# Presentation: 730806

## Running out of and into oil:Oil peaking analysis from an optimist’s perspective

- David L. Greene
- Oak Ridge National Laboratory
- Janet Hopson
- Jia Li
- University of Tennessee
- DOE/EPA Workshop on Modeling the Oil Transition
- Washington, DC
- April 20-21, 2006

## Why Monte Carlo simulation?

- Suited to optimistic perspective (unconstrained)
- Strengths
- Flexible representations of uncertainty
- Resources, Parameters, Scenarios
- Ability to simulate market responses
- Weaknesses
- Lack of geologic detail/accuracy (correctable?)
- Representation of cost v. depletion questionable

## Take optimists’ view but quantify.

- How much oil remains to be discovered?
- How fast might technology increase recovery rates?
- How much will reserves grow?
- How fast will technology reduce the cost of unconventional sources?
- How much unconventional oil is there and where is it?

## The optimists’ approach is... optimistic.

- No Hubbert’s curves
- No geologic constraints on production rates
- 50% of USGS Speculative Resources expected
- Costs do rise with depletion, however
- RESOURCE/Production ratio limits expansion of production
- Analogous to a limit based on life of capital
- No explicit calculation of capital investment
- No environmental/social/political constraints on production
- ANWAR, offshore, etc. fair game

## Three kinds of unconventional resources are included:

- Conventional Oil
- Liquid hydrocarbons of light and medium gravity and viscosity, in porous and permeable reservoirs.
- Plus enhanced recovery and NGLs
- Unconventional Oil
- Deposits of density > water (*heavy oil*), viscosities > 10,000 cP (*oil sands*), both currently in production and,
- tight formations (*shale oil*).
- Coal-to-Liquids: most abundant fossil resource.

## Do we know how much oil there is?

**Do we know how much oil there is?**

- Ahlbrandt et al., 2005

## In 2000 the USGS published a major assessment of world oil resources, including uncertainty and technological progress.

- (Billions of Barrels)

## There is even greater uncertainty about unconventional oil resources, but the 11+1 regions seem to divide into:1. oil sands or heavy oil and 2. shale oil. (1 Gtoe = 7.33 billion bbls, 20.1 mmbd)

**MEA = Middle East + North Africa**

## A resource accounting model was constructed to simulate regional oil resource depletion, expansion and transition under various scenarios. It does not include Hubbert curves. If anything, its rules are optimistic.

**Coal Resources**

- C-T-L
- Conversion

## Costs of conventional oil, oil sands and shale oil are represented by depletion cost curves (Rogner, 1997).

## Coal-to-liquid conversion costs are based on the same study used by the EIA’s NEMS model .(Gray & Tomlinson, 2001)

## A simple oil market model simulates choice among unconventional alternatives.

- Linear, lagged adjustment form
- Calibrated to scenario
- Demand: NAM, ROW
- Supply: NAM, non-OPEC ROW
- OPEC supply exogenous at given growth rate
- Regional deficiencies in conventional oil supply may be filled by unconventional or conventional oil from other regions.
- Total Supply = Conventional Oil + Oil Sands/Heavy Oil 			+ Shale Oil + C-T-L
- Shale oil, C-T-L available after 20??

## A base case combines the IEO 2005 Reference Case with the IIASA/WEC A1 scenario (modified).

## In the base case after 2020, conventional oil production is flat and both unconventional oil and CTL increase rapidly (simulation not prediction).

## Oil shale comes overwhelmingly from the U.S.

## But CTL could come from almost any region.

## U.S. imports decrease (ANWR, offshore), increase, then decrease as unconventional oil comes on.

## In the U.S., CTL and shale oil exceed 10 mmbd by 2050 (a simulation not a prediction).

## OPEC Lives!Even with CTL and Oil Shale, OPEC can retain a considerable share of the world oil market.

## Uncertainty? Enormous.

## The C.I.s reflect uncertain assumptions about process costs, feedstock costs, co-product costs, quality premium, sequestration costs.

## Because the peak is a plateau and the FSU increases late, the non-OPEC conventional oil peak is bi-modal.

## Without oil shale or CTL, oil sands and heavy oil fill the gap.

## Almost 70 mmbd comes from Canada, FSU and Latin America. Huge!

## With neither shale oil nor CTL, US oil import dependence becomes extreme.

## A few observations...

- Uncertainty is very great.
- Assumptions are optimistic, so are outcomes.
- Slowing the growth of world oil demand delays the non-OPEC peak, reduces rate of expansion of unconventional sources.
- Adding viable unconventional sources has a similar but smaller effect.
- Hard to see today’s oil prices in the long run, given optimistic perspective.
- More realistic representation of potential constraints is called for.

## Thank you

- for your interest.