Global & Alaskan Oil
Demand & Supply
Prof. W. M. Sackinger, Ph. D., C. Eng.
P. O. Box 80591
Fairbanks, Alaska 99708 USA
Presented at the
Arctic Energy Summit Technology Conference
15-18 October 2007
The Global Price of Oil has increased from the $20/barrel
range to the $80/barrel range in four years.
Oil demand in China has dramatically increased due to
population demographics and also the rise of consumer
buying power. Automobile use is increasing in China and
in other countries of the emerging former "third world".
Forecasters based in consuming economies conservatively
have projected growth rates of 1.5%/year to 1.8%/year,
and have often included a cyclic component in oil price
projections based on historical evidence.
A growth rate of 2%/year is more realistic.
Petroleum demand is derived from
population growth, industrial growth,
economic growth, and consumer product
Most of the growth in petroleum demand
from 1971 to 2004 came from transportation
growth, as seen in Figure 1.
Electric power growth has been met with new coal-fired
steam turbine generation, new hydroelectric plants, and
LNG-fired turbine generation in the Far East. New oil-fired
electrical generation has been unusual, and cannot be
expected in the future because of the relatively higher cost
of oil in comparison to almost all other alternatives. Even
wind and nuclear electric generation are now less
expensive than oil-fired electric generation.
Saudi Arabia and some of the other OPEC countries have
the prospect of net oil production increases until about
Many major oil producing countries, however, are in the net
depletion phase of their oil resources (e.g. North Sea,
Texas, Alaska, Mexico).
Several other countries have the possibility of expanding net oil production but
are impeded by uncertain or aggressive social and governmental conditions
(e.g. Venezuela, Russia, Nigeria, Burma, Iran, Iraq, etc). Such countries are
considered, in this analysis, to be unable to add to world production growth,
although they may succeed in offsetting depletion by additional drilling and
Alaskan oil is depleting and the trans-Alaska pipeline is operating at about 30%
of its design capacity. Depletion of the two major oilfields at Prudhoe Bay is
only being partially offset by the addition of new, smaller, incremental fields
being brought into production as new discoveries and production economics
A typical global depletion rate of 7%/year, along with a demand growth of
2%/year, means that new oil must be brought on line at the rate of 9%/year,
globally speaking. This comes to be about 7.3 million bbl/d of new oil must be
added each year from new oil fields. Since new large fields are typically
produced at 0.5 million bbl/d to 1 million bbl/d, as are their pipelines or offshore
loading facilities, there must be 7 to 14 such new installations starting each
year. This is not happening and will be difficult to cause to happen.
Year-on-year growth of OPEC production was 2 million
bbl/d last year, and non-OPEC year-on-year growth is
about 1.8 million bbl/d. This leaves about 3.5 million bbl/d
shortfall in growth.
Saudi Arabia has asserted that it can increase at a rate of
about 0.5 million bbl/d, reaching a production rate of 13.4
million bbl/d in about 2014. This will be followed by a
plateau in their oil production.
We may assume that the other members of OPEC which
are increasing their production (Kuwait, UAE, Algeria,
Libya) can do much the same in this time period.
We assume that oil production in the USA, Russia,
Norway, UK, Mexico, and other non-OPEC countries will
be either steady or slightly on the decline.
In Figure 2, the expansion of world oil production
is shown, with a plateau appearing in 2014, and a
sharp rise in oil price from about $100/bbl to
$125/bbl taking place in that period.
There is a very serious inflection point in 2016,
when the available crude oil conversion to
transport fuel is insufficient for the transport needs
of the world, and synthetic transport fuels (made
from natural gas and/or coal) will fill the shortfall. A
very large capital investment on a global scale will
be needed to construct those plants.
In Alaska, the production decline from the North Slope is
presented in Figure 3. The general assumption is made
that no new large oilfields will be brought into production,
either from ANWR or NPRA, during the period 2007-2020.
Since operating costs of the trans-Alaska pipeline will
undoubtedly increase, there will be a point of decision
when the pipeline will be shut down. This will drastically
reduce the Alaska State revenue and the Alaskan
It is important that the Alaskan Natural Gas Pipeline be
installed and operating well before Alaskan oil production
Thank you for your attention.