CERA's report is over-optimistic
On August 8, 2006, CERA (Cambridge Energy Research Associates) released a new private report with the title “Expansion Set to Continue – Global Liquids Capacity to 2015”. “Private report” means that CERA expects you to purchase the report for $2,500. The data files used in the report are also “private” rather than being audited or refereed like the data in normal scientific articles.
In the complete press release CERA present 2 of the 31 figures in the report, and both figures show very optimistic growth in the global productive capacity. The conclusion is that the report “reinforces CERA’s view that the specter of “peak oil” is not imminent”.
It is now time to make some comments about the CERA report. It is obvious that ASPO, the Association for the Study of Peak Oil & Gas, is a problem for CERA, or maybe a business opportunity as Daniel Yergin in the overview of the report announce a forthcoming report, “Myths and Legends Concerning Peak Oil”. In the report is the first of four key conclusions; The much discussed “peak oil” is not imminent nor is the start of the “undulating plateau”.
When discussing different opinions it is always good to look for the common ground and figure 8 is therefore a good starting point. We and CERA agree that production from existing oilfields is declining on average at about 5% per annum and this means, according to CERA, that 40 million barrels per day extra capacity is needed by 2015. CERA has looked at planned projects from now till 2012. They believe that all projects will be completed to 100% but with 30% of the projects delayed one to two years. Even with this very optimistic assumption they need more production and the addition is smaller fields/upgrades, fields under appraisal, NGL and yet to find.
The extrapolation to 2015 can be found for individual countries and what is needed to support an increasing production is an enormous success in new discoveries and that these discoveries can be put in production very quickly. As example CERA think that Saudi Arabia need more than 2 million barrels per day from fields that not have been found today. Shaybah is the latest giant field that Saudi Arabia started up in 1998 with a production capacity of 500,000 barrels per day. In principle CERA is saying that production equivalent to 4 Shaybah fields will be found and put into production during the next 9 years in Saudi Arabia.
When it comes to Russia, the number two global producer, CERA forecasts its production will rise to 11.2 mbpd. That is 1.3 mbpd more than the estimates from the Russian government itself.
Some people say that ASPO is pessimistic when it comes to future supply. We think that we look at the future in a realistic manner. It is clear that CERA is very optimistic, and the fact that they believe that OPEC will increase the production capacity with 12.9 mbpd is an example of optimism.
The global consumption of oil is now around 31 billion barrels per year and the discovery in 2005 was only 8.95 billion barrels according to CERA and they show that the average world discovery rate the last 11 years is 11.5 billion barrels p.a.. The bulk of these discoveries comes from regions that were opened up for exploration after the collapse of Soviet Union and from exploration in deep water. We can now see a decline in the discoveries in these regions and we expect that this decline also will give an overall decline in discoveries worldwide.
Figure 11 gives significant liquid discoveries 2005-06 and one of the listed discoveries is Noxal in Mexico. Earlier this year President Vicente Fox announced that Noxal-1 was a new discovery of the order of 10 billion barrels. This was from just one exploration well without detailed studies. In the end of May a newspaper in Mexico reported that “Noxal-1 was confirmed a failure and there is no hope of realizing a new structure with reserves of 10 billion of oil”. David Shields, a respected consultant working for Pemex, stated this. CERA think that Mexico will have a more or less constant production of 4 mbpd till 2015, even though Cantarell, that today accounts for close to 60% of Pemex’s production, is expected to decline by 50% over the next few years. This is another example of unrealistic over-optimism.
More things can be said about the report, but it is obvious that it is not worth $2,500. Part of the report is based on data not open for the public and the obvious reason for this is that CERA seek to make money from this hidden information. Oil production figures and data on reserves are of greatest importance for the global future and these should be available in the public domain as is the case in Norway and the UK.
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