No "peak oil" yet
New York Times
By JAD MOUAWAD
September 24, 2009
The oil industry has been on a hot streak this year, thanks to a series of major discoveries that have rekindled a sense of excitement across the petroleum sector, despite falling prices and a tough economy.
These discoveries, spanning five continents, are the result of hefty investments that began earlier in the decade when oil prices rose, and of new technologies that allow explorers to drill at greater depths and break tougher rocks.
“That’s the wonderful thing about price signals in a free market — it puts people in a better position to take more exploration risk,” said James T. Hackett, chairman and chief executive of Anadarko Petroleum.
More than 200 discoveries have been reported so far this year in dozens of countries, including northern Iraq’s Kurdish region, Australia, Israel, Iran, Brazil, Norway, Ghana and Russia. They have been made by international giants, like Exxon Mobil, but also by industry minnows, like Tullow Oil.
Just this month, BP said that it found a giant deepwater field that might turn out to be the biggest oil discovery ever in the Gulf of Mexico, while Anadarko announced a large find in an “exciting and highly prospective” region off Sierra Leone.
It is normal for companies to discover billions of barrels of new oil every year, but this year’s pace is unusually brisk. New oil discoveries have totaled about 10 billion barrels in the first half of the year, according to IHS Cambridge Energy Research Associates. If discoveries continue at that pace through year-end, they are likely to reach the highest level since 2000.
While recent years have featured speculation about a coming peak and subsequent decline in oil production, people in the industry say there is still plenty of oil in the ground, especially beneath the ocean floor, even if finding and extracting it is becoming harder. They say that prices and the pace of technological improvement remain the principal factors governing oil production capacity.
While the industry is celebrating the recent discoveries, many executives are anxious about the immediate future, fearing that lower prices might jeopardize their exploration drive. The world economy is weak, oil prices have tumbled from last year’s records, corporate profits have shrunk, and global demand for oil remains low. After falling to $34 in December, oil prices have doubled, stabilizing near $70 a barrel. But if the world economy does not pick up, some analysts believe the price could fall again.
Oil companies contend that is not a prospect they can afford. Despite reaping record profits in recent years, many executives have warned that they need prices above $60 a barrel to develop the world’s more challenging reserves. In fact, some exploration activity has already slowed this year, as producers seek better terms from service companies and contractors.
It is not just oil that is benefiting from the exploration boom. Repsol, Spain’s biggest oil company, said this month that it had discovered what could turn out to be Venezuela’s biggest natural gas field. In recent years, companies have found substantial natural gas reserves in the United States, from shale rocks once believed to be impossible to drill.
“The No. 1 question that exploration teams have right now is, Where do we go next?” said Robert Fryklund, who ran the operations of ConocoPhillips in Libya and Brazil, and is a vice president in Houston at Cambridge Energy Research Associates.
Exploration spending swelled in recent years, partly to offset a doubling of costs throughout the industry — from steel prices to the cost of renting deepwater drilling rigs. A big issue confronting the industry now is how to drive down costs while maintaining a high level of exploration. On average, costs have fallen by 15 to 20 percent from their peak, according to petroleum executives.
Exploration remains a risky, and costly, business, where some deepwater wells can cost up to $100 million. From 30 to 50 percent of exploration wells find oil.
Some executives are also worried the world might face a shortfall in supplies in coming years if another decline in oil prices causes exploration to falter.
The chief executive of the French oil giant Total, Christophe de Margerie, has warned that such a supply crunch is possible by the middle of the next decade. “There could be a shortage of capacity,” he said.
His concerns echoed those of Abdullah al-Badri, the secretary general of the Organization of the Petroleum Exporting Countries, who said that lower oil prices also threatened investments by OPEC nations.
Saudi Arabia is also unlikely to expand its production in coming years because of the uncertainty clouding future oil demand, Ali al-Naimi, the kingdom’s oil minister, signaled earlier this month. Saudi Arabia is just completing a $100 billion program to increase its capacity to 12.5 million barrels a day, from around 9 million barrels a day just a few years ago.
