Oil Major CEO talks about “the real problem of peak oil”
I’ve been cut off the internet in the past two days, and I still have access only via a very slow dialup, (and I have some serious issues to solve) so I won’t be around much for the rest of this week, but this is too big to pass up.
In an interview with the Times of London, Christophe de Margerie, who is the head of exploration and production and the likely next CEO of Total, the French oil major (which is the 4th or 5th biggest around, depending on the metrics), say the following:
People are failing to deal with the reality of the price, which has nothing to do with speculators or even any lack of reserves, which are ample. “It is a problem of capacities and of timing,” de Margerie says. “This is the real problem of peak oil.”
The oil is there, he says, but the amount you can deliver today depends on how many wells you can drill and how fast you can deplete an oilfield, not to mention gaining the co- operation of governments, which guard access to the precious resource jealously. There is no prospect of reaching the lofty peaks that economists at the International Energy Agency, predict will be needed to satisfy world demand for oil.
There are not enough engineers, rigs, pipelines and drillers to increase current world output of 85 million barrels per day to 120 million, he says.
It would be possible only in a world without politics, he says. “If there were no Americans, no Iranians, no English, no French and no Italians. Not a world I know.”
So, he is essentially saying that the problem is not with reserves per se, but with the rates of production, and that we will never be able to reach the production levels predicted by the IEA (International Energy Agency) – or by the US Department of Energy, for that matter – simply because it is taking increasing efforts to get the oil out of the ground and that effort cannot be accomplished with today’s industrial resources.
He underlines a point that I have been making repeatedly: the oil majors are running out of opportunities where to invest. Their investment budgets are stable or slightly increasing, but in a context of skyrocketing prices for a number of items (rigs, for instance), they are not developing more fields than before. They are constrained by lack of resources, lack of people, and lack of access to the remaining reserves, which are mostly located in countries closed to them, and which do not seem in a hurry to invest themselves.
Whatever the reasons, we have the number two guy of one of the top oil companies saying explicitly that the production hypotheses that everybody uses for long term planning are bunk. will that be enough for people to notice? When are the people at Boeing and Airbus, the car makers, the power companies, the civil works and construction companies, etc… – and the people that finance them over 20-30 years start noticing that the long term hypotheses are more and more absurd?
I finance windfarms, so I figure that it’s a safe business to be in the long term. My colleagues down the hall finance new highways and bridges, on the basis of tolls to be paid by drivers, and they usually assume a steadily, if slowly, growing traffic, over periods like 30 years or more. When I ask them, “but who will pay for your tolls in 30 years when oil is scarce and/or incredibly expensive?”, they just look at me and say that some substitute will have been found by then….
Well, scientists had better hurry, and it’s not the US government who’s going to help…
Get it in your head: no sane oilman believes in the rosy production increase scenarios still touted by the authorities. It’s time to act on it.