Peak oil has become the term of the century. Governments deny it, producers await it, citizens fear it and economists do little to prove or disprove it.

In 1956 Marion King Hubbert proposed a theory to the American Petroleum Institute, which generated much skepticism from its audience. In his presentation, entitled “Nuclear Energy and the Fossil Fuels,” Hubbert concluded that “If the world should continue to be dependent upon the fossil fuels as its principal source of industrial energy, then we could expect a culmination in the production of coal within about 200 years. On the basis of the present estimates of the ultimate reserves of petroleum and natural gas, it appears that the culmination of world production of these products should occur within about half a century, while the culmination for petroleum and natural gas in both the United States and the state of Texas should occur within the next few decades.”
“This does not necessarily imply that the United States or other parts of the industrial world will soon become destitute of liquid and gaseous fuels, because these can be produced from other fossil fuels which occur in much greater abundance. But it does pose as a national problem of primary importance, the necessity, both with regard to requirements for domestic purposes and those for national defense, of gradually having to compensate for an increasing disparity between the nation’s demands for these fuels and its ability to produce them from naturally occurring accumulations of petroleum and natural gas.”
Today, not only is his theory etched in the minds of most professionals and academics, but it stands as a stanch warning to the people of the world. Hubbert’s theory was simple: based on the fact that world oil reserves are finite, oil reserves will follow a curvature life-line. Hence, after initial exploration and the intensification of infrastructure, oil production will increase reaching a peak point after which oil depletion will begin.
For the world, it was found that global oil reached its peak in 1960, meaning that if Hubbert’s theory is correct, and the United States as a case example is appropriate, oil depletion will become a reality 40 years following its peak, which is unfortunately now.
However, at the end of the day, no one really knows how much oil is available under the earth’s surface, nor do they know how much can be produced because technological advancements are occurring at such a rapid speed that what we couldn’t produce yesterday we can produce today.
There are essentially four types of oil measurement: ultimately recoverable resource; these are estimations based on partial information and which are constantly changing due to the changes in technology. In this sense, mature fields and what they can produce can fall in this category, where technology, specifically Enhanced Oil Recovery methods (EOR), is making it possible to produce more out of those fields than was possible a decade ago.
The second category is proved reserves. Proved reserves are a more conservative estimate of oil in any given reservoir. In fact there is a numerical cut-off to this estimation of 90%; meaning that there has to be more than a 90% chance of oil recovery for it to be proven. Probable reserves follow the same estimation scheme of proved reserves for the exception of the cut-off percentage to accuracy. Probable reserves have to have at least a 50% chance of being recovered. Finally, possible reserves still have significant reserve estimation, but it lies below 50%.
With the above information in mind, one can begin to understand the controversy surrounding the peak oil theory. On the one hand, on a very theoretical and general level, a reservoir can and in fact by nature of it being a non-renewable resource, must follow a curvature life-line. However, since the initial knowledge of reserves is unknown and measured due to educated estimates, the peak of this curve is quite difficult to predict. But production levels do not lie. Production at some point reaches a peak after which it declines, but it can be once again stimulated based on technological advancements.
Until these advancements are not only discovered, which several optimization methods have been, but also implemented, the threat of peak oil and absolute depletion are still looming. With this being said, one may begin to further analyze the threat, its causes, and possible solutions.

The Problem: Oil Based Consumption
The importance of the peak oil theory is not solely based on the fact that oil will at some point deplete, it is based on the fact that this depletion will undoubtedly present several challenges to nations that rely heavily on the resource. Thus, it is over consumption piled with depletion that equate to an unsure future.
But what exactly is consumption? How is oil consumed in such mass amounts? Petroleum does not solely produce the gasoline by which your car runs. Oil is used to make everything from epoxy paint, to upholstery, to lipstick, to tires and tennis rackets. Oil is gasoline for your car, it’s petrochemicals, it’s plastic, it is the small household items that you use in your daily lives. Oil is also the food that you eat, since in some countries food is transported long distances, thousands of miles to be precise, before it is delivered to the consumer.
Due to oil’s obvious interconnectedness in the daily lives of so many people, the depletion of this resource will sound alarm bells in the minds of world citizenry and not just one or two nations; the depletion of oil is an international pandemic and not a regional or state ailment. Nor are there states that are exempt from the fear. Even oil producing states find it difficult to meet domestic demand while also exporting, especially if they are also attempting to industrialize as is the case with so many of the oil exporting countries, since industrialization is closely tied with oil consumption.
The point of industrialization is an interesting one because most of the countries or regions seen as the world’s savior when it comes to oil are usually categorized as underdeveloped, such as the African region or the Middle East region. These are regions that at the moment are attempting to develop their infrastructures and their economies in order to survive in the highly competitive world economy. And as has been previously mentioned, development, which certainly includes industrialization, needs oil to succeed.