Although they are substantial, the new finds do not match the giant fields discovered in the 1970s, like Alaska’s Prudhoe Bay, Ekofisk in the North Sea, or Cantarell in Mexico. They are also dwarfed by the last enormous discovery, the Kashagan field in the Caspian Sea, discovered in 2000 and estimated to hold over 20 billion barrels of oil.
“We have not seen another Kashagan, but still these finds are very material,” said Alan Murray, the exploration service manager at Wood Mackenzie, a consulting firm in Edinburgh.
Since the early 1980s, discoveries have failed to keep up with the global rate of oil consumption, which last year reached 31 billion barrels of oil. Instead, companies have managed to expand production by finding new ways of getting more oil out of existing fields, or producing oil through unconventional sources, like Canada’s tar sands or heavy oil in Venezuela.
Reserve estimates typically rise over the life of a field, which can often be productive for decades, as companies find new ways of getting more oil out of the ground.
The industry’s record has improved in recent years, thanks to high prices. According to Cambridge Energy Research Associates, oil companies have found more oil than they produced for the last two years through a combination of exploration and field expansions.
“The appetite for opening new frontiers when prices were low in the 1990s was very small,” said Paolo Scaroni, the chief executive of Italy’s oil giant Eni. “Today, the biggest discovery of all is technology.”
One of the largest finds this year was made by a small producer, Heritage Oil, at the Miran West One field in the Kurdistan region of northern Iraq. It found nearly two billion barrels of oil and plans to drill a second well before the end of the year. While the central government of Iraq has had a hard time attracting investors to develop its huge fields, local authorities in Kurdistan have been successfully wooing foreign producers.
BP has estimated that the Tiber field holds four billion to six billion barrels of oil and gas, which would be enough, in theory, to meet domestic consumption for more than a year.
Meanwhile, in the Gulf of Mexico, BP’s discovery proves that the area remains one of the most promising oil regions in the United States. “In 30 years I’ve been in the business, the Gulf of Mexico has been called the Dead Sea countless times,” said Bobby Ryan, the vice president of global exploration at Chevron. “And yet it continues to revitalize itself.”
The oil industry has been on a hot streak this year, thanks to a series of major discoveries that have rekindled a sense of excitement across the petroleum sector, despite falling prices and a tough economy.
These discoveries, spanning five continents, are the result of hefty investments that began earlier in the decade when oil prices rose, and of new technologies that allow explorers to drill at greater depths and break tougher rocks.
“That’s the wonderful thing about price signals in a free market — it puts people in a better position to take more exploration risk,” said James T. Hackett, chairman and chief executive of Anadarko Petroleum.
More than 200 discoveries have been reported so far this year in dozens of countries, including northern Iraq’s Kurdish region, Australia, Israel, Iran, Brazil, Norway, Ghana and Russia. They have been made by international giants, like Exxon Mobil, but also by industry minnows, like Tullow Oil.
Just this month, BP said that it found a giant deepwater field that might turn out to be the biggest oil discovery ever in the Gulf of Mexico, while Anadarko announced a large find in an “exciting and highly prospective” region off Sierra Leone.
It is normal for companies to discover billions of barrels of new oil every year, but this year’s pace is unusually brisk. New oil discoveries have totaled about 10 billion barrels in the first half of the year, according to IHS Cambridge Energy Research Associates. If discoveries continue at that pace through year-end, they are likely to reach the highest level since 2000.
While recent years have featured speculation about a coming peak and subsequent decline in oil production, people in the industry say there is still plenty of oil in the ground, especially beneath the ocean floor, even if finding and extracting it is becoming harder. They say that prices and the pace of technological improvement remain the principal factors governing oil production capacity.
While the industry is celebrating the recent discoveries, many executives are anxious about the immediate future, fearing that lower prices might jeopardize their exploration drive. The world economy is weak, oil prices have tumbled from last year’s records, corporate profits have shrunk, and global demand for oil remains low. After falling to $34 in December, oil prices have doubled, stabilizing near $70 a barrel. But if the world economy does not pick up, some analysts believe the price could fall again.
