Another Failed Energy Prediction: Peak Oil Demand

By David Middleton – Re-Blogged From WUWT

BP’s ‘Peak Oil’ Demand Prediction Falls Flat

By Jude Clemente, February 22, 2019

Always mandatory reading, BP just released its Energy Outlook 2019
It has caused quite a stir again this year.

But, this time the commotion that I see surrounds BP’s forecast that the global war on plastics will be the main factor in cutting global oil demand faster than previously expected. As such, for the first time BP’s outlook predicted a “peak” in oil use. At 13 million b/d, global petrochemical feedstock is 13% of total oil demand.

This is part of a growing trend in recent years where BP continues to see “much slower” growth in new oil demand going forward (see Figure).

Meanwhile, IEA recently reported that it will be those very same petrochemicals that will someday become the largest source of new oil demand, even surpassing transport in the years ahead:

“Petrochemicals are set to account for more than a third of the growth in world oil demand to 2030, and nearly half the growth to 2050, adding nearly 7 million barrels of oil a day by then,” IEA, October 2018

This conclusion from IEA is predicated on the reality that oil is inherently ingrained in pretty much all aspects of our lives, even if those aspects are not immediately obvious in the ways that cars or airplanes are. In fact, perhaps the world’s greatest energy irony is that oil and petrochemicals themselves are integral to renewables, electric cars, and the overall “energy transition” itself:

“Petrochemicals are particularly important given how prevalent they are in everyday products. They are also required to manufacture many parts of the modern energy system, including solar panels, wind turbines, batteries, thermal insulation and electric vehicles,” IEA, October 2018

From a broader oil use perspective, the truth is that population and income growth are the driving forces behind the demand for energy. The equation is a simple one to remember: more people, making more money, using more energy. As the most vital source of energy in the world, and lacking any sort of significant substitute, the upside for oil is clearly bright.

This is especially true since 6 in every 7 humans living today reside in still developing nations, where oil usage has really just begun. By 2050, the world’s economy will add $85 trillion in real GDP, and the global population will surge 30% to over 10 billion humans.

Potential demand is staggering: “What If India And China Used Natural Gas And Oil Like The U.S.

[…]

I must note here that BP has drastically underestimated global oil demand before.

For example, in its Energy Outlook 2011, BP predicted global oil demand at 102 million b/d in 2030. Yet, the world could pass that level this year, and if not, surely will in 2020, or a solid decade before BP thought that we would.

Thus, new oil demand has been surging at twice the rate BP has expected.

To me, oil companies foreseeing the peak of oil without any current evidence is “a bit of a European thing,” particularly among the majors themselves that are venturing into more renewables, natural gas, and storage battery investments: “Shell is Wrong: Global Oil Demand Can Only Increase.

The pressure from environmental groups against outwardly being “pro-oil” helps explain why super majors are understandably shying away from taking the position. In contrast, the smaller independent oil and gas producers are quietly marching forward under the very realistic assumption of “more.”

From a public relations standpoint, this all makes sense: the upside to loudly being “pro-oil” is tiny, while the downside is immense: you get called very bad names and accused of “denying science.”

Indeed, for a very long time now, baseline reference scenarios both IEA and EIA have been forecasting indicate very strong increases in global oil demand, pretty much continuously for as far out as they model.

[…]

As seen below, in EIA’s Annual Energy Outlook 2019released last month, our National Energy Modeling System forecasts that global oil demand stands on very solid footing. More, more, and even more.

Either way, whether it is from me, BP, EIA, or Greenpeace itself, I have learned a very simple truth during my 15-year career in the energy business: one of two things usually happens when you make seriously bold predictions, especially for the longer term.

When the time comes to answer for being wrong, either you are not around to have to respond, or the critics will have forgotten that you ever made the prediction in the first place.

Real Clear Energy

Jude Clemente’s energy articles on Real Clear Energy and Forbes are always worth reading.

Key takeaways:

  1. Major oil company (particularly European majors) predictions of a near-term peak in oil demand are 99.999% driven by politics and the need to appease the investment community.
  2. According to baseball legend, the late, great Yogi Berra, “It’s tough to make predictions, especially about the future.” So, make sure your timeline is long enough to evade having to take responsibility for failed predictions.
  3. Malthuisan predictions have a 100% track record of being wrong.
  4. As these United States become a net exporter of crude oil in the near future, we will have no problem finding customers.

Here are the graphs from Mr. Clemente’s article:

Figure 1. Y-axis is the annual percentage growth in petroleum liquids demand.
Figure 2. US Energy Information Administration (EIA) 2019 global petroleum liquids demand forecast.

In an odd twist, the US government forecast for petroleum demand is more bullish than an oil company’s forecast, albeit a “woke” Euro oil company.

Predictions about oil and gas production over the long term are particularly difficult. The EIA conducts “post mortem” analyses of their forecasts and makes the results available to the public.  I downloaded two Excel files for AEO crude oil and natural gas production.  The most striking thing is that the “shale boom” came out of nowhere in the eyes of the EIA.

Figure 3. AEO crude oil production forecasts vs actual crude oil production.
Figure 4. AEO natural gas production forecasts vs actual production.

