I attended the Offshore Europe 2005 Conference in Aberdeen on Sept 06, 2005. Subjects were: ?Reserves Recovery and Decline: A Global Perspective? and ?Delaying the Production Peak?. I took as many ?bullet point? notes as I could but in some cases the material being presented moved too fast to capture everything but I think the following notes contain most of the highlights. To date I?m only aware of one of the presentations (John Westwood) being available online; I?ll be in touch with the organisers shortly to try to obtain links for the other material. I?m away back to the Exhibition today but will try to respond to questions later today or tomorrow. As a reminder the conference program can be viewed here:
http://www.offshore-europe.co.uk/confer ... ramme.aspx
My notes follow with any of my own comments added in squared brackets i.e. [ ] :
Andrew Gould ? Schlumberger (in his opening address)
- We would do well to remember 1980?s oil price collapse.
- Lack of investment has left little spare capacity.
- Reserves large but finite.
- Non conventional oil will become more important.
- New developments would be very challenging ? deepwater, harsh environment or involve the national oil companies.
Mahmoud Abdul-Baqi - Saudi Aramco
- Assumed demand would add 22m bopd between 2004 and 2020 i.e. robust growth.
- Plenty of supply, no November 2005 peak.
- Proven reserves 1 trillion bbls +; an equivalent amount extra can be made available via new technology
- Huge volume non conventional and heavy oil.
- Big capital investment required would be a challenge, need to start right now.
- Need to drive down cost of development.
- Become more open on sharing ideas and technology.
- Biggest challenge is attracting enough high calibre people.
- SA 260+ Gbbls proven reserves as at end 2004, 85 fields.
- Large promising areas of SA under-explored, 100+ Gbbls undiscovered (a figure which USGS agree with)
- SA output 10m bopd in 1994 rising to 12m bopd in 2010.
- Currently producing a sustainable 11m bopd
- SA always keeps 1.5m bopd in reserve.
Tom Botts - Shell
- Capacity 97m bopd rising to 124m bopd by 2025 [I don?t know how they arrived at the 97m figure[
- Smart systems & intelligent wells revive old fields, raise recovery by up to 8% and decrease costs
- Upbeat re European energy prospects
- Brent still producing more energy in 2002 than entire world renewables (wind & solar) despite 75% decline.
Dave Blackwood ? BP
- IEA forecast oil comprised 35% world energy in 2003 and would still provide 34% in 2030
- IEA forecast gas comprised 21% world energy in 2004 rising to 25% in 2030
- UK %ages in 2004 ? oil 32%, gas 42%, coal 17%, NP 7%, Renewables 2%
- As above for 2020 ? 37, 48, 7, 3, 5 (source for both 2004 and 2020 ? DTI)
- UK has produced ?something over half recoverable NS reserves?
- Need to increase resource base, maintain infrastructure life, maximise and accelerate recovery
- BP N Sea staff stats ? 41% offshore staff > 45 yrs old
- BP staff overall N Sea ? 36% > 45, 49% 30 ? 45, 15% < 30.
- Big problem with ageing workforce.
- Showed graph showing NS would produce 0.3m BOE in 2020 but had an extra 1.5m BOE potential in 2020.
- Current NS production 3.5m BOE. [Turned graph around to show the 1.5m (above) as growth !!]
Nigel Hares ? Talisman Energy
- Presented IEA forecast chart v ?the growing gap? chart which showed source as Colin Campbell.
- IEA chart assumed 3T bbls conventional v 1.9T on Colin?s chart.
- Even to get to 2.4T would require significant improvement (in recovery)
- We are taking out 28 Gbbls pa and putting back 6 Gbbls pa (by discoveries)
- Showed chart of multiple conventional EUR?s, IEA?s 3T was much higher than the rest!
- Forecast [presumably IEA?s] had 7.5m bopd coming from fields not yet even booked.
- To increase production requires more activity, people, rigs etc and to avoid fiscal changes which discourage exploration.
- IEA projections are a very major challenge, strive to achieve same will add to costs.
- Showed graph of independent?s NS involvement v other mature basins ? move from majors to independents in NS still has way to go.
