ASPO Ireland

« Public writer Laura Jones made a cautionary argument for reason in a 1997 essay:

In 1798, Thomas Malthus predicted in An Essay on Population that the world would run out of food. In 1972 Limits to Growth, published by the Club of Rome, predicted that the world will run out of gold in 1981, mercury in 1985, tin by 1987, zinc by 1990, petroleum by 1992, and copper, lead and natural gas by 1993… These predictions were irresponsible today as they were in 1798 (and 1972). Why ? Because the authors ignore the powerful incentives that markets provide. »[1]

Laura Jones misunderstands the point made in Limits to Growth[2]. It did not report that the world will run out of petroleum in 1992: it wrote[3]

- known global Reserves (R) 455 Gb

- R/P[4] (static index) 31 years

- projected average rate of growth of P 3,9 % (range 2.9-4.9%)

- R/P with P grown at 3.9% per year (exponential index) 20 years

- (5*R)/P (exponential index to grown reserves) 50 years

It means that

- if production is projected to grow exponentially at 3,9% per year, the known reserves will be depleted by 20 years or 1992

- if known reserves were grown by 5 times with exponential production, the reserves will be depleted by 50 years or 2022

Laura Jones used only one of the several scenarios studied by the Club of Rome, in fact the one mentioned as being wrong using exponential growth.

The message of Malthus and the Club of Rome is that exponential growth is unsustainable (impossible) in a limited earth. A bacteria population doubling every half an hour will fill (if not constrained by resources) the volume of the solar system in a week and the Universe in 11 days ! Growth cannot keep steady for long.

The oil production growth rate (USDOE/EIA table 1.4 world oil supply www.eia.doe.gov/ipm/) has varied for the last 50 years but overall production will eventually reach a maximum and then go into decline. The growth rate will gradually decline as that maximum is approached and then will become negative.

But, because growth of GDP and growth of oil production, or primary energy, seem to vary together, oil as GDP could peak one day.

Figure 1: World annual growth on oil production, primary energy, and GDP 1950-2006

‘Proved Reserves’ is a financial (SEC rules) or political (OPEC quotas based on non-audited reserves) statement. King Hubbert, in his famous 1956 forecast, did not use the USL48 Proved Reserves (at the time 30 Gb with 52 Gb already produced) but ‘Ultimate Reserves’, being in the range of 150-200 Gb.

The ultimate figure should be used and not the known reserves figure (remaining 445 Gb, 745 Gb discovered, year-end 1972) used by the Club of Rome. In fact, for year-end 1972, OGJ reported[5] proved remaining reserves at 667 Gb, when World Oil reported[6] 562 Gb, plotted as an average of 630 Gb in the next graph (USDOE since 1980), where the estimate for proven + probable remaining reserves is about 1020 Gb. Some clearly optimistic estimates were reported before 1972 for the US: US reserves put at 600 Gb[7]. The world cumulative oil production at the end of 1972 was about 300 Gb.

While the Club of Rome may not have used the most appropriate reserve figure when forecasting how long oil would last, to suggest that they were wrong because they got a date wrong is to miss the point they were trying to make: Exponential growth has a finite lifespan.

Figure 2: World oil remaining reserves from political and technical sources

In 1956 Hubbert used a world oil ultimate of 1250 Gb (90+250+910) against a total discovery of 340 Gb[8] to forecast a peak around the year 2000, but for a low peak production of 12 Gb per year (33 Mb/d) but extending up to 2200.

Figure 3: Ultimate world crude-oil production based upon initial reserves of 1250 billion barrels

In 1971 Hubbert wisely used a world oil ultimate range of 1350-2100 Gb[9], forecasting an oil peak between 1990 and 2000 at a 24 to 37 Gb per year (66 to 100 Mb/d) rate of production.

Figure 4: Cycle of World Oil Production

As Hubbert correctly forecast a peak in US oil production in 1970, the Club of Rome should have used Hubbert’s estimate showing a global peak in 2000, with production extending until 2100. By 1972 world oil ultimates (EUR) had already been reported by many experts:

Table 1: Estimates of Ultimate Oil Reserves[10]

The discovered value of 750 Gb used by the Club of Rome was really too low and should have been at least doubled to include ‘yet to find’.

