Oil Production nearing the Peak (28-Aug-07)
From Lauraibm
Contents |
MI Summary
Full article: Oil Production nearing the Peak (28-Aug-07)
Together the top seven international oil companies (IOCs) produce about 12.5 million barrels a day (just over a quarter of all non-OPEC output), plus 43 billion cubic feet a day of gas. They have delivered only about half the growth promised a few years ago. Exxon Mobil, Shell and Chevron all produce less now in 2002. Global demand for oil and gas has stabilized over the last year or so, after a steady increase at 1.4% to 1.6% a year up to the surge in 2004. Future growth may remain lower, driven nor by higher prices. Meanwhile, gas offers a relatively low-cost, cleaner substitute and is set to last much longer. Much of the real problem may be short-term delivery, and the recent tight capacity may persist for another two years or more.
Text of Article
Sustainable energy: Growth to 2070 and beyond
The world’s growing population needs more energy to improve living standards, especially in developing countries. As competition intensifies to secure conventional oil supplies, all would benefit from cleaner, more efficient energy. Saving energy rather than burning it, as consumers did after the price hikes of the 1970s, is clearly the simplest and quickest way to save money, avoid pollution and reduce wasteful, unnecessary pressure on the current supplies.
Recognizing that the climate is changing, booth physically and politically, Exxon Mobil has joined other industry leaders like BP and Shell to acknowledge the growing threats we face in securing sufficient low cost energy supplies with less damage to our environment. More companies are sending the message to their host governments, consumers and shareholders that failure to address these difficult challenges will damage the global economy and hurt some of these companies themselves.
Do changing consumer opinions, political objectives and business realities offer opportunities for energy companies far-sighted enough to anticipated needs 10 years from now?
Limits to growth
Even with high prices since 2004 giving the market strong signals, many leading energy companies have not invested enough to renew their project, infrastructure and technology portfolios. Now, they struggle to maintain, let alone grow, their production and reserves organically. Together the top seven international oil companies (IOCs) produce about 12.5 million barrels a day (just over a quarter of all non-OPEC output), plus 43 billion cubic feet a day of gas.
They have delivered only about half the growth promised a few years ago. Exxon Mobil, Shell and Chevron all produce less now in 2002. Other is effectively that, and now the cost of growth has risen significantly.
Access to many of the most prospective areas of the Middle East, Russia, southern former Soviet Union, North Africa and Latin American for IOCs is now denied, restricted or under harder terms, while costs have spiraled in the ultra deepwater, the arctic and tar sand plays. Rather than reinvesting in growing more of these higher cost energy supplies, most have returned billions in share buybacks to their shareholders. It is getting harder to see where the next generation of good projects and growth for the leading IOCs will come from.
Global demand for oil and gas has stabilized over the last year or so, after a steady increase at 1.4% to 1.6% a year up to the surge in 2004. Future growth may remain lower, driven nor by higher prices. Tighter emission controls and less wasteful use, as some priorities and attitudes evolve. International energy agency director Claude Mandilhas dismissed his own groups business as usual scenario for energy demand, with oil use rising by 42% and gas by 67% from now to 2030, as unsecured, unattainable, unstainable and unrealistic.
At the same time, energy expert Mathew R. Simmons has said than, under this scenario, China and India would still use less energy per capita in 2030 than Mexico does now. At around 84.7 million barrels a day, the world uses 30 to 32 billion barrels of oil a year. Roughly all the oil we hope to find in two of the 20 most prospective basins is now used up each year!
How long can we expect global oil output to keep growing Global 'proven' oil reserves are sometimes questioned, as many of the Middle East numbers were suddenly and significantly increased when OPEC quotas were set in the mid-1980s and do not appear to account fully for subsequent production?
At face value, the nearly 1.2 trillion barrels would imply in approximate 40 years reserve life with no growth in either production of reserves. Saudi Arabia recently claimed 100 years of production (or, at early 2007 levels, 316 against its stated “proven” reserves of 267 billion barrels. If some of these proven reserves are not quite equivalent to the figures from the US Securities and Exchange commission, something over 800 billion is seen by many as a reasonable lower limit.
