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Oil Supply....point/counterpoint

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Well-known member
Sep 14, 2003
Pulitzer Prize winner said we will be awash in oil in a few years. Other article disputes this theory. Roll the dice, it's anybodys guess.:)

[size=+2]It's Not the End Of the Oil Age[/size]
Technology and Higher Prices Drive a Supply Buildup

[size=-1]By Daniel Yergin
Sunday, July 31, 2005; B07

We're not running out of oil. Not yet.

"Shortage" is certainly in the air -- and in the price. Right now the oil market is tight, even tighter than it was on the eve of the 1973 oil crisis. In this high-risk market, "surprises" ranging from political instability to hurricanes could send oil prices spiking higher. Moreover, the specter of an energy shortage is not limited to oil. Natural gas supplies are not keeping pace with growing demand. Even supplies of coal, which generates about half of the country's electricity, are constrained at a time when our electric power system has been tested by an extraordinary heat wave.

But it is oil that gets most of the attention. Prices around $60 a barrel, driven by high demand growth, are fueling the fear of imminent shortage -- that the world is going to begin running out of oil in five or 10 years. This shortage, it is argued, will be amplified by the substantial and growing demand from two giants: China and India.

Yet this fear is not borne out by the fundamentals of supply. Our new, field-by-field analysis of production capacity, led by my colleagues Peter Jackson and Robert Esser, is quite at odds with the current view and leads to a strikingly different conclusion: There will be a large, unprecedented buildup of oil supply in the next few years. Between 2004 and 2010, capacity to produce oil (not actual production) could grow by 16 million barrels a day -- from 85 million barrels per day to 101 million barrels a day -- a 20 percent increase. Such growth over the next few years would relieve the current pressure on supply and demand.

Where will this growth come from? It is pretty evenly divided between non-OPEC and OPEC. The largest non-OPEC growth is projected for Canada, Kazakhstan, Brazil, Azerbaijan, Angola and Russia. In the OPEC countries, significant growth is expected to occur in Saudi Arabia, Nigeria, Algeria and Libya, among others. Our estimate for growth in Iraq is quite modest -- only 1 million barrels a day -- reflecting the high degree of uncertainty there. In the forecast, the United States remains almost level, with development in the deep-water areas of the Gulf of Mexico compensating for declines elsewhere.

While questions can be raised about specific countries, this forecast is not speculative. It is based on what is already unfolding. The oil industry is governed by a "law of long lead times." Much of the new capacity that will become available between now and 2010 is under development. Many of the projects that embody this new capacity were approved in the 2001-03 period, based on price expectations much lower than current prices.

There are risks to any forecast. In this case, the risks are not the "below ground" ones of geology or lack of resources. Rather, they are "above ground" -- political instability, outright conflict, terrorism or slowdowns in decision making on the part of governments in oil-producing countries. Yet, even with the scaling back of the forecast, it would still constitute a big increase in output.

This is not the first time that the world has "run out of oil." It's more like the fifth. Cycles of shortage and surplus characterize the entire history of the oil industry. A similar fear of shortage after World War I was one of the main drivers for cobbling together the three easternmost provinces of the defunct Ottoman Turkish Empire to create Iraq. In more recent times, the "permanent oil shortage" of the 1970s gave way to the glut and price collapse of the 1980s.

But this time, it is said, is "different." A common pattern in the shortage periods is to underestimate the impact of technology. And, once again, technology is key. "Proven reserves" are not necessarily a good guide to the future. The current Securities and Exchange Commission disclosure rules, which define "reserves" for investors, are based on 30-year-old technology and offer an incomplete picture of future potential. As skills improve, output from many producing regions will be much greater than anticipated. The share of "unconventional oil" -- Canadian oil sands, ultra-deep-water developments, "natural gas liquids" -- will rise from 10 percent of total capacity in 1990 to 30 percent by 2010. The "unconventional" will cease being frontier and will instead become "conventional." Over the next few years, new facilities will be transforming what are inaccessible natural gas reserves in different parts of the world into a quality, diesel-like fuel.

