Articles

Monbiot peak oil u-turn based on duff maths
Posted on Monday, July 30th, 2012

In his column of July 2nd George Monbiot recanted peak oil, claiming “the facts have changed, now we must change too”. Much of the article was spent regurgitating a recent report by Leonardo Maugeri, a former executive with the Italian oil company Eni, which Monbiot breathlessly reported “provides compelling evidence that a new oil boom has begun”.

Plenty of ink has already been spilled by oil depletion experts exposing some of the wildly optimistic assumptions contained in Maugeri’s report. More damning is that the work is shot through with crass mistakes that render its forecast worthless.

When I interviewed him, Mr Maugeri was forced to admit a mathematical howler that would disgrace the back of an envelope, and it also became clear he did not understand the work of the other forecasters he attacks. It also looks as if he has double or even triple counted a vital component of his predicted oil glut.

Maugeri forecasts the global oil supply will soar by almost 18 million barrels per day to around 111mb/d by 2020, the biggest increase in production since the 1980s, which he claims could lead to prolonged overproduction and “a significant, stable dip of oil prices”. So, arrivederci peak oil.

Maugeri claims this looming glut has three legs: booming upstream investment by the oil industry; the rise and rise of unconventional production such as US shale oil; and a tendency among forecasters to over-estimate massively the rate at which production from existing oil fields declines. The first point is uncontroversial, the second is moot, but the third is the most important; without it, Maugeri’s glut evaporates.

All oilfields eventually peak and go into decline as production is sapped by falling reservoir pressures, and as water increasingly dilutes the flow of oil from the well. Measuring the impact of these declines on aggregate oil production is a complicated business, but vital to predicting the future oil supply. There have been two primary studies of decline rates in recent years: one by the International Energy Agency in its 2008 World Energy Outlook; and another by the oil consultancy IHS-CERA.

Maugeri cherrypicks numbers from the IEA study and misrepresents them to claim that “most forecasters” work on decline rates of 6 to 10 percent. He then argues this is incompatible with the observed growth of the oil supply over the last decade – and therefore must be wrong – and uses this conclusion to justify his inflated oil production forecast. But the whole thing is a straw man; an email he sent me revealed he simply doesn’t understand the IEA numbers. The IEA’s global decline rate is actually 4.1%, and CERA’s broadly agrees, at 4.5% (see here for more detail).

Even if we were to accept his 6 to 10 percent range, Maugeri has got his sums horribly wrong. In the key section of the report, he claims that even the lower end of the range “would involve the almost complete loss of the world’s “old” production in 10 years”. But this is laughable. A 6% annual decline over 10 years leaves you with 54% of your original production, because each year’s 6% decline is smaller volumetrically than the previous one. So over a decade the decline is 46% – and very far from an “almost complete loss”.

When I put this to him, Mr Maugeri seemed genuinely confused, and tried briefly to persuade me the loss was much larger. “If you have a 6% decline each year over a 10 year period, the loss of production is close to 80%”, he said, but then the penny dropped. It looks to me as if he compounded 6% in the wrong direction – for growth, not decline. “Maybe on this you are right”, he conceded sheepishly. So by his own admission, Mr Maugeri has overestimated the alleged overestimation of production decline by almost three-quarters(1).

Nowhere in his report does Mr Maugeri explicitly state his own decline rate assumptions. The closest he gets is the unsupported claim that “I did not find evidence of a global depletion rate of crude production higher than 2-3 percent when correctly adjusted for reserve growth”. And yet his actual assumptions appear to be far lower. By analysing Maugeri’s forecasts, Steven Sorrell of the Sussex Energy Group and Christophe McGlade, a doctoral researcher at UCL Energy Institute, have shown his actual global decline rate for 2011-2020 is just 1.4% – scarcely a third of the established estimates. Replacing this implicit rate with the IEA number eliminates the Maugeri glut entirely, slashing his production forecast for 2020 to below his estimate of current production capacity. Sorrell concludes “Since most analysts expect average decline rates to increase over this period, this projection must be considered optimistic”. So, buongiorno peak oil.

When I challenged Mr Maugeri about the discrepancy between the 2-3% decline rate and the 1.4%, he said the difference was explained by reserves growth – the tendency to squeeze more oil than originally expected from existing fields, through new technology, the exploitation of secondary reservoirs and so on. But in that case he seems to have counted it twice, to judge by his quote in the paragraph above. Or possibly even three times, since the notion of reserves growth is already accounted for in the existing estimates. Both the IEA and IHS-CERA numbers are observed overall decline rates: they reflect the actual loss of production that happened after – or in spite of – all the industry’s investment to boost flagging output at existing fields.

“If Maugeri has adjusted decline rates for future reserves growth, he has either double counted, because it’s already in the existing forecasts, or assumes a massive acceleration in reserves growth in future”, explains Richard Miller, an oil consultant who previously worked for BP, and was the first to spot Maugeri’s dodgy maths. “Either way, it’s not credible”. When I emailed Mr Maugeri to check if he understood the definition of the IHS-CERA decline number he had quoted, I received no reply.

Perhaps it’s not so surprising. Maugeri is a long standing cornucopian, and has form in the slapdash stakes. In a previous article for the journal Science(2), he sought to disprove peak oil modelling using a graph of Egyptian oil production. Sadly, the graph he printed was not for Egyptian oil production. Worse, if it had been, it would have demolished the very point he was trying to make(3).