The Players: Consumers
So, which countries are currently the most consumptive when it comes to petroleum? At this point, the United States is by far the world’s most consumptive nation when it comes to oil. Its declining domestic production can barely cover 50% of its consumption and so it opts for importation as do many other nations.
China follows the US when it comes to consumption. In 1993 the world’s most populated country became a net importer of oil and now competes for the title of top consumer with the US. India can be seen as also among the most consumptive states, with growth rates at 4%-7% per year, which compared to China with 5%-7% per year, is not that remote in consumption.
According to the Energy Information Administration (EIA), the statistical arm of the US Department of Energy, the world’s top 15 consumers for the year 2006 include, and this is in order of the most consumptive to the least: the United States, China, Japan, Russia, Germany, India, Canada, Brazil, South Korea, Saudi Arabia, Mexico, France, the United Kingdom, Italy, and Iran. The US consumes about 20,588,000 barrels per day (bbl/d), which is incomparable to the rest of the list which ranges from 7,274,000 bbl/d for China to 1,627,000 bbl/d for Iran.
The top 15 net importers of oil in 2006 from highest to lowest were: United States, Japan, China, Germany, South Korea, France, India, Italy, Spain, Taiwan, Netherlands, Singapore, Thailand, Turkey, and Belgium. Their respective imports range from 12,220,000 bbl/d to 546,000 bbl/d.
In fact, very few countries are actually producing enough oil to meet domestic demand, and even fewer are able to export their production. The United Kingdom is one of those nations that can cover its domestic needs while barely exporting some resources; however it is not clear for exactly how long it can persist in this endeavor.
One of the problems with the depletion of oil or even the mere threat of it is that it has a negative effect on pricing. Since oil will be more expensive to retrieve in the later stages of well maturity, this expense will undoubtedly be delivered to the end-user. And while oil prices are sky-rocketing, so are the prices connected with everything that has to do with oil.  

The Players: Producers
According to the Oil & Gas Journal, which is cited by the EIA, for 2005, the largest reserves in the world were found in the Middle East region with 729.34056 billion barrels of oil. That figure was then followed by the US with 214.771 billion barrels. However, the EIA has differing opinions from Oil & Gas Journal by ranking Russia as the world’s second top producer with 9,668,000 barrels per day. This discrepancy could be due to the fact that Oil & Gas Journal ranks according to region, while the EIA ranks according to countries.
The EIA lists the top 15 producers in the year 2006 from the most productive to the least as follows: Saudi Arabia, Russia, United States, Iran, China, Mexico, Canada, United Arab Emirates, Venezuela, Norway, Kuwait, Nigeria, Brazil, Algeria, and Iraq. The figures of production for these nations range from 10,719,000 bbl/d for Saudi Arabia, to 2,008,000 bbl/d for Iraq.
The top 15 net exporters of 2006 from highest to lowest were: Saudi Arabia, Russia, Norway, Iran, United Arab Emirates, Venezuela, Kuwait, Nigeria, Algeria, Mexico, Libya, Iraq, Angola, Kazakhstan, and Canada. Their respective imports range from 8,651,000 bbl/d to 1,071,000 bbl/d.
With the above information in mind, a few realities are made clear. First, some of the top consumers are also some of the top exporters, such as Saudi Arabia, Russia, Canada, and Iran. These producers who are also mass consumers will not be able to meet domestic demand and also export for long. In fact, literature has been written depicting some of the looming problems of oil depletion that are facing some of these nations, namely Saudi Arabia, which was undertaken in an academic endeavor by Matthew R. Simmons’ in his book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. In essence Simmons fixes a suspecting eye on Saudi’s enthused attitude towards its own oil fields, bearing in mind that Iran’s reserves peaked in the 1970s and the reserves of Kuwait, Syria, Oman, Iraq, and Yemen have all passed their peak output.
Another reality is that some of the world’s top producers are also importers, such as the United States and China. The two nations provide excellent examples of oil-dependent nations and oil-developing nations, respectively. The US is an oil-dependent nation. The daily life of its citizens depends on oil directly and indirectly due to consumption. China is an oil-developing nation, meaning that the development of the nation depends on oil, as mentioned earlier; this dependence is primarily due to industrialization.

