The Peaking of World Natural Gas Production

Matthew Simmons: ASPO Denver 2009 PresentationMatthew Simmons is an energy investment banker. He's been investing in the energy business for thirty five years. His company is Simmons and Company International.

Matthew Simmons is also a writer on oil depletion. He wrote a book, Twiligh in the Desert: The coming Saudi Oil Shock and the World Economy. It is an excellent book.

Matthew Simmons also gives radio and television interviews. He talks at conferences and he posts his conference slides on his company website.

Matthew Simmons recently spoke at the ASPO 2009 conference in Denver, USA. ASPO 2009 is a peak oil conference.

Here is a slide from his talk. Slide number 26. The message it conveys is very important.

Here is the text from the slide:

The Coming Surprise: Gas Has Peaked

• Data on global gas output makes oil data look pristine
• But, solid data argues that global gas flows have also probably peaked

1. Western Siberian gas
2. North Sea gas
3. Indonesian gas
4. Conventional U.S./Canadian gas

All in irreversible decline

• Middle East gas not widely abundant and too sulfurous.

Other voices

On Monday 23rd November 2009, Fatih Birol Chief Economist at the International Energy Agency (IEA) addressed the Council on Foreign Relations in New York, presenting highlights of the recently released 2009 World Energy Outlook.

With regard to natural gas he is quoted as saying

"To keep up with global gas demand the world will need to discover an additional four Russia’s worth of natural gas reserves by 2030"'

Russia has the world's largest natural gas reserves - about one quarter of the world total. So to keep up with global gas demand,  we need to find more natural gas than has already been discovered. Discovery of natural gas peaked in the 1970's and has been in decline more or less ever since. By the 1990's the world used more gas per year than was being discovered each year. The chances of finding such large reserves of conventional natural gas is remote.  Fatih Birol is also quoted as saying

A natural gas glut is forming globally and will reach its apex in 2015

Background

Natural gas production in individual countries (or globally) will tend to rise over time until a maximum flow rate is achieved. This is the peak production rate. In general, after this peak production rate has been achieved, the production flow rate will decrease until the resource is fully depleted. Natural gas reserves are much more difficult to assess than oil, and much more susceptible to economic factors, the most important of which is transport (pipeline or LNG).

Western Siberia

The status of Russian natural gas production is summarised here and, more recently in this doctoral thesis. This latter source agrees with Simmons in that it shows Western Siberian fields peaking around 2010 - 2013. As stated in the doctoral thesis, "within a few years much larger supplies from the Yamal Peninsula and the Shtokman field will be urgently needed, if Russian production is to avoid a decline and be able to increase". Russian natural gas production peaked at the fall of the Soviet empire, but production has recently risen according to BP data, as shown in this plot of Russian natural gas production, consumption and exports.

The North Sea

The UK, Norway, Denmark and The Netherlands make up this region. The Netherlands have been producing natural gas at a steady rate for the last 30 years. Norway has expanded its production over the last 10 years (including exports to the UK via pipeline) and is now the largest producer in the region. As we have seen in an earlier blog, UK natural gas production peaked in the year 2000 and has been in sharp decline ever since. Denmark is the smallest producer amongst this group. Collectively, according to data from BP, the North Sea production of natural gas appears to have peaked in 2005 as rapid production decline in the UK outpaces production increases in Norway.

Norwegian natural gas production was 99 billion cubic metres (bcm) in 2008 and is forecast to peak between 2015 and  2020 at 124 - 135 bcm/year. The UK peak was 108 bcm in 2000, was 70 bcm in 2008  and will be approaching 10 bcm around 2020 if the current decline rate is maintained. There is only a limited potential for increased gas exports from Norway to the European Union.

Thus it appears highly probable that Simmons is correct and that the 2005 peak seen in the BP data is the peak of natural gas production from the North Sea at 245 bcm. This can be seen clearly on this plot of North Sea natural gas production.

The Asia Pacific region including Indonesia

Indonesia is the second largest natural gas producer in the Asia Pacific region. According to data from BP and assuming Simmons is correct, Indonesian natural gas production peaked in 2003. New Zealand passed peak natural gas production in 2001. India appears to have managed to put off a peak in natural gas production expected in 2001, but a peak now looks imminent. Pakistan is also reaching an imminent natural gas production peak. This group of countries confirmed past or near peak produced over one third of the region's natural gas in 2008.

It is anticipated that China, the largest regional producer, can increase its natural gas production through to 2035.

The region is a net importer of natural gas importing 15% of its consumption in 2008. This can be seen clearly on this plot of Asia-Pacific natural gas production.

USA, Canada and Mexico

US, Canada and Mexico natural gas: Discovery and productionAccording to Jean Laherrere, an internationally renowned oil and gas exploration expert, conventional natural gas production has peaked as shown in the accompanying graph. Over 70% of the natural gas that will be produced has been produced.

An alarming trend is the net energy associated with the remaining North American reserves post peak production. There is concern that Canadian natural gas production may not be worth producing post 2014 as it simply takes more energy to get out of the ground than can be obtained from the resulting natural gas. And net energy from US natural gas production is rapidly following Canada's. This issue is discussed further here.

Non Conventional Natural Gas

There has been a lot of recent excitement about non conventional natural gas, expecially in the USA. There is a lot of non conventional natural gas (and oil) in the world. The recent excitement has been about natural gas locked up in shale. The shale oil industry was active in West Lothian for around 100 years up until the 1960's. The large "bings" that blight the landscape west of Edinburgh are the spoil from that mining operation. Natural gas production from shale tends to have very very high depletion rates and the volume of gas produced tends not to match the initial production estimates before drilling (and "fracking") commences. There is also a very serious issue about pollution of ground water sources. The debate about non conventional natural gas is well summarised in this link. It is interestng that Matthew Simmons reckons that it may take more energy to develop shale than you would get out from the natural gas produced. This net energy issue is key in the development of new energy sources. We are rapidly using up the easy to produce fossil fuels that give high energy yields. We are left with non conventional sources that tend to provide much less net energy. Most non conventional oil and gas (and there is an awful lot of it) will never be produced simply because it takes too much energy to produce.

I'll add to this blog shortly to support the assertions that Matthew Simmons has recently been making.