THE ASSOCIATION

THE ASSOCIATION

FOR THE STUDY OF PEAK OIL AND GAS

“ASPO”

NEWSLETTER No. 99 – MARCH 2009

ASPO started as a European network of scientists and others, having an interest in determining

the date and impact of the peak and decline of the world’s production of oil and gas, due to resource
constraints. Now, associate organisations are active in

Argentina,

Australia

Austria,

Belgium,

Canada, China,

Croatia,

Denmark, Egypt

Finland,

France, Germany, Hong Kong, Ireland,

Isle

of Man

Israel

, Italy,

Luxembourg

, Japan, Korea

Kuwait

Malaysia,

Mexico, Netherlands, New

Zealand, Portugal,

Russia

Singapore, Slovenia,

South Africa, Spain, Sweden, Switzerland,

United Kingdom, USA

and Venezuela

(Formally constituted entities are shown in bold face)

Missions:

1. To evaluate the world’s endowment and definition of oil and gas;
2. To study depletion, taking due account of economics, demand, technology and politics;
3. To raise awareness of the serious consequences of oil and gas decline for Mankind.

Foreign language editions are available as follows:

Spanish: www.crisisenergetica.org

French: www.oleocene.org (press “Newsletter”)

CONTENTS

1121. A most impressive BBC Programme

1122. An Extension of Resource Nationalism
1123. Polar Oil and Gas
1124. Flat-Earth Cheers
1125. Saudi Concerns

Index of Country & Regional Assessments with Newsletter Reference

(*revised)

Abu Dhabi

China

*89 Kazakhstan

Qatar

REGIONS

Algeria

Colombia *62 Kuwait

Romania

AFRICA

Angola

Denmark

Libya

Russia

*93 EURASIA

Argentina

Ecuador

Malaysia

Syria

*60 EUROPE

Australia

*94 Egypt

*98 Mexico

S. Arabia

*66 L.AMERICA

Azerbaijan

Gabon

Netherlands

Trinidad

N.AMERICA 72

Bolivia

India

Neutral Zone

Turkey

THE EAST

Brasil

*85 Indonesia *61 Nigeria

*92 UK

*68 M.E. (Minor)

Brunei

Iran

*97 Norway

*87 USA

*95 M.E.GULF

Canada

Iraq

*96 Oman

Venezuela *67 Deepwater

Chad

Italy

Peru

Vietnam

Polar

THE GROWING GAP

Regular Conventional Oil

1930

1950

1970

1990

2010

2030

2050

Past Discovery

Future Discovery

Production

Revisions backdated.
Rounded with 3yr moving
average.

OIL & GAS PRODUCTION PROFILES

2008 Base Case

1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Regular Oil

Heavy etc

Deepwater

Polar

NGL

Gas

Non-Con Gas

Oil Price

100

125

150

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Bre

nt Crude $/b

The General Depletion Picture

ESTIMATED PRODUCTION TO 2100

Amount

Annual Production - Regular Oil

Total Peak

Regular Oil

Mb/d

2008 2010 2015 2020 2030

Date

Past

Future

Total

US-48

2.9

2.6

2.1

1.7

1.1

200

1970

Known Fields

New

Europe

4.0

3.5

2.5

1.8

0.9

1999

1054

736

110

1900 Russia

8.8

8.2

6.8

5.7

4.0

230

1987

846

ME Gulf

673

1974

All Liquids

Other

722

2005

1156

1269

2425

World

1900 2005

2008 Base Scenario

Non-Conventional

Regular Oil

excludes Heavy Oils

Heavy etc.

4.3

5.0

6.5

7.2

7.7

226

2030

(inc. tarsands, oilshales); Polar &

Deepwater

5.9

6.6

8.1

4.7

2013

Deepwater Oil; & gasplant NGL

Polar

1.4

1.5

1.7

2.0

2.3

2030

Reference date : end 2008

Gas Liquid

5.1

5.5

5.6

5.9

5.6

156

2020

Rounding

-1

Revised

10/03/2009

ALL

2425 2008

1121. A most impressive BBC Programme

On February 20

, BBC-2 broadcast a singularly fine programme produced by Rebecca Hosking and Tim

Clark investigating the impact of Peak Oil on agriculture and food supply. It tells the story of Rebecca who
was brought up on a small traditional farm in the west of England. Life was hard and she was encouraged to
find a new life for herself. She was aware of Nature from her earliest days on the farm and eventually made a
career making Nature films.