Michael Benezit ? Total
- Need to replace reserves otherwise industry dies
- $60/bbl not enough to push consumers into reducing demand
- Scarcity of big new projects
- International oil co?s had shown no reserve growth in 2004 v 2003.
- N Sea drilling costs had doubled in a year.
- Skill shortages, need pool of talented geoscientists.
- 7 Majors control just 4% of reserves.
- Gas reserves 190 T cu m = 70 years? supply at current consumption rates
- Oil reserves (1188 Gbbls conventional) = 40 years? supply at current consumption rates
- Gas reserves 1074 G BOE.
Luis Vierma ? PDVSA
- 1138 Gbbls oil (247 Gbbls non OPEC, 801 Gbbls OPEC)
- 6349 TCF gas (3216 TCF non OPEC, 3133 TCF OPEC)
- Cheap oil gone, new price floor $35 ? 40 / bbl
- Demand growth by region 2010 v 2004 (bopd) ? US 2.4, Asia 4.3, EU 0.9, Latin Am 0.9, FSU 0.7, ME 1.0, Africa 0.4; Total 10.6.
- Rig shortage ? 2k rigs now v 6k rigs in 1980?s.
- OPEC spare capacity 15m bopd in 1980?s v <2m bopd now.
- Spare refining capacity down from 8m bopd to 4m bopd since 2002.
- No new refineries built in past 25 years.
- By 2010 refining ?deficit? will be 6.8m bopd of which US will be 1.4m bopd, EU 0.3m bopd and Asia 2.1m bopd
- SA, Iran, Venezuela and Kuwait will peak c2020.
- Venezuela has largest reserves of light oil as of now.
- Venezuela could produce 7.5m bopd in 2020 [did not capture whether heavy or light] and still be producing in 2100.
- Presented population and temperature chart v fossil fuel consumption since c1860.
- Are we looking to keep planet safe or just consume energy?
- H2 will have to come from either water or hydrocarbons
- Industry can no longer ?walk into areas? to exploit oil & gas without local consent.
- Need to eradicate lack of access to efficient energy sources in poor countries.
Q+A Session
In response to questions from floor Andrew Gould responded:
- No one knows when PO is.
- Today?s crisis would have occurred 3 to 4 years earlier without improved recovery.
- Referred to DOE PO Mitigation Report [that?s Hirsch et al], message is to ?fix energy problem early?.
John Westwood ? Douglas-Westwood Ltd
- PO 2010, peak gas 2030+
- No viable alternative to oil for transport in reasonable timescale
- OPEC cannot satisfy demand
- 52 oil producers > 5 years past peak
- 1.5% growth indicates 2013 supply crunch BUT 3.6% growth in 2004
- If we get a panic the switch to dirty fuels will wipe out a decade?s environmental gain.
- Gov?ts must stop subsidising oil consumption.
- Message is CONSERVE.
(Full presentation available for download at:
http://www.dw-1.com/ ).
Thomas Andersen ? Maersk
- Enhanced recovery is way forward
Wim Schinkel ? Shell
- No ?silver bullet? i.e. no single solution to energy problem
Q+A Session
- In response to Q re SERA report John Westwood referred to quality of info and Matt Simmons? concerns.
- Q re DTI assumption of $35/bbl in real terms ?are we heading for price bubble?? Panel?s view - ?cheap energy over?.
Robert Estill ? Marathon
- Reserve replacement getting tougher.
- ?People? constraint
- Marathon built last US refinery at Garyville in 1976.
Robert Olsen ? ExxonMobil
- Natural oil decline 4 ? 6% pa
- By 2030 world needs to bring on new oil production > today?s world consumption.
- Double digit growth in renewable energy but will still only provide 1% of demand in 2030 (BP say 2%)
- IEA estimate oil industry spending needs to be $200 bn pa for 25 years.
- Estimate 3.2T bbls conventional oil, 1T produced to date (this leaves 2.2T)!
