Recovery rate is apparently going to rise from 35% to 70% on 'technological innovation'.
In other news, pigs forecast to evolve wings by 2010.
It's a CERA conference, what do you expect.
By Chris Baltimore
HOUSTON, Feb 14 (Reuters) - Global oil production has not yet peaked and technological innovations should keep output rising at least through 2050, an official from Saudi Arabia's state oil company said on Wednesday.
Nansen Saleri, reservoir management manager for Saudi Aramco, dismissed arguments that the world's oil production had reached its apex and was sliding into decline, adding Saudi Arabia could boost reserves by 40 percent to 1 trillion barrels in the next two decades.
"I would say it is going to be 2050 or more (before production peaks) because I think new technologies are going to favorably impact the business," Saleri said at a conference hosted by Cambridge Energy Research Associates.
Saleri spoke a day after energy investment banker Matthew Simmons, a proponent of the "peak oil" theory and a critic of Saudi Arabia's production statistics, called for better industry data to prove that crude output is on the wane.
Key to delaying the decline in global production is squeezing more from oil fields, Saleri said.
Oil companies are forced to leave significant volumes of crude in wells, because draining extra barrels is either too difficult or expensive. The current industry record for development is about 35 percent of reserves pumped, with the remaining 65 percent left in the ground.
High-tech advances and use of water injection to push crude oil out of deposits should put that percentage closer to 70 percent, Saleri said.
Saudi Arabia -- the de-facto leader of the OPEC producers group and the world's biggest crude oil exporter -- has about 25 percent of global crude oil reserves.
Total known reserves are about 716 billion barrels, of which about 260 billion barrels have been officially quoted as being "proven," or recoverable with current methods.
New technologies being employed by Saudi Aramco could push that figure over 1 trillion barrels in the next 20 years, Saleri said.
Previous predictions for a peak in global output have been proven wrong, Saleri said. Global producers continue to confound such projections -- global crude production now stands at about 86 million barrels per day.
Around 1 trillion barrels of crude oil have been produced so far, out of a total resource base of about 14 trillion barrels -- roughly evenly split between conventional sources and nonconventional ones like heavy oil from the Canadian oilsands, Saleri said.
"Saudi Arabia could boost reserves by 40 percent to 1 trillion barrels in the next two decades"
Statements like this, which we know have never been backed up by any demonstrable evidence, certainly do a lot of damage to the cause, especially to those who might be just starting to find out about peak oil.
This time it was Leonardo Maugeri, senior Vice President at the Italian oil corporation Eni SpA, plugging his book ?The Age of Oil: The Mythology, History, and Future of the World's Most Controversial Resource?, and doing everything he could to keep us all happily wagging our tails as we hurtle onwards and upwards into a blissful future of endless oil supplies.
I actually get the impression sometimes that guys like this really DO believe what they're saying. I wonder what?s more likely, that senior board members at large oil companies are ?covering up? the truth, or that many of them are simply not fully aware that there is a problem. Maybe the further up the ladder you go, the more positively exaggerated is the data that you?re fed by eager-to-please subordinates?
Some classics from the National Geographic article:
Some experts believe we're at or near a point where world oil supply will be unable to meet demand?with potentially devastating consequences. Are we close to this point of "peak oil"?
It's so seductive, in a way, to speak of a coming catastrophe?but we're not on the brink of a catastrophe.
People usually assume that the planet is thoroughly explored [for oil], but this is not true. The United States and Canada are the most thoroughly explored, and the latest discovery by Chevron in the Gulf of Mexico demonstrates that they are not really so [thoroughly] explored.
Other parts of the world are really not explored at all. Even today more than 70 percent of the world's oil exploration wells are concentrated in the U.S. and Canada?countries that hold only 3 percent of the world's oil reserves. Conversely, only 3 percent of the world's exploration wells are drilled in the Middle East.
Many countries, Saudi Arabia in particular, have discovered oil fields in the past but have never developed them because of their fear of creating excess capacity.
