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Petroleum Production and Exploration: Approaching the End of Cheap Oil with Bottom-Up Modeling
Uppsala University, Disciplinary Domain of Science and Technology, Physics, Department of Physics and Astronomy, Global Energy Systems.
2012 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The theme of this thesis is the depletion of petroleum (crude oil and natural gas). Are there reasons to be concerned about an ‘end of cheap oil’ in the near future? There is a lively debate regarding this issue. The debate is sometimes described as a clash of ‘concerned’ natural scientists and ‘unconcerned’ economists. However, this clash is both harmful and unnecessary. The views of natural scientists and economists can and should be reconciled. At the micro-level, geological and physical factors (such as diminishing reservoir productivity) are parameters in the producer’s economic optimization problem. Bottom-up modeling therefore appears to hold more promise for forming a common understanding of depletion than prevailing top-down models, such as the controversial Hubbert model.

The appended papers treat various aspects of petroleum depletion: critical examination of top-down scenarios (I); bottom-up economic and geologic modeling of regional production (II); review of published bottom-up models and sensitivity analysis (III); simulation of success rates and expectations in oil exploration (IV); bottom-up scenarios of future natural gas production in Norway (V) and Russia (VI); empirical analysis of production profiles of giant oil fields (VII).

Bottom-up models have the potential to be accepted by scientists from different disciplines, and they enable interpretable sensitivity analyses. They are, however, not likely to reduce quantitative uncertainty in long-term scenarios. There is theoretical evidence of the possibility that petroleum scarcity occurs long before the recoverable resource is close to exhaustion. This result is a consequence of both geological and economical factors. Several arguments for an ‘unconcerned’ view are at best uncertain, and at worst relying on questionable assumptions (analyzing reserves rather than production flows, using irrelevant reserve definitions, using average cost instead of marginal cost). The considerable uncertainty regarding an issue of such importance is in itself a cause for concern.

Place, publisher, year, edition, pages
Uppsala: Acta Universitatis Upsaliensis , 2012. , p. 85
Series
Digital Comprehensive Summaries of Uppsala Dissertations from the Faculty of Science and Technology, ISSN 1651-6214 ; 891
National Category
Other Engineering and Technologies not elsewhere specified
Identifiers
URN: urn:nbn:se:uu:diva-163181ISBN: 978-91-554-8252-7 (print)OAI: oai:DiVA.org:uu-163181DiVA, id: diva2:476153
Public defence
2012-02-24, Häggsalen, Ångströmlaboratoriet, Lägerhyddsvägen 1, Uppsala, 09:15 (English)
Opponent
Supervisors
Available from: 2012-02-03 Created: 2011-12-08 Last updated: 2012-02-15Bibliographically approved
List of papers
1. How reasonable are oil production scenarios from public agencies?
Open this publication in new window or tab >>How reasonable are oil production scenarios from public agencies?
2009 (English)In: Energy Policy, ISSN 0301-4215, E-ISSN 1873-6777, Vol. 37, no 11, p. 4809-4818Article in journal (Refereed) Published
Abstract [en]

According to the long term scenarios of the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA), conventional oil production is expected to grow until at least 2030. EIA has published results from a resource constrained production model which ostensibly supports such a scenario. The model is here described and analyzed in detail. However, it is shown that the model, although sound in principle, has been misapplied due to a confusion of resource categories. A correction of this methodological error reveals that EIA’s scenario requires rather extreme and implausible assumptions regarding future global decline rates. This result puts into question the basis for the conclusion that global "peak oil" would not occur before 2030.

Keywords
Peak oil, Depletion rate, R/P ratio
National Category
Physical Sciences Other Earth and Related Environmental Sciences
Research subject
Physics with specialization in Global Energy Resources
Identifiers
urn:nbn:se:uu:diva-109736 (URN)10.1016/j.enpol.2009.06.042 (DOI)000271824600063 ()
Available from: 2009-10-23 Created: 2009-10-23 Last updated: 2017-12-12Bibliographically approved
2. The end of cheap oil: Bottom-up economic and geologic modeling of aggregate oil production curves
Open this publication in new window or tab >>The end of cheap oil: Bottom-up economic and geologic modeling of aggregate oil production curves
2012 (English)In: Energy Policy, ISSN 0301-4215, E-ISSN 1873-6777, Vol. 41, p. 860-870Article in journal (Refereed) Published
Abstract [en]

There is a lively debate between 'concerned' and 'unconcerned' analysts regarding the future availability and affordability of oil. We critically examine two interrelated and seemingly plausible arguments for an unconcerned view: (1) there is a growing amount of remaining reserves: (2) there is a large amount of oil with a relatively low average production cost. These statements are unconvincing on both theoretical and empirical grounds. Oil availability is about flows rather than stocks, and average cost is not relevant in the determination of price and output. We subsequently implement a bottom-up model of regional oil production with micro-foundations in both natural science and economics. An oil producer optimizes net present value under the constraints of reservoir dynamics, technological capacity and economic circumstances. Optimal production profiles for different reservoir drives and economic scenarios are derived. The field model is then combined with a discovery model of random sampling from a lognormal field size-frequency distribution. Regional discovery and production scenarios are generated. Our approach does not rely on the simple assumptions of top-down models such as the Hubbert curve - however it leads to the same qualitative result that production peaks when a substantial fraction of the recoverable resource remains in-ground.

Keywords
Peak oil, Bottom-up modeling, Micro-foundations
National Category
Geosciences, Multidisciplinary
Identifiers
urn:nbn:se:uu:diva-163177 (URN)10.1016/j.enpol.2011.11.073 (DOI)000301155500085 ()
Available from: 2011-12-08 Created: 2011-12-08 Last updated: 2017-12-08Bibliographically approved
3. Bottom-up modeling of oil production: Review and sensitivity analysis
Open this publication in new window or tab >>Bottom-up modeling of oil production: Review and sensitivity analysis
(English)Manuscript (preprint) (Other academic)
National Category
Geosciences, Multidisciplinary
Identifiers
urn:nbn:se:uu:diva-163179 (URN)
Available from: 2011-12-08 Created: 2011-12-08 Last updated: 2012-02-15
4. Oil exploration and perceptions of scarcity: The fallacy of early success
Open this publication in new window or tab >>Oil exploration and perceptions of scarcity: The fallacy of early success
Show others...
2012 (English)In: Energy Economics, ISSN 0140-9883, E-ISSN 1873-6181, Vol. 34, no 4, p. 1226-1233Article in journal (Refereed) Published
Abstract [en]

It has been suggested that oil exploration may lead to false perceptions of decreasing scarcity. We perform a simulation of the exploration process using Bayesian updating. The approach enables us to isolate the information effect on the success rate and also to quantify the subjective expectation of the total resource size. The area under exploration consists of a number of regions which may differ in their oil content. Exploration is performed with the goal to maximize the expected success rate. The resulting information about the distribution of oil and the total resource size is assumed public knowledge. A number of scenarios with variations in the dimensions of the area under exploration, the oil distribution and initial beliefs are considered. The results indicate that the information effect on the success rate is significant but brief — it might have a considerable impact on price but is an unlikely mechanism behind a long-term declining price trend. However, the information effect on expectations is gradual and persistent. Since exploration is performed in regions where the expected success rate is the highest, the historical success rate will not be representative of the area as a whole. An explorer will tend to overestimate the total resource size, thereby suggesting an alternative mechanism for false perceptions of decreasing scarcity, a mechanism that could be called the “fallacy of early success”.

Keywords
Oil exploration, Success rate, Expectation bias, Bayesian updating, U-shaped price path
National Category
Economics Geosciences, Multidisciplinary Energy Systems
Identifiers
urn:nbn:se:uu:diva-163174 (URN)10.1016/j.eneco.2011.11.003 (DOI)000306158000038 ()
Available from: 2011-12-08 Created: 2011-12-08 Last updated: 2017-12-08Bibliographically approved
5. European energy security: The future of Norwegian natural gas production
Open this publication in new window or tab >>European energy security: The future of Norwegian natural gas production
2009 (English)In: Energy Policy, ISSN 0301-4215, E-ISSN 1873-6777, Vol. 37, no 12, p. 5037-5055Article in journal (Refereed) Published
Abstract [en]

The European Union (EU) is expected to meet its future growing demand for natural gas by increased imports. In 2006, Norway had a 21% share of EU gas imports. The Norwegian government has communicated that Norwegian gas production will increase by 25–40% from today’s level of about 99 billion cubic meters (bcm)/year. This article shows that only a 20–25% growth of Norwegian gas production is possible due to production from currently existing recoverable reserves and contingent resources. A high and a low production forecast for Norwegian gas production is presented. Norwegian gas production exported by pipeline peaks between 2015 and 2016, with minimum peak production in 2015 at 118 bcm/year and maximum peak production at 127 bcm/year in 2016. By 2030 the pipeline Export levels are 94–78 bcm. Total Norwegian gas production peaks between 2015 and 2020, with peak production at 124–135 bcm/year. By 2030 the production is 96–115 bcm/year. The results show that there is a limited potential for increased gas exports from Norway to the EU and that Norwegian gas production is declining by 2030 in all scenarios. Annual Norwegian pipeline gas exports to the EU, by 2030, may even be 20 bcm lower than today’s level.

Place, publisher, year, edition, pages
Oxford: Elsevier Limited, 2009
Keywords
Norway, natural gas production, forecast
National Category
Physical Sciences
Research subject
Physics
Identifiers
urn:nbn:se:uu:diva-112216 (URN)10.1016/j.enpol.2009.06.075 (DOI)000272426500005 ()
Available from: 2010-01-11 Created: 2010-01-11 Last updated: 2017-12-12Bibliographically approved
6. European energy security: An analysis of future Russian natural gas production and exports
Open this publication in new window or tab >>European energy security: An analysis of future Russian natural gas production and exports
2010 (English)In: Energy Policy, ISSN 0301-4215, E-ISSN 1873-6777, Vol. 38, no 12, p. 7827-7843Article in journal (Refereed) Published
Abstract [en]

The widening gap between EU gas production and consumption may require an 87% increase of import volumes between 2006 and 2030, and there are great uncertainties regarding the amounts of gas that can be expected from new suppliers. The potential of increased production from Norway and Algeria is limited, hence, Russia is likely to play a crucial part of meeting the anticipated growing gas demand of the EU. A field-by-field study of 83 giant gas fields shows that the major producing Russian gas fields are in decline, and by 2013 much larger supplies from the Yamal Peninsula and the Shtokman field will be needed in order to avoid a decline in production. Gas from fields in Eastern Siberia and the Far East will mainly be directed to the Asian and Pacific Rim markets, thereby limiting its relevance to the European and CIS markets. As a result, the maximum export increase to the European and CIS markets amounts only to about 45% for the period 2015-2030. The discourse surrounding the EU’s dependence on Russian gas should thus not only be concerned with geopolitics, but also with the issue of resource limitations.

Keywords
Russia, giant gas fields, forecasting
National Category
Physical Sciences
Research subject
Physics
Identifiers
urn:nbn:se:uu:diva-112221 (URN)10.1016/j.enpol.2010.08.042 (DOI)000285032000030 ()
Available from: 2010-01-11 Created: 2010-01-11 Last updated: 2017-12-12Bibliographically approved
7. The evolution of giant oil field production behaviour
Open this publication in new window or tab >>The evolution of giant oil field production behaviour
2009 (English)In: Natural Resources Research, ISSN 1520-7439, E-ISSN 1573-8981, Vol. 18, no 1, p. 39-56Article in journal (Refereed) Published
Abstract [en]

The giant oil fields of the world are only a small fraction of the total number of fields, but their importance is huge. Over 50% of the world oil production came from giants by 2005 and more than haft of the worlds ultimate reserves are found in giants. Based on this it is reasonable to assume that the future development of the giant oil fields will have a significant impact on the world oil supply.

In order to better understand the giant fields and their future behaviour one must first understand their history. This study has used a comprehensive database on giant oil fields in order to determine their typical parameters, such as the average decline rate and life-times of giants. The evolution of giant oil field behaviour has been investigated to better understand future behaviour. One conclusion is that new technology and production methods have generally lead to high depletion rate and rapid decline. The historical trend points towards high decline rates of fields currently on plateau production.

The peak production generally occurs before half the ultimate reserves have been produced in giant oil fields. A strong correlation between depletion-at-peak and average decline rate is also found, verifying that high depletion rate leads to rapid decline. Our result also implies that depletion analysis can be used to rule out unrealistic production expectations from a known reserve, or to connect an estimated production level to a needed reserve base.

Keywords
Giant oil fields, field behaviour, peak oil, depletion
National Category
Physical Sciences Other Earth and Related Environmental Sciences Other Engineering and Technologies not elsewhere specified
Research subject
Physics with specialization in Global Energy Resources
Identifiers
urn:nbn:se:uu:diva-100954 (URN)10.1007/s11053-009-9087-z (DOI)
Available from: 2009-04-14 Created: 2009-04-14 Last updated: 2017-12-13Bibliographically approved

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Citation style
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  • Other locale
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Output format
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