Energy Information Administration Forecast
Have we, the hydrocarbon depletion aware folk of this world got it wrong? Is it reasonable to think that this small band of retired geologists, academics, amateurs and energy enthusiasts have a clearer idea of what’s going on in the world than the prestigious governments and energy agencies? Someone once suggested to me that the very fact governments and energy agencies didn’t appear to recognise an imminent peak in oil extraction rates as evidence that there wouldn’t be such a peak, at least not soon enough to really worry about. The implied point being that they have a far greater understanding and more resources than then people like us.
Let’s have a look at how this great understanding and their resources have served them in the recent past by looking back at the 2001 International Energy Outlook from the US DOE/EIA IEO2001 (1.3mb pdf).
What is US DOE/EIA? This is what it says on the Energy Information Administration (EIA) website:
The Energy Information Administration (EIA), created by Congress in 1977, is a statistical agency of the U.S. Department of Energy. We provide policy-independent data, forecasts, and analyses to promote sound policy making, efficient markets, and public understanding regarding energy and its interaction with the economy and the environment.
So they should know what they are talking about, right?
This analysis by Ron Patterson is inspired by the original work of Roger D. Blanchard who questioned the future predictions back in 2001 in his paper Analysis of the IEO2001 Non-OPEC Supply Projections , Patterson has followed up these predictions in an article here where he highlights how the EIA got it very wrong.
North Sea
Vital Trivia has written a lot about the decline in the North Sea, this is what the IEO2001 had to say about the North Sea:
In the IEO2001 forecast, North Sea production reaches a peak in 2006, at almost 6.6 million barrels/day (mb.d). Production from Norway, Western Europe’s largest producer, is expected to peak at about 3.7 mb/d in 2004 and then gradually decline to about 3.1 mb/d by the end of the forecast period with the maturing of some of its large and older fields. The United Kingdom is expected to produce about 3.1 mb/d by the middle of this decade, followed by a decline to 2.7 mb/d by 2020.
The report was published in March 2001 and talks of a peak in 2006. The facts of the matter are that the North Sea had already peaked back in 1999 at 5.947 mb/d! Today we are more than 1mb/d below that 1999 peak.
For Norway they forecasted a peak of 3.7 mb/d in 2004 declining to 3.1mb/d by 2020. In fact Norway had peaked the year earlier (2000) but the real absurdity was the forecasted rate of decline post peak of 1.1% per year. Show me any province, let alone a modern offshore one with a post peak decline rate as slow as that!
The UK forecast of a 3.1mb/d peak in 2005 compares with a reality of a 2.684 mb/d peak in 1999, a full two years before this report was published. The report goes on to forecast a decline to 2.7 mb/d by 2020, an annual fall of less than 1%, when in reality the UK has seen average annual falls of over 7% from 1999.
These forecasted decline rates are most concerning, either the EIA are incredibly ignorant or they are purposefully releasing misleading information.
Mexico
I reported on Mexico’s difficulties just last week. Here is what the IEO2001 said:
Mexico is expected to adopt energy policies that encourage the efficient development of its vast resource base. Expected production volumes in Mexico exceed 4 million barrels/day by the end of the decade and show little decline out to 2020.
It would appear Mexico has already peaked with a peak month of December 2003 at 3.455 mb/d and a peak 12-month moving average in June 2004 of 3.408 mb/d, more than half a million barrels down and more than half a decade earlier than predicted. As for showing little decline out to 2020, Pemex themselves are saying that Cantrell is some 68% depleted with flow rate likely to crash at between 10 and 20% per year.
Closing remarks
The Energy Information Administration claim to provide policy-independent data, forecasts, and analyses to promote sound policy making, efficient markets, and public understanding regarding energy and its interaction with the economy and the environment.
On the evidence of recent performance one can only assume that any policies influenced by the EIA are unsound, any markets inefficient and the public are left ignorant. I think there is far more truth in that statement than those from the EIA.
So remember, next time you hear an official sounding energy forecast from a government agency it could already be significantly wrong and rapidly deviating from reality.
This post was written by Chris Vernon
This entry was posted on Saturday, December 10th, 2005 at 1:03 am and is filed under Hydrocarbon Depletion. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
December 10th, 2005 at 7:27 pm
I would check that the forecasts for the North Sea do not refer to oil plus gas as a bbl equivalent total. This has often been used to hide the early decline of the N Sea as gas production did not fall so steeply in the initial stages. No escaping the fact that typical pre-peak forecasts from the UK govt. IEA and the PILOT initiative were hopelessly optimistic. Denial of real gas supply decline is still denied by UK govt.