As recently as 2008, the EIA (and most of the rest of the world) had no idea how significant the shale revolution was. The realization that low permeability source rocks could be economically developed was a game-changer.

Figure 5. Selected AEO forecasts vs actual oil production.  Note that the shale “revolution” was not even in the range of technological possibilities as recently as 2008.  The 1998 forecast assumed that the US was past “Peak Oil.”
Figure 6. Selected AEO forecasts vs actual natural gas production.  Note that the shale “revolution” was not even in the range of technological possibilities as recently as 2008.  The 1998 forecast assumed steadily rising natural gas prices and failed to predict the collapse in natural gas prices triggered by the shale “revolution.”

“It’s tough to make predictions, especially about the future.”

These sorts of forecasts can only incorporate conditions that were known at the time they are generated. The Williston Basin is a great example.

Figure 7. “Extent of the Williston Basin with major North Dakota structures shown.” North Dakota Geological Survey.

The Williston Basin is an “intracratonic sedimentary basin” (AKA a bowl).

Figure 8. Structure map of Cretaceous Dakota Formation. Contours are feet below sea level. Sonnenberg 2017.

Figure 9. Cross section A-A’.
Sonnenberg 2017

The Williston Basin has numerous petroleum systems and is productive from the Cambrian through the Triassic.

Figure 10. Williston Basin stratigraphic column.
Sonnenberg 2017

The Williston Basin has survived wild swings in sea level. Modern climate “science” tells us that if this happened today, the planet would be destroyed. Also note that over the past 600 million years, sea level oscillated cyclically. Modern climate science has eliminated these cycles… presumably protecting the planet from water.

Figure 11. “Time-stratigraphic column of the North Dakota Williston Basin with the First and Second Order sea level curves of Vail, et al. (Modified from Fowler and Nisbet, 1985).” North Dakota Geological Survey.

If I have to tell you when I’m being sarcastic, there’s no point in being sarcastic

The map below is from the 1972 Geologic Atlas of the Rocky Mountain Region published by the Rocky Mountain Association of Geologists. It is affectionately known as “The Big Red Book.” As I only have the huge print copy and am too cheap to spring for the digital version available from the AAPG, I took this picture with my phone…

Figure 12. Structure map of the Mississippian Mission Canyon formation. Contours are feet below sea level. RMAG “Big Red Book.”

Oil production in the Williston Basin was first established in 1951 with a discovery well on the Nesson Anticline. Anticlines are essentially subsurface ridges or hills. They are positive structural features. In 1972 all of the production from the Williston Basin was from traditional reservoirs. The oil was trapped on anticlines and up-dip in structurally and/or stratigraphically bound accumulations around the north and west flanks of the basin in porous and permeable sandstone and carbonate reservoirs. By 1985, it appeared that production from the Williston Basin had peaked.

Figure 13. “Total annual oil production in North Dakota” millions of barrels per year. North Dakota Geological Survey.

Then… A funny thing happened on the way to Peak Oil… A nearly ten-fold increase in Williston Basin oil production.

Figure 14. North Dakota crude oil production. EIA
Figure 15. Figures 13 and 14 merged at the same scale.

The industry, largely led by Continental Resources figured out that through the miracles of horizontal drilling and hydraulic fracturing (frac’ing) they could produce lots of oil from one of the basin’s most prolific source rocks, the Bakken Formation’s shale members. Rather than discrete accumulations in various traps, the Bakken Shale was a continuous oil field, which essentially filled the center of the basin.

Figure 16. SOURCE: CONTINENTAL RESOURCES INVESTOR PRESENTATION, 2011 (Motley Fool).

Compare the 1972 Williston Basin map to this recent map of the Bakken Formation. Bakken oil production is in green…

Figure 17. Structure map on top of Bakken Formation.
Sonnenberg 2017

Note that the highest density of Bakken wells and best production is east of the Nesson Anticline.

Figure 18, Bakken IP (initial production rate) in barrels of oil equivalent per day.

The best production is coincident with the thickest Bakken. Beets 2016.

Figure 19. Bakken isopach (thickness) map.
Sonnenberg 2017
Figure 20. Stratigraphic cross section. Datum is Lodgepole Formation.
Sonnenberg 2017

As recently as 2008, the EIA (and most of the rest of the world) had no inkling that vast, continuous oil resource plays like the Bakken, Eagle Ford and myriad plays of the Permian Basin were about to be exploited by the Climate Wrecking Industry. And that’s why their oil production forecasts were so far off the mark.

About the Author

David Middleton doesn’t normally speak of himself in the third person… But that’s how these “about the author” thingies tend to be written. David has a B.S. degree in Earth Science from “that fine oil school,” Southern Connecticut State University. David has worked in the evil Climate Wrecking Industry since 1981, entirely for small to mid sized companies, that most people never heard of.

Figure 21. Medium Oil ca.1993.

His first employer, Enserch Exploration, decided he was a geophysicist because he minored in math. His fourth employer decided he was VP of Exploration because he was really good at PowerPoint. His current employer bought his fourth employer and decided he was a geologist due to the unique stratigraphic nature of his office. There actually was a time when there really was a difference between oil industry geologists and geophysicists… David never figured out the difference.

CONTINUE READING –>

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