As we read this
IEA makes 60 million barrels of oil available to market to offset Libyan disruption
The IEA estimates that the unrest in Libya had removed 132 mb of light, sweet crude oil from the market by the end of May. Although there are huge uncertainties, analysts generally agree that Libyan supplies will largely remain off the market for the rest of 2011.
we have to ask ourselves what will happen with Libya’s oil beyond 2011. There is a surprise ahead even if peace broke out tomorrow.
Let’s assume all weapons are collected and stored away safely, all oil workers return to their jobs, oil production resumes, pipelines, pumps, storage tanks and refinery generators are repaired and tested, all other war damage to supporting infrastructure is repaired, in short everything is returned to pre-war conditions. Even in that optimistic scenario oil production from existing fields would still decline by 30% over the next 10 years, according to production profiles presented by Richard Miller in an oil forecasting workshop at the Energy Institute in London, in November 2010 http://www.energyinst.org/events/oil-forecasting.
Richard Miller’s focus is on fallow oil fields/reserves which have not been developed for many years, mainly because they have been put in the “too hard basket”. In the above graph, they have been added in whitish colors with a peak in 2016.
We can see:
(1) Existing oil fields will decline by 30% over the next 10 years. Up to 2040, they will produce 9.4 Gb
(2) Cumulative production until 2010 was 27.4 Gb. Ignoring the tail end production after 2040 the depletion level in existing fields in 2010 was 27.4/(27.4+9.4) = 75%, an alarming high level
(3) Even with a potential 5.3 Gb for new fields, the depletion level of the whole system would be 65%. In this case the total oil produced up to 2040 would be 42 Gb, 14.7 Gb out of which would be remaining reserves, far below the 46.4 Gb claimed in the latest BP Statistical Review, but closer to Dr. Salameh’s reserves of 25.56 Gb in 2003 minus production of 4.7 Gb = 20.86 Gb
(4) Given the uncertainties and divisions in the country it is likely that any new fields will just mitigate the declines from existing fields but not lead to another peak.
(5) Under normal economic circumstances local consumption would increase by around 3% pa, the long term historic trend (dotted line). In this case, export volumes would decrease by between 4 and 8% pa to drop by around half in 2020.
Given the current political and geo-political circumstances it is impossible the make any predictions how oil production in Libya is going to develop, but the above calculations give an indication of the upper boundaries in which possible scenarios can be expected.
Awful lot of oil
A recent example of how unaware analysts are of the underlying oil reserve issues in OPEC countries is this interview on ABC TV’s flagship program Lateline:
TONY JONES: Robert, when it comes to Western military intervention, we often hear the question: why do it in Libya, but not Syria? Is it simply a hard calculation that Syria is far too dangerous a prospect and if you destabilise Syria in this way, you destabilise the whole region?
ROBERT FISK: That’s a good excuse. I think the real answer is that Libya has an awful lot of oil and Syria doesn’t have very much oil, and businessmen are not interested in Syria. In fact, its economy is rock bottom already, whereas Libya is a golden palace to be seized by anyone who gets – who intervenes. I think at the end of the day, that’s what it’s about. There is no other reason……
Previous posts on Libya
5/5/2011 Libya oil field battle lines
12/4/2011 Libyans fight over oil field at depletion mid point while African crude oil exports decline
24/3/2011 Libya: yet another (peak) oil war
24/2/2011 Libya exports 7% of crude from Mediterranean and Middle East
23/2/2011 Quick primer on Libyan oil
Further reading and links:
How realistic are OPEC’s proven oil reserves?
Petroleum Review, August 2004, by Dr. Mamdouh G. Salameh