All Liquids Are Not Created Equal (Revisited)

A few weeks ago, I wrote a blog post pointing out some of the difficulties posed by the move away from ‘crude oil’ to ‘all liquids’ reporting by BP, the Energy Information Administration (EIA) and the International Energy Agency (IEA) when they publish their flagship yearly reports (see herehere and here).

I also showed some numbers taken from Table 3.4 in the IEA’s World Energy Outlook 2012 (click for larger image). The declining share of crude oil within the overall ‘all liquids’ mix is obvious.

Oil and Liquids Supply jpg

It’s worth drawing attention to some charts taken from a post by Marco Pagani on Ugo Bardi’s excellent blog Cassandra’s Legacy. Note Pagani’s post is, in turn, a summation of original work done (in Italian) by Antonio Turiel. We start with the IEA’s headline chart that shows ‘all liquids’ on a healthy (in energy terms rather than climate) rising trend:

IEA Predictions jpeg

Turiel then makes two adjustments to the chart. First, he takes into account that natural gas liquids and other non-crude oil components of ‘all liquids’ only have 70% of the energy of crude oil per barrel. Second, he adjusts for the fact that we are interested in net energy from oil, not gross energy. This is the Energy Return on Energy Investment (EROI) concept pioneered by Charles Hall. In short, EROI takes account the fact that traditional Saudi production needs minimal energy investment to extract the oil, but unconventional shale fields need very high energy investment. As a result of these two adjustments, we get the following chart:

IEA Predictions Corrected jpeg

In conclusion, net energy equivalent oil basically flat lines over the coming two decades. I am a little less happy with Turiel’s second adjustment. His EROI numbers are open to dispute and, more important, society may be happy to substitute a fuel with one set of properties (shale gas) for another (tight oil) to capture the unique properties of the latter.

Nonetheless, I think the critical point that Turiel highlights—that the components within the ‘all liquids’ mix are not fungible—is correct. Accordingly, any escape from the crude oil constraint will be much tougher than the IEA’s headline chart suggests. I will return to this theme with my own numbers in a future post.

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