The growing supply of energy should not lead us to underestimate the longer-term challenge of providing energy for a growing world economy. At this point, even with greater efficiency, it looks as though the world could be using 50 percent more oil 25 years from now. That is a very big challenge. But at least for the next several years, the growing production capacity will take the air out of the fear of imminent shortage. And that in turn will provide us the breathing space to address the investment needs and the full panoply of technologies and approaches -- from development to conservation -- that will be required to fuel a growing world economy, ensure energy security and meet the needs of what is becoming the global middle class.

The writer is chairman of Cambridge Energy Research Associates. His book "The Prize: the Epic Quest for Oil, Money and Power" received the Pulitzer Prize.

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Read this also from 321energy:

It says the increases will not be able to overcome the DECLINES in current fields and that the world may well be producing it's MAXIMUM ever now(PEAK OIL).

It goes on to talk about the declines from MEXICO, the North Sea, Australia, and even RUSSIA.

It goes on to talk about how scary it would be if one oil field in particular went into decline: GHAWAR, the KING oil field of the world, which has been pumping for 50+ years and alone produces about 6% of the world's oil and about 60% of Saudi Arabia's oil. It has only maintained it's output by very advanced recovery techniques. Similar Giant oilfields in the past using the same techniques(North Sea, etc.) have had dramatic declines of 10%+ which would be scary for the world.

Read this article too.

There will be a lot of extra oil coming on the market in the next 4-5 years, but many experts predict the declines will OVERCOME these increases around 2008. Even if they don't we can't just HOPE the new supplies are enough. Eventually they won't be. We need to now begin the conservation and increase production of alternatives before it's too late.

CHEVRON from their http://www.willyoujoinus.com/issues/alternatives/ site which looks for a way to move past oil says 33 of the 48 MAJOR OIL PRODUCING COUNTRIES HAVE REACHED THEIR PEAK OIL. This is serious. They are in decline, and it takes a lot of increased production for the other 15 major oil producing countries to overcome this decline.

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What about that new $1 billion drilling platform that was just built but was slightly hurt during that hurricane a couple weeks ago? That and Anwar could fill the gap. Also, didn't Libya just come back into the oil picture? After paying off the Pan Am families, I thought they were allowed to sell oil again. And, if Iraq ever gets back up to normal, that too will help. Also, any major price increases will probably slow down other economies, and that will yeild more gas for the rest of us.

Bye Bye--General Lee
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General Lee,
The Thunderhorse Platform in the gulf you're talking about is only going to provide .25 million barrels per day after years of increased production. Global oil demand increases 1.5-2 million barrels a day now. Drilling in ANWAR, unfortunately wasn't passed in the Energy Policy, but when it passes soon, it will take 10 years to provide 1 million barrels per day.

Lowecur offered the link below, but did not cut and paste it. It talks about how CERA's optimistic views have a ton of wild assumptions. BELOW IS THE BOTTOM of the article linked below. I suggest you all read the article linked.

From Lowecur's linked site from the bottom of his first post, which he didn't cut and paste:

CERA's optimistic views are in the minority.

John S. Herold, Inc.

Wall Street firm John S. Herold Inc. of Norwalk, CT http://www.herold.com/ has estimated peak production for about two dozen oil companies. Without substantial new investment and additional discoveries, the company believes that French oil company, Total S.A., will reach peak production in 2007. Exxon Mobil, ConocoPhillips, BP, Royal Dutch/Shell Group, and the Italian producer, Eni S.p.A. will hit peak production in 2008. In 2009, Herold expects ChevronTexaco Corp. to peak. In Herold's view, each of the world's seven largest publicly traded oil companies will begin seeing production declines within the next 48 months or so.

PFC Energy

From the July 1, 2005 edition of the Washington Post comes this commentary by Robin West, in an article entitled "Crude Courage"

"J. Robinson West, chairman of the consulting group PFC Energy, has floated with administration officials his idea of a sustained national dialogue on energy that includes all stakeholders. And his group has gathered what may be the best statistics available on the seriousness of the supply-demand crunch.

