CERA study: Oil production to track ‘undulating plateau’

Nov. 27, 2006
The “peak oil” theory, stipulating that world oil production will soon peak and sharply decline, is flawed, according to an analysis by Cambridge Energy Research Associates (CERA).

The “peak oil” theory, stipulating that world oil production will soon peak and sharply decline, is flawed, according to an analysis by Cambridge Energy Research Associates (CERA).

Instead of a peak, CERA says, production is more likely to trace an “undulating plateau” that will last for a decade or more beyond 2030. The report added that during later decades of the plateau period, unconventional production of heavy oil, gas-related liquids (condensate and natural gas liquids), gas-to-liquids, and coal-to-liquids will supplement traditional liquids supply.

“It is likely that the situation will unfold in slow motion and that there are a number of decades to prepare for the start of the undulating plateau. This means that there is time to consider the best way to develop viable energy alternatives that would eventually provide the bulk of our transport energy needs and ensure that there is a useable production stream of conventional crude for some time to come,” CERA said.

Peter M. Jackson, CERA director of oil industry activity, said, “The ‘peak oil’ theory causes confusion and can lead to inappropriate actions and turn attention away from the real issues.”

He added, “Oil is too critical to the global economy to allow fear to replace careful analysis about the very real challenges with delivering liquid fuels to meet the needs of growing economies. This is a very important debate, and as such it deserves a rational and measured discourse.”

Hubbert analysis

The CERA report contends that the often-cited Hubbert model, which patterns production as a bell curve, fails to recognize that recoverable reserve estimates evolve with time and are subject to significant change. The model also underplays the impact of technological advances.

Although M. King Hubbert accurately predicted timing of the peak in US Lower 48 oil production in 1970, the CERA study says, he underestimated the peak rate by 20% and total cumulative Lower 48 production during 1970-2005 by 15 billion bbl.

Hubbert’s symmetrical post-peak reservoir decline-curve assumptions also fail to match observations of typical oil-field production profiles, which are often asymmetrical, even without new technology or enhanced recovery.

The CERA report also challenges the peak-oil theory’s reliance on assertions that new discoveries aren’t replacing production. It calls the argument “incomplete,” saying it ignores the role of development and economic considerations that can encourage companies and governments to favor development over exploration.

CERA’s report contends that it is not reservoir constraints but aboveground factors such as geopolitics, conflict, economics, and technology that will dictate future oil supply.