Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre, the UK registered charity dedicated to raising awareness of peak oil.
This week saw the Chairman of one of the world’s major oil companies publicly acknowledge the approaching peak in oil production. During a panel discussion at the annual World Economic Forum at Davos in Switzerland on Thursday, Thierry Desmarest, Chairman of Total said:
“The problem of peak oil remains. We have always been relatively prudent in our assessment of a peak oil date in Total between, I would say, the International Energy Agency, which was extremely optimistic a few years ago – a bit less today – and some so called experts who were announcing that the peak oil has already taken place. In our opinion it will be very difficult to raise the oil production above 95 million barrels/day, which is something like 10% above today’s level – so its not enormous…So I think we must keep in mind that in a few years from now the market may be in a relatively difficult position in, the energy security concerning oil (because I think for gas we have certainly more time), will be a big problem.”
You might think that such an explosive point would provoke a lively debate, but you would be wrong. Panel moderator Daniel Yergin, the founder of CERA and a long-term antagonist of peak oil, moved quickly onto Iraq and the prospects for expanding production. Only Khalid al-Falih, Chief Executive of Saudi Aramco contradicted Desmarest, saying that although “long-term it [oil] is a depletable resource”, it would be possible with the use of technology to exceed 95 or even 100 million barrels/day.
Both Tony Hayward and Peter Voser, Shell’s chief executive, emphasised the growing global demand for energy and insisted hydrocarbons will continue to make up to 80% of the energy mix for the foreseeable future. Despite nods towards environmental responsibility, their focus was on the need for governments to provide the conditions to allow the industry to develop the remaining resources. The organizers seemed to agree and to have made their minds up in advance, since there was little discussion of renewables in a debate billed as a ‘World Energy Outlook’.
Press reports continue to punt the idea that an imminent expansion of oil production capacity in Iraq will soon cause a glut – this despite the massive security, legal and infrastructure challenges. This week however it was Venezuela that was touted as the ‘next Saudi Arabia’. The claims are based on a new US Geological Survey estimate that raises the country’s recoverable reserves numbers. ODAC trustee Dr Richard Miller is sceptical that the development will lead to any significant change in the global supply situation, as he explains in this week’s ODAC commentary.
In the UK this week the government tried to slow the decline of North Sea oil and gas by bowing to pressure to increase tax relief for oil companies. ODAC waits with interest to see if the treasury will give equally generous incentives to renewables in its forthcoming feed-in tariff scheme. According to a YouGov survey conducted for Friends of the Earth, the Renewable Energy Association and the Co-operative Group, the UK public is receptive to the idea. However Alan Simpson MP, the government’s special adviser on renewable energy sounded a note of warning: “As things stand, the government could turn a brilliant idea into a pitiful failure. What the public are looking for is real vision and ambition, not a towering lack of it.” You have been warned.
Oil
Davos – Global Energy Outlook
Despite the major decline in energy prices from their peak in 2008,
energy security concerns have increased as major producing and
consuming economies differ significantly on how to develop a more
secure and stable energy system.
How can producers and consumers develop mutually beneficial approaches to energy security?
DAVOS-Saudis say don’t worry about peak oil
There is still plenty of oil in the ground and the world should put aside fears about “peak oil”, the head of the Saudi state oil firm Saudi Aramco said on Thursday.
“The concern about peak oil is behind us,” chief executive Khalid al-Falih told a session on energy supplies at the World Economic Forum in Davos…
Davos 2010: a new peak in oil production is needed, energy leaders argue
At a meeting of oil leaders at the World Economic Forum at Davos, Tony Hayward, group chief executive of BP, said that there was a “supply challenge” for the industry which would have to increase output to 100mbd – a new peak for oil. Mr Hayward said that at present the world was producing between 83 and 84mbd.
He said he hoped Iraq would become a major oil player, producing up to 10mbd in the next decade if the political situation remains relatively stable…
Venezuela oil ‘may double Saudi Arabia’
Shell forced into oil sands U-turn
Royal Dutch Shell chief executive Peter Voser cannily chose the safe ground of an exclusive interview with the Financial Times to finally admit the all-too-obvious – the Canadian oil sands development Shell has touted as a major growth driver is instead a costly distraction, on which time is now being called. Mr Voser said the massive expansion the company had previously planned for its Athabasca Oil Sands Project (AOSP) – envisioning growth from the current 155,000 barrels per day (bpd) capacity to an eventual 770,000bpd – was now ‘”clearly scaled down” and would be “very much slower”…
IEA to Meet CFTC, OPEC, Banks on Curbing Speculation
The International Energy Agency will meet OPEC, banks and U.S. and U.K. regulators in Tokyo next month to discuss limiting energy-price speculation.