What About OPEC?
 The Organization of Petroleum Exporting Countries (OPEC) provides the following types of oil according to their country of origin: Saharan Blend (Algeria), Minas (Indonesia), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and BCF 17 (Venezuela). Some of these countries were mentioned above in the lists of top exporting countries and of top producers.
OPEC produces about 43 per cent of the world’s crude oil and has over 78.4 per cent of the world’s oil reserves. The organization claims that it can guarantee the world’s oil supplies for the future by expanding production to meet growth in demand. However, this expansion is contingent on producers’ willingness to invest in the industry.
In spite of the organization’s optimistic view of their reserves and production for the future there are still quite a few discrepancies that must be mentioned. These discrepancies can be portrayed through case examples of some of the organization’s members. Saudi Arabia has already been discussed with Simmons book, which casts a doubting gaze on the country’s reserves and ability to maintain production.
The second country of concern is Indonesia, which in 2004 became a net importer; not a good sign from one of the members of the organization which claims to have the ability to maintain future oil security. Nigeria is another country that is not at a loss of oil, but is marred with socio-political and economical instability. Iran, which has the world’s second largest oil reserves following Saudi Arabia, is also surrounded by controversy, not only politically, but economically. The hastily industrializing nation is consuming most of its oil for domestic purposes, which is its inherent right as an independent state, but nonetheless leaving a question mark on the future of its presence as a major exporter.  

Looming Doom or Fate to Alternate?
In 1993, Richard C. Duncan wrote a paper entitled “The life-expectancy of industrial civilization: The decline to global equilibrium.” In his paper he statistically backed a theory which he had originated in 1989. This theory was the Olduvai theory. The Olduvai theory, named after the Olduvai Gorge (what is referred to as the “The Cradle of Mankind”), essentially professes that industrial civilization, which is defined by per capita energy consumption, has a life expectancy of an average of a hundred years; meaning that industrial countries, which basically flourished in the 1930s will reach their decline in 2030.
The theory is based on the fact that exponential growth of energy production ended in 1979 and that the beginning of the 21st century marks the start of energy growth becoming piercingly negative. The theory lays out a three phase plan for the decline of the industrial civilization. The first phase, “The Olduvai slope,” which spans the years of 1979–1999 witnessed the decline of energy per capita at a rate of 0.33 % per year. The second phase, “The Olduvai slide,” which spans the years of 2000–2011, witnesses the rise in warfare in the Middle East and the peak of world oil. The third and final phase, “The Olduvai cliff,” which spans the years of 2012–2030, begins with temporary blackouts and then the beginning of the end. The collapse of the industrial civilization will transgress the value of per capita energy production to the levels of the 1930s and will be characterized by worldwide permanent black-outs from high-voltage networks of electricity.
Many have stated that Duncan’s theory compliments Hubbert’s theory. A bit pessimistic maybe, but the two theories do have a common basis of empirical data. The theories are also being proven by time, the most accurate of indicators. Hubbert’s theory has manifest before the eyes of many operators when their wells begin to decline after reaching a certain peak in production. Duncan’s theory is also manifesting and has somewhat already manifested. The decline of energy per capita did occur following the oil shock of the 70s; warfare is currently rising in the Middle East with conflicts reaching international proportion in Israel, Palestine, Afghanistan, Iraq, and a big question mark hanging over Iran. Finally, while a bit ahead of its time, the “Olduvai cliff” was slightly witnessed with the California blackout that took the nation by shock and surprise.
However, the theories, and especially Duncan’s theory does not predict the future after the depletion of oil because that is the only course that man can take. The theory is based on oil-dependent nations. It is the dependency and not the loss of oil which matters. As with any situation, the glass can be seen as half full or half empty.
If nations remain attached to oil and its by-products they will undoubtedly have to face the world of transgression that Duncan predicts; a world of war over resources, which to a certain extent we are already seeing, where oil prices are as effected by production as they are by political instability. However, several countries have come to the realization that steps must be taken to wean their societies and their economies off of their oil addiction.
During February of this year, the United States Government Accountability Office (GAO) conducted a study entitled Crude Oil: Uncertainty about Future Oil Supply Makes It Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production. The study analyzes peak oil production, America’s dependence on oil, and suggests strategies for the future. Among the suggestions made by GAO were: ethanol from corn, advanced vehicle technologies, and hydrogen fuel cell vehicles.
Nonetheless, nations need to think of short term and long term strategies that will complement each other. In the short term, governments should be encouraging companies to pursue optimization and EOR methods in order get the full benefit of mature wells and not just aggressive drilling where a well is used to produce the cost efficient high production of easy oil while leaving behind the burden of heavy oil, oil sands, and oil shale to someone else.
For the long term, governments should be pursuing a two-fold strategy: research and development of alternative energy and societal education towards energy conservation. Several steps have been taken in terms of alternative energy, Germany has led the way with wind power; for solar power, BP Solar is one of the world’s leading solar companies.
In short, the future without oil does not have to bleak. This is our world and our future and we should command it. We have the power to secure our life without oil in the long term and to conserve and accommodate what oil is still left in the short term. Governments across the world should use the short term oil conservation and optimization to smoothly transition into the next era of alternative energy. This should be a continuing mission.  

