The peak oil production forecast of China: Result after distinguishing conventional and unconventional oil

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1 The peak oil production forecast of China: Result after distinguishing conventional and unconventional oil Lianyong Feng, Professor School of Business, China University of Petroleum, Beijing

2 Content 1.Introduction 2.Resource and Production 3.Method 4.Result 5.Discussion 6.Conclusion

3 1. Introduction China is the world s largest oil consumer and the world s fourth largest oil producer. Accurate estimate to China s future oil production is important. At this point, however, forecasts of China s future oil production diverge widely, with no clear consensus as to the future pattern to be expected. The most important reason for divergence is failure to recognize the very different patterns to be expected for production of conventional and unconventional oil. The aim of this paper is to objectively forecast China s conventional oil production and unconventional oil production based on accurate historical production data, reasonable URR data, and suitable production forecasting methodology.

4 Unit:Gt 2. Resource and Production Average value of China's total oil URR estimated by academics after year 2000 Summary of research results regarding China s total oil URR (conventional + unconventional) Publication Year URR of China s total oil estimated by academics (averagely billion tons), is only about half as much as the URR of conventional oil only (26.8 billion tons ) published by the official agency. URR used in this paper of China s unconventional oil Viscous oil Light tight oil Kerogen oil Oil sands URR(billion tons)

5 2. Resource and Production Historical production of China s total oil and conventional oil China s conventional oil production began to show difference with the total oil production from The difference broadens gradually and has reached million tons in During time period , the average annual growth rate of China s conventional oil production is only 1.29%, compared with that of China s total oil production, 2.08%.

6 3. Method 3.1 Multi-cycle Generalized Weng Model (Feng et al. [1] or Wang et al. [2] ) Q = k k et i=1 Q i = i=1 Q max t m b e bt tm i 3.2 Stochastic Resource-Constrained Growth Model (Ward et al. [3]) q t = q 0 e krt (1 Q t URR )

7 4. Results 4.1 Production forecast of China s conventional oil Forecast of China s conventional oil production According to the calculation, China s conventional oil production has already peaked in 2010, with the peak production of 167.5million tons.

8 4. Results 4.2 Production forecast of China s unconventional oil Forecast of China s total oil production According to the result, the total production of China s conventional oil and unconventional oil will peak in 2029 (with peak production of 253 million tons), 19 years later than the conventional oil peak year.

9 Production [Mt] Production Share Discussion 5.1 The peak year of China s conventional oil may be even earlier than 2010 oil produced by other methods oil roduced by ASP flooding oil produced by polymer flooding % of oil produced by polymer flooding and ASP flooding Oil production of Daqing oil field 40% 35% 30% 25% 20% 15% 10% 5% 0% The proportion of in Daqing oil produced by polymer flooding and ASP flooding accounted for near 35% till the year This part of oil, due to its high development cost and environmental impact, should also be categorized as unconventional oil. Apart from the Daqing oil produced by polymer flooding and ASP flooding, another controversial part of oil is the lowpermeability oil and very-low permeability oil mainly produced in Changing and some other oil fields. If we take all these oil production out, China s conventional oil production may already be peaked even earlier than 2010.

10 5. Discussion 5.2 The prospect of China s unconventional oil development may be even more pessimistic The development of oil sands, viscous oi, kerogen oil, shale oil will all cause much larger amount of greenhouse gases and cost much larger amount of money than conventional oil. Upstream GHG emission and development cost of different kinds of oil There are still many uncertainties with the substitution from conventional oil to unconventional oil Note: The size of bubbles in the figure represents URR of certain kinds of oil in China; Data source: URR data can be found in 2.1 of this paper. Development cost data comes from IEA [1]. Upstream GHG emission data comes from Brandt and Farrel [2].

11 5. Discussion 5.3 It s urgent to change over-optimistic attitude to China s future oil production Several scandals has already been caused by the public denial of peak oil and over-optimistic estimate to China s future oil production: One billion tons reserve of Nanpu Oil Field Exploration of Ten Daqing Oil Field The attitude of objective and calm is important in the oil resource and production forecast and we should change overoptimistic attitude as soon as possible, bravely face the reality, and deal with the peak oil problem actively.

12 6. Conclusion China s conventional oil has already peaked in 2010, but most of the publics and the government agencies have confused conventional oil and unconventional oil, hence hold over-optimistic attitude for China s future oil production. Separation of unconventional oil production from conventional oil production is still not thorough in this paper. If some other controversial oil production are also separated, China s conventional oil production might have peaked even earlier than Unconventional oil will delay China s peak oil production by only 19 years. And since constrained by both cost and emission problems, China s unconventional oil development will still meet many challenges. In addition, when the implication of low oil price is considered, there will be even uncertain future for China s unconventional oil. China should change over-optimistic attitude; clearly distinguish conventional oil and unconventional oil to be consistent with the international standard; bravely face the reality that conventional oil production has already peaked and deal with the problem actively; make separate and more suitable policies and strategies to develop unconventional oil.

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