Russia and Peak Oil

Still on light posting mode…but I think this should be noted in contrast to the Oil Drum’s recent discussion I noted on Saudi Oil.

From Reuters:

Russian oil output could peak at more than 510 million tonnes annually in 2010, or 10.2 million barrels per day (bpd), Russian Energy Minister Victor Khristenko said on Monday.

“It will reach a certain plateau of production within the time frame of 2010,” Khristenko told reporters. That plateau would be about 510 to 520 million tonnes a year, he said, or the equivalent of about 10.2 to 10.4 million bpd. In September, Russia produced 9.53 million bpd, which was a post-Soviet high, according to Energy Ministry data.

And let’s not forget that Russia currently is neck-and-neck with the Saudi’s on oil production:

Russia is chasing Saudi Arabia’s title as the world’s top crude oil producer. Saudi Arabia pumped 9.6 million bpd of crude oil in September, according to the U.S. Energy Information Administration.

But unlike the Middle East’s oil giant, which chooses not to pump at full capacity, Russia is keen to see production hit record highs. Saudi Arabia has surplus capacity of up to 1.4 million bpd, according to the EIA.

More oil worries to ponder on.


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4 responses to “Russia and Peak Oil”

  1. Jacob H

    This is tangential to your post, so forgive me, but I really take issue with the term “peak oil.” I understand that people use it as a general label for discussions of the challenges we face in meeting our worldwide energy needs, but it still irritates me. Hubbert’s model is a dangerously simple representation of world oil production. Has anyone ever made a system dynamics model that accounted for the feedbacks that exist between demand, oil production and price?

    You have an interesting blog by the way. I’ll have to add it to my daily
    —————————————————————————
    StrategyUnit Note: This is a reposting. In my foolishness, I clicked the “delete” link when moderating comments. Henceforth, I’ve changed this to open comments – no moderation before posting is seen.

  2. StrategyUnit

    Hello Jacob,

    Thanks for your comment. See my response below. Overall I think it made me realize that I need to explain my position on Hubbert and Peak Oil more thoroughly next time, as there are some issues I am over looking with my over simplification.

    “This is tangential to your post, so forgive me, but I really take issue with the term “peak oil.” I understand that people use it as a general label for discussions of the challenges we face in meeting our worldwide energy needs, but it still irritates me.”

    SU: I agree that most folks, I myself included, use Hubbert’s term very loosely. And, I do explicitly use the term to further the discussion of the energy security, not necessarily in Hubbert’s original inattention.

    Indeed, for this posting on Russia, all we know is production is thought to peak soon – it says nothing regarding the actual geological conditions. Russia’s major issues are upgrading to more advance oil extraction techniques and being handicapped in its ability to export its oil to a diverse market. I’m actually thinking of placing a major posting on it.

    “Hubbert’s model is a dangerously simple representation of world oil production. Has anyone ever made a system dynamics model that accounted for the feedbacks that exist between demand, oil production and price?”

    SU: Hubbert’s model, from my understanding, is somewhat simplistic and relies on a bell-shaped logistics curve and seems to hold many variables constant. Regardless, the basic premise of the Oil Peak (used in the casual sense) I believe is valid for reasons I will save for a future post.

    I don’t know of published models that take into account demand, production and price – I have seen wild-guess/analyses, but never a “model” approach as like Hubbert’s.

    “You have an interesting blog by the way. I’ll have to add it to my daily roll.”

    SU: Thanks! What’s your blog by the way? Email me.

  3. TM Lutas

    What is the long-term oil price ceiling for petroleum? If you cannot answer, I would guess that you aren’t really serious about the subject. An explanation is in order.

    The US can convert coal to diesel fuel all day long for decades using the Fischer Tropsch method (long ago discovered by petroleum poor Germany). The current production cost is $32 a barrel. The governors of Wyoming and Montana are keen for oil production revenue to supplement their budgets and are touting their coal fields as great places to put down production plants.

    The investors aren’t quite rushing in because they are not yet convinced that expensive oil is here to stay. In a “peak oil” scenario where Saudi Arabia’s production drops year on year, those investors would be convinced and after a few years of massive price spikes, the new “oil price ceiling” imposed by coal to diesel production would come into play.

    All this assumes that the massive Canadian tar sand fields can’t be exploited faster. That variant has an $11 production cost but suffers because you need a great deal of water in the process and that restrains production.

    Oil will continue to be found. And if there is nothing to find, we will make it. There *is* a ceiling price to oil. When you find chicken littles proclaiming that prices will long-term exceed that ceiling price, you have discovered an unserious observer.

  4. StrategyUnit

    TM Lutas,

    If you note my blog, I havnt addressed the energy issue in terms of peak oil in depth as of yet; hence, my comment in this post earlier. So, I am unsure why you are being critical when I’ve been vague on the issue thus far.

    I’ve been looking to clarify my perspectives on the issue of Energy Security and Peak Oil, but I havnt had the opportunity to do so. But in any case, let me try clear some things up with the following points:

    1. Like you, I believe in the end of *cheap* oil (specifically Saudi Arabia). I don’t believe that oil will cease, bringing in the end of the world ala “Long Emergency” scenario. We have plenty of oil – just not in easy to get, refine or process cheaply.

    As for a “price ceiling” – I would venture to say that’s whatever the market can bear. Whatever the price of oil is, the current world infrastructure is such that it has to pay for it (at least in the immediate short term).

    Oil production is cyclical so there’s some hesitation in investing in other sources of oil until the new oil price (“price ceiling”) is known. Once the industry feels it knows this, it will reevaluate what fields and reserves are readily available etc.

    2. Oil production will continue – be it from nearly dried up wells to oil shales to coal.

    At this point in time, processing oil shales (“oil sands”) is energy and water intensive, not to mention environmental issues. But this wont matter – much of the world’s infrastructure depends on oil and it will take much time to make the switch to alternative fuels.

    I am very aware of oil from liquefying from coal – and the West still has lots of coal mines sitting idle (for now).

    3. From my understanding, beyond energy, oil is needed in pharmaceuticals and for plastics – I look forward to research if there are possible substitutions for this or not. I honestly don’t know.

    4. Substitution Effect

    Since things are too early, I don’t think there’s any comprehensive forecast of how an increase in oil will lead to increasing fuel substitution.

    5. “Peak Oil” is part of larger and growing resource problem.

    Natural Gas, water, clean air, fertile earth etc – are going to be an increasing issue as various resources continue to be taxed. Again, I don’t believe in the “Mad Max” scenario, but these resource limitations will lead to shortages and increasing strains in the political space.

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