What Peak Oil Means to Egypt
The oil and gas industry in Egypt has played and will continue to play an ever-growing role in the country’s development. However, while there are certain aspects of the industry that have presented the nation with optimism for the future, such has the growing exportation of liquefied natural gas (LNG), which began in January 2005, there are other aspects which impart a menacing reality. In 1996, Egypt reached its peak point of oil production which essentially equated to 922,000 barrels per day (bbl/d). This in effect caused a decline in the country’s net exports of crude oil and petroleum products.
In 2006, Egypt’s crude oil production averaged 658,000 bbl/d; a startling 40 percent decrease in production since its peak point more than a decade ago. Estimates place the country’s proven oil reserves at 3.7 billion barrels, which is approximately 0.3 percent of world reserves, while its more recent above-mentioned daily production average equates to less than 1 percent of world production.
In 2004, it was estimated that Egypt’s domestic oil consumption stood at 594,000 bbl/d while its exports stood at 134,000 bbl/d. In essence, consumption is swiftly rising while production is steadily declining. In fact, Egypt is expected to become a net importer of oil by the year 2015. And the answer to this dilemma cannot be solely found in natural gas, because in short natural gas cannot wholly replace petroleum and petrochemicals. Furthermore, while alternative energy is undoubtedly the next step to be taken in the long term for the world’s energy crisis, for the short term, there are three key efforts that must be addressed. The first is redundant and thus will not be discussed in detail, suffice to say that conservation will always have to be on the government’s to do list.
The second means of boosting oil production is new-discoveries through exploration. There are a few problems with this approach however. The first and foremost problem of exploration is cost. Oil companies find exploration to be an expensive operation especially if exploration is pursued offshore. Deep-sea drilling is by far one of the most expensive endeavors world-wide, due to the incredibly high prices of equipment needed for offshore drilling. Secondly, while there have been recent discoveries made in the industry none have been major.
The third method of increasing oil production in a country, whose production has waned in the past few years, and also the most economic method, is to utilize what is already there. And this is where the story gets a little more interesting…
Increased production, greater investment, more job opportunities, higher exportation, enhanced fulfillment of domestic consumption, transfer of knowledge for advanced technologies, all this and so much more encapsulated in just one word: brown-fields. For now, and for Egypt, this is the answer to the fears that are resounded with the words “peak oil.”
In a nutshell, Egypt has options and quite a few of them, but they must be pursued with the help of a concerned and responsive government. Initiatives to conserve, to search for alternative energy, to engage in exploration, and to optimize the production of what is already found are all options and better yet, opportunities.

By Diana Elassy