CENTRE D'ANALYSE STRATEGIQUE Les pics mondiaux de production du pétrole et du gaz et leurs impacts sur l'avenir des énergies Pierre-René BAUQUIS Professeur Associé ENSPM (IFP School) Professeur TPA (TOTAL Professeurs Associés) Expert auprès de l'Académie des technologies CAS - PARIS 1

UN POINT SUR LE PICS DU PETROLE PARTIE 1 UN POINT SUR LE PICS DU PETROLE ET DU GAZ CAS - PARIS 2

Brief summary of past findings and views The only "publically available data" on oil reserves are the so called "proven reserves". Unfortunately, they are totally useless to study and predict "Peak Oil". The only "usable" concepts for "peak oil estimation", at oil basins levels, countries levels or world level are : Ultimate reserves concept Evolution of past exploration performances and production curves (creaming curves) King Hubbert methodology (world applicability). CAS - PARIS 3

PROVEN RESERVES : AN OPTIMISTIC PICTURE Observing the "visible part of the iceberg" leads to conclude that we have plentiful and fast growing oil and gas reserves and that there is no problem Oil world reserves Gas world reserves 1973 Years of consumption GTOE 2000 86 52 30 48 140 40 65 CAS - PARIS 4

What the R/P (Reserves/Production) ratio means World oil production (Mbep/d) ?? ? ! 30 years R/P = 40 years this area = already used this area = reserves left CAS - PARIS 5

(conventional crude, worldwide) But a closer look (at ultimate reserves) suggests a different picture Ultimate reserves (conventional crude, worldwide) 1973 2000 G barrels 2000 - 3000 2000 - 3000 Between 1973 and 2000, ultimate reserve estimates have practically remained flat. source: PR Bauquis 26-28 novembre 2000 - Global Foundation CAS - PARIS 6

HISTORICAL VIEWS ON ULTIMATE RESERVES * Cumulative production + proven reserves + possible reserves yet to be discovered Gb Pratt (1942) Duce (1946) Pouge (1946) Weeks (1948) Leverson (1949) Weeks (1949) MacNaughton (1953) Hubbert (1956) Weeks (1958) Weeks (1959) Hendricks (1965) Ryamn (1967) Shell (1968) Weeks (1968) Hubbert (1969) Moody (1970) Weeks (1971) Warman (1972) Bauquis (1972) Schweinfurth (1973) Linden (1973) Bonillas (1974) Howitt (1974) Moody (1975) WEC (1977) Nelson (1977) De Bruyne (1978) Klemme (1978) Nehring (1978) Nehring (1979) Halbouty (1979) Meyerhoff (1979) Roorda (1979) WEC (1980) Strickland (1981) Coliti (1981) Nehring (1982) Masters (1983) Kalinin (1983) Martin (1984) Ivanhoe (1984) Masters (1987) Campbell (1991) Masters (1991) Townes (1993) Petroconsult. (1993) Masters (1994) USGS (2000) 1940 1949 1950 1959 1960 1969 1970 1979 1980 1989 1990 2000 CAS - PARIS 7 Source: IFP/DSEP adapted from Martin (1985) and Campbell (1992) - Updated 2000

THE IRREVERSIBLE DECLINE OF OIL PRODUCTIONS IN THE USA (*) Discoveries are registered as per their initially declared sizes and their timing is « forwarded » by 33 years CAS - PARIS 8 Source : King Hubbert 1956 - Updated by Jean Laherrere

Excl. non-conventional oils such as Athabasca and Orenoco Oil and condensate discoveries and worldwide production of liquid hydrocarbons 34 39 29 7 1 16 36 32 20 14 12 13 11 58 47 2 4 5 9 15 23 21 24 26 27 10 30 40 50 60 70 01/05 06/10 11/15 16/20 21/25 26/30 31/35 36/40 41/45 46/50 51/55 56/60 61/65 66/70 71/75 76/80 81/85 86/90 91/95 96/00 2001 - 2004 (*) Gboe/year (5-year average) ‘Classic’ exploration Deep sea (>500m) Kashagan / Shah Deniz Liquid HC production Sources: - Discoveries: IHS (excl. onsh US/Canada and GoM Shelf ) (May 2005) - Production: BP Statistical Review of World Energy (June 2004) (*) 4-year average 2.2 4.7 4.2 1.5 0.9 Excl. non-conventional oils such as Athabasca and Orenoco CAS - PARIS 9