IEA Executive Director Nobuo Tanaka said today he has asked U.S. Commodity Futures Trading Commission Chairman Gary Gensler, officials of the U.K. Financial Services Authority, and bank executives including Lawrence Eagles, head of commodities research at JPMorgan Chase & Co., to take part. The two-day meeting will start Feb. 25…
BP’s Iraq oil deal faces court battle
An Iraqi MP is attempting to derail BP’s flagship deal to develop the giant Rumaila oil field in legal action against the country’s prime minister and oil minister.
The British oil major and its partner China National Petroleum Corporation won the right to develop the massive Rumaila field in a historic televised oil field auction last June. The contract was formally signed in November…
Kazakhstan to force foreign oil firms to pay more tax
Kazakhstan will tear up contracts signed by Shell, BG and other foreign energy companies to invest more than $150bn (£90bn)to exploit giant new oil fields in the country, forcing them to pay more tax.
Shell has a 16.8% stake in the consortium developing the Kashagan field at an estimated total cost of $136bn…
Tax breaks to lure oil and gas sector
Hundreds of millions of pounds in tax breaks for companies opening up Britain’s last offshore oil and gas frontier are being offered by the government…
Shell faces legal fight over Arctic wells
Royal Dutch Shell’s controversial plans to drill for billions of barrels of oil in the Arctic’s environmentally sensitive frozen waters face a potentially damaging legal challenge.
An alliance of conservation and Alaskan indigenous groups has filed a legal claim to prevent Shell drilling for oil this year in the Arctic Ocean’s Chukchi Sea. Two years ago, Shell paid $2.1bn (£1.3bn) to the US government for 275 oil leases there…
Iraq’s production bonanza may fuel a slide in oil
It is only a matter of days before the last of Iraq’s yet-to-be awarded oil contracts are due to be signed, bringing to a close a two-stage, seven-month process under which Western energy majors have gained access to a country with the planet’s third-largest oil reserves.
Such deals will inevitably be a focus of the UK oil sector’s year-end reporting season, which begins the following week, and the annual round of strategy presentations to investors that starts shortly after…
Gas
Crown in row over energy supply
Utility companies hoping to build eight vital gas storage projects for UK supplies have written to MPs urging them to stop the Crown Estate from tripling fees for leasing suitable land off the British coast.
Centrica, National Grid, EON, EDF, Scottish Power and Scottish and Southern Energy are part of the 16-member Gas Storage Operators Group, which is challenging the proposals to increase fees for using depleted fossil fuel fields in the North Sea…
Cold winter leaves utilities with a warm feeling inside
The cold winter weather this year will deliver a £100 million boost to the profits of Britain’s Big Six energy companies, according to forecasts by City analysts.
Centrica, the owner of British Gas and Britain’s largest gas and electricity supplier, with 16 million customers, is likely to be the biggest single winner, Peter Atherton, utilities analyst at Citigroup, said…
Coal
E.ON chief: Preserve coal plants to keep lights on
Ageing coal-fired power stations should be exempted from environmental regulations and kept open to stop the lights from going out, the chief executive of E.ON UK has urged the government.
Paul Golby told the Guardian that some of the coal and oil-fired plants due to close this decade because of European pollution regulations should remain operational and ready to come online during periods of peak demand such as those experienced in recent weeks. The Guardian revealed this month that almost 100 large power users had to switch to alternative sources when National Grid triggered clauses in their interruptible supply contracts…
Renewables
Public supports ambitious scheme for micro-scale renewable energy: poll
The public overwhelmingly support a much more ambitious scheme to push renewable energy for homes and communities, a new poll shows today ahead of a key government announcement next week.
Government officials are putting the finishing touches to plans to boost the take-up of renewable energy in Britain – which is the lowest in Europe – through a system known as the “clean energy cashback”, or feed-in tariff…
Climate
Barack Obama commits to climate change bill
Barack Obama put himself firmly behind the effort to get a climate change bill through Congress last night – but said it must include a new generation of nuclear power.
