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Is Venezuela the Next Flashpoint for Oil?

Kurt Cobb, Scitizen
In a world desperate for new oil supplies, Venezuela beckons. But will its fumbling management of oil production lead to foreign intervention, covert or otherwise, in a effort to raise Venezuelan output?

In the days of ample oil supplies a poorly managed nationalized oil industry or a hostile political regime just meant that exploration companies had reason to search for oil elsewhere. Now with 88 percent of the world’s oil reserves under the control of national oil companies and few good prospects for large finds available beyond areas controlled by such companies, oil importing countries will be forced to rethink how they will supply themselves with adequate quantities of oil.

Robert Rapier recently explained the reasons behind the drop in Venezuela’s oil production: failure to reinvest in new production and fear of expropriation among those companies that deal with Venezuela and its national oil company, Petróleos de Venezuela S. A. (PDVSA). Whatever one thinks of Venezuelan President Hugo Chavez’s programs designed to assist the nation’s poor, they have been largely paid for with oil revenues. And, he has now undermined the ability of the oil industry to fund his programs.

But that also means he is undermining Venezuela’s ability to provide oil exports to importing nations. In a world awash in oil, this would merely be Venezuela’s problem. But with oil supplies tight and a near-term peak in the world’s rate of oil production a major risk, it’s possible that oil importing countries–particularly the United States which is one of Venezuela’s largest oil customers–may decide that it is necessary to solve Venezuela’s problem of declining oil production for it.

I am not necessarily predicting armed conflict. But a country advertised to have 513 billion barrels of technically recoverable heavy oil alone is a tempting target for international mischief.
(4 October 2010)
Kurt Cobb is an EB contributor. -BA

Foreign Policy: Iraq Is Back In The Game

Steve LeVine, NPR
In the world of oil reserve forecasting, Iraq is hunky, handsome, and — to its dissatisfaction — often overlooked. Today, it sought to rectify this negligence with the announcement of a whopping 24 percent increase in its estimated reserves. With a poke in the eye to a traditional rival, Iraq’s oil minister said the country had overtaken Iran as the world’s fourth-largest petrostate, with 143 billion barrels of oil, or more than half of Saudi Arabia’s mother lode.

Hussain al Shahristani appears to be targeting two audiences with his announcement, write Bloomberg’s Kadhim Ajrash and Nayla Razzouk: cash-rich foreign oil companies and, more importantly, the Organization of Petroleum Exporting Countries (OPEC), which at some point will reassign Iraq a production quota.

Bluntly speaking, Shahristani was giving the following notice to OPEC: We are big, really big, and can shake up global oil prices if left to our own devices.

… Phil Flynn, an analyst with PFG Best, is impressed, but for different reasons, he wrote in his daily column today. "Oh well," he said, "another setback for peak oil theorists."

Steve LeVine is a contributing editor at Foreign Policy and the author of the book, The Oil and the Glory.
(5 October 2010)
Steve is also a regular contributor to Energy Bulletin. -BA


Running on empty: the end of oil as we know it

Jim Baldauf, The Hill’s Congress Blog
… Many of the world’s top energy experts attending ASPO-USA’s annual peak oil conference in Washington, D.C. this week agree that the era of low-cost, easy-to-get oil has come to an end just as global demand will start to accelerate. That’s why oil and gas companies are trying to extract oil from shale formations and drilling miles down in the Gulf of Mexico and elsewhere. Recent reports from government and military agencies in the United States, Great Britain and Germany all point to shrinking oil supplies as a growing reality fraught with potentially drastic consequences —resource wars, price shocks, shortages of fuels and vital goods, and broad economic decline.

Peak oil and energy depletion represent a stark challenge to long-held assumptions that underlie the American way of life. Without affordable energy to drive our economy, we can expect price spikes and economic crises to be the new normal. The Pentagon’s Joint Operating Environment Study uses the bleak language of war and collapse. These are not the ravings of “Chicken Little” alarmists; these are cold sober calculations from the minds of the best scientists and energy analysts on the planet.

While the debate about Peak Oil is over, the work of addressing the enormous challenge of energy depletion has barely begun.

