GLOBALSHIFT - Energy Shift

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Discussion of The Energy Shift*

Over the years the owner of Globalshift has written many articles and given numerous presentations on oil and gas supply, industry activity and the transition to clean energy.

The selection listed to the left demonstrates how perceptions within the industry have changed in 3 decades, with signals of ‘The Energy Shift’ first appearing in 2005.

In the 1980s and early 1990s recurring themes were technology and growth. New frontiers of science and of geography were discussed, with investment only disrupted by volatile demand. Analyses were unfettered by global resource constraints or environmental concerns.

From the mid 1990s the focus moved to discussions of future oil supply and demand with clear recognition of the twin threats of dwindling cheap resources and environmental change. Forecasts were simple, tending to be pessimistic.

Traditional exploration areas were declining in both number and potential whilst new technology appeared unable to make up for dwindling opportunity.

By 2005 these analyses had expanded to include more detailed, scientific breakdowns of all conventional and unconventional oil supplies coupled with the implications of demand fluctuations, price issues and newly adapting technologies.

A future supply gap was identified and quantified while noting the urgent need for additions to fossil fuel types, such as from shales and oil sands, along with replacements from other energy sources.

In the longer term the trend for unconventional fossil fuels to become more valuable was recognised but with the awareness that they would be unable to fully offset decline of conventional oils over longer periods.

Moreover, the balance would be disturbed by an increased public awareness of the damaging environmental effects of the new (and the traditional) fossil fuels. The sense of an impending ‘energy transition’ was sign-posted but blatantly ignored by most of the large oil and gas companies.

The owner expected “rapidly rising prices after 2010 accompanied by painful conservation.” He commented that “predictions that oil demand will increase to 120 mn b/d by 2020 [by the EIA] are futile and damaging to policy makers.” Articles were built around how the industry could and should deal with change, especially by developing new energy sources.

Drilling and spending levels were also examined, allied to forecasts of cost escalation. The relative importance of new geographic frontiers (such as deep waters) and technological frontiers (such as horizontal drilling) once again became central to the analysis of future supply.

After a deep recession in 2008, the world appeared resigned to volatile prices even though alternatives were being exploited, including large volumes of oil (and gas) from tight (usually shale) reservoirs.

To add to this, demand was fluctuating during price peaks and a future of feast and famine with dramatic price volatility was now expected - and still is. By late 2014 the world was entering a deep oil price trough with activity in high cost environments collapsing, even as service costs plummeted.

The ‘Energy Shift’ (forecast for 2016 in many early articles and commercial reports by the owner) had begun.

At the end of 2016, OPEC and a number of other countries including Russia, alarmed by persistent lower oil prices, began to establish new rules to attempt to restrict output once again, albeit aware that oil shales in the USA were waiting in the wings to fill up any shortfalls. Such efforts continue.

In this environment, over the longer term, repeated waves of price peaks and troughs became inevitable. In the future resources will be shared amongst growing, affluent populations living under the dual threat of resource wars and environmental (and other) disaster.

*To control forecasts and constrain data sets, Globalshift has introduced the concept of the ‘Energy Shift’ to replace the term peak oil, once used to describe oil use growing to a peak and then declining.

The ‘Energy Shift’ also obviates the use of other terms by some commentators such as peak supply and peak demand. These are simplistic ideas adopted in the mistaken belief that eventual decline in fossil fuel use will only be controlled by a single trigger.

Nevertheless, of course, as part of the Energy Shift, peak oil (including peak demand) will be in existence when oil discovery and extraction costs (Capex and Opex) exceed the value (the amount most of us are willing to pay) of the refined product.

Technological Drive for Marginal Field Development

Petromin Asia, Jul 1986

Lessons from the rush to Yemen

Asian Oil and Gas, Feb 1993

Remote Control: The cost of modern communications

Asian Oil and Gas, Jun 1993

The Consulting Business: How both sides can win

Asian Oil and Gas, Oct 1993

Upstream Technology Special Report: Part 1

Petroleum Argus, Jul 1999

Upstream Technology Special Report: Part 2

Petroleum Argus, Aug 1999