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New Fields May Offset Oil Drop
Neil King Jr., The Wall Street Journal
Output from the world’s existing oil fields is declining at a rate of about 4.5% annually, a new study concludes, depriving the world of the same amount of oil that No. 4 producer Iran supplies in a year.
Yet the study’s authors, Boston-based Cambridge Energy Research Associates, argue that their assessment supports a generally rosy view of the industry’s future, given that new projects in the works will make up for the decline.
…Oil-field depletion rates are a key barometer of the health of the world’s oil market, and thus are hotly debated among factions feuding over the relative stability of future supply. That debate is made all the more intense because analysts have limited access to reliable data on field-by-field production rates from key suppliers such as Saudi Arabia, Iran, Venezuela and Russia.
Decline rates are also closely watched because the world remains heavily reliant on output from regions and individual fields that have been producing for decades. Some of the biggest fields in the North Sea, Alaska and the Gulf of Mexico are declining at rates approaching 18% a year.
…The study strikes a more optimistic tone than do many heavy hitters in the industry. Andrew Gould, the longtime chief executive of oil-services titan Schlumberger Ltd., has estimated that the industry’s average decline rate is closer to 8% a year and growing. Christophe de Margerie, the CEO of French oil company Total SA, warned in October that many existing oil fields are being depleted at rates that will do them lasting harm.
Veteran Houston-based energy banker Matthew Simmons says that few in the industry believe that the global oil-decline rate is below 5% a year, but the lack of clear data is a problem that haunts the industry.
…CERA has drawn fire among skeptics for being one of the most optimistic forecasters in the industry. The company predicted in June that world oil production, now at just above 85 million barrels a day, could hit 112 million barrels a day by 2017.
The task of reaching that mark appears daunting.
…”However you spin it, a 4.5% decline rate is a very sobering fact,” says Thomas Petrie, a veteran Denver-based oil banker and Merrill Lynch & Co. vice president.
(17 January 2008)
UPDATE: The article has been re-posted at the Shell’s website. -BA
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The article is behind a paywall At the original, there is a nice video with journalist Neil King summarizing the article. You can also view it at Marketwatch Video: Choose “Most Popular” from the pull-down menu, then select the title “Study shows oil production down.”
The WSJ article digs into the implications of the CERA report — does a much better job than the archtypal “Experts say not to worry about oil supply” article. In the video, King presents the peak oil side of the controversy. We’ve heard from an EB contributor that the WSJ will be running even more on peak oil soon. The WSJ is becoming a positive hotbed of rationality on the subject.
Contributor Hurricane Jim writes:
Interesting video on Marketwatch from Niel King, a oil reporter from the Wall St. Journal. Cites Cambridge Energy Research Assoc. talking 4.5% decline in existing fields.
The Construction Site Called Saudi Arabia
Jad Mouawad, New York Times
RABIGH, Saudi Arabia – THE alarm bell sounded the end of the lunch break here one November afternoon, and suddenly thousands of workers – on foot, on bicycles and in buses – streamed in, seemingly from out of nowhere, and jolted this huge construction site to life.
Amid a forest of cranes, towers and beams rising from the desert, more than 38,000 workers from China, India, Turkey and beyond have been toiling for two years in unforgiving conditions – often in temperatures exceeding 100 degrees – to complete one of the world’s largest petrochemical plants in record time.
By the end of the year, this massive city of steel at the edge of the Red Sea will take its place as a cog of globalization: plastics produced here will be used to make televisions in Japan, cellphones in China and thousands of other products to be sold in the United States and Europe. Construction costs at the plant, which spreads over eight square miles, have doubled to $10 billion because of shortages in materials and labor. The amount of steel being used is 10 times the weight of the Eiffel Tower.
(20 January 2008)
Comment by Jeffrey Brown (westexas):
What is odd about this article is that the only reference to net oil exports that I saw was a suggestion that Saudi Arabia would need oil exports more than ever to finance its construction boom and because of demographics (something like six to seven kids per family).