No one knows how much oil there is. But all the hints we have?for example surveys made the U.S. Geological Survey?indicate that the world still has really huge oil resources in its soil.
Some enormous proven fields exhibit slowing oil production, but you stress that new technologies can boost these rates?
Yes. I'll give you an example. Yukos, the Russian company destroyed by Vladimir Putin, doubled its production in four years by one simple [act].
They hired Schlumberger, [the U.S. oil-technology company] with great experience in the drilling and management of oil fields. The recovery rate for Yukos went from 9 percent to 26 percent without any new discovery.
Can we ease our "oil addiction" before supplies run short?
The Stone Age didn't finish because of a lack of stone. The Oil Age won't finish because of a lack of oil. Sooner or later, probably in this century, oil will be surpassed by another source of energy.
IS THE WORLD SUPPLY OF OIL & GAS PEAKING?
by
Matthew R. Simmons
Chairman
Simmons & Company International
International Petroleum Week
London, England
February 13, 2007
It is an honor to be your guest speaker during International Petroleum Week, particularly as I am going to spend this time addressing what I believe to be the singular issue shaping the future of oil and gas, and also perhaps the main issue which will dictate the way the remainder of our still new 21st Century plays out: Is the supply of oil and gas now peaking?
The peaking of hydrocarbon supply is not just critical to the industry?s future, it is enormously important to our global economic behavior. Given this importance, I am amazed that the issue of peak oil has remained cloaked in almost total obscurity for such a long time. I am also astonished at the virtual lack of easily obtained production data to begin clarifying the growing peak oil debate. Finally, I am amazed that so many powerful energy voices are still dismissive that peak oil will not happen any time soon, and some argue it is 50, 70 or even 100 years away. Even worse, most who scoff at peak oil think the term means ?running out of oil? instead of the true definition, that is: oil production can no longer grow.
I have carefully read most, if not all, the optimistic reports and comments on why peak oil is a fallacy, or even what one observer called ?garbage.? I can virtually assure all of you that these optimists are well intended, but none have a particular set of proprietary data that gives them any hard proof that peak oil is not happening now, let alone being an event that is decades away. The optimists are loaded with pleasant sounding theories, but no reliable facts.
To grasp the importance of peak oil, it is vital to begin with an assessment of future demand for oil and gas. If demand for hydrocarbons were also peaking or even now starting to slow down, this issue would become moot for all but the producers whose individual oil and gas production face future declines.
Unfortunately, there is no data pointing to any halt, or even a slowdown to what has become a relentless growth in oil and gas demand. On the contrary, while growth in European and Japanese oil demand has been quite stagnant in recent years, America?s oil demand set new records almost every month while oil demand growth in Asia, the Middle East, and Latin America still seems to be accelerating.
The IEA recently updated their demand forecasts through 2030. Their numbers are not much different from forecasts issued by the US DOE/EIA. Future demand for oil is projected to grow by 42%, with natural gas demand growing by 67% over the next 23 years. Moreover, by 2030, after this staggering growth, countries like China and India would still lag even Mexico?s current low per capita oil use.
These ambitious demand forecasts obviously become mere pipe-dreams if oil and gas supplies soon peak. Energy reality 101 is that demand can be a high as anyone wants to forecast, but energy use can only be as high as energy supply.
What data do we have to evaluate our future oil and gas supply? The simple answer is that there is a wealth of published data reporting on the world?s proven oil reserves on a country-by-country basis. The Oil and Gas Journal publishes this data annually. BP?s annual Statistical Energy Review also details their estimates, which are also available on their website. Taken at face value, these reserves add up to about 1.2 trillion barrels of oil. At current usage, just these proven reserves alone will last another 42 years which assumes no more oil is found or greater amounts of already discovered oil are recovered.