Oil companies contend that is not a prospect they can afford. Despite reaping record profits in recent years, many executives have warned that they need prices above $60 a barrel to develop the world’s more challenging reserves. In fact, some exploration activity has already slowed this year, as producers seek better terms from service companies and contractors.
It is not just oil that is benefiting from the exploration boom. Repsol, Spain’s biggest oil company, said this month that it had discovered what could turn out to be Venezuela’s biggest natural gas field. In recent years, companies have found substantial natural gas reserves in the United States, from shale rocks once believed to be impossible to drill.
“The No. 1 question that exploration teams have right now is, Where do we go next?” said Robert Fryklund, who ran the operations of ConocoPhillips in Libya and Brazil, and is a vice president in Houston at Cambridge Energy Research Associates.
Exploration spending swelled in recent years, partly to offset a doubling of costs throughout the industry — from steel prices to the cost of renting deepwater drilling rigs. A big issue confronting the industry now is how to drive down costs while maintaining a high level of exploration. On average, costs have fallen by 15 to 20 percent from their peak, according to petroleum executives.
Exploration remains a risky, and costly, business, where some deepwater wells can cost up to $100 million. From 30 to 50 percent of exploration wells find oil.
Some executives are also worried the world might face a shortfall in supplies in coming years if another decline in oil prices causes exploration to falter.
The chief executive of the French oil giant Total, Christophe de Margerie, has warned that such a supply crunch is possible by the middle of the next decade. “There could be a shortage of capacity,” he said.
His concerns echoed those of Abdullah al-Badri, the secretary general of the Organization of the Petroleum Exporting Countries, who said that lower oil prices also threatened investments by OPEC nations.
Saudi Arabia is also unlikely to expand its production in coming years because of the uncertainty clouding future oil demand, Ali al-Naimi, the kingdom’s oil minister, signaled earlier this month. Saudi Arabia is just completing a $100 billion program to increase its capacity to 12.5 million barrels a day, from around 9 million barrels a day just a few years ago.
Although they are substantial, the new finds do not match the giant fields discovered in the 1970s, like Alaska’s Prudhoe Bay, Ekofisk in the North Sea, or Cantarell in Mexico. They are also dwarfed by the last enormous discovery, the Kashagan field in the Caspian Sea, discovered in 2000 and estimated to hold over 20 billion barrels of oil.
“We have not seen another Kashagan, but still these finds are very material,” said Alan Murray, the exploration service manager at Wood Mackenzie, a consulting firm in Edinburgh.
Since the early 1980s, discoveries have failed to keep up with the global rate of oil consumption, which last year reached 31 billion barrels of oil. Instead, companies have managed to expand production by finding new ways of getting more oil out of existing fields, or producing oil through unconventional sources, like Canada’s tar sands or heavy oil in Venezuela.
Reserve estimates typically rise over the life of a field, which can often be productive for decades, as companies find new ways of getting more oil out of the ground.
The industry’s record has improved in recent years, thanks to high prices. According to Cambridge Energy Research Associates, oil companies have found more oil than they produced for the last two years through a combination of exploration and field expansions.
“The appetite for opening new frontiers when prices were low in the 1990s was very small,” said Paolo Scaroni, the chief executive of Italy’s oil giant Eni. “Today, the biggest discovery of all is technology.”
One of the largest finds this year was made by a small producer, Heritage Oil, at the Miran West One field in the Kurdistan region of northern Iraq. It found nearly two billion barrels of oil and plans to drill a second well before the end of the year. While the central government of Iraq has had a hard time attracting investors to develop its huge fields, local authorities in Kurdistan have been successfully wooing foreign producers.
BP has estimated that the Tiber field holds four billion to six billion barrels of oil and gas, which would be enough, in theory, to meet domestic consumption for more than a year.