West argues that the oil market squeeze will only get worse -- and more vulnerable to political disruptions. By his estimate, about 77 percent of proven oil reserves are controlled by nationalized oil companies rather than by the international majors such as Exxon Mobil. Meanwhile, non-OPEC sources of supply are slowly declining. …. Even if more crude were suddenly discovered, there's a worldwide refining squeeze, with almost no spare capacity left.

The day of reckoning is less than 15 years away, by West's calculation. Assuming fairly slow growth in demand of about 1.8 percent annually, he reckons that by 2020 demand will total over 100 million barrels per day, and OPEC will be unable to fill the supply gap. Unless the United States and other consuming countries have taken steps to reduce consumption, the supply-demand imbalance will throw the world into economic chaos ….. "


Dave O'Reilly, the chairman of ChevronTexaco: “The time when we could count on cheap oil and even cheaper natural gas is clearly ending.” Chevron has started a petroleum resource discussion on the WEB at http://www.willyoujoinus.com/. Vice President of Policy, Government and Public Affairs, Patricia Yarrington believes the site is an important first step in a new dialogue. "We developed a campaign that is rooted in the real issues facing our industry. They are issues that affect everyone who has a stake in energy – consumers, businesses, policymakers, environmentalists, educators and political leaders. We think it’s a very compelling campaign about a very compelling subject."


ExxonMobile projects non-OPEC Crude and Condensate production will plateau before 2015 in its Energy Outlook presentation. ExxonMobil proposes that increased demand be met in two ways. The first is greater fuel efficiency. (How often do you hear oil companies pleading with us to buy cars that use less gas?). The second way is for OPEC to vastly increase production.

We should pay attention to ExxonMobile's judgment. "This assessment (of increased OPEC production) is somewhat ominous"writes Dr. Colin Campbell, a founder of ASPO, "… such production increases are only possible from Iraq, Saudi Arabia, Kuwait, and the United Arab Emirates.For these countries, and indeed for most OPEC members, petroleum and petroleum products are their only significant export. As such, they have a vested interest in obtaining the best possible price for their non-renewable resources. OPEC nations would be quite unlikely to increase production as rapidly as needed unless compelled to do so." And in the ASPO Newsletter 55 (July 2005), Dr. Campbell writes "It is significant that the first quarter production of most of the major oil companies is falling : ExxonMobil -3%; Chevron -6% ; Shell -8% ; Repsol YPF -7%., while Phillips-Conoco maintained its level with BP at least reporting a 2% increase (see Petroleum Review, June 2005). All the more reason that the public should heed the silent alarm sounded by the ExxonMobil report, which is more credible than other predictions for several reasons.First and foremost is that the source is ExxonMobil. No oil company, much less one with so much managerial, scientific, and engineering talent, has ever discussed peak oil production before. Given the profound implications of this forecast, it must have been published only after a thorough review."


The Royal Dutch/Shell Group of Companies, in their presentation "Visions of the Future: Shell launches new Global Scenarios looking forward to 2025" lays out the risks: " The energy scene will be reshaped by the combination of three discontinuities: a relinking of energy consumption and economic growth as a result of the faster development of emerging countries, the emergence of carbon as a commodity in its own right, and the search for energy security. The latter will remain a key consideration during the scenario time span, potentially leading to far more politicized energy relations and creating new sources of tensions among countries as well as new opportunities for entrepreneurship and cooperation. Ambiguity will persist as to what the term “energy security” covers: physical supplies can be threatened by rising international insecurity as well as by depletion of supply sources. Insecurity can also result from the lack of investment in enhanced recovery of existing sources, in new energy sources and/in infrastructures."


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Although Aramco, Saudi Arabia's national oil company (and the largest oil company in the world), has launched a massive expansion program, it could be 5 to 7 years before we see any meaningful increase in production from this additional investment. Worse, Saudi officials have apparently told the Bush Administration that OPEC will be unable to meet projected oil demand in 10 to 15 years. Saudi Arabia would have to produce up to one half of the increased demand, with most of the remainder coming from Kuwait, the United Arab Emirates, and Iraq. In order for the CERA scenario to work, the cartel would have to boost its production to 50 Mbl/d
(I'm adding: This is 5X the current 9.5mbl/d!! Matthew Simmons says they're close to decline now).
Few believe that will happen.
Saudi Arabia, for example, has apparently calculated that its contribution will fall short by up to 5 Mbl/d by 2024.


