Here are a few key reasons world oil (liquid fuel) production may be at or near a peak or plateau.
- All oilfields are subject to depletion, which eventually leads to production declines as natural reservoir pressure decreases and can not be maintained by water or gas injection. Most new fields are small (reserves < 400 million barrels) or in deepwater basins. Production declines sooner and faster in both cases. The world’s largest producing fields are also the most mature. These aging giants are now mostly depleted and in some cases have peaked (Burgan in Kuwait) or are in decline (Cantarell in Mexico). The status of Ghawar in Saudi Arabia, the world’s largest oil field, is unknown, but the prospects for this field are worrisome due to its advanced stage of depletion. Some of the new production capacity in Saudi Arabia will merely replace declines that are likely to occur by 2015. Production in Russia, the world’s largest oil supplier, will likely remain flat or decline after 2012.
- If the world’s overall decline rate of crude oil is 4.5%, as some studies suggest, then new conventional oil production must replace 20 million barrels per day by 2015 just to break even. Unlike the period after the disruptions of the 1970’s and early 1980’s, there are no new large oil provinces such as the North Sea or Prudhoe Bay waiting in the wings to substantially boost global supplies.
- Conventional oil production outside of OPEC (“non-OPEC”) appears to have already peaked. Higher levels of production from OPEC are not guaranteed for a variety of reasons. Chavez’s policies have hampered Venezuelan production, which is declining. Political conflicts in Nigeria affecting production in the Niger Delta or offshore show no sign of abating. Iraq’s production is rising with some new development, but is still at significant geopolitical risk. Iran’s production is endangered by a lack of investment and skilled workers due to its political policies. The other Persian Gulf producers have more incentive to preserve their long-term oil income than to keep increasing production in order to meet rising global demand.
- Unconventional oil production from the tar sands of Canada, the Orinoco Basin in Venezuela, and the Green River Shale in the United States is unlikely to surpass 5 million barrels per day by 2015.
- Biofuels from corn, sugar cane, soybeans, palm oil or other sources are limited to making a minor contribution to replacing conventional oil demand.
- The average worldwide recovery factor for all oil fields is about 35%. This means that almost two-thirds of all the oil in place is effectively stranded ─ it is not economically recoverable using existing technology. Despite research & development efforts by the oil industry, recovery factors are not likely to increase much in the medium term. There is no applicable “miracle” technology, no silver bullet, that will increase production rates enough to offset natural declines.
For these and other reasons, a peak of world oil production may be imminent.