As another example of corporate ignorance look at GM’s decision to release a whole new range of SUVs just a gasline hit $3 a gallon.
In the UK we have truly spectacular plans for new airport runways and motorways which also provide startling evidence of the ‘establishment’ view of peak oil.
I have discussed cancelling airports and motorways with members of scottish parliament (SNP MSP’s) who state that there is no alternative to oil fuelled growth.
December 10th, 2005 at 10:13 pm
Since Shell revealed the need to “adjust” their stated reserves I have simply assumed that published figures are both fiddled deliberately and inaccurate through sheet incompetence.
I suspect as does MO above, that the real situation in North Sea gas beachings is optimistic.
There is a curious belief amongst the political classes that commerce and industry serve to meet the customers and not the suppliers best interests, and that insurers really do want you to have a happy retirement rather than they maximise their income.
It is also becoming evident as offshore wind farms are delayed, (E.ON S. Wales etc.,) the costs of distribution become crystal clear, the reliability of equipment is under question and maintenance costs are now being realistically costed, that the projected level of energy output in the UK from wind is going to be negligible.
Furthermore UK Coal is continuing to make stupefying losses which cannot continue as the shareholders will not accept it, as far as I can see they are hanging on to realise the above ground property values.
December 13th, 2005 at 1:47 am
Wow, EIA does seem to have their heads up their asses. I had no idea their predictions were this bad.
December 13th, 2005 at 3:09 am
Asset stripper Wilbur Ross has moved in on UK Coal and now has 3.6% of the equity. It is assumed he takes over, shuts the pits, imports coal (he has widespread coal interests in the Americas) and sells off the above ground landholdings.
Leaving the UK within 2 years importing 95% of it’s coal.
Drax offers its shares for sale this week. UK Coal’s main customer. The bondholder slook to have increased their investment (£700Mn)by about 150% in 3 years.
December 21st, 2005 at 2:23 pm
In trying to convince local leaders about the issue of the coming energy famine I find myself confronted with stupified gazes and the occasional comment “They would never let something like that happen !” or a suspicious look that I’m some kind of dangerous subversive. Trying to alert local goverment officials such as city councils, school boards, planning bodies, etc. is not simply difficult but I’m coming to believe dangerous work. It flies in the face of deeply held assumptions about how the world works and the immediate impulse is to distrust the messenger. My thinking is that PO activists are setting themselves up for some hard slogging and I fear vicious attack as the dominent world views begin to diverge and reality sets in. This is difficult and dangerous work and it should be understood as such. Sweet reason is not welcome and the anxiety this issue arouses expresses itself in anger and fear directed at innocent others who simply want to see some prepartory action in the face to the coming crashes of damn near everything.
December 21st, 2005 at 6:23 pm
While the EIA may be quite good at reporting on past values, I have found that their predictive powers are pretty poor. One only needs to look at the Annual Energy Outlook to see that even in the short-term on such things as costs and supply (in the US), they have a pretty poor track record.
I was recently engaged in a debate over the Kyoto Protocol and the citing of economic effects on the US if the Kyoto Protocol was ratified. The citation…the EIA evaluation of the Kyoto protocol published in 1999, with several scenarios as well as a “no-action” base case. What’s interesting is that all the costs for fuels and the lost jobs have all been realized even without Kyoto (if only gas had only risen 66 cents/gallon, etc.).
The reply has typically been “well, the impact would have been worse….” but even in the very short-term the EIA has not been able to get any of the prediction for energy costs and impacts correct. Why should people who claim doubt on global climate models because they might show a couple of degree variation between model assumptions out into the future (though fairly close agreement with “past values”) hold so strongly to a group that has consistently shown themselves to be so wrong?
Is it politics? Maybe a bit, despite the nonpartisan charter for the EIA. But it seems that the EIA is afflicted with the same problem that most of the society seems to have…it will be the same in the future because its always “been that way” in the past. But the consistent failure to get even reasonably close to cost and supply estimates suggests something bordering on incompetence (though I’m not suggesting willful incompetence). As a policy tool, I’m not sure that it serves us well except as a rear-view mirror to show where we’ve been.
January 30th, 2006 at 9:43 pm
[…] we looked at the shocking discovery that the EIA’s International Energy Outlook 2001 was completely wrong in it’s analysis of some major oil provinces, worrying since it seems some people, eve […]
February 13th, 2006 at 9:57 pm
Very true. You always seem to get your facts right.
Avax