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The end of cheap oil: Bottom-up economic and geologic modeling of aggregate oil production curves
Uppsala University, Disciplinary Domain of Science and Technology, Physics, Department of Physics and Astronomy, Global Energy Systems.
University of Reading.
Uppsala University, Disciplinary Domain of Science and Technology, Physics, Department of Physics and Astronomy, Global Energy Systems.
Uppsala University, Disciplinary Domain of Science and Technology, Physics, Department of Physics and Astronomy, Global Energy Systems.
2012 (English)In: Energy Policy, ISSN 0301-4215, E-ISSN 1873-6777, Vol. 41, 860-870 p.Article in journal (Refereed) Published
Abstract [en]

There is a lively debate between 'concerned' and 'unconcerned' analysts regarding the future availability and affordability of oil. We critically examine two interrelated and seemingly plausible arguments for an unconcerned view: (1) there is a growing amount of remaining reserves: (2) there is a large amount of oil with a relatively low average production cost. These statements are unconvincing on both theoretical and empirical grounds. Oil availability is about flows rather than stocks, and average cost is not relevant in the determination of price and output. We subsequently implement a bottom-up model of regional oil production with micro-foundations in both natural science and economics. An oil producer optimizes net present value under the constraints of reservoir dynamics, technological capacity and economic circumstances. Optimal production profiles for different reservoir drives and economic scenarios are derived. The field model is then combined with a discovery model of random sampling from a lognormal field size-frequency distribution. Regional discovery and production scenarios are generated. Our approach does not rely on the simple assumptions of top-down models such as the Hubbert curve - however it leads to the same qualitative result that production peaks when a substantial fraction of the recoverable resource remains in-ground.

Place, publisher, year, edition, pages
2012. Vol. 41, 860-870 p.
Keyword [en]
Peak oil, Bottom-up modeling, Micro-foundations
National Category
Geosciences, Multidisciplinary
Identifiers
URN: urn:nbn:se:uu:diva-163177DOI: 10.1016/j.enpol.2011.11.073ISI: 000301155500085OAI: oai:DiVA.org:uu-163177DiVA: diva2:463038
Available from: 2011-12-08 Created: 2011-12-08 Last updated: 2017-12-08Bibliographically approved
In thesis
1. Petroleum Production and Exploration: Approaching the End of Cheap Oil with Bottom-Up Modeling
Open this publication in new window or tab >>Petroleum Production and Exploration: Approaching the End of Cheap Oil with Bottom-Up Modeling
2012 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The theme of this thesis is the depletion of petroleum (crude oil and natural gas). Are there reasons to be concerned about an ‘end of cheap oil’ in the near future? There is a lively debate regarding this issue. The debate is sometimes described as a clash of ‘concerned’ natural scientists and ‘unconcerned’ economists. However, this clash is both harmful and unnecessary. The views of natural scientists and economists can and should be reconciled. At the micro-level, geological and physical factors (such as diminishing reservoir productivity) are parameters in the producer’s economic optimization problem. Bottom-up modeling therefore appears to hold more promise for forming a common understanding of depletion than prevailing top-down models, such as the controversial Hubbert model.

The appended papers treat various aspects of petroleum depletion: critical examination of top-down scenarios (I); bottom-up economic and geologic modeling of regional production (II); review of published bottom-up models and sensitivity analysis (III); simulation of success rates and expectations in oil exploration (IV); bottom-up scenarios of future natural gas production in Norway (V) and Russia (VI); empirical analysis of production profiles of giant oil fields (VII).

Bottom-up models have the potential to be accepted by scientists from different disciplines, and they enable interpretable sensitivity analyses. They are, however, not likely to reduce quantitative uncertainty in long-term scenarios. There is theoretical evidence of the possibility that petroleum scarcity occurs long before the recoverable resource is close to exhaustion. This result is a consequence of both geological and economical factors. Several arguments for an ‘unconcerned’ view are at best uncertain, and at worst relying on questionable assumptions (analyzing reserves rather than production flows, using irrelevant reserve definitions, using average cost instead of marginal cost). The considerable uncertainty regarding an issue of such importance is in itself a cause for concern.

Place, publisher, year, edition, pages
Uppsala: Acta Universitatis Upsaliensis, 2012. 85 p.
Series
Digital Comprehensive Summaries of Uppsala Dissertations from the Faculty of Science and Technology, ISSN 1651-6214 ; 891
National Category
Other Engineering and Technologies not elsewhere specified
Identifiers
urn:nbn:se:uu:diva-163181 (URN)978-91-554-8252-7 (ISBN)
Public defence
2012-02-24, Häggsalen, Ångströmlaboratoriet, Lägerhyddsvägen 1, Uppsala, 09:15 (English)
Opponent
Supervisors
Available from: 2012-02-03 Created: 2011-12-08 Last updated: 2012-02-15Bibliographically approved

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Jakobsson, KristoferAleklett, Kjell

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