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Is there really an ocean of oil off Brazil?

The Economist (UK)
JUST how much oil is there off the coast of Brazil? Until recently, Brazil’s oil reserves were thought to be relatively modest: about 12 billion barrels at the beginning of 2007, according to BP, or about 1% of the world’s total. But last year, Petrobras, Brazil’s partly state-owned oil firm, announced the world’s biggest oil discovery since 2000: the Tupi field, which it hopes will produce between 5 billion and 8 billion barrels. Now the head of Brazil’s National Petroleum Agency (ANP) says another nearby discovery might hold as much as 33 billion barrels, which would make it the third-largest field ever found. That alone would be enough to raise Brazil to eighth position in the global oil rankings-and there is talk of further big discoveries. But the peculiar way in which the information came to light is casting doubt on its significance.

The ANP, which regulates the oil industry in Brazil, was quick to distance itself from the remarks of its boss, Haroldo Lima. His comments were of a personal nature, it said, and were based on past reports in the media.

… Nonetheless, the immediate impact of the “pre-salt” discoveries will be small. It will be several years at least before any of the new oil comes to market. What is more, it will be expensive to produce. The fields are all far out at sea, deep under ground that is itself far below sea level.
(16 April 2008)

Hydrates updated

Jean Laherrère, The Oil Drum: Europe

I decided to update my past papers on hydrates.

… Conclusion

Since 2002 many hydrates discoveries have been made in countries eager to get domestic methane production as in Japan, India, China and South Korea. But as in previous discoveries in US Cascadia and Blake Ridge, hydrates are of limited extent, quite dispersed and mainly in clay sediments in deepwater. Permafrost drilling finds different hydrate types, being frozen from former conventional gasfields.

Estimates of methane hydrates have been divided by a factor of 1000 but old estimates are still quoted in order to get financing.

An offical report to the US Congress states that there is no commercial hydrate production technique available. Oceanic hydrate methane will stay unproduced as marsh gas or methane in cows or termites.

My only unanswered question is: why hydrates being lighter than water are not popping up to the sea surface?
(14 April 2008)

Petroleum Geologist Jeffrey J. Brown Speaks at UCSB

Ben Preston, Santa Barbara Independent
Peak Oil Means Much Higher Prices

It’s something we’ve all heard before-oil prices are going up and reserves are being depleted. Usually, the people talking about it are environmentalists-sometimes easy targets for those who are in favor of continued production and consumption of petroleum.

However, there is another, and in many ways more effective voice crying wolf. Jeffrey J. Brown, a petroleum exploration geologist from West Texas, has been studying oil production for years and his message is simple-despite increasing consumption, the production of oil around the world is on the decline.

Invited by the UCSB Energy Club and the Bren School for Environmental Science and Management, Brown held the rapt attention of a crowd of over 100 people at UCSB’s Corwin Pavilion last night. Listening to him speak in his calm, unexcited West Texas drawl, one would expect him to begin extolling the virtues of industrialized society and the many hidden reservoirs of black gold that the world can rely upon.

On the contrary, Brown stated very plainly that world consumption of oil-particularly in America-is unsustainable, and is embarked upon a crash course with falling production. Comparing the current decline in Saudi Arabian production-Saudi Arabia is currently the number one producer in the world-with the early 1970s decline in West Texas’ production, Brown’s facts and figures indicated that not only will production continue to fall ever more rapidly, but that increasing use will cause a major crisis at some point in the not-too-distant future-some of the estimates indicated within the next 20 years.

While some might call for drilling in the Alaska National Wildlife Refuge to beef up the U.S. oil supply, Brown’s model shows that the amount of oil there is only a minute fraction of what is needed to push forward a production peak that already passed years ago. “It’s just a rounding error,” he said.
(16 April 2008)
If you ever wanted to know what maverick oilman “westexas” looks like in person, there is a handsome photo of Jeffrey J. Brown at the print-version of the article. -BA

UPDATE (Apr 17) Jeffry J. Brown writes:
We had a good turnout, and I was honored to be asked to speak at the University of California at Santa Barbara, and UCSB is doing pioneering work in a number of areas, especially energy efficiency and photovoltaics.

Note that I was essentially presenting the quantitative work that my coauthor, Samual Foucher, has done, which the Energy Bulletin published in this article:

The author of newspaper article did a good job of capturing the overall context of the presentation, but the nuances are sometimes easy for people to miss, for example, Saudi Arabia is the world’s largest net oil exporter, but Russia is the world’s largest oil producer.

6 Ways to Profit from ‘Peak Oil’

Aaron Task, Tech Ticker via Yahoo!Finance
Earlier, Charles Maxwell, senior energy analyst at Weeden & Co., made the case that “peak oil” theory is real and inevitable, and that $300 oil is coming in the next decade. While a frightening prospect with major societal implications, it’s also one with significant potential for profit.

When investing in energy for the long run, it’s best to avoid the major oil companies like Exxon Mobil, Chevron, and ConocoPhillips, Maxwell says. There’s a reason these firms are cutting back on exploration even as oil prices and demand are rising: Facing both geological and geopolitical obstacles, they cannot find reserves big enough to move the production needle.

Instead, Maxwell recommends a basket of companies with “long-lived reserves…
(X April 2008)
Contributor Dan writes:
My jaw nearly hit my desk when I saw this story in the Top Stories on the Yahoo Finance main page. Not for the fact it was there, but the spin placed on it to actually profit from this. More video coverage at the original.

Why Do Oil Prices Keep Rising?

Michael “Mish” Shedlock, Mish’s Global Economic Trend Analysis
… Inquiring minds might be asking: If U.S. consumption is down why are p
rices rising? Here are the answers.

  • The dollar is falling

  • Global demand is still rising
  • Peak Oil
  • Speculation

… Is Peak Oil Causing Inflation?

The answer is clearly no. Peak oil can never cause inflation in and of itself. Inflation is an increase in money supply and credit. Peak oil cannot cause that to happen. Rising oil prices in general, for any reason cannot cause inflation either. However, rising oil prices could be a result of inflation. But given that the U.S. is in deflation right here right now, the recent rise in oil prices cannot be attributed to inflation, at least in the U.S.

Rising oil prices can be attributed to rising inflation in China, rising worldwide demand, and peak oil. That is a nasty brew and there is no way for the Fed or the ECB to control it.

Suppose oil production in a large Saudi Arabia oil field halted tomorrow. Oil just ran out unexpectedly and oil surged to $300. Would the correct response be to hike interest rates to combat inflation?

The idea of course is preposterous. Every central bank in the world would be rapidly cutting rates because economic activity would drop off a cliff. Instead of shutting down that oil field overnight, imagine it shuts down over time. Just like is happening. Oil prices rise. Is the response from central bankers supposed to be to keep hiking?

That simple example should show why setting interest rate policy based on the price of oil is absurd. However, central bankers are certainly guilty of spawning bubble blowing policies that have led to the mess we are in.
(16 April 2008)
Contributor Rick Lakin writes:
Mr. Shedlock effectively presents counterarguments to all of the day-by-day explanations given by the mainstream press as to why oil prices are rising. His conclusion accurately points out that the Fed is in a a conflation of the inflationary effects of Peak Oil and the weak dollar vs. the deflationary effects of the credit crunch and downward pressure on equities.