Steven Kopits on Peak Cost of Production
admin January 11th, 2011
I get the privelege of editing the Peak Oil Review Commentary, as part of my role on the ASPO board. This is utterly delightful since it means I get to read a lot of good stuff ahead of everyone else. Steven Kopits, a private energy consultant, has written a really fascinating piece for this week, which contains it, among other fascinating nuggets, this bit:
Nor has capital become more productive. From 1995 to 2004, $180 billion of upstream capital expenditure would deliver 1 million b/d of incremental oil, condensate and natural gas liquids production. From 2005, when the oil supply stalled, through year-end 2010, producing the same volume required $1.07 trillion, a six-fold increase — even after allowing for the $100 billion the Saudis invested in their spare, and currently idle, capacity.
Thus, increasing the oil supply now requires either six times as much money, or technology six times more productive, than it did a decade ago. This suggests that neither a modest increase in capital spending nor modest technological improvement will create additional supply. There is not a bigger oil resource available for just slightly more investment or marginal technology improvement. In the case of oil, “halfway through” does actually imply peak oil. Put another way, Hubbert‘s production curve is accompanied by Hubbert‘s cost curve. The cost of extraction does increase, and it is likely to increase at an increasing pace.
I’ve rarely seen the cost of production issues articulated so clearly and coherently, and this goes in my repetoir of useful information!
Sharon