Peak Oil

Since oil is a finite resource in any given reservoir, it would make sense that, as soon as oil production from the first well begins in a particular reservoir, the resource of that reservoir is declining. As a reservoir is developed (i.e., more and more wells are brought into production), the total production from the reservoir will increase. Once all the wells that are going to be drilled for a given reservoir have been brought into production, the total production will begin to decline. M. King Hubbert took this concept and developed the term peak oil to describe not the decline of oil production but the point at which a reservoir reaches a maximum oil production rate. Hubbert said this would occur at the midpoint of reservoir depletion or when one-half of the initial hydrocarbon in place had been produced.²⁸ Hubbert developed a mathematical model and from the model predicted that the United States would reach peak oil production sometime around the year 1965.²⁸ A schematic of Hubbert’s prediction is shown in Fig. 1.6.

Figure 1.6 The Hubbert curve for the continental United States.

Figure 1.7 contains a plot of the Hubbert curve and the cumulative oil production from all US reservoirs. It would appear that Hubbert was fairly accurate with his model but a little off on the timing. However, the Hubbert timing looks more accurate when production from the Alaskan North Slope is omitted.

Figure 1.7 US crude oil production with the Hubbert curve (courtesy US Energy Information Administration).

There are many factors that go into building such a model. These factors include proven reserves, oil price, continuing exploration, continuing demand on oil resources, and so on. Many of these factors carry with them debates concerning future predictions. As a result, an argument over the concept of peak oil has developed over the years. It is not the purpose of this text to discuss this argument in detail but simply to point out some of the projections and suggest that the reader go to the literature for further information.

Hubbert predicted the total world crude oil production would reach the peak around the year 2000. Figure 1.8 is a plot of the daily world crude oil production as a function of year. As one can see, the peak has not been reached—in fact, the production is continuing to increase. Part of the discrepancy with Hubbert’s prediction has to do with the increasing amount of world reserves, as shown in Fig. 1.9. Obviously, as the world’s reserves increase, the time to reach Hubbert’s peak will shift. Just as there are several factors that affect the time of peak oil, the definition of reserves has several contributing factors, as discussed earlier. This point was illustrated in a recent prediction by the International Energy Agency (IEA) regarding the oil and gas production of the United States.²⁹

Figure 1.8 World crude oil production plotted as a function of year.

Figure 1.9 World crude oil reserves plotted as a function of year.

In a recent report put out by the IEA, personnel predicted that the United States will become the world’s top oil producer in a few years.²⁹ This is in stark contrast to what they had been predicting for years. The report states the following: “The recent rebound in US oil and gas production, driven by upstream technologies that are unlocking light tight oil and shale gas resources, is spurring economic activity… and steadily changing the role of North America in global energy trade.”²⁹

The upstream technologies that are referenced in the quote are the increased use of hydraulic fracturing and horizontal drilling techniques. These technologies are a large reason for the increase in US reserves from 22.3 billion barrels at the end of 2009 to 25.2 at the end of 2010, while producing nearly 2 billion barrels in 2010.

Hydraulic fracturing or fracking refers to the process of injecting a high-pressure fluid into a well in order to fracture the reservoir formation to release oil and natural gas. This method makes it possible to recover fuels from geologic formations that have poor flow rates. Fracking helps reinvigorate wells that otherwise would have been very costly to produce. Fracking has raised major environmental concerns, and the reservoir engineer should research this process before recommending its use.

The use of horizontal drilling has been in existence since the 1920s but only relatively recently (1980s) reached a point where it could be used on a widespread scale. Horizontal drilling is extremely effective for recovering oil and natural gas that occupy horizontal strata, because this method offers more contact area with the oil and gas than a normal vertical well. There are endless possibilities to the uses of this method in hydrocarbon recovery, making it possible to drill in places that are either literally impossible or much too expensive to do with traditional vertical drilling. These include hard-to-reach places like difficult mountain terrain or offshore areas.

Hubbert’s theory of peak oil is reasonable; however, his predictions have not been accurate due to increases in known reserves and in the development of technologies to extract the petroleum hydrocarbons economically. Reservoir engineering is the formulation of a plan to develop a particular reservoir to balance the ultimate recovery with production economics. The remainder of this text will provide the engineer with information to assist in the development of that plan.