Prospective de la production pétrolière mondiale (first draft : final draft objective end 2006) Production par pays ou Zones géographiques (hydrocarbures liquides naturels 2005 2020 2050 2100 Pays de l’OCDE 2005 USA 8 6 3 1 Canada 3 4 5 3 Mer du Nord 6 4 1 0.5 Autres 1 1 1 0.5 Sous total 18 15 10 5 Pays de l’OPEC 2005 Arabie 9 12 7 4 Iran 3.5 5 3 2 Irak 2.5 5 4 2 Koweit 2 3 2 1 Venezuela 2 4 5 4 Algérie + Libye 2 3 1 0.5 Nigéria 2 3 1 0.5 Emirats + Qatar 3 4 1 0.5 Autres 1 1 1 0.5 Sous total 27 40 25 15 Pays non OCDE – non OPEC Russie et autres : Kazakstan, Azerbaïdjan, Angola, Mexique, Argentine, Colombie, Brésil, Congo, etc… 36 43 30 20 Schistes bitumineux   4 10 CAS - PARIS Total Monde GTep / mb/d 4 / 81 5 / 98 3.5 / 69 2.6 / 50 10

Gas-hydrocarbon discoveries and production worldwide 18 26 8 16 23 15 14 65 52 3 1 2 6 11 13 9 7 10 20 30 40 50 60 70 01/05 06/10 11/15 16/20 21/25 26/30 31/35 36/40 41/45 46/50 51/55 56/60 61/65 66/70 71/75 76/80 81/85 86/90 91/95 96/00 2001 - 2004 (*) (*) 4-year average Gboe/uear (5-year average) 1.4 2.2 3.9 ‘Classic’ exploration Deep sea (>500m) Kashagan / Shah Deniz Liquid HC production Sources: - Discoveries: IHS (excl. onsh US/Canada and GoM Shelf ) (May 2005) - Production: BP Statistical Review of World Energy (June 2004) CAS - PARIS 11

2000 – 2006 : a historical warning by ASPO Are we here ? ASPO France members (June 2006): Jean Laherrère (formerly Total) Pierre-René Bauquis (fy Total) Carlos Cramez (fy Total) Jean-Luc Wingert Xavier Chavannes (Paris VII) Jean-Marc Jancovici (fy Envt) Alain Perrodon (fy Elf) Paul Alba (fy Elf) Maurice Allègre (fy IFP) Jacques Varet (BRGM) Adolphe Nicolas (Montpellier Uni) Jean-Marie Bourdaire (ex Total) Bernard Rogeaux (EDF) A few ‘peak oil’ websites 3w.peakoil.net 3w.aspofrance.org 3w.oilcrisis.com 3w.peakoil.com CAS - PARIS 12

A reminder of previous PRB views about "peak oil" 1972 IFP report to United Nations by Brasseur-Masseron – Bauquis about ultimate reserves. Publication in French in the "Revue de l'Energie" 50th birthday of the paper "What energies for medium terme (2020) and long term (2050)" in which peak oil is estimated to take place around 2020 for a world production of around 100 Mb/d (all natural liquid H.C.). 2001 Publication in English of a slightly expanded version in "la revue de l'IFP" plus versions in Spanish, German, Russian and Arabic. Publication by IFP School in "Les cahiers de l'Economie" of the paper "Quelles énergies pour les transports au XXIe siècle (in French and in English). In 2006 the author still maintains and clarifies his 1999 views as follows :  date range 2020 (+ 5 years)  world production level 100 Mbd (+ 5 Mbd)  World oil price "stabilized" in $ 2000 at 100 $/bbl (+ 20 $) 1999 2004 CAS - PARIS 13

A new methodological approach of peak oil by Paul Alba and Olivier Rech (1) Utilisation de la dynamique des phases et de la représentation f/c réf. note Paul Alba – Olivier Rech du 13.10.2004 (30 pages). Représentations initiées en 1994 par Paul Alba (ex Directeur des Etudes Economiques du Groupe ELF de 1985 à 1991). Poursuivies en 1999 par Olivier Rech dans son DEA. (actuellement Ingénieur Economiste à l’IFP).  Ce sont des méthodologies d’analyse mathématique de la forme des chroniques. (notions de trajectoires possibles, de pentes dynamiques, de paliers, de comportements asymptotiques et de convergence). CAS - PARIS 14

