Tuesday, October 25, 2011

Daniel Yergin massively reduced his energy estimates

by Jeffrey J. Brown 
Originally posted on the EnergyBulletin.

If one can’t rely on Daniel Yergin for soothing reassurances about the state of the global oil market, who you gonna call?

Daniel Yergin and his associates at Cambridge Energy Research Associates (CERA) have consistently been predicting a 20% to 25% increase in global total liquids production (which consists of crude oil, condensate, natural gas liquids, refinery gains and other liquids such as low net energy biofuels). Technically, they attempt to hedge by stating that they are talking about productive “Capacity,” but it’s clear that they have been predicting a robust increase in global liquids production.

However, CERA has shown a definite, but little noticed, trend of declining rates of increase in predicted production. In fact, it appears that CERA hit Peak Optimism regarding future production increases several years ago, in 2005, when Daniel Yergin predicted a 20% increase in total liquids production within six years (a 3%/year rate of increase).

In 2006, Mr. Yergin’s associate, Robert Esser, predicted a 20% increase in total liquids production within nine years (a 2.5%/year rate of increase).

In 2011, Daniel Yergin predicted a 20% increase in total liquids production within 20 years (a 0.9%/year rate of increase).

Note that there is a “Receding horizons” trend in CERA’s predictions for when the fabled 20% plus increase in total liquids production will arrive--first six years, then nine years, then 20 years--matched by the steady decline in the predicted rate of increase in production, from 3.0%/year to 2.5%/year to 0.9%/year. At the ongoing rate of increase in the time period required to reach the promised land of 20% higher production, in 2016 CERA will be predicting that the 20% plus increase in production will be achieved in about 55 years.
Following are links to and excerpts from the three Yergin/CERA predictions.

July 2005

“It’s not the end of the oil age”
Daniel Yergin
Washington Post
Our new, field-by-field analysis of production capacity, led by my colleagues Peter Jackson and Robert Esser, is quite at odds with the current view and leads to a strikingly different conclusion: There will be a large, unprecedented buildup of oil supply in the next few years. Between 2004 and 2010, capacity to produce oil (not actual production) could grow by 16 million barrels a day -- from 85 million barrels per day to 101 million barrels a day -- a 20 percent increase. Such growth over the next few years would relieve the current pressure on supply and demand.

September 2006

“Plenty of oil--Just drill deeper”
Business Week

Cambridge Energy Research Associates predicts world oil and natural gas liquids capacity could increase as much as 25% by 2015. Says Robert W. Esser, a director of CERA: "Peak Oil theory is garbage as far as we're concerned.”

September 2011

“There will be oil”
Daniel Yergin
Wall Street Journal
Based on current and prospective plans, it appears that the world's production capacity for "oil and related liquids" (in industry jargon) should grow from about 92 million barrels per day in 2010 to over 110 million by 2030. That is an increase of about 20%.
While I’m not privy to what goes on within the CERA organization, I can certainly speculate, and perhaps the following charts provide some explanation for CERA hitting Peak Optimism in 2005, followed by a steady decline in projections for when we will reach the promised land of 20% higher global production.

The first chart shows actual global annual Crude + Condensate production for 2002 to 2010 (EIA). The gap between what production would have been at the 2002 to 2005 rate of increase and actual production is shaded. A production rate of 86 mbpd (million barrels per day) in 2010 would be consistent with Yergin’s 2005 prediction, but the actual production rate was 74 mbpd,

Chart 1: Actual global annual Crude + Condensate production for 2002 to 2010 (EIA)

The second chart shows actual global annual Total Petroleum Liquids production for 2002 to 2010 (BP). The gap between what production would have been at the 2002 to 2005 rate of increase and actual production is shaded. A production rate of 94 mbpd (million barrels per day) in 2010 would be consistent with Yergin’s 2005 prediction, but the actual production rate was 82 mbpd, resulting in a 12 mbpd gap between expectations and reality..

Chart 2: Actual global annual Total Petroleum Liquids production for 2002 to 2010 (BP)

Note that in both cases, global Crude + Condensate and Total Petroleum Liquids production have been basically flat since 2005. We have seen a material, but quite small, increase in global Total Liquids production, which includes items such as low net energy biofuels, but the 2005 to 2010 rate of increase in Total Liquids production was only 0.5%/year (EIA), and biofuels don’t appear to have any kind of material impact on Global Net Exports (GNE), from oil exporting countries.