The following graph from our top five paper shows what would happen to Saudi net exports if their total liquids production had stayed flat at 11 mbpd (in reality, 2006 and 2007 production fell relative to 2005) and if their consumption increased at the 2005 to 2006 rate of increase (current data suggest that the rate of increase in consumption accelerated in 2007):
Net oil exports would be the difference between the flat line production curve and increasing consumption. The overall long term net export decline rate (2005 to 2030) would be about -10%year, starting out slowly and accelerating with time.
http://graphoilogy.blogspot.com/2008/01/quantitative-assessment-of-futur…
Shell exec: Oil Demand, the Climate and the Energy Ladder
Jad Mouawad, New York Times
Energy demand is expected to grow in coming decades. Jeroen van der Veer, 60, Royal Dutch Shell’s chief executive, recently offered his views on the energy challenge facing the world and the challenge posed by global warming. He spoke of the need for governments to set limits on carbon emissions. He also lifted the veil on Shell’s latest long-term energy scenarios, titled Scramble and Blueprints, which he will make public next week at the World Economic Forum in Davos, Switzerland. Following are excerpts from the interview:
Q. What are the main findings of Shell’s two scenarios?
A. [The scenario named] Scramble is where key actors, like governments, make it their primary focus to do a good job for their own country. So they look after their self-interest and try to optimize within their own boundaries what they try to do. Blueprints [scenario] is basically all the international initiatives, like Kyoto, like Bali, or like a future Copenhagen. They start very slowly but before not too long they become relatively successful. This is a model of international cooperation.
Q. Your first scenario looks very similar to today’s world, with energy nationalism, competition for resources and little attention to consumption.
A. It depends where you live. I realize there are different opinions about Kyoto in the world. But if you think about Bali, Bali is a good outcome if people can agree how to have useful discussion in the coming two years and the United States, China and India are on board. The Blueprints world is maybe a world that starts slowly and is not that easily feasible, but you see some early indicators that it is a realistic possibility.
(19 January 2008)
Peak Oil Passnotes: CERA’s Silly Season
Edward Tapamor, Resource Investor
…These days we should have an oil ‘silly season’ because surely this is what the ‘analysts’ at Cambridge Energy Research Associates (CERA) have come up with this week, silliness.
They have placed their latest bit of anti peak oil ‘research’ in the media at a time when news is a bit slow in order to play their PR game, that is speak up for the oil industry. They start by claiming that their “analysis demonstrates that the aggregate global decline rate for fields currently in production is approximately 4.5% per year, and that annual field decline rates are not increasing with time.”
CERA believes that their figure is lower than the “8% rate cited in many studies and projections.” Well it is not. There is not a generally accepted figure. The figure they are talking about comes from those pesky meddling kids at the International Energy Agency (IEA) who reckon that 8% per annum is roughly correct. I mean who is the IEA when you have a load of industry consultants who make their money from oil companies?
“Some of the more gloomy, pessimistic ‘peak oil’ views about the future of oil supplies that are current today result from an assumption of high decline rates,” said CERA’s Peter Jackson. “This new analysis provides the basis for more confidence about the future availability of oil.”
So why are they even talking about peak oil? Why do they feel the need to refute it? Is CERA refuting the arrival of tonnes of oil from our new Martian overlords? Is it refuting the creation of oil by squeezing dry every last Big Mac? No, because it does not bother them, but they are bothered by peak oil.
(18 January 2008)
To support Tapamor’s point that this is “silly season” news — the report on which the CERA press release is based originally appeared more than four months ago. -BA
Whether or not Peak Oil Imminent, Bush’s Allusion to it heightens chance of ‘Peak Shock’ on Wall Street
Energy Tech Stocks
Unless you read The Oil Drum, a web site dedicated to the discussion of “peak oil” – which is the point at which global production can only go down because it has reached its physical limits – you probably didn’t hear what President Bush told an American television correspondent last week.
While in Saudi Arabia, President Bush was asked by a correspondent for the U.S.’s ABC network program “Nightline” about whether he should be taking a tougher approach in jawboning Saudi Arabia to raise its oil production. Before you hear what the American president said, a little background is necessary.
Of all the world’s oil producers, only Saudi Arabia is considered to have significant spare production capacity. Indeed, a top Iranian Oil Ministry official reportedly said the other day that most OPEC producers are currently going flat out, meaning they can’t further raise their production to meet ever-rising demand.