Meanwhile, in the Gulf of Mexico, BP’s discovery proves that the area remains one of the most promising oil regions in the United States. “In 30 years I’ve been in the business, the Gulf of Mexico has been called the Dead Sea countless times,” said Bobby Ryan, the vice president of global exploration at Chevron. “And yet it continues to revitalize itself.”
posted by Rob Anderson @ 4:50 PM
20 comments
20 Comments:
http://www.theoildrum.com/node/5811#more
Actually the head I put on the article is misleading, since the NY Times article is not about peak oil per se; it's just about recent discoveries/extractions. The higher the price for oil the more oil companies can finance looking for new fields. I understand you bike nuts are hoping that the world is going to suddenly run out of oil, forcing millions of drivers to embrace the noble, planet-saving bicycle, but apparently that's not going to happen.
The problem - as clearly pointed out on the oil drum, is that when oil gets expensive enough that it's worth drilling for the oil, the economy collapses, people can't pay the going rate for oil, oil prices drop, and once again it's too expensive to drill for the hard to extract oil.
We saw this very plainly last summer. I certainly thought that people would pay nearly any price for gasoline to keep their cars running. The reality is that over a certain price, they simply cannot afford to. The knee of the peak oil curve comes when it is more expensive to drill for oil than people are willing to pay. We saw pretty clearly that price is in the 70 dollar range where prices have stabilized over the last several months. That price range won't justify some of the really difficult deep water drilling.
The people posting on TOD are far more reliable as sources than the POD guy.
I disagree. The Peak Oil Debunked guy is particularly good on the doomsayers, like Jim Kuntsler, who are always wrong on their predictions of disaster and collapse.
(http://peakoildebunked.blogspot.com/2009/02/394-conservation-stimulates-economy.html)
Wait a minute. Let's look at the article you just quoted from someone you say is "particularly good"
"The large new supply of secure crude is going to come from conservation, i.e. U.S. commuters riding two-to-a-car instead of one-to-a-car etc."
A large majority of your whining on this blog is based on the premise that we cannot give up our cars, that we must have more traffic lanes to have a higher throughput of cars. Now you are quoting someone who says we need to conserve - to drive less. If people are riding two to a car, then we would need LESS parking, yet you claim that Divisadero's primary problem is that it needs MORE parking.
"Or consider commuting. The average commute in the US is 16 miles Source. Which means that, in a pinch, half the population could easily commute to work by bicycle."
" For example, the classic case would be a commuter who switches from a single-occupant 12mpg SUV to a 180mpg hybrid scooter, and then to an ∞ mpg electric scooter driven by solar or nuclear."
Sounds to me like you think people should be on bikes and hybrid scooters (which are classified as bicycles and are supposed to use.... BIKE LANES).
"This is the key point: Whenever you conserve oil, you also save money, and that money gets spent or invested, stimulating the economy."
But but but Rob told me that all those bicyclists who don't spend money on gas or a car don't spend money on anything?
Rob - is your whole blog just a gigantic troll - you actually agree with what all of us are trying to tell you?
To the point - Oil production will in fact peak. The POD guy even says this - "DISCLAIMER FOR IDIOTS: This site officially accepts that oil is finite, and will peak someday." His arguments are a bit scattered but one of his points is that oil will get so expensive that we will in fact conserve so we'll never see a real "shortage".
The problem most people have with this assumption is that a peak can happen faster than we can adjust. If you work in SF and have a house in Antioch, and shortages come that cause a price pinch, your house will effectively become worthless, you can't move, you can't afford to commute, and you're hosed.
I know you're at work---your "real job"---when you do your troll thing on my blog, and your comments are probably rushed, but you never seem to read my blog carefully, either. All you have is your know-it-all bike bullshit.
"A large majority of your whining on this blog is based on the premise that we cannot give up our cars, that we must have more traffic lanes to have a higher throughput of cars."
"Whining" is exactly what I don't do, but this probably refers to my ongoing criticism of your religion, BikeThink. Factually wrong on everything here, Murph. I think cars---and trucks, buses, motorcycles, etc.---are here to stay. People can and do give up their cars every day. Good for them. I haven't owned a car in 20 years. I have never advocated more traffic lanes for San Francisco. I just don't think we should take away traffic lanes on busy streets to make bike lanes. You have this cartoon version of my opinions that you can't seem to shake. Reading what I actually write would help.