She recently became aware of Peak Oil and began to see its impact on agriculture, which is so dependent

on petroleum for fuel and synthetic nutrients. She also came to realise that modern methods were destroying
the soil. An earlier picture of flocks of seagulls following the plough has passed into history as the soil itself
becomes barren. At first, it seemed a depressing realisation, but her researches led her to discover new more
benign methods of farming. In earlier years, hedges were no more than barriers between fields, but now are
found to be capable of supporting diverse crops from the tree tops to the subsoil. Several such experimental
holdings were visited offering great promise for a new more sustainable style of agriculture.

Rebecca was herself so impressed by what she learnt that she has resolved to return to her childhood farm

to build a new sustainable life. Not only did the film tell a critically important message, but it did so with the
most spectacular photography.

Petroleum Man

will be virtually extinct by the end of this Century, but the film offers great hope that the

survivors can find a new and attractive way of life. No doubt the tensions of the transition will be severe as
urban living deteriorates and the world enters the most severe economic depression it has known as is now
being increasingly recognised, but the film offers enormous encouragement for those with the vision and
dedication to find a new direction.

A remarkable book, entitled

A Short History of Progress

by Ronald Wright (ISBN 10.0.88784.706.4),

confirms the assessment explaining how the great civilizations of the past, from the Sumarians of ancient
Iraq to the Romans and Mayans, all eventually died out for want of food when the soils on which they
depended lost their fertility from excessive agriculture and the destruction of woodlands. Cities developed
but became vulnerable as the local food supply dwindled from declining soil fertility. These societies were
run by priests and kings, some claiming divine authority. Gold and money became mechanisms for winning
power and wealth by an elite who were sometimes benign guardians of the poor, but not always. Apparently,
then as now, devaluation and inflation marked peak times, being accompanied by excessive usury. Cicero
apparently accused the Roman Emperor, Brutus, of lending money to a starving town in Cyprus at a 48%
interest rate. Even the modern banks did not reach that height before they crashed. After the peak of these
civilizations came their collapse.

With this background in mind, it is easy to see that the Oil Age fits the general picture, becoming the

most extreme example, as oil was much more effective source of energy than the slaves of Antiquity. The
peak of this civilisation, if that is the word, was higher but it means that the collapse will be steeper and
longer. Already it is admitted that the situation is worse than in the so-called

Great Depression

of the 1930s :

it has a good chance of being the greatest ever, being a turning point for Mankind.

1122. An Extension of Resource Nationalism

Under the now largely discredited principles of globalism, the resources of any country were deemed to

belong to the highest bidder, and any move by a country to protect its own interest was frowned upon. Even
so, there has been a degree of dualism. A few years ago, the United States, a champion of globalism,
frustrated for nationalistic reasons a superior bid by China to buy the American oil company, Unocal.
Furthermore, the world’s financiers, who do tend to have a national base, have basically impoverished the
Third World through the mechanism of globalism whereby countries were persuaded to encourage trade such
that natural resources, product and the profit from cheap labour were exported, while the country itself
became enslaved by dollar debt. Ecuador, for example, found itself having to dedicate its substantial oil
revenues in their entirety to service foreign debt, leaving the campesino as badly, if not worse, off than
before. Organisations such as the World Bank and IMF played their part. It was globalism in name but had a
nationalistic subtext, given the identity of the financiers.

Britain, however, was certainly not guilty of

Resource Nationalism

: during the 1980s and 1990s it

depleted its resources at the maximum rate possible, allowing exports, even though it was obvious that such a
policy would inevitably lead to subsequent imports as the country’s own resources were depleted. In fact, it
exported at a time of low oil prices, but now faces rising imports at high prices as world depletion grips. A
wiser policy, given that the national interest was a priority, would have been to deplete them slower, so that
they lasted longer.

Polar Regions

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1950

1970

1990

2010

2030

2050

uct

ion

b/a

Other
Alaska

Now, China, which operates a national oil industry, is scouring the world for oil and gas, and its National

Energy Administration is considering endowing a fund to do so. It has signed supply deals costing $42
billion with Russia, Brasil and Venezuela.

Strategies may again change as the World’s Greatest Depression, as it might soon be known, unfolds,

putting the last nails into the coffin of globalism. The world financiers have evidently lost their grip, having
been consumed by their own greed. Countries and local communities will no doubt again move to protect
their interest, preserving their precious resources for their own benefit. Britain in the past welcomed cheap
immigrant labour, but now begins to restrict immigration with tighter rules. Before long, we may even see it
provide grants to encourage emigration such that the population may fall to a level the island could support.
The average age of its farmers is apparently above 60 years. What has all of this to do with Peak Oil? Just
about everything is the short answer.