What is astonishing is that George Monbiot finds Maugeri’s work so “compelling”. How many times have I read Monbiot banging on about the importance of peer review? Strange then that he should gush that this report was “published by Harvard University” but fail to mention it had not appeared in any peer reviewed journal, and worse, had been funded by BP. I suspect both those organizations may live to regret their involvement. What about Monbiot? If he is as intellectually rigorous as he likes to make out, he will perform not one peak oil u-turn this month, but two.

1) (80-46)/46*100 = 74%

2) L. Maugeri, Oil: Never Cry Wolf-Why the Petroleum Age is Far from over, Science, Vol. 304 mo. 5674 pp. 1114-1115, 21 May 2004 http://www.sciencemag.org/content/304/5674/1114.summary

3) Q.Y. Meng and R.W. Bentley, Global oil peaking: Responding to the case for ‘abundant supplies of oil’, Energy, vol.33 pp 1179-1184, 2008



14 Comments on “Monbiot peak oil u-turn based on duff maths”

Dredd Says:
July 30th, 2012 at 3:39 pm

Thank you very much for steering straight.



John B. Says:
July 30th, 2012 at 8:07 pm

Peak oil production will be a non-event. It would be nice if more pundits like Monbiot would simply admit they were wrong.



Luís Says:
July 30th, 2012 at 8:16 pm

Thank you David for your thorough work.

What I found most interesting in Monbiot’s article was the title: “We were wrong”, as if trying to herd everyone else into his logic. It’s not “we”, it’s “I”, and yes there’s enough oil, but to fry you Georges.



Al Says:
July 30th, 2012 at 8:24 pm

Well done for exposing the lack of credibility in Maugeri’s report.
Monbiot sees everything in the context of increasing CO2 levels, via decreasing EROEI. Still no excuse for taking the report on face value.



Martin Hanson Says:
July 31st, 2012 at 2:13 am

What does Monbiot have to say about this?



Simon Ratcliffe Says:
July 31st, 2012 at 7:47 am

Thanks for this unpicking of his arithmetic. I wonder whether George monbiot has the intellectual honesty to retract his silly piece.



Frank Says:
July 31st, 2012 at 10:19 am

Seriously? He didn’t see that his way of calculating the compounded decline rate was wrong? If he had tested it with 10% decline rate for ten years he would get a minus 60% production rate. Another point for Upton Sinclair i guess.



Jeremy Stocks Says:
August 1st, 2012 at 4:59 am

It does seem like Monbiot has just recently reached peak credibility.



SteveR Says:
August 1st, 2012 at 9:32 am

This is a link to Chris Nelder’s analysis of the Maugeri report. Explains the difference between depletion and decline very well. Hope the link comes thru
http://ftalphaville.ft.com/blog/2012/07/24/1094111/is-peak-oil-dead/



mORTON Says:
August 1st, 2012 at 2:51 pm

First off, it’s not the Petroleum Age. Why would you name an age after extracted sludge? Do the participants of an age even get naming rights? I thought that was done in retrospect. If anything it is the Stainless Steel Age. It represents our mastery over the molecular engineering of metallic crystals.
Come on, oil?

Shouting PEAK OIL! is like shouting PEAK FOSSILS! We all know most of it is still in the ground but will simply get more and more difficult to extract. So then the game becomes, who’s saying this?

If I was in the business of oil I would love to hear the cry of peak oil for the simple reason that it enhances the perception of scarcity. Every good salesman knows how much can be done with that. But in this case it also enhances the perceived desirability of alternatives that are reaching parity. Thus the ‘double edged fence.’

Where do they fall? The game is afoot!



Otto Says:
August 9th, 2012 at 11:42 pm

…as Morton says, “The game is afoot!” — on a pedal, powering a bicycle, used to connect to other transport vehicles. Oil is needed for cars (and lots else). But it shouldn’t be needed as much if we play the new game in town: transportation as social and not atomized (car) experience. OK – sorry – irrelevant! But there it is …



Peak oil – Monbiot på djupt vann | Sammenbrudd eller Kommunisme 5.0 Says:
August 12th, 2012 at 8:24 am

[...] at Maugeri gjør helt elementære feil, noe den tidligere oljedirektøren har måttet innrømme i intervju med Strahan. Maugeri vil ha oss til å tro at et årlig fall i produksjonen på 6% vil betyr en nesten total [...]



LLew Says:
August 31st, 2012 at 7:15 pm

mORTON Says:
August 1st, 2012 at 2:51 pm

First off, it’s not the Petroleum Age. Why would you name an age after extracted sludge? Do the participants of an age even get naming rights? I thought that was done in retrospect. If anything it is the Stainless Steel Age. It represents our mastery over the molecular engineering of metallic crystals.
Come on, oil?

Shouting PEAK OIL! is like shouting PEAK FOSSILS! We all know most of it is still in the ground but will simply get more and more difficult to extract. So then the game becomes, who’s saying this?

If I was in the business of oil I would love to hear the cry of peak oil for the simple reason that it enhances the perception of scarcity. Every good salesman knows how much can be done with that. But in this case it also enhances the perceived desirability of alternatives that are reaching parity. Thus the ‘double edged fence.’

Where do they fall? The game is afoot!

=================================================

The above comment is proof there’re complete idiots out there and who should do some research before posting a comment.
If you had a brain you would be dangerous!
N.B. it is called the petroleum age because that is where our main source of energy comes from, DUNCE!



Mitt Romney’s Energy Plan « integral permaculture Says:
September 8th, 2012 at 11:37 pm

[...] brief, I’ll mention that one of Romney’s sources is an already discredited report by oil executive (disguised as an academic) Leonardo Maugeri. The basic idea is that [...]





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