Sustainable Supply Chains
Supply Chain Oil Vulnerability: Mitigation and adaptation
Bruce Robinson
Convenor
ASPO-Australia
Supply Chain Oil Vulnerability:
Mitigation and adaptation
Bruce Robinson
Convenor
Australian Association for the Study of Peak Oil
The evidence and the “No Worries” mythology
www.ASPO-Australia.org.au
An Australia-wide network of professionals working to reduce oil vulnerability
Working groups
Oil & Gas industry
Urban and transport planning
Finance Sector
Health Sector
Social Services Sector
Regional and city
Defence and Security
Conservation and Environment
Remote & indigenous communities
Active transport (bicycle & walking)
Agriculture, Fisheries and Food
Biofuels
Construction Industry
Public transport sector
Economics
Tourism
Children and Peak Oil
Young Professionals working group
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Outline
1. Serious global oil shortages are quite likely in the
near term. The evidence is mounting, but so is the
“no-worries” hype.
2. Supply chain and logistics planning should
include serious consideration of "Peak Oil"
scenarios
3. Oil vulnerability assessment of key suppliers,
clients and contractors would be a valuable
precaution
● What is Peak Oil ?
the time when global oil production stops rising and starts its final decline
● When is the most probable forecast date ? ? 2015 +/- 5 years
● “Peak Exports” will arrive sooner, as exporting countries
use more of their own oil internally, leaving less for export
● What psychology or mythology is stopping
decision-makers considering these risks ??
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Psychological aspects
of Peak Oil
“Beyond The State of Denial”
Peak Oil seminar, Perth, 2001
The Theory of Black Swan Events is a metaphor
The event is a surprise (to the observer) and has
a major impact. After the fact, the event is
rationalized by hindsight.
Revised edition, 2008
Why do leaders consistently ignore looming signs of crises
even when they know the consequences could be
devastating?
Most events that catch us by surprise are both predictable
and preventable, but we consistently miss (or ignore) the
warning signs
Peak Oil is probably a "Predictable Surprise" which is being ignored
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Optimism bias
Strategic misrepresentation
Sydney Morning Herald, 10th July 2008
8
Doomsday warning on fuel stock
Cameron Stewart February 28, 2013
AUSTRALIA would grind to a halt within three weeks with almost no
deliveries of food or medicine if its overseas oil and fuel supplies were
cut off.
An NRMA-commissioned report on the nation's liquid fuel security released today
says the government has allowed the country to become too dependent on foreign
supply of liquid fuels.
It says there are no coherent contingency plans to deal with the devastating impact of
any cut to overseas supply because of war, economic turmoil or natural disasters,
instead adopting a "she'll be right" approach.
The report, written by retired RAAF Air Vice-Marshal John Blackburn, finds that 85
per cent of transport fuel comes from overseas crude oil or imported fuel.
.
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Air Vice-Marshal John Blackburn AO
retired from the Royal Australian Air Force in 2008
as the Deputy Chief of the Air Force following a
career as an F/A-18 fighter pilot, test pilot and
strategic planner.
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Dr. Sadad I. Al Husseini, ex Saudi Aramco
Oil and Money Conference, London, October 2007
...predicts a 10 year plateau
a structural ceiling determined by geology
Price
$/barrel
Production
M b/day
100
90
80
70
The economic mantra is that as prices rise, production will increase.
Clearly not true from these data.
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Murray and King, January 2012 481 433-435
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Oil prices to double by
2022, IMF paper warns
(West Australian May 2012)
May 2012
October 2012
IMF study: Peak oil could do serious
damage to the global economy
Washington Post October 27, 2012
"The modelling is forecasting what can be termed ‘the 2017 drop-off’. The
outlook under a base case scenario is for a long decline in oil production
to begin in 2017
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BITRE 117 David Gargett
17
Tuesday 13 July 2010
18
'Peak Oil' and the German
Government
Military Study Warns of a Potentially Drastic
Oil Crisis 1st September 2010
US military warns oil output
may dip causing massive
shortages by 2015
April 11th 2010
www.csiro.au/resources/FuelForThoughtReport.html
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US oil peak 1970
mb/d
USOil
Oil Production
Production
US
2012
19101910-2011
– 2012
(EIA)
(million
barrels/day)
million barrels / day
10
8
Now 48%
self-sufficient
??
6
4
2
0
1910
1930
1950
US EIA Field Production of Crude Oil MCRFPUS1
1970
1990
2010
21
1,600
US Shale Oil
Bonanza or Hype or both ??
1,400
Sevenfold
increase in rigs
US Oil Rig Count
1,200
Baker Hughes 1995-June 2013
1,000
800
600
400
200
0
28/10/95
1995
24/7/98
19/4/01
2001
14/1/04
10/10/06
6/7/09
2007
1/4/12
2013
Only 37%
increase in
production
250,000
200,000
150,000
100,000
50,000
US
US monthly
monthly oil
oil production
production
EIA
EIA 1995-March
1995-March 2013
2013
0
Oct-1995
Apr-2001
Oct-2006
Apr-2012
22
Australian Shale Oil
Bonanza or Hype ??