1123. Polar Oil and Gas

Much confusion arises from differing definitions of the boundary between

Conventional

and

Non-

conventional

oil and gas. The classification adopted here treats Polar Oil and Gas as

Non-Conventional

for

several reasons : first, it is a harsh operating environment which imposes economic and perhaps
environmental constraints ; second, it is far removed from tropical areas which were prime source-rock
provinces ; third, it has been affected by vertical movements of the crust due to the weight of fluctuating ice
caps, having an impact on oil generation and preservation ; and fourth, it is little known. The latter is a
particularly important factor, as it is undesirable to allow the uncertainties of its potential to affect the
assessment of other regions that are relatively well known. Still another factor is that the Polar Circles are
drawn at about 66

on astronomical criteria having no relevance to present or past geological boundaries, so

the assessment is partially arbitrary.

The US Geological Survey runs a programme evaluating the undiscovered oil and gas potential of the

world and has recently produced a revised assessment of the Arctic (see Fact Sheet 2008-3049). It is
particularly useful in defining the various sedimentary basins having potential. It does however use the
Probabilistic Method of assessment which deserves some comment. Its primary application in the oil
industry has been in modeling reservoir parameters such as thickness, porosity and oil saturation
distributions, which lie within a fairly narrow range That seems valid enough, but applying it to the
extremely wide range of the assessed undiscovered potential in little known areas such as the Arctic is less
sure. Indeed, a classic was contained in the assessment of East Greenland made by the USGS in its earlier
report of 2000, when it stated that there was a 95% probability of it containing more than zero, namely at
least one barrel, and a 5% probability of more than 112 Gb (billion barrels), delivering a Mean value of 47
Gb – quoted to three decimal places. Obviously, the upside potential of a large almost unknown area is huge,
but to take it into account in calculating a Mean value, which is regarded as the

best

estimate, is open to

question. There is a certain polarity to

Regular Conventional Oil

, which tends to be there in profitable

abundance or not there at all, but in probabilistic terms it is very difficult to assign a zero estimate. It is
noteworthy that in the revised 2008 USGS assessment, East Greenland is given a Mean value of no more
than 8.9 billion, a radical reduction. Overall, the USGS estimates the potential of the Arctic at 90 Gb of oil
and 1700 Tcf of gas, of which about 85% is thought to be offshore. It states that the operational, financial
and political constraints, which are clearly considerable, have been ignored.

Obviously, much more exploration would

have to be conducted before any realistic
estimates could be made, and hopes have to be
expressed to justify such investment. But
approaching the issue from what might be
termed the Peak Oil standpoint, it might be
better to take a more sanguine approach, as it
is probably unwise to assume that the entry of
Polar oil and gas will materially affect the
world production decline during the Second
Half of the Oil Age, which is now dawning.
There are political overtones too because
countries are already staking claims : the
Russians having planted a flag on the seabed
beneath the North Pole.

Certainly, some important discoveries have been made in the Arctic regions of Alaska, Russia, and to a

lesser extent Canada and Norway. The Prudhoe Bay Field in Alaska, which holds about 12.5 Gb, is the
flagship for oil, with other areas being predominantly gas prone. It is noteworthy that the critical source-rock
for Prudhoe Bay is Triassic in age (laid down about 210 million years ago) whereas the Russian finds,
amounting to about 260 Gb of oil and 600 Tcf of gas, rely largely on even older Devonian-Silurian sources
of double that age.  This may be significant as such oil as was formed was subject to dissipation over time,
being also depressed into the gas generating window on deep burial.  The impression is that it is the sort of
province that gives hints of encouragements that fail to materialize save in a few freak occurrences.  Even
greater uncertainties apply to Antarctica. It is closed to exploration by agreement, but the geological
indications are less than promising.

The above figure illustrates our current assessment of Polar oil production for the World. It supposes that

the total amount of oil produced in Polar Regions by the end of the Century will amount to 22 Gb in Alaska
and 30 Gb elsewhere, giving a total of 52 Gb. It is very difficult to evaluate the gas and gas liquid situation,
when so much depends on the construction of pipelines and political factors. Alaska’s production has been
roughly flat since 1990 in the 400-500 bcf/a range, presumably set by the pipeline capacity, with known
reserves standing at about 12 Tcf, implying that about 25 Tcf have been found at least in producing fields. It
might be reasonable to expect, say, four times this amount to come in from new fields and pipelines,
suggesting that the USGS estimate of 221 Tcf might err on the side of optimism. But it is too soon to be sure.

1124. Flat-Earth Cheers

The oil depletion analysis used here is built on the following elements, evaluated by country, such

being summed to give regional and world totals. (See

Atlas of Oil & Gas Depletion

by Campbell & Heapes).