The oil supply (all liquids) linearization designed by Hubbert as the percentage annual over cumulative production versus cumulative production displays a linear trend only when the annual production follows an Hubbert curve (derivative of the logistic function), which can be extrapolated towards the ultimate. But most plots display several partial linear parts, meaning that it could change in the future. It is the case for world oil supply as reported by US DOE/EIA (table 1.4) the linearization is erratic but the forecast for U=3 Tb using a Hubbert curve is in line with the last 4 years 2003-2006:

Figure 5: Hubbert Curve for Global Oil Production

Figure 5 demonstrates that oil supply does not follow a simple Hubbert curve but can be modelled with several because the plot is composed of several linear parts trending towards 900 Gb from 1973 to 1984, 2250 Gb from 1985 to 2002, and the period 2003-2006 could be extrapolated towards an ultimate of 3 Tb, which is estimated by another approach.

The past production is not the best data to evaluate ultimate. Creaming curves (cumulative discoveries versus cumulative number of New Field Wildcats (NFW)) is a much better approach, but needs confidential data, limiting its use.

The Saudi Arabia creaming curve from IHS data shows that the first 20 NFW (1935-1964) found 300 Gb with 12 fields when the last 20 NFW (1998-2006) found 3 Gb with 18 fields, meaning that yet to find should be small in volume despite being large in number of fields, much smaller than the uncertainty of the known discoveries. IHS has increased Saudi reserves in the last two years by 90 Gb to match Aramco values released after the debate in 2005 between Baqi-Saleri of Aramco (“Fifty-year crude oil supply scenarios: Saudi Aramco’s perspective”) and Simmons in Washington D.C. (CSIS Feb.24). It is the practice, BP’s Statistical Review the classic example, to report the official national reserve values as reported despite the glaring question marks hanging over them. Reserve estimates that stay the same for many years (despite large production and small discoveries) are highly questionable.

Figure 6: Saudi Arabia Creaming Curve 1935-2006

The ultimate for crude oil less extra-heavy oil is estimated at 2000 Gb. Only one significant number is used because of the uncertainty of the data. A more precise ultimate figure can be used only when better data is available, particularly for the Middle East. The world ultimate is reached through several cycles (first cycle with surface exploration, second with seismic and third with deepwater), resulting in a mid-point that is different from the peak.

Figure 7: World annual oil (less extra-heavy) mean discovery & production

But oil supply must match oil demand, which includes all forms of oil which can be burned including biofuels and coal to liquids. For such ultimates we estimate that the all liquids ultimate is 3Tb (2 Tb for crude less extra-heavy, 0,5 Tb for extra-heavy, 0,25 Tb for natural gas liquids and 0,25 for other liquids including refinery gains and biofuels). Of course biofuels are renewables and will follow not the derivative of the logistic function but the logistic function (S curve), but it will occur after 2100. For 3 Tb the peak is about 2015 and less than 100 Mb/d, but adding another 1 Tb to the expensive oil (red curve) will not change the peak but the slope after the peak.

Figure 8: World annual liquids production forecast

To conclude, Limits to Growth was right in 1972 by writing that exponential growth is unsustainable, however, the Club of Rome didn’t use the best reserves value and should have mentioned Hubbert’s forecasts. Hubbert’s world oil peak forecasts were too pessimistic because he did not anticipate the 1973 and 1979 oil shocks. He was too short on the low estimate but about right for the high value of 2 Tb for crude oil (as for the US with his range 150-200 Gb).

I feel obliged to clarify misunderstandings of important papers such as those of the Club of Rome and Hubbert. Despite their shortcomings their approach was correct, believing that constant growth is unsustainable. Their data was not because of the confidentiality of field data.

It is critically important that all oil producers share field data as is done in the UK (DTI), Norway (NPD), and US federal lands (MMS). Matt Simmons’ proposal to oblige every nation in the world to relinquish annual production of every significant producing field (>50 000 b/d or even > 10 000 b/d), is one to be supported.

[1] World Energy vol.10 n°2 2007 p 56 I.B.Mishari, VP Aramco

[2] Limits to Growth: A Report for the Club of Rome's Project on the Predicament of Mankind by D H Meadows (Hardcover - Mar 1972)

[3] See pages 58 & 59

[4] P: Annual Production

[5] OGJ Dec.25, 1972 p83

[6] WO Aug.15, 1973 p66

[7] OGJ Sept 2, 1963

[8] 90 Gb produced plus 250 Gb proven reserves

[9] Scientific American Sept 1971 «Energy and power –The energy resources of the earth » p60-70

[10] J.D.Parent 1979 Institute of Gas Technology p39-42, 57-58