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.
“It’s not the end of the oil age”
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.
“Plenty of oil--Just drill deeper”
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.”
“There will be oil”
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,
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.