Incidentally, we have seen a measurable decline of about three mbpd from 2005 to 2010 in the volume of GNE, even with a slow rate of increase, less than one percent per year, in Total Liquids production, and the following chart shows the gap between where we would have been in 2010 at the 2002 to 2005 rate of increase in GNE. A GNE rate of over 58 mbpd in 2010 would have been consistent with Yergin’s 2005 prediction, but the actual net export rate was less than 43 mbpd, resulting in about a 16 mbpd gap between expectations and reality.

Chart 3: Gap between where we would have been in 2010 at the 2002 to 2005 rate of increase in Global Net Exports (GNE)

Given Mr. Yergin’s current prediction for less than a one percent per year increase in Total Liquids production, which is roughly consistent with what we have seen from 2005 to 2010, it appears that Mr. Yergin--probably without realizing it--is effectively predicting a continued decline in Global Net Exports.


Jeffrey J. Brown is a licensed Professional Geoscientist and a member of the ASPO-USA Board of Directors. He has discovered several oil and gas fields in West Central Texas, and currently manages an exploration program searching for oil and gas fields in this region. Jeff has conducted analysis of the Peak Oil issue for several years, and has written and coauthored several articles on Peak Oil related topics, with a special emphasis on world net oil export capacity.

4 comments:

  1. Hi there. Just found your informative blog. Im a Finnish "peak everything"-blogger, and Im writing a book with a title "Finland after oil", due out autumn 2012.

    Im currewntly writing a chapter about the current global oil production and net-exports, and google got me to your site. I have two questions:
    1) is it ok if I use some of your graph(s) for the book? I love the gap on actual net-exports vs forecasted net exports on this post. I will of course mention the source for any graphs I use.
    2) can you show me to the source of your numbers on net-exports? (they seem hard to find).

    My own blog is at http://kaikenhuippu.wordpress.com but its in finnish (kaikenhuippu means peak everything).

    ReplyDelete
  2. I can send you our data file for the top 33 net oil exporters in 2005. We primarily used the BP data base for production & consumption, with some minor input from the EIA for smaller countries.

    Feel free to use our graphs, with attribution.

    Following are some recent comments and graphs.

    Regards,

    Jeffrey J. Brown

    Following is a graph for production, consumption and net exports for “Export Land,” assuming a production peak in 2000. Note that on the upslope, the rate of increase per year in net exports exceeded the rate of increase in production, but on the downslope, the rate of decline in net exports exceeded the rate of decline in production.

    http://i1095.photobucket.com/albums/i475/westexas/Slide1-17.jpg

    Following is a graph for production & consumption for the top 33 net oil exporters and for Chindia’s net imports, from 2002 to 2010. As the model predicted, the rate of increase in top 33 net exports (GNE) exceeded the rate of increase in production from 2002 to 2005, but from 2005 to 2010, the rate of decline in net exports exceeded the (very slight) rate of decline in production.

    http://i1095.photobucket.com/albums/i475/westexas/Slide09.jpg

    If we simply extrapolate the 2005 to 2010 rate of change numbers on this graph, the 2010 to 2020 rate of decline in ANE would accelerate to about 5%/year, and if we extrapolate the other rates of change, and assume a 1%/year production decline rate for the top 33, the ANE decline rate would accelerate to about 8%/year from 2010 to 2020:

    0.1%/year Production Decline (2010 to 2020), Top 33 Net Oil Exporters:
    http://i1095.photobucket.com/albums/i475/westexas/Slide10-1.jpg

    1.0%/year Production Decline (2010 to 2020), Top 33 Net Oil Exporters:
    http://i1095.photobucket.com/albums/i475/westexas/Slide11.jpg

    I estimate that there are about 157 net oil importing countries in the world. If we extrapolate the Chindia region’s rate of increase in their combined net oil imports, as a percentage of GNE, in 19 years just two of these oil importing countries--China & India--would consume 100% of GNE.

    ReplyDelete
  3. FYI--I need your email address.

    Mine: westexas@aol.com

    ReplyDelete
  4. Great, thanks. I will contact you.

    ReplyDelete