Click on the headline (link) for the full text.
Many more articles are available through the Energy Bulletin homepage
Saudis Face Hurdle In New Oil Drilling
Neil King Jr., Wall Street Journal
Next year, if all goes well, Saudi Arabia will turn the spigots on the largest oil field to come online anywhere in the world since the late 1970s.
The Khurais complex, sprawling across a swath of red dunes and rocky plains half the size of Connecticut, is expected to add 1.2 million barrels a day to an oil market caught between growing demand and a paucity of significant new discoveries. The twin forces have led to historically high prices for crude oil, which settled at a record $117.48 on Monday.
But the project also illustrates a darker point: Even in Saudi Arabia, home to more than a quarter of the world’s known recoverable reserves, the age of cheap and easily pumped oil is over.
To tap Khurais, Saudi Arabian Oil Co., known as Aramco, has embarked on the most complex earth- and water-moving project in its history.
… But the [Khurais] project also illustrates a darker point: Even in Saudi Arabia, home to more than a quarter of the world’s known recoverable reserves, the age of cheap and easily pumped oil is over.
… “Khurais and Manifa are the last two giants in Saudi Arabia,” says Sadad al-Husseini, a former Aramco vice president for oil exploration. “Sure, we will discover dozens of other smaller fields, but after these, we are chasing after smaller and smaller fish.”
(22 April 2008)
Peak Oil? Saudis Squeeze the Stone Even Harder
Keith Johnson, Environemental Capital (Wall Street Journal)
As oil reserves get harder and more expensive to suck out of the ground, one big question looms: Is Saudi Arabia facing “practical peak oil” or the real thing?
Saudi Arabian officials made waves last week with an announcement that the kingdom would voluntarily limit future oil production, in order to leave oil wealth “for future generations.” Last weekend, Saudi officials said that the world’s biggest oil producer won’t be diving into new exploration projects after next year, citing sluggish Western demand and the search for alternative fuels to petroleum.
So are the Saudis smartly shepherding their oil resources? Or are they obliquely acknowledging that getting them out of the ground will be increasingly difficult and expensive?
Neil King in the WSJ reports today (sub reqd.) on the challenges facing Saudi Aramco as it launches its last big project before taking an upstream hiatus
(22 April 2008)
Unqualified experts create fear in market, says Naimi
Nadim Kawach, Emirates Business 24/7 (United Arab Emirates)
Saudi Arabia has dismissed claims that it is overstating its real oil production capacity and said resulting fears and speculation are to blame for the sharp increase in crude prices.
Saudi Oil Minister Ali Al Naimi slammed “a handful of unqualified experts” for their attempts to create fear in the market by downgrading the real oil wealth and available capacity.
In an article published by the quarterly bulletin of the Riyadh-based International Energy Forum (IEF), Naimi put Saudi Arabia’s sustainable crude output capacity at 11.3 million barrels per day and said it would climb to 12.5 mbpd by the end of 2009.
… “One of the main challenges is dealing with the artificial fear about the availability of oil supplies, resources and production capacity. Frankly, I believe this fear has neither a scientific nor an economic basis. Nevertheless, it is creating a perception of scarcity and is therefore helping push oil prices higher,” the minister said in the article that coincided with the meeting of more than 100 IEF oil ministers, officials and experts.
“Take for example the issue of petroleum resources: all respected petroleum engineers, geologists and upstream professional organisations believe the world has enough resources to easily meet demand for at least the next 30 years.
Yet, a handful of non-specialists are able to scare the world with theories about peaking oil reserves,” he said, in a reference to recent remarks by some analysts the world’s proven oil resources have reached their peak and started to decline.
Naimi said such analysts had also created a false alarm about the spare capacity available in producing countries. “For example, we, in Saudi Arabia, have a current production capacity of 11.3 mbpd and 12.5 mbpd by year end 2009.
Yet some people who have never actually visited Saudi Arabia and who have a limited scientific knowledge about production capacity and the oil industry in general [let alone the specifics of the Kingdom’s oil industry] lower their estimates of Saudi production capacity to the range of 10 to 10.3 mbpd,” he said.
(21 April 2008)
The article by Minister Naimi is on page 4 of the April issue of the IEF Newsletter (PDF)
Many outside of the oil-producing countries are calling for greater transparency about reserves. Instituting a policy of transparency would go a long way in alleviating fears. -BA
UPDATE (Apr 23). Contributor Dave Cohen writes:
As one of the “unqualified” experts al-Naimi is referring to, I thought I would give you this excerpt from The Saudis Are Blowing Smoke Again.
Simple arithmetic can tell us what Saudi Arabia’s spare capacity is now. (All references are to crude + condensate only.) Saudi Aramco’s production capacity target is 12 million b/d by the end of 2009 and they get another 500,000 barrels from the Neutral Zone they share with Kuwait. Saudi Arabia is putting an additional 2.05 million b/d of productive capacity on-stream by the end of 2009, which makes their production capacity = 10.45 million b/d now. They are producing 9.2 million barrels, so their spare capacity is 1.25 million b/d, give or take a hundred thousand barrels, most of which is very sour (sulphur-laden) crude they can’t sell.