- EHO (extra heavy oil) / oil sands ? 4T bbls in place, up to 1T recoverable
- Shale oil ? 3T bbls in place, up to 700 Gbbls recoverable (eventually)
- N Sea prod?n to date 34 Gbbls, could be another 28 G BOE recoverable
- Only the one window in N Sea ? while existing infrastructure is still in place
- State of the art seismic has raised expl well success rate from 1 in 10 to 5 in 10 over past 30 years
- Shakalin Island ? now drilling 10km extended reach wells
- Deepwater ? now wells drilling in 1000m+ water depth
- LNG will be supplying 25% of world?s energy needs by 2030
- New LNG plants in Qatar, capacity 7.8m tonnes pa (1 TCF/d)
- LNG terminal in Milford Haven (UK) can receive 15.8m tonnes pa from Qatar
- Technology is key to the future
Q + A Session
- Q ? Is there a crisis? A (Olsen) Reserves are there, we must develop them. A (Westwood) Everyone has to play a part incl consumers.
- Q ? Is there an industry wide risk assessment as could be ?tail spin? if major disruption occurs. A No, risk assessment only on indiv Co basis.
- Additional comment from panel ? big barrier to new projects was ?politics?, in some cases projects were approved + funded by Co. but stalled due to politics.
- Comment made during discussion [did not capture by whom] that world demand would exceed refinery capacity by 2008
and refineries took 4 years + to build and none were in planning stage right now.
Overall comments
The morning session (up to and including Malcolm Wicks? presentation) was very well attended; estimate 400. The afternoon session was much less attended, estimate around 100. As might have been expected presenters from the oil majors did not really go into peak oil but more focussed on the steps their company thought was necessary to extend field life and enhance recovery. One even showed a qualifying slide before speaking (as required by his co?s lawyers) which stated ?the views were his own and not the company?s?. With the exception of the presentation by Nigel Hares (Talisman) and John Westwood (independent consultant) and, to some extent, the presentations by Benezit and Vierma, I formed the impression that the other presentations really focussed on how each individual speaker?s company would address the more difficult exploration and production era (and thus maintain shareholder value as opposed to gradually liquidating the company). Providing enough oil at the wellhead or refinery for the world is not really their remit and, to be fair, the Total speaker clearly stated that the ?7 largest oil majors only controlled 4% of world reserves?. I also felt, deep down? that (with the exception of Saudi Aramco speaker) they all knew ?the writing is on the wall? especially for conventional oil.
The Saudi Aramco speaker delivered an extremely upbeat message with regard to ongoing SA ability to supply; Ghawar was never mentioned. He did, however, make the specific point of ?no Nov?05 peak? so it sounds like Ken Deffeyes? prediction had struck a chord. Despite his upbeat statements I captured the key point that SA output was only going to increase by 1m bopd by 2010 based on Saudi Aramco?s own estimates (and that assumes they really are producing 11m bopd now). Running my own calculations this SA output increase would only cover about 8 months? world ?type 3 depletion? which will equal at least 1.4m bopd pa from 2006 onwards; it would do nothing to address future demand growth. Furthermore I didn?t hear any claim that the (promised) new SA output would be LSC (therefore I?d conclude much of it will be heavy sour crude).
The theme of some of the speakers, especially those from 'big oil' was both greater and accelerated recovery. No one appeared to address the issue of what happens 'on the other side of the mountain' i.e. the downslope of Hubbert's curve following techniques such as rapid ramping up of new developments and accelerated recovery. In the absence of their comments I'll 'fill in the blanks for them' - much faster decline rates as we have seen, for example in North Sea and Yemen's Yibal field. US lower 48 was mainly developed using traditional oilfield technology and decline rates of between 1.6% and 3% have been noted. New oilfield technology was heavily applied in UK NS more or less since inception hence c10% decline rates and whole province's output is down 40% from peak in just 5 years. To quote Matt Simmons - 'does use of NT lead to a 'monster ball' of depletion?' Judging by NS the answer is yes!
At the end of the meeting I had an opportunity to talk to one of the participants who had expressed serious concerns re future supply / demand balance. I explained that I?d had a 30 year career in E+P and he told me that ?lots of people with similar background in the industry were also telling him of their concerns?. In other words given the profile of many of those who were worried about PO Gov?ts should be listening (but as of yet they don?t appear to be doing so).