1. Clear definition of what to measure, recognizing that some categories of oil are cheap, easy and, above

all, fast to produce (termed

Regular Conventional

), whereas others are the precise opposite.

2. Extrapolation of discovery trends and field-size distributions to indicate the

Total

likely to be

discovered through the remainder of the Century. This cut-off avoids the difficulty of speaking of an

Ultimate Recovery

, given that the last barrel on Earth may never be found or produced for all sorts of

reasons. Tail-end production in the next Century is unlikely to have any material impact on the overall
depletion profile.

3. Subtraction of

Past Production

from the

Total

to indicate

Future Production.

4. Assessment of the

Percentage of Future Production in Known Fields

, based on the wide range of

Reported

Reserves.

They have a wide range of meanings. Some are sound technical estimates; some subject

to varying degrees of subjective probability; some are reported for financial purposes under Stock Market
rules ; and some are politically inspired, such as for example setting OPEC quota, or meeting

Five-Year

Plans

under the Soviet system.

5. Calculation of the

Yet-to-Find

by subtracting the indicated amount attributed to known fields from the

total

Future Production.

6. Calculation of annual

Depletion Rate

(

Annual Production

as a percent of estimated

Future

Production

7. Estimation of future annual production on the assumption that countries that have produced more than

half their assessed

Total

(

Midpoint

) will decline at their current

Depletion Rate

, and that production in

countries not yet at midpoint may rise or remain constant as local circumstances dictate, such assumptions
not being critical to the overall assessment, as most such countries are now close to midpoint, when the
normal decline at the then

Depletion Rate

is assumed to set in.

8. Determination of the dates of peak exploration (based in the annual number of exploration boreholes),

discovery and production.

9. Recording areas, populations and consumption.

It is far from an exact science, especially due to inaccurate and inconsistent reporting practices, but

certain patterns and relationships emerge delivering a degree of confidence as to the resulting general
conclusions. Assessing gas follows a similar procedure, although it is assumed that the depletion profile
delivers more of a plateau than a peak.

In short, the current assessment concludes that the production of

Regular Conventional Oil

passed its

peak in 2005 at 67.8 Mb/d and that all categories did so in 2008 at 81 Mb/d. Note that

Refinery Gains

mean

that supply to the market was 2-3% higher.

The above assessment may help explain the current financial and economic collapse, which is

increasingly being seen as the worst ever experienced. Oil production, which commenced on a commercial

Oil Price

(2007 dollars)

100

1860

1880

1900

1920

1940

1960

1980

2000

lar

scale in the mid-19

Century, delivered an increasing supply of cheap and easy energy that stimulated the

growth of industry, transport, trade and agriculture, allowing the world population to expand six-fold in
parallel. Economic growth was facilitated by the creation of financial capital, with banks lending more than
they had on deposit, confident that

Tomorrow’s Economic Expansion

was collateral for

To-day’s Debt

This chapter of history also saw the adoption of classical

Flat-Earth Economics

, perceiving a Planet of

infinite resources to be captured by human ingenuity and market forces, with its choir chanting that

The

Stone Age did not End for want of Stones

. Prices over most of the period were relatively stable, being partly

controlled by the international oil companies or government agencies, such as the Texas Railroad
Commission or OPEC which curtailed production to support price. Even so, there were periodic surges,
especially in the early 1980s, reflecting political
events.

It is evident that prices have been firming since

the turn of the Century, as the indicated peaks of
production were approached. The main surge
however followed the peak of

Regular Conventional

in 2005, being partly driven by speculation on a
rising market. The higher prices gave rise to a
massive transfer of petrodollars to the governments
and royal families of the Middle East, where
production costs for much of their oil probably lie in
the range of no more than $10-$15 a barrel. The
resulting surplus may have been recycled to
overseas banks with the effect of devaluing currency and destabilizing the global financial structure.

The high prices also began to adversely affect the economy, which in turn undermined the assumption of

eternal growth reducing thereby the collateral for current debt. Prices reached a peak of almost $150 a barrel
in mid-2008, but then fell back to 2005 levels as the market sold short on the futures market, the industry
reduced its holdings in storage, and demand fell in a crumbling economy.

As usual, different databases show widely different production numbers, but the EIA (an arm of the US

Government) reports a peak of 86.8 Mb/d in July 2008 for all categories of oil liquids, including refinery
gains, falling to 84.3 Mb/d by the end of the year.

It seems likely that this year will see a further marked decline in production. The flat-earth economists

may cheer, being able to attribute it to falling demand from a collapsing world economy, as well as
investment constraints. These factors, which are indeed contributory factors, will allow them to persist in
denial of physical limits as imposed by Nature, which are anathema to their calling. They can cheer even
louder in recognition that their principle of discounted cash flow, whereby the future is deemed in financial
terms to be worth less the present, has been more than vindicated.

