What Cantarell means to you

A friend in the oil infrastructure business sent me an article the other day concerning the Cantarell oil field in Mexico. The gist of it wasn’t really a surprise: The Cantarell field has been in decline for a few years, producing 1.9 million barrels per day (mbpd) in 2006, compared to 2.1 mbpd in 2004. Pemex, the Mexican state-owned oil company, predicts that Cantarell will be down to 1.4 mbpd in 2008, with leaked insider memos positing a worst case scenario of 520,000 bpd in 2008. Why should you care?

The Cantarell field happens to be the second highest producing oil field in the world, after the Ghawar field in Saudi Arabia. They are two of the four oilfields in the world that produce over a million barrels a day. The Ghawar field itself is not looking particularly healthy. The Saudis have been pumping in seawater to get the oil out faster, and now the field is producing 55% seawater. Ghawar peaked in 1990 at 6.5 mbpd, and has declined by a third since then. The other two, Burgan in Kuwait and Daquing in China, are also in decline.

The oil industry is searching hard, especially at $70+ a barrel, but they haven’t found a million-barrel-a-day field since Cantarell in 1976. In the article mentioned above, an analyst with a worldwide oil investment bank put the chances of finding a replacement field for Cantarell at “slim to none.” Fourteen giant oilfields produce 20% of the world’s oil, and their average age is 43 years.

Last year, ExxonMobil issued a report on the world oil situation. They are predicting a worldwide decline in non-OPEC oil production within five years. Other observers of the oil situation, such as Michael Simmons, an international oil financier, say that Saudi Arabia, the heart of OPEC production, can’t sustain its present output for much longer. Of course, there are problems with all oil analyses in that oil-producing countries have been exaggerating their oil reserves in order to increase their OPEC production quotas and/or improve their credit ratings.

What I am writing about here is what is popularly known as “Peak Oil,” the point at which world oil production stops increasing and starts going down forever. It’s not the end of oil, just the end of cheap oil, and the end of having as much oil as we want. The Cantarell decline, the last of the big four, is ominous.

Many people denigrate the concept of peak oil, and point out that “the end of the world” has been predicted many times. To them I say two things:

1) What is it about the Late Miocene Period (~12 million years ago) that you don’t understand? The Late Miocene was the last time the earth was in the business of actually making oil. It hasn’t since then, and it isn’t likely to again till some continents get crunched up a few million years from now. The quantity in the ground was fixed long before we came on the scene. We are using it up. Ergo, at some point production will peak.

2) I can mistakenly predict the time of sunset a number of times.

Some oil industry analysts point to Canadian tar sands and Venezuelan Orinoco heavy oil as the sources that will keep going for a hundred years. The first problem with both these options is that they require heavy energy inputs to extract them. The tar sand is exactly what it sounds like - tar mixed with sand. It takes huge quantities of natural gas and water to produce steam to liquefy the stuff so it can be separated and purified. Canadians will want their declining natural gas production to heat their homes and make the oh-so-necessary nitrate fertilizer for large-scale agriculture. The Orinoco heavy oil has the same problem.

The second problem with a hundred years worth of tar and heavy oil is that global warming would continue and accelerate if we burned it all. I live on a mountain at 1200 feet, and I joke that I am going to put a dock at the bottom of my driveway so I can export my banana crop by boat to the other islands in the Vermont chain. Ok, an exaggeration, but someday southern Florida will remind you of Waterworld without the bad acting. Gulf Coast real estate is a bad investment even now.

Some analysts say that oil production is peaking right now. Others place it five to fifteen years from now. The optimists at the U.S. Energy Information Agency predict a peak in conventional oil around 2037. The production curve has a lot of variations in it from year to year, so we will only be able to determine the real statistical peak in hindsight. The exact timing is less important than the inescapable fact of it.

I have used the skydiver analogy before, but the concept of inevitability is apt in this case as well. We are in the position of skydivers free falling through a bank of clouds. We know the ground is down there, and we are heading towards it at deadly speed. We don’t know how far away it is. We don’t know how far from the ground the clouds end, so it’s a gamble to wait until we can see the situation clearly. If the clouds end at a hundred feet we’re going to feel really stupid for a second. Sweden has pulled the ripcord, and it is long past time for us to do the same.

It wouldn’t take much of a shortage to push oil prices to $160 a barrel (Think $6.50/gal gasoline and heating oil). How would you want your state of oil dependency to be when this happens? Think about how you earn your living, where your food comes from (especially in February), and how you heat your house.

In another essay I’ll write about the efforts of various groups, working mostly on a local basis, to reduce their dependency on fossil fuels.