An important distinction must be drawn between what oil optimists and pessimists say. Optimists emphasize reserves, how much oil is still in the ground. Pessimists emphasize production capacity, how fast those reserves can be brought to the surface. When you think about it, production capacity is what really matters, especially to a global economy whose growth remains totally dependent on increasing supplies of oil (such as for those 25 new car models about to be sold to India’s emerging middle class).
Peak oil often is misinterpreted as being a function only of the amount of oil still in the ground. It is partly that. But it is also a function of the number of engineers and of equipment availability. The world has shortages of both that are likely to continue for years, causing new projects to be delayed. It all contributes to what some say is an imminent “peak” in the amount of oil the world can produce.
This argument is rebutted by those who emphasize continuing improvements in oil drilling technology, the steadily-growing amount of oil coming from tar sands and, before long, from coal (synthetic oil), plus also the sharply-rising amounts of biofuel that are being blended into gasoline.
Ultimately, whether the world has or will soon hit a production peak may be as much a political as a geological question.
(21 January 2008)
Tough sledding on other side of peak oil
Carl Etnier, Times-Argus (Vermont)
…Even when statistics are used to demonstrate something that can really be known no other way, it is often the supporting story that sticks in people’s minds. The movie, “An Inconvenient Truth” was chock-full of statistics about global warming. If you have seen the movie, can you remember a single statistic from it? I suspect most people cannot. How about the animation of the polar bear that drowns because it can’t find solid ice? I bet a lot more people remember that story.
Peak oil is similarly hard to grasp without statistics, and that’s probably one reason people have had a hard time accepting that the oil we use to run our cars and trucks and to heat our buildings is soon to become increasingly scarce. In some ways, peak oil is hard to grasp even with statistics. When world oil production reaches its peak and begins declining permanently, no statistics can confirm it until a few years after it’s happened. Right now, oil analysts examining the same numbers debate whether the plateau in world oil production since 2005 represents a rounded peak before a permanent decline or a “false summit” that precedes another rise in production.
Peak oil is even more challenging to observe with the senses than climate change. Climate change is tied to dramatic natural phenomena: the heat wave in Europe a few summers ago that killed tens of thousands of people, droughts so severe that they would normally be expected every thousand years, warm Novembers in Vermont, or dropping water levels of the Great Lakes.
Peak oil is tied to high prices at the gas pumps or increasing fuel oil bills, but even high prices are abstractions compared to drought or heat waves. At least until the prices become so painfully high that a family cannot afford enough oil to heat the house, or it has to choose between heat and adequate food, as too many Vermont families are doing this winter.
Oil shortages are no abstraction, when they lead to rationing and blocks-long gas lines, or simply to “out of gas” signs at filling stations. Those of us who lived through the Arab oil embargo of the 1970s saw the effects of those shortages. Yet without statistics, it’s impossible to see peak oil in shortages. The shortages of the 1970s were caused by political decisions; future shortages caused by exhausting the world’s finds of easily produced oil will look pretty similar.
Carl Etnier, director of Peak Oil Awareness, blogs at vtcommons.org/blog and hosts the weekly radio show Relocalizing Vermont on WGDR, 91.1 FM Plainfield. He can be reached at EnergyMattersVermont(at)yahoo.com.
(20 January 2008)
Carl is an Energy Bulletin contributor.
EU energy chief warns about ‘peak oil’
EurActiv
Energy Commissioner Andris Piebalgs has drawn attention to the ‘overlooked’ issue of dwindling oil reserves coupled with rapidly growing and unprecedented global demand. His comments were made in the run-up to the publication of a widely-anticipated package of Commission legislative proposals on energy and climate change.
Speaking to the Swiss Energy Congress on 14 January, Piebalgs warned that global energy demand is expected to more than double by 2030, and questioned whether the provision of oil can “keep up” with demand in this period.
With the Commission set to release on 23 January a series of proposals designed to help the EU realise its commitment of reducing CO2 emissions by 20% by 2020, Piebalgs argued that while tackling climate change is crucial, policymakers should not lose sight of the issue of security of fossil fuel supply.
The combined challenge of climate change and supply security leads to the conclusion that the EU cannot “hang on” to its “old, fossil energy system’, he said.
Piebalgs referred to varying predictions about when the oil production peak will be reached, with some experts saying it will be in 20 years and others arguing that the world is already at peak production.
(16 January 2008)