Many senior oil spokesmen convincingly say that this 1.2 trillion number is extremely conservative. They then toss out far larger reserve numbers ranging from 4 trillion to as high as 10 trillion barrels of useable remaining oil. While these numbers seem to include some ?yet to be discovered? oil, a source that is risky at best, even a stiff discount of the more optimistic reserve numbers would put the risk of oil peaking way beyond our planning process. But all this assumes that even the 1.2 trillion barrel estimate accurately reflects the world?s future production of oil.
Offsetting this group of reserve optimists are a core group of petroleum scientists who have spent a great deal of time adjusting proven reserve estimates to what they consider far more realistic numbers. Their adjusted reserve analysis then assumes that global oil will peak as soon as 50% of our total reserves of usable oil have been produced. Every petroleum scientist that has relentlessly worked on the resource/reserve issue pegs peak oil occurring sometime in the next one to ten years.
Even these scientists, though, lack hard reserve data on the true reserve status for most of the important OPEC producers, beginning with Saudi Arabia but also including Venezuela, Iraq, Iran the UAE and Kuwait. As a group, these countries increased their reported proven reserves in the mid-1980s by almost 300 billion barrels. These inflated numbers then stayed constant (or even grew) without any significant new oil field discoveries for the next 15 to 18 years, while about 130 billion barrels of this proven oil was produced. To me, this suggests that even the seemingly conservative 1.2 trillion barrels of remaining proven reserves might be way too optimistic. The real number could just as easily be over 800 billion barrels. If so, we have now clearly passed the 50% remaining mark.
In harsh reality, the data quality of all these reserve estimates is non-existent. Only a handful of our publicly-held oil companies have ever conducted a third-party independent audit. Not a single OPEC producer has done this key test. Moreover, we toss every conceivable type of oil reserve into a common pool as if all reservoirs had the same recovery rates. No financial analyst would ever trust non-audited financial statements from a publicly traded company. Yet the world is betting its energy future on an ?unaudited set of books.?
A key component anchoring energy optimists? thesis that we have no supply problem is a concept that oil and gas reserves generally appreciate in size over time. The USGS uses the USA as final proof that this reserve appreciation is real because 85% of America?s proven reserves added in the past 15 years have come through upward reserve revisions. I find this argument bewildering because 15 years ago, the USA produced almost 7.5 million barrels per day, while we now struggle to produce above 5 million, with 2 of this 5 million coming from deepwater oil, which was diminimous in 1990.
The North Sea is another basin that optimists point to as having steady reserve appreciation. But these folks seem blind to the sad fact that the North Sea peaked in 1999 when Norway and the UK produced 6.1 million barrels per day and both countries are now struggling to keep their oil production above 4 million barrels per day.
Prudhoe Bay is also often used as another reserve appreciation case study. In fact, this super giant field has enjoyed a 30 to 35% appreciation of its estimated recoverable reserves. Yet Prudhoe Bay peaked exactly in line with forecasts, and has now declined from 1.5 million barrels per day to less than 400,000 barrels per day
Reserve appreciation is probably real for many large oil and gas fields but it does not seem to have any impact on when each field peaks, or how fast production declines.
I also find the idea of relying on ?yet to find? oil as foolish as a lender loaning money against a yet-to-be-earned net worth. Why any serious oil observer would think that regions which are still largely unexplored could be quantified as ?yet to find oil? never ceases to mystify me. Yet, this is also part of many optimists? arguments why oil will not soon peak. The long history of exploring for new sources of oil and gas is littered with skeletons of hopeful giant fields that turned out to be dry holes.
Supply optimists also point to almost unlimited amounts of non-conventional oil like Canada?s oil and tar sands, Venezuela?s Orinoco Tar Belt or oil shales in Western Colorado and Eastern Utah as further proof that oil supply will never peak.
These non-conventional energy resources are indeed real and Canada?s oil sands also make money as long as oil prices stay above steadily rising production costs. However, the ability to extract this heavy oil in significant volumes is still non-existent. Worse, it takes vast quantities of scarce and valuable potable water and natural gas to turn unusable oil into heavy low quality oil. In a sense, this exercise is like turning gold into lead.
