Peak Oil (was "petroleum geologist explains US war policy")

[Falcon]

I think what it is about, and what its strategic intent is, are two different things. Specifically, a policy based on isolationism and self sufficiency, and a policy based on unilateral military intervention to secure by force, are different.

I also think it is inaccurate - and perhaps a little complacent? - to describe the latter as 'boring'.

 

[bigfish]

Greg Palast - “Armed Madhouse"

"Is the war in Iraq for oil? Yes, it's about the oil, but not for the oil. In my investigations for Armed Madhouse, I ended up with a story far more fascinating and difficult than I imagined. We didn't go in to grab the oil. Just the opposite. We went in to control the oil and make sure we didn't get it."

Audio/video: http://www.informationclearinghouse.info/article13055.htm

 

[bigfish]

Aramco to boost oil reserves by 25pc

Saudi Arabia is 'quadrupling' exploration activities to boost its oil reserves by 25 per cent by 2025, a Saudi Aramco official said.

Aramco, the state oil firm of the world's top exporter, has 260 billion barrels of proven oil reserves and a sustainable production capacity of 10.8 million barrels per day (bpd), said Mohammed al-Qahtani, manager, production and facility development department.

'The 260 billion barrels represents 36 per cent of discovered oil resources, this is the so called oil initially in place. We have 716 billion barrels of discovered resources. We produced 106 billion barrels so far, that is 15 percent, and 36 per cent is our proven reserves,' he told an Arab energy conference.

'We are estimating that by 2025 we will increase total discovered resources up to more than 900 billion barrels,' he told the conference in Jordan.

'The role of exploration is to increase the size of the pie and the role of development is to take more out of the pie.'

Saudi Arabia, the largest producer in the Organisation of the Petroleum Exporting Countries (OPEC), has fast tracked plans to boost oil production capacity to 12.5 million bpd by 2009 to help meet growing global demand for oil.

The Gulf state's output capacity now stands at 11. 3 million bpd and it has been producing around 9.5 million bpd.

'Over the next five years, we are almost more than quadrupling our exploration activities, keeping the level of exploration for the non-associated gas programme and also heavily increasing our exploration in the crude programme,' Qahtani said.

http://www.tradearabia.com/tanews/newsdetails_snOGN_article105141_cnt.html

 

[Crispy]

Interesting. That's certainly a good reason (among many) for the US to hate Chavez.

 

[Falcon]

Aramco, the state oil firm of the world's top exporter, has 260 billion barrels of proven oil reserves and a sustainable production capacity of 10.8 million barrels per day (bpd), said Mohammed al-Qahtani, manager, production and facility development department.

Aramco's reserves are state secret, have never been audited and cannot be verified by independent third parties. Meanwhile, the more reserves they say they have, the greater their slice of the OPEC production quota revenue. To paraphrase them, the role of OPEC is to increase the size of the pie, and the role of individual OPEC member reserves declarations is to take more out of the pie. The former Aramco Head of Exploration is on record as stating that the American government's estimate of future global supplies from the country are dangerously over-estimated.

Additionally, the Kingdom now faces what is probably a terminal political scenario - if they do not boost production they will be able neither to sustain their sclerotic economy nor prevent US military intervention directed at securing access to those firms that can boost production. They cannot boost it without Western service companies, which heightens exposure to Western culture and intensifies internal pressure for the overthrow of the regime.

So they are desperate to project the impression that future reserves, and production derived from those reserves, are secure. There is considerable pressure to lie in order to do so, no restriction on them in doing so, and considerable evidence that they have done so in the past.

The chart shows both the basis for current reserves claims, and the circumstances under which reserves were last increased by 25% in the region.

Within six years of introducing the OPEC quota system and therefore the massive incentive to cheat, OPEC members increased their reserves by 300 billion barrels, or about 40% without drilling a single well. Of the 260 billion barrels that Saudi claims it currently has, 90 billion barrels were added in a single year without drilling a single well. The pink is the proportion of OPEC reserves that probably don't exist.

Even if they had the reserves, a sustainable production capacity of 10.8 million barrels per day would be insufficient to maintain world demand. This picture shows future production from regions grouped by the phase in which they are producing i.e. "Decline", "At Peak" and "Pre-Peak"

To supply world demand growth of 1.5% per annum, OPEC countries will have to grow production at 6% every year for the next 20 years. They have never achieved this sustained growth rate, and the easy production has been discovered.

Even if they could, there are insufficient projects in the pipeline to deliver that capacity. Petroleum Review, which is a respected industry journal, identifies around 17 million barrels per day of additional capacity due onstream by 2010. Around 21 million bpd is required to offset decline and supply demand growth, leaving a shortfall in 2010 of around 4-5 million barrels a day on about 90 million barrels a day daily consumption.

 

[davekriss]

"Is the war in Iraq for oil? Yes, it's about the oil, but not for the oil. In my investigations for Armed Madhouse, I ended up with a story far more fascinating and difficult than I imagined. We didn't go in to grab the oil. Just the opposite. We went in to control the oil and make sure we didn't get it."

Audio/video: http://www.informationclearinghouse.info/article13055.htm

Hey, bigfish (how are you?) -- I've been saying this since the runup on 2002: It was about controlling the future flows of oil. He who controls, will control.

 

[bigfish]

Hey, bigfish (how are you?) -- I've been saying this since the runup on 2002: It was about controlling the future flows of oil. He who controls, will control.

Hi Dave, I'm fine, thanks. Hope you and the family are too.

Yes, it's all about controlling the future flow of oil, alright. Control over the most productive petroleum region in the world - "the jewel in the crown," as one former US president put it (I forget which one).

 

[bigfish]

World oil supply - presentation by Micheal C. Lynch

(PDF) http://www.petersco.com/whatsnew/energyseer jan26.pdf

 

[Falcon]

Bigfish - thanks for this. Michael (as seen in playboy) