Every now and again, a senior oil company executive speaks optimistically to some august gathering about all the oil that is left. This time the honor fell to Stephen Pryor, president of ExxonMobil Refining. Speaking to a conference in Houston, Mr. Pryor stridently asserted that “energy resources are adequate to sustain growth— we are not peak oil people.” At the mention of the bogeyman, “peak oil,” the reporter covering the speech, or at least his editor, felt impelled to add a few words of explanation: “proponents of peak oil argue that the world has already tapped most of the easy-to-find deposits and that the drop in supplies combined with ever-growing demand point toward inevitably higher prices that will eventually hamper global economic growth.” Actually, the reporter did a nice job in capturing the essence of peak oil.
The speaker then backs up his assertion by saying that the world has thus far produced 1 trillion barrels of oil and that there are still 4 trillion left. The average listener is left with the impression that oil shortages are centuries or at worst lifetimes away.
Of course, based on what we currently know about he earth’s oil resources, the “4 trillion barrels left” is really a stretch bordering on irresponsible. The first 2 trillion are supposed to be reserves of conventional oil. This number is based on a badly flawed US Geologic Survey study produced a few years back that attempted to estimate the world’s remaining conventional oil resources.
The major flaw was the authors’ assumption that existing and not-yet-discovered fields would eventually turn out to contain much more oil than originally estimated. While it was true many decades ago that the ultimate size of newly discovered oil fields was often seriously underestimated, modern geologic techniques have markedly reduced initial overestimates.
The usual answer to the “we have 2 trillion barrels left” assertions is to ask, “OK just where is it?” If there are really 2 trillion barrels of conventional (the kind that comes out of a well) out there, why are we only finding 4 or 5 billion new barrels a year while consuming 31 billion barrels?
This question is always answered with an evasive reply or silence, for there is no answer. The earth has been surveyed time and again with increasing sophisticated geological surveying equipment. The widely-touted 2 trillion barrels left is growing less and less likely with each passing year.
To throw in shale and tar sands as major sources of oil is also becoming less and less likely. We have yet to figure out how to get the “oil” out of shale in an economical and environmentally acceptable fashion. The latest proposal is to lower some flavor of a microwave oven down wells into the shale beds in order to melt out the “oil” using radio frequency energy. It just might work someday, but odds are it will be a very long time before we see millions of barrels a day poring out of the Rockies.
The Alberta tar sands are currently producing about 1 million barrels a day (b/d) of the world’s 85 million (b/d) of oil production. As North America runs short on natural gas to cook the tar out of the sands and water to move the mess to processing plants, very large increases in production from the tar sands seems less and less likely no matter what the price of oil.
If Canadians can stomach the environmental mess that exploiting the tar sands is making, they might get another million or two barrels b/d out of the project, but the tens of millions of production per day needed to replace depletion of conventional oil seems highly unlikely.
Someday soon it will be obvious to all that the “4 trillion barrels” of reserve exist only in the minds of Exxon speechwriters and not in the ground. To keep repeating this fable may be good for Exxon’s stock and the morale of its employees, but it certainly is not helping America prepare for oil depletion.
The second theme of the “there is plenty of oil” speech is more subtle and in effect negates the primary argument. Immediately after asserting that we at Exxon “are not peak oil people,” Pryor went on say “however, access to these (resources) will require large investment and governments will have to allow access.” Or put another way, as long as energy companies are given access to oil fields and have an incentive to invest in new technologies, we can meet the world’s needs.
In other words, Exxon says there is plenty of oil underground, but unless they are allowed to drill for it, bring it to the surface, and sell it at an acceptable profit, all bets are off. The world might just get its peak production despite those 3 trillion barrels of reserves just waiting to be exploited.
With this caveat, Exxon is getting a little closer to admitting to reality and the proximity of peak oil. Most of the remaining oil is in: Saudi Arabia, Iran, Iraq, Kuwait United Arab Emirates, Angola, Nigeria, Libya, Algeria, Sudan, Russia, Kazakhstan, Azerbaijan and Venezuela. Only nine percent or so of the world’s remaining conventional oil is in nice safe places like the Gulf of Mexico, Canada, and the North Sea, where there are no civil wars, corruption, or nationalistic governments bent to tossing out the International Oil Companies.
Now why should we really care if Exxon runs around making speeches and buying newspaper ads proclaiming there is plenty of oil left? Other oil companies are doing the same though not quite as stridently, while a few are becoming much more cautious. Well, here is the problem.
It seems that a year or so ago the US Government, Energy Secretary Bodman to be specific, became concerned about all the peak oil talk that was starting to float around in the media so the government decided to conduct the most comprehensive, thorough, definitive study of the future of energy resources every performed.
To carry out this task, they turned to the National Petroleum Council, which was set up in 1946 to advise the government on matters pertaining to petroleum. The study is due out in the second quarter of 2007 and is to answer what may be the most important question of the 21st Century— “What does the future hold for oil and natural gas supply?”
An elaborate hierarchy of committees, subcommittees and task groups has been formed. Some 200 researchers are said to be working away on this complex and incredibly important problem. When all the research is done and all the conclusions are reached, the results will be forwarded up the hierarchy to the Chairman of the study who turns out to be none other than Lee Raymond, recently retired CEO of, you guessed it, ExxonMobil and implacable foe of the concept of peak oil. It is going to be an interesting year.
In the meantime, disingenuous speeches by senior US oil company officials resulting in headlines like “Exxon Sees Plenty of Oil to Meet Increasing Demands” are not helping the situation.