A final belief the optimists use time and time again involves rapid advances now taking place in oil field technology that will supposedly further increase the world?s ability to find more oil and also create the ability to recover far more oil than we now leave behind.
I have closely watched the oil field technology revolution over the past 38 years. I began raising venture capital for the pioneers of deepwater oil in 1969, which began my life-long specialization in energy investment banking.
Our firm also played an active role in capital raising or restructuring in the dark days of the 1980s that kept most of the important new oilfield technologies alive. These new technical advances included horizontal extended reach drilling, measurement while drilling, sub-sea completion systems, 3 and 4 D seismic. I have witnessed first hand that it took decades for these breakthrough technologies to evolve from a concept to being successfully employed around the world.
Oil field technology takes a long time to develop. More importantly, the current oil field technology blackboard is pretty bare. Any new ideas are likely to take decades to implement. So this accelerated oilfield technology revolution is one more false burst of optimism based on no solid facts.
Sadly, when I examine all the major arguments about why oil will not peak, they all lack accurate, or perhaps even realistic data to prove these theories are correct.
In my opinion, there is only one reliable way to gauge the timing of when the world?s oil and gas supplies will reach sustained peak output. If the world?s leaders enacted a new energy mandate stipulating a legal requirement for the owners of any oil or gas field producing over 50,000 barrels of oil equivalent or greater (a list of probably around 250 - 300 individual producing fields) to provide historical and current production data going back five years on a quarterly basis, this new database would create the grounds to begin accurately predicting field-by-field decline rates. It is simple to extrapolate any producer?s field production trends into the future once we have historical production data. This simple, time-proven analysis is exactly what trained petroleum engineers decipher when hired to analyze oil and gas assets.
For the sake of aggregate accuracy, it would be helpful to further expand this database to 400 to 500 producing oil and gas fields. However, this added data would be simply be icing on the database cake. Securing accurate production data from even only the world?s top 150 producing oil fields will probably capture at least 60 - 70% of our global oil production statistics.
What would this revealing data prove? It would establish real evidence for how close we are to reaching peak oil. If visible production declines are now occurring in oil fields supplying over 50% of total crude produced, then the world has realistically already passed peak oil supply. More importantly, production trends based on this actual historical field performance could then allow serious supply forecasting of our global oil supply.
So far, the only region of the world with visible, precise field-by-field production data is the North Sea. Thanks to both the Norwegian and British governments, field-by-field production data has been tracked for years. And, I have never heard any operator whine about the loss of their competitive edge because this data was transparent.
It was the UK government?s Brown Book of field-by-field production data that led me to correctly predict in the fall of 1995 that UK oil production would almost certainly peak and then decline somewhere between 1998 and 2000. It took me less than half a day to complete this analysis. Trust me, field-by-field data works.
There is no logical reason to hide this data from the world?s energy planners and world leaders. Every owner of these 200 to 250 producing fields has this data. If I were the global ?Energy Czar? I would mandate the publishing of production data and levy a stiff fine on each producer who refused to comply. And, I would mandate that the data needed to be furnished by the end of February, 2007.
Because this production data is still withheld from astute oil analysts, is there any other data that sheds light on the timing of peak oil? When you start digging around, there are an overwhelming number of data points, but each takes a lot of research and it can be tricky to carefully connect the various important energy dots.
An easy task is to simply add up all the producing countries whose oil output is now in decline. The list of countries clearly beyond peak oil is long and growing. Thus far, over 25% of the world?s oil production comes from countries whose production has certainly peaked. Many countries continue to hope that they will suddenly begin growing production again, but energy history has shown, time after time, that reversing aging of an oil field or oil basin is as hard as reversing aging in humans.
When I look at 2007 supply forecasts, just the probable declines from the UK, Norway and Mexico?s Cantarell field could add up to close to a million barrels per day. The IEA?s latest supply model still hopes that USA oil production will grow in 2007, but this optimistic hope ignores relentless production declines in virtually every oil producing region of the USA other than Deepwater Gulf of Mexico.