Only BP appears to agree with CERA. There "is no shortage of oil and gas resources for the long term" (From "Making the right choices, The energy year in perspective"). The world has enough proved reserves of oil to last 40 years "at current consumption levels". Higher prices, BP claims, have been caused by a supply-demand imbalance that should be resolved with the addition of new production over the next few years. Incidentally, BP is the only major independent oil company that had more reserves at the end of 2004 than it had at the beginning of that year.

Delayed projects and disruptions in the oil supply chain, coupled with current rates of depletion, could lead to temporary shortages long before "Peak Oil".

Why? Because the issue is NOT how much oil do we have left in the ground. The issue is – How much oil can we produce? Sure. Calculating available reserves (proven, probable, and possible) is important because these projections give us a rough idea when peak oil production will occur. But when we talk about oil as a business, we have to include the challenges of exploration, production and transportation. It will be tough, for example, to find and pump this stuff from black holes in remote Siberia or the cold blue ice of the Artic. Emerging technologies may permit us to drill 10,000 meters below the surface of the ocean, but it's still an incredible operations headache. Producing oil from shale and sand is possible, but finding enough water and natural gas to sustain production will be difficult. And then there's another problem. Most of the world's remaining reserves and transport routes are located within the boundaries of nations that are politically unstable, have unpredictable regimes, may ignore their contractual obligations, or have a large faction of politically active extremists.

Given the seemingly infinite number of imponderable variables and assumptions, a credible forecast based on available information (facts) is impossible. That's why I developed a series of scenarios for my book - Oil, Jihad and Destiny. Each scenario provides a way to organize a set of related facts and assumptions. Because they begin as a hypothesis, scenarios can be tested against known data points. We can also estimate each scenario's probability. Although the resulting "Best Case" scenario in my model projects adequate oil production through 2020, I gave it a probability of only 40 percent. The "Production Crisis" in my book describes a more likely scenario. Oil shortages will drive intermittent periods of recessive economic activity. Recession drives down demand. Oil surpluses appear and prices decline. A sluggish economic recovery occurs until oil production again falls behind demand. Consumption then decreases or is stagnant, and the cycle is repeated.

In the final analysis, however, the pivotal point for all of these assumptions and scenarios rests on the motivations, political realities, and production capabilities of the Middle East. If they are willing to act in the selfish-best-interest of the industrialized nations, then CERA's "Best Case" scenario is possible.

If not, we are in for a long period of cultural and economic agony.

Ronald R. Cooke

PLEASE READ the whole article from the above link. Of course read CERA's optimistic views, but then read the countless other information available that unfortunately discredits their optimism. If Saudi Oil Production ever reaches 12 mb/d it will be a miracle. Read "Twilight in the Desert" from an advisor to the Bush Administration. He analyzed hundreds of recent SPE Papers from Saudi Aramco and summarizes the major difficulties, they're having. They use the MOST advanced recovery techniques known to man, to just maintain the production they have now. Also when they increase production all they have left is the HEAVY SOUR CRUDE. ALMOST ALL OUR REFINERIES CAN'T use the stuff. We need the Light Sweet Crude. We need to build the new refineries to handle the HEAVY SOUR! Let's hope we can build them on the old military bases.

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New Oil Projects Cannot Meet World Needs This Decade

Just found this INTERESTING article about supply problems from:

World oil supplies are all but certain to remain tight through the rest of this decade, unless there is a precipitous drop in demand, according to the results of a study by the London-based Oil Depletion Analysis Centre (ODAC).

The study found that all of the major new oil-recovery projects scheduled to come on stream over the next six years are unlikely to boost supplies enough to meet the world’s growing needs.

ODAC analysed a total of 68 ‘mega projects’ with publicly announced start-up dates from 2004 through 2010. In total, these projects would add around 12.5 million barrels a day to world oil supplies by the turn of the decade.

