Sunday, May 29, 2005

Michael Lynch: The Last Skeptic?

Call me skeptical about his skepticism: via, Michael Lynch gets a piece into the Canadian Globe and Mail decrying the current round of peak oil predictions as "unscientific", noting the Hubbert misread economically-motivated gas production declines as having a geologic origin.
More recent work has falsely assumed that low discoveries in the Middle East mean a lack of oil in the ground, rather than a lack of drilling activity, which is primarily the result of a large glut of discovered oil fields.

Some of these “scientific” analysts graph production and assume a bell curve, seeing an unending decline after any peak, when in fact, countries often peak, decline, then improve their fiscal regime to attract new investment and raise their production again.

Others fit a curve to discoveries by size, and extrapolate it to an asymptote, mistakenly thinking that discovery size could be gleaned from estimates by geologists, and that sequenced oil discoveries reflect geology, rather than being influenced by political decisions as to where and when drilling will be permitted.

Though both these approaches often yield what appear to be solid “fits,” they are descriptive rather than predictive. Oil discoveries are much more human-influenced than the orbits of the planets, which can be predicted by simple observation, and efforts to forecast them are doomed to failure as was curve-fitting of the stock market.

Lynch's Energy SEER website has a number of interesting papers on it, including this one about natural gas (PDF) in which he notes that production declines in US natural gas will require LNG imports (amounting to 5.5 Bcfd by his calculations). It becomes apparent that this Globe And Mail article is really a condensed version of the white paper "The New Pessimism about Petroleum Resources: Debunking the Hubbert Model (and Hubbert Modelers)" (PDF). The one thing I've always found the most interesting in this fairly lengthy paper is the paragraph that
... those who have had access to the IHS Energy database dispute the findings of Campbell and Laherrere, including the geologists of the USGS, who relied on the database in concluding that reserve growth is not only real but substantial (600 billion barrels; see USGS 2000). Perhaps more damning, personnel at IHS Energy themselves estimate global reserve growth at 373 billion barrels and total URR at over 3000 billion barrels. Where Campbell and Laherrere foresee remaining recoverable resources of conventional petroleum limited to 1100 billion barrels, IHS estimates it at over 2200 billion, a huge difference. (Stark 2002) Perhaps the creators of the database understand it less perfectly than Campbell and Laherrere, but that is hard to accept without further evidence. [emphasis mine]
(p. 5; note I'm using the PDF pages, as his document is unnumbered.) Lynch then attacks Laherriere and Campbell's construction of creaming curves by field size rather than date of discovery as a method whose "utility (and novelty) ... is hard to comprehend" (p 8). Again, as with the case of natural gas, he ascribes the lack of oil discoveries in the Middle East to the decade of cheap oil in the 1990's: "To an economist, the drop in exploration reflects optimal behavior: they do not waste money exploring for something they will not use for decades" (p 8).

It would be comforting if Lynch were right, and while that is possible, the greater possibility is that he is not. Whether it's ExxonMobil tacitly admitting a peak in oil production within five years in its report, "The Outlook for Energy The Outlook for Energy A 2030 View", or outsiders like John S. Herold, Inc. using SEC documents to do the projections, the worriers would seem to outnumber the optimists.