The IEA, OPEC and the US DOE/EIA still expect non-OPEC supply to grow by almost 1.1 to 1.3 million barrels per day in 2007, after five to six years of stagnant supply. Barclay?s oil forecasters predict only 500,000 barrels per day, and even their forecast is probably a bit optimistic. If 2007 non-OPEC supply stays essentially flat, the likelihood that growth could suddenly start in 2008 or 2009 gets less likely with each passing month.
Several vocal skeptics of peak oil argue that our only supply worries come from a series of ?above the ground risks.? There is no question that above ground risks are real, but they merely add fuel to the peak oil fire. Start with Venezuela and the nationalization of its oil industry. Add to the mix Nigeria where the MEND movement to emancipate the Niger Delta is ever-prevalent. Add to that the turmoil-ridden Middle East which is nullifying any sensible long-term investment program in Iraq and Iran.
I fear that our biggest ?above ground risks? lie in the age of our oil and gas delivery system. Too much is now rusting away. A high percent of our drilling rigs, most other oil service assets, our pipelines, our refineries and our people are now too old and need to be quickly replaced. Unless a massive rebuilding of these old assets begins quickly, it would become increasingly difficult to even keep current supplies flat. The ultimate indignity would be to have wellhead oil production fall to, say, 70 million barrels per day by 2015, while we can only ship half as much because we let our delivery system rust away.
Global natural gas statistics are far fuzzier than our global oil statistics but a litany of data points suggest that the world?s gas supplies might be peaking, too. Since gas declines far faster than oil due to the simple fact that gas is a vapor while oil tends to be more like a syrup, the risk of gas peaking and then declining quite rapidly has more long-lasting consequences than that of peak oil.
Oil and gas supplies will peak. The only debate is when and then how fast they will both decline. Today, we lack hard data to begin proving how real this risk is. As long as the world is happy with a ?Trust Me? system, we will remain in the dark and ultimately discover that the world?s two most important energy supplies peaked by using a rear view mirror.
There is no downside to the world stakeholders in peak oil to clamor for this energy data reform. No producer who starts providing this data will get hurt, although a few key producers might be embarrassed at what their data shows. There is also no downside for energy planners to assume peak oil and gas is nearing so a serious plan can be created and implemented to begin using less oil and gas so there is enough to go around.
The world ought to seriously embark on a conservation production schedule for all key oil and gas fields because lower field production rates will result in longer, steadier production levels and potentially recover greater amounts of oil.
If the world shrugs off this concern, or decides to trust the optimists and they then turn out to be wrong, or if we spend the next three to five years debating the merits of peak oil, we steadily move closer to what could spiral into a gigantic energy abyss.
It is time for a global energy wake-up call, time for energy data reform and time to take peak oil as seriously as the British Empire was forced to do when going to war in the fall of 1939, or the U.S. did after Peal Harbor Day.
Thank you for the opportunity to address this serious topic during International Petroleum Week. I hope this encourages all of you to clamor for energy data reform and to begin planning on how we adjust to a post-peak oil world.
Erik wrote:I actually get the impression sometimes that guys like this really DO believe what they're saying. I wonder what?s more likely, that senior board members at large oil companies are ?covering up? the truth, or that many of them are simply not fully aware that there is a problem.
What would be their motive for covering up? Wouldn't oil companies actually make more money if they talked up an impending shortage rather than talking down the price as they keep seeming to want to do?
Erik wrote:I actually get the impression sometimes that guys like this really DO believe what they're saying. I wonder what?s more likely, that senior board members at large oil companies are ?covering up? the truth, or that many of them are simply not fully aware that there is a problem.
What would be their motive for covering up? Wouldn't oil companies actually make more money if they talked up an impending shortage rather than talking down the price as they keep seeming to want to do?
Companies are valued on expected future earnings which are as much a factor of proven oil reserves as current oil prices. Consider what happened to Shell's share price when they were caught over-stating their reserves...
