmingly.

The US has already experienced a peak in its high grade coal: anthracite in 1914 and bituminous in 1990. The nation is now concentrating on low-grade subbituminous coal. And is importing coal.

Research in 2009 from the University of Newcastle in Australia concluded that global coal production “may well peak as soon as 2010.” Overall, it concludes, production will most likely peak “between 2010 and 2048.”

This is startling, because we keep reading that the planet has hundreds of years’ worth of coal in reserve. Even well respected peak energy writers like Paul Roberts (The End of Oil) suggests that we have generations of coal power ahead of us – with consequent pollution and climate change issues.

But this assumption is challenged by a 2008 New Scientist article, The Great Coal Hole, written by David Strahan. It tackles the commonly held belief that “coal is generally seen as our safety net in a world of dwindling oil.” Unfortunately, like oil, coal reserves seem to have been routinely inflated. Strahan writes:

Mine below the surface, however, and the numbers are not so reassuring. Over the past 20 years, official reserves have fallen by more than 170 billion tonnes, even though we have consumed nothing like that much. What’s more, by a measure known as the reserves-to-production (R/P) ratio – the number of years the reserves would last at the current rate of consumption – coal has declined even more dramatically. In February 2007, the European Commission’s Institute for Energy reported that the R/P ratio had dropped by more than a third between 2000 and 2005, from 277 years to just 155. If this rate of decline were to continue, the institute warns, “the world could run out of economically recoverable …reserves of coal much earlier than widely anticipated”. In 2006, according to figures from the BP Statistical Review of World Energy, the R/P fell again, to 144 years. So why are estimates of coal reserves falling so fast – and why now?
Strahan notes that global coal consumption “rose 35 per cent between 2000 and 2006,” particularly in China and India. He observes: “China is by far the world’s largest producer of coal, but such is its appetite for the fuel that in 2007 it became a net importer.”

Energy Watch, a group of scientists led by the German renewable energy consultancy Ludwig Bölkow Systemtechnik (LBST) produced a 2007 report stating commonly accepted coal reserves are unreliable, notes Strahan:
“As scientists we were surprised to find that so-called proven reserves were anything but proven,” says lead author Werner Zittel. “It is a clear sign that something is seriously wrong.”

Since it is widely accepted that major new discoveries of coal are unlikely, Energy Watch forecast that global coal output will peak as early as 2025 and then fall into terminal decline. That’s a lot earlier than is generally assumed by policy-makers, who look to the much higher forecasts of the International Energy Agency, which are based on official reserves. “The perception that coal is the fossil resource of last resort that you can come back to when you run into problems with all the others is probably an illusion,” says Jörg Schindler of LBST.
We constantly read that the world has enough coal for centuries of “dirty power,” with environmentalists warning that more and more carbon will be released into the atmosphere as the world struggles to come to terms with declining oil supplies. This may not be the case. An item in Walrus magazine, An inconvenient talk, written by Chris Turner states:

A Caltech engineer named David Rutledge, meanwhile, applied the same methods used in peak oil prediction to the coal question, and he discovered a paucity of supply so great that he now argues it will be impossible to create the worst-case scenarios in the Intergovernmental Panel on Climate Change’s reports, because there are simply not enough economically viable coal reserves left on earth to cloud the atmosphere with more than 460 parts per million of carbon dioxide.
This may be good news to people concerned with global climate change, but is clearly very worrying to anyone with an interest in global energy security.

Peak gas

According to author David L. Goodstein, worldwide natural gas discovery peaked around 1960 and has been declining since.

In an article titled The Future of the Oil and Gas Industry: Past Approaches, New Challenges, Exxon Mobil director and executive vice president Harry J. Longwell writes that most global natural gas resources were discovered “between roughly 1960 to about 1980,” and that discovery rates have subsequently been declining. He continues:

In the recent past, we have seen increasing demand for oil and gas, but generally decreasing discovery volumes. . .

It’s getting harder and harder to find new oil and gas. Industry has made significant new discoveries in the last few years. But they are increasingly being made at greater depths on land, in deeper water at sea, and at more substantial distances from consuming markets.
A peak in discovery in a heavily exploited non-renewable resource is always followed by a peak in output, and then diminishing returns – with oil, peak discovery was around 1964, with peak output believed to be around the present day, give or take a few years. It’s natural that gas, then, will follow the same pattern.

According to an interview in Walrus magazine, Canadian hydrocarbon geologist David Hughes predicts a global peak of natural gas reserves by 2027. Hughes, an expert in calculating how natural gas might someday be mined from coal bed methane deposits, includes “unconventional” gas reserves in his calculations.

Dave now places Canada’s natural gas production plateau between 2001 and 2006; he supports predictions of a global peak of conventional gas reserves by 2027. He is calmly, logically, witheringly dismissive of rosier scenarios involving unconventional reserves.
Exxon Mobil Corp's chief executive Lee Raymond, writing in 2005, stated "gas production has peaked in North America." Others give it a little longer. Studies by economist Douglas B. Reynolds and Marek Kolodziej, of Boston University’s Center for Energy and Environmental Studies, suggest “a peak in North American natural gas supplies could happen in 2013.”