Most people regard proven plus probable (2P) as the best estimate of what is eventually producible. While there are both much higher and some lower estimates, a reasonable range for 2P as the best estimate of what is eventually producible. While there are both much higher and some lower estimate, reasonable range for 2Pis from 1.6 to 2.2 trillion barrels.
This is somewhat conservative as some Russia and heavier Middle East oil is not yet properly evaluated. The third category of discovered resources is ‘possible” and companies is 2006 started announcing their estimated long-term resources. Improved recovery effectively draws from these and moves resources into producible 2P and then proven.
Over the next 20 years, we may continue to expect improved recovery to add over 1 billion barrels a year to producible resources, increasing with time and better reservoir imaging and management technologies up to perhaps 15 or more – or around 250 billion barrels in total. Exploration may continue to add 10 to 15 billion barrels a year declining over time. Looking beyond conventional resources, heavy oil sands projects have are likely to add a further 300 to 500 billion or more to the producible resource high enough. We have already produced around 1.1 trillion barrels of oil. At 30 to 36 billion a year, we may produce another 600 to 700 billion over the next 20 years, again strongly depending on how rapidly oil demand grows. This is likely to slow down with much higher prices and tighter controls on CO2 emissions.
The 0.6 percent growth in oil demand over the last 12 months highlights this slowdown. The relatively simple and straightforward estimates in the above scenario imply an oil resource growth of around 250 billion barrels over the next 20 years. Remaining producible oil would still exceed by around 400 billion barrels the expected cumulative oil production of around 1,.75 trillion in 20 years.
Under this scenario, we would not have reached half way, indeed, the slowing now of oil demand growth, with high prices, environmental concerns and uncertainties in economics, politics, investment and energy substitution, may be evidence that an undulating and asymmetrical plateu is more likely than an Alpine peak. Individual field production profiles, too, are asymmetrical with long tails extended by reservoir management activity. In addition, more oil from the massive, already-known but expensive unconventional heavy and shale resources, more enhanced oil recovery of the large volumes left in the ground (perhaps using some of the abundant CO2) and new remote basins such as the Arctic and eventually the Antarctic will add to the oil resources base in the long term. But whether they come quickly enough will depend on prices, access and technology.
Meanwhile, gas offers a relatively low-cost, cleaner substitute and is set to last much longer. Over 100% is still replaced on a 2 basis each year, mainly in the Eastern Hemisphere.
Better estimates for both oil and gas to aid energy planning would be possible if transparent production data from most of the world’s 200 largest fields were available. As in individual fields, the decline is, fortunately, likely to be slower than the ramp-up to peak production levels and will probably be extended by new imaging, drilling, completion and recovery technologies.
But the oil industry has cut costs and become more conservative, and, as Simmons also has noted, the technology blackboard is somewhat bare. A real push to innovate is needed now. Predictions by some (dubbed the “Malthusians”) of an peak and shortfall within one to 10 years may be useful wake-up call, reinforced by falling production in such leading producer countries as the United State, Mexico, Indonesia, United Kingdom and Norway.
The continuing lack of production growth from most of the leading oil majors, who face mega-project delays and stronger national oil companies (NOCs) wanting bigger shares of national asset, has certainly hurt their revenues and market value. Nevertheless, most of these delayed projects will still come on stream over the next few years. The cornucopias can point to growing oil and gas production capacity in Canada, Russia, the Caspian, brazil, GoM deepwater, Saudi Arabia, Angola, Qatar, UAE, Kuwait, Libya, Algeria, Egypt, Kazakhstan, china, Indian, Myanmar and Australia. Others with potential to grow more, but held back by above ground problems, include Iraq, Iran, Nigeria, Venezuela and Bolivia.
Much of the real problem may be short-term delivery, and the recent tight capacity may persist for another two years or more.
- Source: Nigerian Tribune