A new methodological approach of peak oil by Paul Alba and Olivier Rech (2) Ces méthodologies sont applicables au problème du « peak oil » réf. 1 : Article de P. Alba et O. Rech dans la Revue de l’Energie, n° 561 de novembre 2004. réf. 2 : Présentation d’O. Rech à l’ASPO (Berlin 2004).  Formulation mathématique de la production (yn) mondiale de l’année « n » (tn) supposant connues les RUR (Réserves Ultimes Récupérables) et la production d’une année de référence (yo) au temps « 0 » (to) log yn = log yo + δ log yo + C δ δ (tn-to) e - 1 CAS - PARIS 15

Accumulated production in billions of tonnes (log) From global accumulated production to URR estimates for conventional liquids Ultimate Recoverable Reserves Pessimistic scenario (2500 Gb or 342 GT) 1973 USGS (2000) (3345 Gb or 458 GT) 1945 Optimistic scenario (4000 Gb or 548 GT) 1945-73 : positive slope Unsustainable rate 1988 2004 Growth rate 10 50 100 1000 342 458 548 1900 1923 1945 1973 0.01 0.1 1 10 100 1000 Accumulated production in billions of tonnes (log) CAS - PARIS IFP - Economic Studies Division 16

From extrapolating the world accumulated production to the annual production curve Ultimate Recoverable Reserves scenarios Pessimistic scenario (2500 Gb or 342 GT) USGS (2000) (3345 Gb or 458 GT) Optimistic scenario (4000 Gb or 548 GT) Million tonnes CAS - PARIS IFP - Economic Studies Division 17

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PARTIE 2 PRINCIPALES CONSEQUENCES DU PIC PETROLIER la question du prix des énergies la question des transports CAS - PARIS 19

OIL Prices 2005 – 2050 (Arabian Light in US $ 2000/bbl) A dream view presented in Cambridge by P.R. B on 15/03/06 US$/bbl CAS - PARIS 20

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Annule et remplace Conclusions about "peak oil" - 1 Since June 2006 it can be considered that views about Peak Oil in France have become reasonably similar : TOTAL : Thierry Desmarest – around 2020 / around 100 Mb/d ASPO France : J. Laherrère – around 2015 / less than 100 Mb/d IFP : Y. Mathieu –ondulated plateau 20150/2030 – less than 100 Mb/d This point of view is widely different from those among the "optimists" who believe that Peak Oil is not "reserves related" but a political problem : insufficient investments and restrictive policies about investments by OPEC countries, Russia and Mexico : Exxon-Mobil – ongoing at ad. Campaign "no signs of peak oil" Aramco – July 2006 – "no reserves problems" BP : John Browne – May 2006 - "There is no reserves problem" Mike Lynch (ex MIT) – "similar and above 120 Mb/d" USGS, DOE, EIA, IEA… CAS - PARIS 24

Conclusions about "peak oil" - 2 The work conducted by Paul Alba and Olivier Rech leads to the important conclusion that their “optimistic view” about peak oil is practically identical to PR. Bauquis view, i.e. : Peak around 2020 Peak around 80 Mb/d for conventional oil and around 100 mb/d for all natural liquid H.C. (oil). Il est essentiel que l'IFP, TOTAL, les Universités ou les autres organismes de recherches consacrent plus d'efforts à l'étude des pics du pétrole et du gaz. Ces efforts devront porter tant sur des méthodologies "top down" que sur des analyses "bottom up". CAS - PARIS 25

conclusions - 3 La survenue du pic de production du pétrole (entre 2015 et 2025 très probablement) puis du gaz (entre 2020 et 2030) vont modifier fondamentalement notre industrie. Après le pic du pétrole, les prix du pétrole et du gaz changent de logique : ils deviennent liés à ceux de leurs substituts. Dès que le déclin s'amorce l'OPEP perd son rôle de régulateur des prix, mais peut garder d'autres fonctions . CAS - PARIS 26

conclusions - 4 Le déclin du pétrole et du gaz durera tout au long du XXI ème siècle et au-delà. Ce sera paradoxalement l'"âge d'or" du pétrole et du gaz (prix élevés et relativement prévisibles). Ce sera l'âge d'or pour les pétroliers mais aussi pour leurs fournisseurs et pour les entrepreneurs du secteur parapétrolier. Ce sera aussi l'âge d'or des "mariages" entre énergies fossiles, énergies renouvelables, … et nucléaires. CAS - PARIS 27