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Has global oil production peaked?

By David R. FrancisStaff writer of The Christian Science Monitor / January 29, 2004

Today's civilization depends on an abundant and relatively cheap supply of oil. It fuels most of our vehicles, aircraft, ships, and trains. It provides the raw material for fertilizer, some clothing fabrics, most plastics, and many chemicals. Oil heats many of our homes and businesses.

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So when experts discuss when oil production will begin to decline, the world pays heed. The question now making the rounds in energy circles: Has production already peaked?

If it has - or if a peak lies only a few years away - the repercussions would be huge. It could intensify a scramble by oil importers to tie up existing reserves. Decline could lead to scarcity and higher prices, possibly recession, while prompting an urgent push to alternative fuels and conservation.

For at least one analyst, the scenario has already begun to unfold.

"World production is flat now," says Kenneth Deffeyes, a Princeton University geology professor.

But that's a controversial view. Other pessimists talk about 2010; many analysts see no change until 2035.

Of course, various "experts" have been predicting the end of the oil age for more than 100 years. And even now, no one really knows how much oil is left in the ground. Estimates involve guesses of not only future oil finds but future world economic output and oil consumption. These numbers are typically highly imprecise.

Even calculating current reserves is tricky. The Royal Dutch/Shell Group, one of the world's largest oil producers, shocked the financial community earlier this month when it announced it had overbooked its proven reserves by 20 percent - an indication of the fragility of such estimates.

The United States Geological Survey (USGS) puts yearly world consumption of oil today at about 30 billion barrels. That comes out of known or proven world reserves of 1.1 trillion barrels, according to IHS Energy, an oil and gas information-gathering group in Tetbury, England. By adding in Canada's oil sands, the Oil and Gas Journal in Houston raises proven reserves to 1.266 trillion.

"It is not an issue in which there are absolute answers," says Robert Tippee, editor of the Houston trade journal. Much depends on advancing technology and the economics of production, as well as how much oil the ground really holds.

Advocates of a production peak coming soon offer several pieces of evidence:

• Total world oil production reached 68 million barrels per day in 2003, according to a count by the Oil and Gas Journal. That's not much above the 66.7 million barrels per day. in 2001. Oil reserves estimated at 1.266 trillion are up only a bit from 1.213 trillion a year earlier.

• Production has peaked for more than 50 oil-producing nations, including the US (1970) and Britain (1999). China, second to the US in the consumption of oil, was a net exporter of oil until five years ago.

• The Department of Energy predicts world demand will reach 119 million b.p.d. in 2025, with huge increases in China, India, and other developing nations.

• In 2002, the world used four times as much oil as was newly found.

• The rate of discovery of worldwide oil reserves, after declining for 40 years, has slowed to a trickle. In 2000, there were 16 large discoveries of oil, eight in 2001, three in 2002, and none last year, notes James Meyer, director of the Oil Depletion Analysis Centre in London.

• All the giant fields, such as those in the Middle East, have already been discovered, some experts say. These giants are relatively easy to find. The last major oil field, Cantarell, off Mexico's shore, was discovered in 1976.

"The oil companies are drilling fewer and fewer wells," says Colin Campbell, founder of the Association for the Study of Peak Oil, a network of scientists, professors, and government experts. "There are fewer worthwhile prospects to test."

But optimists see another picture.

For example, with scientific advances, oil companies have boosted their drilling success, which means they don't need to drill as many wells. Last year, nearly 40 percent of exploration and wildcat projects located oil, gas, or gas condensate, according to IHS Energy.

Besides conventional oil, there are huge amounts in Canadian oil sands, Venezuelan heavy oils, and Rocky Mountain shale. If oil prices skyrocket, oil in deep offshore fields and in polar regions would become economically feasible to extract. And there's oil from natural gas, which experts see as lasting longer than conventional oil, outside North America.