"Now you are quoting someone who says we need to conserve - to drive less. If people are riding two to a car, then we would need LESS parking, yet you claim that Divisadero's primary problem is that it needs MORE parking."
Of course we need to conserve. Who doesn't believe that? Divisadero badly needed repaving, which is happening now, along with a bunch of cosmetic crap we could do without. The small businesses in the area, especially the restaurants, really do need more parking for their customers. The city should tear down the old Harding Theater and turn the property into a parking lot.
"The problem most people have with this assumption is that a peak can happen faster than we can adjust."
Yes, you and the doomsters keep saying that this "can" or will happen, but it never does, does it?
"The small businesses in the area, especially the restaurants, really do need more parking for their customers."
According to your source, what they need is for those people to carpool and ride their bikes. so they will have money to order a second round and maybe dessert.
10 bn barrels is less than a year of world supply.
No sale, Rob. You have repeatedly, vehemently, and (to say the least) abrasively asserted that any claim that Americans would ever agree to use bicycles as transportation in any numbers as "fantasy". You've repeatedly referred to those of us who think bikes have a role to play, and may well play a much bigger role, as "nuts". Now, you find yourself quoting a source that claims "...half the population could easily commute to work by bicycle". Your source, Rob. "Half the population".
Either you don't agree with your own source, Rob, or you think the 50% of the population that takes to bikes will deserve no facilities to allow them to cycle in safety.
Which brings us to my point. Regardless of whether we should cycle to conserve oil supplies (your own source says yes), regardless of whether we should cut back on fossil fuels to avoid climate change, regardless even of the local effects of pollution, cyclists have an individual right to use the road in safety. We pollute less, but our rights don't depend on proving it. We use less of a valuable resource, but our rights don't depend on proving it. We have a right to local mobility, one that goes all the way back through time. We have a right to exercise that in a way that does not damage our bodies or our pocketbooks.
So go ahead and "debunk" peak oil; quote, if you have to, sources that directly contradict your own argument. It doesn't matter. We simply have a right to cycle.
The Debunking Peak Oil site is good for just that---analyzing and criticizing the doomsters who predict the end of civilization when we run out of oil, which supposedly could happen any time now. His opinions on the bicycle fantasy are another story. No, I don't see any evidence that Americans in significant numbers are ever going to abandon their cars and start riding bikes.
Nor have I ever denied that cyclists have a right to ride their bikes on city streets. I just object to turning traffic lanes on busy streets into bike lanes on behalf of a small minority. And I object to the bad behavior displayed by many cyclists on city streets. Got it, John? Interesting that so many of you bike people seem to have reading disorders.
"The Debunking Peak Oil site is good for just that---analyzing and criticizing the doomsters who predict the end of civilization when we run out of oil, which supposedly could happen any time now."
I think you fail to understand what peak oil is about.
"No, I don't see any evidence that Americans in significant numbers are ever going to abandon their cars and start riding bikes."
I'm glad you understand that abandoning cars and riding bikes are two distinct concepts. But what are your 'significant numbers'? Care to define?
"And I object to the bad behavior displayed by many cyclists on city streets."
So do I, but that doesn't make their claim to the road any less legitimate.
Remember that cyclists are constantly harassed and intimidated by motorists, treated like they don't belong, etc. Should we really expect them to be on their best behavior after all this?
Big Note: where there are clearly marked bike lanes, this sort of intimidation is reduced dramatically.
If cyclists were treated like legitimate road users, they would start acting that way.
"I think you fail to understand what peak oil is about."
You're not going to explain it to me? What's the use in being a know-it-all if you're not going to explain everythng for us?
"But what are your 'significant numbers'? Care to define?"
The 2000 Census said that around 2%of city residents commuted by bike. Even if that percentage is doubled in the 2010 Census, that still wouldn't justify the city's taking away traffic lanes on busy streets to make bike lanes.
"So do I, but that doesn't make their claim to the road any less legitimate."