$3.00
Linc Energy
Share price to 21st June 2013
$2.50
$2.00
Announcement 23rd January 2013
Arckaringa Basin Coober Pedy
$1.50
$1.00
Shale Oil
“as big as Saudi Arabia”
(103-233 billion barrels)
$0.50
$0.00
May0 2012
50
August
100
150
November
200
February
250
June 2013
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Big fields are found first, and as they decline, they are replaced by smaller and smaller fields
soon the additional small fields can not match the decline of the large fields,
so the overall production begins its final decline
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World Discovery Peaked in 1964
Billion barrels of oil per year
After Longwell, 2002
60
50
Discovery revisions backdated
3-year moving average
Campbell 2012
40
30
20
10
0
1930
1950
1970
1990
2010
2030
25
IEA November 2008
The world is heading for a catastrophic energy
crunch that could cripple a global economic
recovery because most of the major oil fields in the
world have passed their peak production, a leading
energy economist has warned. (IEA’s Fatih Birol)
The IEA estimates that the average production-weighted
observed decline rate worldwide is currently 6.7% pa for
fields that have passed their production peak”.
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2008
Even if oil demand were to remain flat to 2030, 45 m barrels/day of gross capacity -roughly four times
the capacity of Saudi Arabia - would be needed just to offset the decline from existing fields
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A simple observation -- or why peak will be earlier
than most people expect
Chris Skrebowski
Petroleum Review
London
‘Global production falls when loss of output from countries in
decline exceeds gains in output from those that are expanding.’
Expansion
Decline
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Australia uses
59,000 megalitres
of oil each year
a 390m cube
Sydney Harbour Bridge
is 134 m high
70% of Australia’s oil usage is in transport
If Australia’s 20 M tpa wheat crop → ethanol ~ 10%
29
Million barrels/ day 2012
BP Statistical Review, 2013
Australia uses
1.0
China
10.2
US
18.6
World
86.2
US 1 cubic km oil / year
Australia
l
China
1 km
l
United States
30
China – Motor Vehicle Production
China
kb/day
Oil consumption and production
12,000
Consumption
10,000
8,000
Imports
6,000
4,000
Production
2,000
0
1965
1975
1985
From BP Statistical Review 2013
1995
2005
2015
UK
kb/day
Oil consumption and production
3,000
2,500
2,000
Consumption
1,500
Imports
Production
1,000
500
0
1965
1975
1985
From BP Statistical Review 2013
1995
2005
2015
Indonesia
kb/day
Oil consumption and production
1,800
Consumption
1,600
1,400
Imports
1,200
1,000
Production
800
600
Indonesia left OPEC in 2009
400
200
0
1965
1975
1985
1995
2005
2015
From BP Statistical Review 2013
34
Saudi Arabia
kb/d
Oil Consumption and Production
14,000
Production
12,000
10,000
8,000
Exports
6,000
Consumption
4,000
2,000
0
1965
1975
1985
1995
2005
2015
From BP Statistical Review 2013
35
USA
kb/d
Oil consumption and production
20,000
Consumption
15,000
Imports
10,000
Production
5,000
0
1965
1975
1985
1995
2005
2015
From BP Statistical Review 2013
36
Australia
Oil consumption and production
kb/d
Consumption
1,000
800
Imports
600
Production
400
200
0
1965
1975
1985
1995
2005
2015
From BP Statistical Review 2013
37
World Oil Production Forecast
ASPO-2013 (Dr Colin Campbell)
Gas plant NGL
Billion
Barrels / year
Polar
Deepwater (>500m)
30
Heavy and frac.
Regular conventional
20
10
2012
0
1950
1970
1990
2010
2030
2050
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"Anyone who believes exponential
growth can go on forever in a finite
world is either a madman or an
economist."
IEA
US-EIA
Kenneth E. Boulding,
economist
1910-1993
"The only function of economic
forecasting is to make astrology
look respectable"
John Kenneth Galbraith
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www.ASPO-Australia.org.au
The nation, individual businesses and
individuals face serious oil vulnerability
risks, both short-term and long-term
The supply chain and logistics sector is of
course highly vulnerable.
Failure to plan now may prove incredibly
costly: a“predictable surprise”
An oil vulnerability assessment and risk
management plan is an essential first step
Hint: Check your
superannuation is not being
invested into urban toll-roads,
tunnels and airports.
ASPO-Australia can assist, if needed
www.ASPO-Australia.org.au
Bruce.Robinson@ASPO-Australia.org.au
0427 398 708
08-9384-7409
Try to separate the
hype and mythology
from the actual
evidence of oil
vulnerability risks
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