Thursday, September 07, 2006

Dr Ali Morteza Samsam Bakhtiari and the four phases of transition

The Daily Reckoning
Byron King
Wed 06 Sep, 2006

Note: Dr Bakhtiari predicts oil will cost in the range of $100-150 per barrel in the not-too-distant future. He characterizes this as the "Four Phases of Transition"

Dr Ali Morteza Samsam Bakhtiari is a former senior energy expert who spent his long career, which started in 1971, employed by the National Iranian Oil Co. (NIOC) of Tehran, Iran. During the course of his employment with NIOC, he held many important positions of trust and responsibility.

Dr Bakhtiari is now fully retired from NIOC, in accordance with a mandatory age requirement. He has no current official link with the company. But, luckily for us in the Western world, he is among the pioneers of the global "Peak Oil" theory.

Dr Bakhtiari predicts oil will cost in the range of $100-150 per barrel in the not-too-distant future. He characterizes as the "Four Phases of Transition" (which he labels T1, T2, T3, and T4) in a world of declining conventional oil output. So what are the "Four Phases of Transition"?

I asked the good doctor this very question, and his reply was, "As for T1, T2, T3, and T4, they are still very vague concepts, but if you allow me a few days...I shall try to explain to you what I think about these four." And good to his word, within a few days, Dr Bakhtiari was kind enough to forward some amplifying thoughts on the matter. Here is what he sent to me, to share with you:

"The four Transition periods (T1, T2, T3, and T4) will roughly span the 2006-2020 era. Each Transition [will] cover, on average, three to four years.

"The major palpable difference between the four Ts is their respective gradient of oil output decline - very small for T1, perceptible for T2, remarkable in T3, and rather steep for T4. In fact, this gradation in decline is a genuine blessing for those having to cope and adapt.

"It should be borne in mind that these four Ts are only an overall theoretical structure for future global oil output. The structure is thus so orderly because [it is] predicted with 'Pre-Peak' methods, 'Pre-Peak' assumptions, and [a] 'Pre-Peak' set of rules.

"The problem is that we now are in 'Post-Peak' mode, and that none of [the] above applies anymore.

"The fact of being in 'Post-Peak' will bring about explosive disruptions we know little about, and which are extremely difficult to foresee. And the shock waves from these explosions rippling throughout the financial and industrial infrastructure could have myriad unintended consequences for which we have no precedent and little experience.

"So the only Transition we can see rather clearly (or rather, we hope to be able to comprehend) is T1. It is clear that T1 will witness the tilting of the 'Oil Demand' and 'Oil Supply' scales - with the former dominant at the onset and the latter commanding toward the close (say, by 2009 or 2010).

"But even during that rather benign T1, the unexpected might become the rule and the orderly 'Pre-Peak' rapidly give way to some chaotic 'Post-Peak.'

"In any instance, the overall structure of the 'Four Transitions' is a general guideline for the next 14 years or so - as far as global oil output is concerned. In practice, reality might prove to be worse than these theoretical Transitions; but certainly not better."

Dr Bakhtiari has a background in chemistry. He holds a B.Sc. and Ph.D. in chemical engineering, granted by the Swiss Federal Institute of Technology in Zurich, Switzerland. He has worked in industry and taught at a university level in the fields of both chemistry and chemical engineering for about four decades.

I asked Dr Bakhtiari if it would be fair to say that he is using the term "Transitions" in a manner similar to what are known as "phase transitions" in physical chemistry? Of course, the analogy need not be an exact chemical description. But I asked him if that concept from chemistry would be a proper way of helping to explain his thinking process.

The reason I asked the question of Dr Bakhtiari, and used terms from physical chemistry, was his statement, "The major palpable difference between the four Ts is their respective gradient of oil output decline." My interpretation of that comment is that at each "transition" point where the gradient changes, we might view that as the "phase change" analogous to, say, frozen water melting, or hot water boiling.

And as for how much we do not know in a post-Peak Oil world, as Dr
Bakhtiari noted, that could be analogous to the phenomenon known as "flash evaporation." That is, if you raise the temperature of water to something well below its standard boiling point, but then rapidly change some other condition, such as lowering the atmospheric pressure above the water, the water "boils" at a lower temperature and lower pressure regime. This might be considered similar to some abrupt, unanticipated event reducing the supply of oil; for example, warfare, natural disaster, or unexpectedly rapid depletion and decline in a major oil-producing region of the world.

Dr Bakhtiari replied as follows:

"I certainly like your idea of 'phase transition,'...especially the analogy from ice to water, which occurs gradually. Start with ice and end with water, while to the very last second there is some ice present.

"I also agree that at the junction of two Ts, there should be some kind of a milestone. For example, at the close of T1, Supply should totally dominate Demand...I am toying with [the] idea, very preliminary, that close of T2 could be OPEC [oil production] surpassing non-OPEC [oil production], although OPEC died in 2004."

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