But whatever other short term factors are involved, the peak ultimately reflects the underlying physical

limits imposed by the immutable physics of the reservoirs and the falling discovery trend of the past forty
years. Accordingly, even if there are brief economic recoveries, raising production in the years ahead will be
progressively more difficult. It is well to remember that for every gallon used, one less remains, which is the
underlying driver whatever the short term economic or political factors cause departures from the underlying
trend.

The implications are colossal posing the difficult question of how many people the Planet can support in

the next Century without the help of cheap and easy oil-based energy, which to-day is equivalent in energy
terms to some 22 billion slaves working around the clock. It looks indeed as if this is a

Turning Point for

Mankind.

Even so, there is much that could be done to ameliorate the consequences and lessen the tensions

of the transition, and it is encouraging that the International Energy Agency, the OECD watchdog, is at last
able to reveal what it has long known, and urge governments

to leave oil before it leaves us.

This can give

national governments an umbrella for new, even draconian, policies, which might otherwise be difficult to
adopt. Energy saving by improved efficiency should clearly have priority even if it runs counter to the past
economy built on consumeristic waste. The least effective measure might be to fabricate yet more baseless
currency as seems to be favoured by governments in their so-called bail-out programmes, which they hope
will restore the outdated practices of the past.

1125. Saudi Concerns

Saudi Arabia’s oil minister, Ali Al-Naimi, warns of a “catastrophic” supply crunch in the near future if

current oil prices cause a curtailment of investment. He evidently regards the current oil price at just under

$50 a barrel as far too low, saying that OPEC, led by Saudi Arabia, is dedicated to cutting production to
support higher prices, which he seeks to justify on the grounds that it will deliver investments resulting in
more supply for the future. He expresses concern that the consuming countries should seek to reduce their
imports by turning to alternative energy sources for environmental or other reasons,
suggesting that Saudi Arabia can be a reliable source of oil for the foreseeable future.

There is a somewhat misleading tendency to describe current oil prices as

low

. By all

means, they now stand at about one third of the brief surge in mid-2008 when they nudged
$150 a barrel, but they do not seem that low with a slightly longer perspective. Probably, the
direct production cost of most Middle East oil is still well below $20 a barrel, and has been
flowing from long established wells not requiring any particular new investment. No doubt,
further investment in infill drilling and various forms of stimulation is needed to sustain
current production but the incremental supply is likely to be insignificant on a long term
global scale.

It rather looks as if the price surges reflected the peak of

Regular Conventional Oil

2005 and of all categories in 2008, as imposed by the physical limits. Further investment can ameliorate the
decline, but the inevitable downward trend has probably now dawned with far-reaching financial and
economic consequences. King Abdullah of Saudi Arabia expresses concern for his grandchildren but his Oil
Minister is evidently more worried about the immediate future and the plunging decline in his country’s
excessive income over the past six months. He is not alone in seeing his income fall radically in the new
world that opens.

NOTES

This newsletter is produced and distributed for perusal primarily by ASPO members.-

Permission to reproduce items from the Newsletter, subject to acknowledgement, is expressly granted.

Compiled by C.J.Campbell, Staball Hill, Ballydehob, Co. Cork, Ireland.

PUBLICATIONS

Multi-Science Publishing Co. (Sciencem@hotmail.com) wishes to advise that copies of the book

Oil Crisis

by C.J.Campbell, providing background reading, are still available for purchase

A privately printed booklet entitled

Living through the Energy Crisis

by C.J.Campbell and Graham

Strouts is available from www.zone5.org (price €7 plus postage)

An Atlas of Oil and Gas Depletion

By C.J.Campbell and Siobhan Heapes

Provides an evaluation of oil and gas depletion, together with political and historical summaries, for 65

countries, which are summed into regional and world totals.

Non-Conventional oil and gas

are also covered,

and a final chapter places the Oil Age in an historical perspective.

ISBN: 978-1-906600-26-6

Hardback, cloth bound, 404 pages, full colour.

Copies can be purchased from Jeremy Mills Publishing by telephone, fax, post or through the website:

www.jeremymillspublishing.co.uk

Telephone: 01484 463340. Fax: 01484 643609. E-mail: sales@jeremymillspublishing.co.uk

Postal Address: Jeremy Mills Publishing

113 Lidget Street, Lindley, Huddersfield, West Yorkshire HD3 3JR,, ENGLAND

The price of the book is £110, including UK delivery

Brent
Crude

Price

($2007)

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Present