Ironically, there is something of a natural gas on the North American market at the current time, mid-2010 – which just goes to show that we are not using what’s left of this resource wisely. The US is tapping its shale gas reserves and, at the same time, importing liquified natural gas. But, it’s claimed domestic supplies will begin to diminish within this decade, and worldwide supplies the following decade.

Peak uranium

Like the hydrocarbons mentioned above, uranium is a finite resource.

It is used in nuclear fission – according to industry lobby group World Nuclear Association there are currently 436 commercial nuclear power reactors operating in 30 countries, which together provide around 15 per cent of the world’s electricity.

Breeder reactors, which essentially convert uranium into plutonium, are more efficient, but they still rely on uranium inputs. (Which makes sense, when you think about it; you can’t create energy, after all.) Reprocessing is not enough to beat the growing gap between supply and demand for uranium.

According to a 2006 report, despite an claimed four million tonnes of global uranium deposits, output cannot meet demand:

Currently, global demand for uranium as fuel at nuclear power plants is estimated at 65,000 tons a year. But annual production is stuck at about 40,000 tons. Uranium retrieved from dismantled Russian nuclear weapons and stockpiles make up the gap. However, commercial stockpiles dropped 50% between 1985 and 2003 because mine output could not keep up with demand.
How can it be that output cannot match demand when, we are constantly reminded, the world has such a wealth of uranium deposits? The answer is in the ore grades. The high grade deposits are largely gone, and what is left is difficult to reach and expensive to extract. If an ore contains 1 per cent uranium, it means 100kg of ore must be processed to yield 1 kg of uranium. If the ore is 0.01 per cent, you must process 10,000 kg to yield the 1 kg uranium.

A 2006 report by the Energy Watch Group, Uranium Resources and Nuclear Energy, suggested that proved uranium reserves will be “exhausted within the next 30 years at current annual demand.” It states:

Eleven countries have already exhausted their uranium reserves. In total, about 2.3 Mt of uranium have already been produced. At present only one country (Canada) is left having uranium deposits containing uranium with an ore grade of more than 1%, most of the remaining reserves in other countries have ore grades below 0.1% and two thirds of reserves have ore grades below 0.06%. This is important as the energy requirement for uranium mining is at best indirect proportional to the ore concentration and with concentrations below 0.01-0.02% the energy needed for uranium processing – over the whole fuel cycle – increases substantially.

The proved reserves (=reasonably assured below 40 $/kgU extraction cost) and stocks will be exhausted within the next 30 years at current annual demand. Likewise, possible resources – which contain all estimated discovered resources with extraction costs of up to 130 $/kg – will be exhausted within 70 years.
It concludes that “In the long term beyond 2030 uranium shortages will limit the expansion of nuclear power plants.”

This is currently being reflected in the market. A March 2010 report in Bloomberg Businessweek, with the straight-talking headline Uranium May Have ‘Hyper’ Price Run, Uranium Energy Corp Says, interviews key personnel at Uranium Energy Corp:

Prices may jump to $100 a pound from about $40 a pound now, Amir Adnani, president and chief executive officer of the U.S.- based company, said today in an interview in Hong Kong, without giving a timeframe for the target price. Prices may average about $75 a pound in the next 5 to 10 years, he said.

About 200 gigawatts of atomic capacity are planned or under construction globally, and China, India, Russia and South Korea are set to be the main drivers of uranium demand growth, according to Nomura International. Atomic-power plants risk running short of fuel within a decade because suppliers can’t build enrichment facilities or recycle Soviet-era warheads fast enough, the World Nuclear Association said in a 2009 report.
Nuclear power is clearly not the answer to peak oil.

Conclusions

Many peak oil proponents suggest oil either is about to peak, or has already, and that production will fall below demand sometime before 2020.

In addition, many independent researchers believe the world’s natural gas, coal and uranium are likely to peak during the following decade. (The suggested peak dates are: natural gas by 2027, coal “between 2010 and 2048,” and with acute uranium shortages beyond 2030.) This is based on current usage, and does not consider what will happen to demand once the price of oil goes sky high.

When oil peaks, and the price rises, it will cause our fragile, debt-ridden economies to collapse. We will most likely found ourselves in another Great Depression. But the worst will be yet to come. When other fuel sources peak, we will be left with no affordable “bridge fuel” to carry us to a sustainable, renewable future. Whereas oil is mainly used in transportation, natural gas and coal together account for the generation of 60 per cent of our electricity, according to EIA figures. If the grid goes down, modern life is over.

But this isn’t the only problem we will face around this time. There is a slew of related collapses in environmental resources, including soil, water and the minerals that make up fertilizers. For many people, particularly in the Third World, these will be more of a threat than the energy crisis.