Jim Baldauf is a Co-founder and President of the non-profit, non-partisan Association for the Study of Peak Oil & Gas-USA (ASPO-USA). The group is holding its 6th annual Peak Oil Conference October 7-9 in Washington, D.C.
(5 October 2010)


Depletion Is Economic, Not Just Geological, Concept

Jeffrey Rubin, Huffington Post
As I head down to Washington to speak at the ASPO-USA (Association for the Study of Peak Oil and Gas) 2010 World Oil Conference this week, I can’t help but reflect on how far the peak oil movement has come over the last decade. It’s not too hard to figure out why. There is a very simple litmus test for the credibility of the movement’s central theory of depletion–the price of oil. With oil already trading at over $80 per barrel in the shadow of the world’s deepest-ever postwar recession, I guess there’s not much of a debate anymore.

Of course the world will never run out of oil in the literal sense. There are some 170 billion barrels of the stuff trapped in the Alberta tar sands, and over 500 billion barrels more in the Orinoco tar sands in Venezuela. And if we suck them dry, there are billions more barrels of oil in shale, just as there is natural gas.

But what the global economy has already run out of is the oil it can afford to burn. Depletion isn’t just a geological concept; it’s also an economic one.
(5 October 2010)


Shale oil boom underlines importance of innovations on another fuel – oil shale

Sheila McNulty, Financial Times (journalist blog)
Kevin Shaw, an energy lawyer with Mayer Brown, the law firm, says the standard joke in the oil and gas industry is you know a boom is near the top when people start talking about oil shale in Colorado. That is because what is known by purists as “oil shale” is different from the “shale oil” that is being pumped like crazy out of the Bakken oil reserve and being targeted for production in the Eagle Ford and other new hotspots across the US. ExxonMobil’s Patrick McGinn explains the difference:

The hydrocarbons locked up in oil shales in Colorado are a solid material called kerogen, which is a precursor to oil and gas. In other words, nature has not yet had enough time to cook the kerogen into oil and gas because of a lack of heat (typically caused by pressure deep underground). The Baaken shale oil contains hydrocarbons that already exist as liquid oil because it was originally deep underground and had enough time and heat to convert from kerogen to oil.


The majors, like Exxon, have been working on and off for years on technology to economically convert the oil shale of Colorado and other similiar formations into fuel.

… it already seems clear why the majors have never gotten caught up in the peak oil arguments. Given all the potential source rocks out there, and the industry’s record of technologial advancements, they are a long way from pronouncing the last drop of oil has been produced.
(4 October 2010)


LNG Trumped

Peter McKenzie-Brown, Oil Week via Language Matters
If you want to understand the performance of global natural gas markets in the next few years, think hockey. On one side the team captain is liquefied natural gas (LNG); on the other natural gas from shale reservoirs (“shale gas”). The matches are serious, but they are also friendly. Each side is a team of rivals. The squads frequently swap players in and out, but they can play nail-biting games.

Robin Mann’s description of an annual CBM conference in Asia calls the game during two days of play. The first day of the Singapore conference, the president of AJM Petroleum Consultants says, the dominant theme was that “if there is a lot of shale gas development in India, Europe and China, there will be no need for much LNG project development.”

Shale Gas one; LNG zip.

On the second day, however, “the speakers suggested that new LNG projects will be needed no matter how much shale gas is developed in those countries. LNG development might not be as dynamic as people had thought it would be, but the projects now built or on the books to be built will remain viable.”
Game tied.

He cautions, though, that “In the end price will be the deciding factor.” Of course, everything from geopolitics to economics can influence price. This is the recurring theme in the competition between LNG and shale gas.

Three Sources of Gas

From the perspective of North American producers, the future of three gas sources (not two) is of interest. The first is the wild success of shale gas production in the US and Canada. The shale gas revolution, as it is called, is largely the result of rapid innovation in such down-hole technologies as horizontal drilling, better bit design, coil tubing, down-hole motors, geo-steering, microseismic, measurement-while-drilling tools and more powerful fraccing systems. It has truly been a revolutionary development.

The second is the evolution of a global market for liquefied natural gas. This development has been decades in the making, and it has eliminated the need for pipelines to tie stranded gas into the world’s industrial markets. To cite the extreme example, Qatar is developing liquefaction facilities for an offshore reservoir with more than a quadrillion cubic feet of proved reserves, and it will be able to deliver that gas around the world for a century or more.

The gas industry’s third area of interest lies in the huge conventional gas reserves in Alaska and the Northwest Territories.
(5 October 2010)