Don't forget that "top people" are just that .. people.
They may have higher IQs, more aggression, better/faster decision handling skills etc ... BUT they are NOT significantly different to the rest of us.
We here may in fact have a better grasp of Peak Oil than many oil executives ... clearly we have more spare time, and also a richer set of data/opinions to work with.
I suspect that we could EASILY reach Peak Oil WITHOUT many/most oil industry staff being aware of any impending problem.
Do you think that Lord Browne of BP has looked in depth at Peak Oil data? Nope, he has probably received a single A4 summary from a senior manager. The summary will hedge its bets ... senior managers don't want to be sacked!
So ... top MDs may NOT have the full uncensored story!
(A couple of years ago I was key witness in a major US law case covering this very topic ... one key point was how a bad piece of data got better and better as it ascended the management tree until the MD received a rather rosey report ... thus costing two companies many, many millions of dollars)
Vortex wrote:
Do you think that Lord Browne of BP has looked in depth at Peak Oil data?
I sat behind Browne at a lecture by David Fleming in Totnes so he definately knows about it.
Fleming poked fun at him during the lecture and then Browne got up at the end to briefly defend himself, he basically didnt deny peak oil but just dismissed it at as a non-event due to belief in a technofix.
Vortex wrote:
one key point was how a bad piece of data got better and better as it ascended the management tree until the MD received a rather rosey report
Thats the essence of Celine's Second Law: [accurate] communication occurs only between equals.
See:
[http://en.wikipedia.org/wiki/Celine's_laws]
(for some reason the forum software doesnt allow URLs with an apostrophe in them.)
Rob
XENG - University of Exeter Engineering Society
"Now there is one outstandingly important fact regarding Spaceship Earth, and that is that no instruction book came with it." - R. Buckminster Fuller
clv101 wrote:I had the interesting experience of hearing Peter Odell speak this week - he was talking about higher production (all liquids) in 2100 than 2000.
I must admit I wasn?t sure who Peter Odell was (not a big name in Spain!) but, upon googling:
Oil supply will likely be more demand than resources constrained - given the demand-side preference for gas for technical and commercial, as well as environmental, reasons. The remaining 2000x109 barrels of recoverable conventional oil resources will sustain over 50% of oil demand until almost 2060. Thereafter non-conventional oil will take the leading role. The latter's output will peak only in the penultimate decade of the century and by 2100 its resource-base will be little more than half-depleted. In spite of oil's relative decline as an energy source the industry will, nevertheless, be larger in 2100 than it was in 2000.
That?s pretty radical stuff!
biffvernon wrote:Is that what it took to sell the book?
At 39 quid a throw, he won't have to sell too many.
On one side we have CERA and this guy telling us all will be well.
On the other side we have Blair & Darling clearly panicking about the UK's energy future.
Meanwhile major oil fields such Cantarell & the North Sea are spluttering to a halt.
Will my grandchildren live in a world with plastic bags, BigMacs, cars and electric light ... or will it be a coal-smog covered energy deficient hell-hole?
On one side we have CERA and this guy telling us all will be well.
On the other side we have Blair & Darling clearly panicking about the UK's energy future.
Meanwhile major oil fields such Cantarell & the North Sea are spluttering to a halt.
Will my grandchildren live in a world with plastic bags, BigMacs, cars and electric light ... or will it be a coal-smog covered energy deficient hell-hole?
It's all so confusing ...
That's just it. Unless you believe there is some grand conspiracy there probably is no-one who knows what the future brings with regards to this, its all informed hunches.
On a personal level I think its best not to dwell to deeply on it. There not really much you can do about it.
I planted a few apple trees on Wednesday ( a good day for it in the gentle rain). I hope to train them as espaliers along the fence. Their produce could be very handy if peak hits in the future, however if it doesnt then I will enjoy training them and seeing them flourish anyhow. I think this is generally the best view to have. Change your life in preparation but enjoy doing it. If in the process it saves you money and is kind to the environment then its a win win situation.