If you look at what the Saudis say publicly, they sometimes say that their capacity at the end of 2009 will be 12 million b/d. Sometimes they say 12.5 million b/d, but hey! — what’s a half-a-million barrels anyway? Let’s also see if they get 1.2 million b/d from Khurais, which is added in the 2009 total. Mr al-Husseini seems to think that might happen, but for a short while. From Neil King’s article —
Some doubt that Khurais will reach the promised 1.2 million barrels a day of oil production or be able to sustain that level if it does. Mr. Husseini, the former Aramco head of oil exploration, who retired five years ago, says he doesn’t doubt the company can extract that much at least briefly. “The question,” he says, “is how long you can sustain it and at what price.”
Last week Mr. al-Naimi said that Saudi Arabia has no intention of raising their 2009 capacity — whatever it is — until at least 2020. He foresees low demand in the longer term. Yes, demand will be going down because the price will be so high that few will be able to afford his oil. This will happen long before 2020.
Oil Has Two Potential Futures, Shell Strategist Says (audio, text)
Morning Edition, NPR
As oil prices hit $117 a barrel this month, a forecast from Shell Oil outlines two very different possibilities for the future of the world’s energy supply. Looking out to the year 2050, Shell strategist Jeremy Bentham says demand will go up, while oil supplies will be harder to find. But how nations and companies react is harder to predict.
“We anticipate that you’ll begin to see a plateauing of easily accessible conventional oil and gas around about the 2015, 2020 type of period,” Bentham tells Steve Inskeep.
Bentham outlines two outcomes – one a “scramble” and the other a “blueprint” scenario – for addressing energy needs.
In the scramble scenario, he says, “a focus on supply security drives a lot of decision-making.” For example, China is worried about its future supply of oil, so it decides that it needs to be friendly with Iran. Or the U.S., worried about its supply of oil, holds intensive talks with Saudi Arabia.
“That can kick off a dynamic where the tensions are perceived to be a fight between nations and hence a scramble for supply.
(22 April 2008)
Peak Oil Crisis with Chandramouli Mahadevan
Sundar Rajan G S, Coffee With Sundar (CWS) (Podcast)
Its my pleasure to invite Chandramouli Mahadevan a.k.a Mouli for the first “live” interview on CWS. Mouli is a TLM (Tech Lead and Manager) at Google. He is voracious reader and is kind enough to share some of his learnings about Peak Oil Crisis with CWS Readers. Thank you Mouli for sparing your time.
[Go to original for audio]
You can also download the interview here.
http://coffeewithsundar.com/PeakOilDiscussionsWithMouli.mp3
The following can be used as a reference to skim through the interview.
- What is this Peak Oil Crisis all about? (0:09)
- Why did the whole issue start? Why is it that the people are suddenly aware of it? (1:26)
- How is today’s oil crisis different from 1970’s oil crisis (6:25)
- What are the alternate sources of energy available to us? (8:31)
- There are these small steps like minimizing driving, work from home etc.. Can economies of scale help us mitigate the crisis with these small steps? (10:16)
- (More)
Here are some references for further reading on Peak Oil Crisis.
theoildrum.com
energybulletin.net
lifeaftertheoilcrash.net
Peak Oil – Is the world running out of Oil?
(20 April 2008)
Limits to growth and related stuff
Paul Krugman, New York Times
I’ve been getting some correspondence asking me where today’s resource concerns fit with the old “Limits to growth” stuff that received a lot of publicity 30+ years ago. Actually, there’s a bit of a backstory there.
In 1973-4, my junior and senior years in college, I was Bill Nordhaus’s research assistant, working on energy issues.
… Nordhaus, among other things, wrote a hostile review of Jay Forrester’s World Dynamics, which led to the later Limits to Growth. The essential story there was one of hard-science arrogance: Forrester, an eminent professor of engineering, decided to try his hand at economics, and basically said, “I’m going to do economics with equations! And run them on a computer! I’m sure those stupid economists have never thought of that!” And he didn’t walk over to the east side of campus to ask whether, in fact, any economists ever had thought of that, and what they had learned.
…As a result, the study was a classic case of garbage-in-garbage-out: Forrester didn’t know anything about the empirical evidence on economic growth or the history of past modeling efforts, and it showed. The insistence of his acolytes that the work must be scientific, because it came out of a computer, only made things worse.
All this is old history. But there’s something else I learned from that summer, which is important.
Much of what I did back then was look for estimates of the cost of alternative energy sources… And the estimates – mainly from Bureau of Mines publications – were optimistic. Shale oil, coal gasification, and eventually the breeder reactor would satisfy our energy needs at not-too-high prices when the conventional oil ran out.
None of it happened. OK, Athabasca tar sands have finally become a significant oil source, but even there it’s much more expensive – and environmentally destructive – than anyone seemed to envision in the early 70s.
(22 April 2008)
As an economist, Paul Krugman rejects the approach of “Limits To Growth.” But “Limits to Growth” is looking more and more prescient, while mainstream economics appears inadequate to deal with resource constraints.
Mainstream economics grew and flourished during a time of abundant resources. As we move into peak oil, we may be seeing its twilight. Our best wishes to Krugman as he manfully struggles with the transition.
Note that his comments on energy sources seem to support “Limits to Growth.” To his credit, Krugman does not ignore the contradiction. -BA