Why am I again accused of denying cyclists' right to be on the road? I've never written any such thing on this blog.
"Remember that cyclists are constantly harassed and intimidated by motorists, treated like they don't belong, etc. Should we really expect them to be on their best behavior after all this?"
This is the Crybaby Justification that we've heard many times before. Cyclists as an oppressed class! Cyclists behaving badly simply because they are ill-treated by motorists! What crap.
"If cyclists were treated like legitimate road users, they would start acting that way."
This too is typical bike nut bullshit. The reality is that the great bike movement has a serious problem in the way at least a substantial minority of cyclists behave on city streets. And from what I read it's an international phenomenon. You can deny it and rationalize it all you want, but it's bad for your movement, and I suspect that it's a permanent phenomenon. The childish, speed and thrill aspect of cycling seems to attract a lot of juvenile personality types. Add that to the remarkable, saving-the-world self-righteousness and you have a recipe for a lot of bad behavior.
I've actually read a bit of the POD stuff, and now I'm really confused. I think you are using a source that more closely aligns with Shawn and Spragge and me and etc... than you. His thesis is basically "We will (and must) adjust" rather than "We're all going to hell", which is what most of us are saying. And that bikes, housing density, TOD, are important parts of that.
I think he underestimates that ability of large portions of the nation to adjust, however. The goal of any well run city is to be on the plus side of the "adjust" lever.
You seem to be having a problem digesting the fact that I too believe in conservation and energy efficiency. What POD is saying is that our transition is going to be a lot easier than they doomers think. In fact, it really began way back in 1973 with the first oil embargo by OPEC.
POD rightly insists that we consider the demand side of the oil equation, that there are indications that a number of countries began reducing their oil consumption more than ten years ago:
http://peakoildebunked.blogspot.com/search?q=peak+demand+in+Sweden
The notion that bicycles are going to play a major part in this transition seems fanciful to me.
"...it really began way back in 1973 with the first oil embargo by OPEC."
You're showing a glimmer of understanding here, Rob. Keep it up.
"Even if that percentage is doubled in the 2010 Census, that still wouldn't justify the city's taking away traffic lanes on busy streets to make bike lanes."
Why not? 4% of San Franciscans cycling, on an almost non-existent bike network? That would signify that there's enough interest in cycling to justify promoting it. Unless, of course, we did not see it as a desirable and viable way to get around the city.
"Cyclists behaving badly simply because they are ill-treated by motorists! What crap."
It's part of the equation. The other parts include the fact that people break laws and behave badly regardless of transportation mode and that some of the laws on the books don't take cyclists into account very well, etc.
"This too is typical bike nut bullshit. The reality is that the great bike movement has a serious problem in the way at least a substantial minority of cyclists behave on city streets. And from what I read it's an international phenomenon. ... The childish, speed and thrill aspect of cycling seems to attract a lot of juvenile personality types. Add that to the remarkable, saving-the-world self-righteousness and you have a recipe for a lot of bad behavior."
Can you cite some numbers?
In this, a year trumpeted by oil industry folk as a giant one for discovery, the world has found 10 billion barrels of oil. How much of that is recoverable remains to be seen. Even if all of it is recoverable, which is basically impossible (usually it’s 30%), 10 billion barrels represents 14 months worth of oil for the the United States and a mere 4 months of oil for the world. And this is the best year for discoveries in a decade. If this is the best that will happen, $2 gas doesn't seem real to me.
Take care, Julie
All I'm saying is that the Peak Oil doomers are wrong when they predict the collapse of civilization when oil runs out. The world evidently has enough oil to make the transition to other forms of energy relatively smooth, a process that's already underway.
transition to other forms of energy
"like using your own 2 legs"
relatively smooth, a process that's already underway.
"except in San Francisco"
"The world evidently has enough oil to make the transition to other forms of energy relatively smooth, a process that's already underway."
Gee, what could we possibly use to get around as oil becomes more expensive and people drive less? I know, I will design a cyclist-incinerating steam engine and power my car with the bodies of the vanquished! Hopefully we can keep them well-fed so I get better miles per cyclist.
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