This new production would almost certainly not be sufficient to offset diminishing supplies from existing sources and still meet growing global demand,” ODAC Board member Chris Skrebowski said.

More than half of the estimated new supply would simply replace production declines elsewhere due to natural depletion, the study found. A modest one percent annual rise in demand over the six-year period would then leave little or no surplus capacity to cushion against unforeseen disruptions in supply.

If demand were to increase by two percent annually, available supplies could fall short of the total needed in 2010 by more than two million barrels a day – roughly equivalent to losing all of Kuwait’s current daily production.

“With most producers operating flat out to meet runaway demand increases this year, the world’s immediately available spare production capacity has virtually disappeared,” Mr Skrebowski said. “This means that significant additional supplies in the near-to-medium term must come from new projects already in the development pipeline.”

“We now see those projects providing surprisingly limited relief in terms of incremental supply in coming years, and indeed physical shortages appear ever more likely if demand remains strong,” he said.

Even with relatively low demand growth, our study indicates a seemingly unbridgeable supply-demand gap opening up after 2007,” he said.

Mr Skrebowski, who is editor of the UK trade magazine Petroleum Review, compiles and regularly updates the details of planned major oil-development projects, as reported by the oil companies. The list contains all announced projects with at least 500 million barrels of estimated reserves and the claimed potential to produce 100,000 barrels a day or greater.

Using that list, ODAC examined three demand-growth scenarios of one, two and three percent a year to illustrate the likely range of outcomes. It also assumed that the combined annual rate of production losses from those countries where output is now permanently declining would remain constant each year, despite evidence that it appears to be accelerating and the likelihood that more producers may go into decline soon.

The effect of depletion in mature oil-producing regions is now becoming a much more significant factor in the supply-demand equation,” Mr Skrebowski noted.

According to data from the latest BP Statistical Review of World Energy, 18 major oil-producing countries are now past their peak production, and their combined annual output dropped by over a million barrels a day in 2003. This group of countries now accounts for almost 29 percent of total world production.

The ODAC study did not attempt to forecast when other countries would peak and tip into decline, but experts agree that several more are likely to do so within the next few years. Mexico and China, the world’s fifth- and sixth-largest producers respectively, appear to be among the likely candidates.

Mexico’s national oil company, Pemex, has already announced that production from Cantarell, the world’s largest offshore oil field, is expected to peak in 2006 and then decline by 14 percent a year. China, too, has confirmed that its two largest producing regions are now in decline. It achieved only modest overall production growth last year of 1.5 percent.

Of the 68 confirmed projects that ODAC analysed, 56 are due to come on stream in the next three years. Seven are scheduled to start pumping oil in 2008, three in 2009 and just two in 2010. Since it takes, on average, six years from first discovery for a major project to start producing oil, any other new projects approved now would be unlikely to add further supplies until after 2010.

It is disturbing to see such a dramatic fall-off of new project commitments after 2007, and not more than a handful of tentative projects into the next decade,” Mr Skrebowski said.

This could very well be a signal that world oil production is rapidly approaching its peak, as a growing number of analysts now forecast, especially in view of the diminishing prospects for major new oil discoveries,” he said.

Industry consultants IHS Energy recently reported that 85 percent of all the oil ever discovered is now in production, and only half the total produced last year was replaced by new field discoveries. Annual consumption has now exceeded new discoveries every year since the early 1980s. Overall, worldwide oil discoveries have been declining steadily for the past 40 years.

Not good. Let's begin getting away from oil now!
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As has been mentioned in other threads, turbine engines can be modified to run on Hydrogen. There are of course the problems associated with developing a practical storage technology on aircraft. I also don't know what the numbers are for energy extracted per lb. of fuel for H2 versus jet A. Additionally, the hydrogen has to come from some energy source: solar, nuclear, etc. But I think the point is that there are alternatives that will be developed. Commercial aviation will adapt.
Guys there is plenty of oil for us to fly on in our lifetime. When it does run out...and I do stress WHEN.......theres nothing we can do about it anyway. What the powers to be should be doing is making every effort to get us off of petroleum ASAP. This debate has been going on since the 1970's and it won't be any different in the 2070's.

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