Wednesday, December 06, 2006

Refine it if you got it

Author discusses our 1000-barrel-a-second oil addiction
By Jason Chesworth

1000 Barrels

Atop the title of Peter Tertzakian’s book A Thousand Barrels A Secon lays the subheading, ‘The coming oil break point and the challenges facing an energy dependent world’. Tertzakian begins his 6th chapter, ‘The Next Great Rebalancing Act’, with the sobering statement: “We are approaching another moment in the evolutionary cycle of energy supply and demand where the status quo will be shaken. A break point is coming before the end of this decade.”

If you’ve been subject to a media blackout or perhaps a coma for the past year and a half, you may be surprised to hear that the fossil fuel, oil, is getting harder to produce and deliver, therefore making it more expensive. For those of you who have gotten a whiff of this news already, Tertzakian’s book provides an articulate point of view from within the energy industry that offers few easy answers and many newfound questions.

The title comes from the author’s assertion that “sometime in 2006, mankind’s thirst for oil will have crossed the milestone rate of 86 million barrels per day, which translates into a staggering one thousand barrels a second!” He goes on to put it in simple imagery by saying, “picture an Olympic-sized swimming pool full of oil: we would drain it in about 15 seconds. In one day, we empty close to 5500 such swimming pools.”

Tertzakian is no doomsayer, nor is he in the business of delivering exaggerated claims for dramatic effect. In fact, as Chief Energy Economist for ARC Financial (a private equity firm devoted to investing in energy-based companies), and former geophysicist for the Chevron Corporation, he has a vested interest, both professionally and financially, in addressing energy realities in an era where real energy facts are subject to intense debate.

In a recent interview with S&, the author stated, “We as consumers don’t consume oil; we consume gasoline, jet fuel, kerosene and heating oil.” In other words, products refined from oil. “You can make these products from any number of fossil carbon sources; oil shale and coal for example. The easiest and best way of making those products is from conventional light sweet crude oil.” When you have the stuff, that is.

If you were to Google the term “Peak Oil” two years ago, it wouldn’t have turned up half as much commentary as it does today. Peak Oil is not a new term by any stretch of the imagination; it is, however, becoming more and more hotly debated as it enters the collective consciousness of not only a heavily energy-addicted society, but one that is also heavily energy-invested.

The theory of Peak Oil, simply put, is the idea that once we hit the halfway mark in pulling oil out of the ground (and oil being a finite resource), the last half gets tougher and more expensive to extract. M. King Hubbert, widely considered to be the pioneer of the Peak Oil movement, was a geophysicist with the Shell Oil Company from 1943 to 1964 and was later the senior research geophysicist for the United States Geological Survey until his retirement in 1976. However, his views and research are largely remembered as a curved line known as the “Hubbert Curve”, which is a contentious bell curve graph that looks like the side view of a mountain. The concept being, once you work your way to the top, the only direction is down. That’s one side of the argument.

1000 Barrels

As Tertzakian pointed out to S&, “the fundamental understanding of the Hubbert Curve is to make some estimate of how much oil there is in the ground and how much of that oil has already been produced. So, depending on what source you use and who you talk to, the amount of oil in the ground … is somewhere around 2 ½ trillion barrels, and somewhere between 1 to 1 ½ trillion barrels has been pulled out. Therefore, half of it has been produced. It’s very simplistic, but then you get into the debate: What do we include under this curve? What type of oil are you talking about? Are you talking about light sweet crude? Are you talking about light sweet crude plus heavier grades? Do we throw bitumen like the oil sands in there? Do we throw oil shale and coal and kitchen grease in there?

“As you start getting deeper into the Peak Oil debate, you start transitioning into the Cadman world”, he said, referencing another “soothsayer” of energy, Sir John Cadman, whom Tertzakian explained, “predates Hubbert’s work by 30 years.”

A former chairman of Anglo-Persian (later known as British Petroleum, or, BP), Cadman made the following statement way back in 1927: “The time will eventually come when the world may have to look for a great part of its supplies from secondary and synthetic sources, but he would indeed be an optimist who imagined that -- on the reaching of such a stage -- prices would remain as low as those existing in the past.”

Part Two: Tapping the Well

Illustration by Trevor Turner
Book image courtesy McGraw-Hill

Originally published: Scene and Heard

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