The brief passage on energy and climate in Obama’s state of the union address did deliver the signal Congress and much of the world had been seeking that the White House is ready to throw itself into the effort to pass legislation…
China admits ‘open attitude’ over warming
China appeared to cast doubts on Sunday on the scientific consensus on the underlying causes of global warming, with a senior official saying that Beijing had an “open attitude” towards what he described as “disputes in the scientific community” on the issue…
Geopolitics
Iranian forces fully withdraw from Iraq oilfield
A small contingent of Iranian troops fully withdrew on Wednesday from near an inactive oil well inside Iraqi territory, the Iraqi Foreign Ministry said.
The foreign ministers of the two countries had agreed to maintain friendly relations and withdraw all military forces in the area to their original positions, the ministry said in a statement…
Russia, Belarus sign deal ending oil dispute: official
Russia and Belarus on Wednesday signed a new deal on Russian oil deliveries to Belarus, Russian Deputy Prime Minister Igor Sechin said, ending a month-long dispute that had raised fears European supplies could be threatened.
“Today a large number of documents have been signed,” Sechin told Russian President Dmitry Medvedev at a meeting, in comments published on the government web site…
Economy
UK economy emerges from recession
The UK economy has come out of recession, after figures showed the economy had grown by 0.1% in the last three months of 2009.
The economy had previously contracted for six consecutive quarters – the longest period since quarterly figures were first recorded in 1955…
Sarkozy seeks a new order and throws down gauntlet to China
President Sarkozy has promised to put the huge trade imbalances between the East and West at the centre of global financial reform when France takes over leadership of the G8 next year.
In a speech at the World Economic Forum in Davos yesterday, Mr Sarkozy called for a more responsible form of capitalism for the 21st century and backed President Obama in his attempts to break up some of the world’s biggest banks…
Economic growth ‘cannot continue’
Continuing global economic growth “is not possible” if nations are to tackle climate change, a report by an environmental think-tank has warned.
The New Economics Foundation (Nef) said “unprecedented and probably impossible” carbon reductions would be needed to hold temperature rises below 2C (3.6F)…
Iata says airlines suffered ‘worst year’ in 2009
The year 2009 saw the biggest decline in air passenger traffic in the post-war era, according to the International Air Transport Association (Iata).
“In terms of demand, 2009 goes into the history books as the worst year the industry has ever seen,” said the group’s boss Giovanni Bisignani…
The Orinoco Belt is Venezuela’s version of the Canadian tar sands, an unconventional resource. This non-conventional oil is generally assessed to be 1200 billion barrels in place, about equal to the world’s conventional oil reserves.
The question is, how much might be recoverable? Venezuela’s reserves today are put at around 100 billion by BP, of which perhaps 40-50% or more is from the Orinoco (there isn’t a current detailed breakdown of what BP’s reserves data consist of). What the USGS has done is raise the estimate of how much of the Orinoco tar might be recoverable, to 40-45%. They have applied views of… “currently available technology and industry practices”. And yes, that would clearly leapfrog Saudi’s declared reserves.
It’s worth noting just how long Canada’s oil sands are taking to develop, where perhaps another 5 million b/d will come on stream over the next 20 years. Even if Venezuela could match this, I don’t think that an extra 250,000 b/d of production every year is going to make a global supply difference. Oil sands are also notoriously “dirty” both in terms of environmental destruction and pollution, and extra carbon dioxide emission during the production process.
But the BBC story continues. “However, Venezuelan oil geologist and former PDVSA board member Gustavo Coronel was sceptical. “I doubt the recovery factor could go much higher than 25% and much of that oil would not be economic to produce”, he told Associated Press news agency.” So a PDVSA insider reckons that the feasible recovery factor will actually be much less than the USGS thinks, and the extra oil would often be unaffordable anyway.
Nothing has therefore changed much. The USGS has done its work of identifying how much oil could theoretically be recovered by today’s technology, but the investment required, the lead times, the environmental consequences and the final product cost all presently suggest that this isn’t a game-changer.
Dr. Richard Miller is an Independent Consultant, and former geochemist for the BP Exploration Department