Monday, 7 July 2008

Shell on Peak Oil, Coal and Climate Change

If you've been waiting for the cheer leading OilCos to save the day by yet again denying peak oil and saying we can battle climate change cheaply and effectively - well now is the time to stop reading.

Shell just put out their yearly scenarios up to year 2050. The estimates, while both critical and optimistic on the surface, are neither.

First, they now admit that the world oil production will peak in 2020 (somewhat optimistic I might add). Quite a change from three years ago, when they said that all people talking about peak were idiots.

However, by some odd magic oil production remains on plateau up to 2040 in their scenarios. No other geologists, oil analyst or oil company is able to manage such munging of data, even if they have tried. Well EIA has succeeded in that, but they have good track record of not being very accurate.

Shell's 20 year plateau would require us finding about hundred new Saudi Arabias worth of oil by 2040. That is not just possible - regardless of what type of weed one is smoking.

Alternatively it would require that the non-conventional oil sources, which in the optimistic EIA/IEA scenarios scale to 6-7 Mb/d by 2030 would need to be wrong on the downside by a factor of 10. Yes, estimates have been wrong before, but physical infrastructures and energy engineering mega projects don't build themselves overnight. They take an average of 10-25 years to complete.

Even if it somehow magically those figures would come to light, the environmental devastation and CO2 emissions from unconventionals production would be something the world has never experienced before. I doubt that is the future anybody wants. GHG emissions might be the least of our worries in such a scenario, due to groundwater destruction, climate pollution, electricity scarcity and utter devastation of environment in huge areas in North and South America.

So, either people at Shell are smoking some heavy-duty ganja or they are trying to pretty up the truth in order to retain our sanity. You take your pick from those two. Of course, it is possible they actually believe the data they published, but that remains a fairly improbable assessment.

As for coal, their assessment is more sober, but not a pretty sight in regards to global warming:
"Limiting GHG concentrations to 450 ppm CO2-equivalent is expected to limit temperature rises to no more than 2°C above pre-industrial levels. This would be extremely challenging to achieve, requiring an explosive pace of industrial transformation going beyond even the aggressive developments outlined in the Blueprints scenario. It would require global GHG emissions to peak before 2015, a zero-emission power sector by 2050 and a near zero-emission transport sector in the same time period"
That assessment is indeed a challenge, considering their view of the global energy mix to 2050:

Coal will dominate and keep growing up to and including 2050

I say we give Nobel prize for physics, peace and everything else for the person who comes up with a time machine, invents working commercial CCS ten years ago and gets it installed in every single coal plant in the world retroactively. The situation is almost that dire.

It is worth noting that at the same time EIA is assuming in their Annual Energy Outlook 208 coal use to go up by c. 1.7% per annum. That would mean the world would hit 560ppm for CO2 already in 2030 from coal emissions alone - unless we magically capture and store that CO2. With the same growth rate the figure would be 785 ppm by 2050 + emission from everything else, like oil, natural gas, biofuels, meat production, etc.

I'm not sure if 350ppm or 450ppm is the absolute safe limit, but I'm fairly sure that even by most optimistic geological records way back a few millennia 1000+ ppm is not a safe level anymore.

Now, there are kernels of truth in the scenarios as always with Shell (they know the scenario methods very well), like this final assessment:

"Neither of the scenarios is comfortable, which is to be expected given the hard truths we are facing. While both portray successful economic development and the globalisation that accompanies this, both also have branching points that could potentially lead towards escalating geopolitical chaos."

Replace the word 'could' with words 'will most likely' and you the situation staring us in the face. Every big multi-nation war has started at the end of a commodity cycle, with nations competing for access to precious primary resources, like energy. Tell me this time it's going to be different, when we are looking at immediate decline in oil and a possible decline in the next 15-20 years of natural gas.

In the end, this quote from the presentation is quite sanguine:

"If historians now see the turn of the 19th century as the dawn of the industrial revolution, I hope they will see the turn of the 21st century as the dawn of the energy revolution." - Rob Routs, Executive Director Downstream, Shell

Revolution it surely will be, but not the one like we are reading in the papers. It'll be something completely different - something probably none of us can yet imagine.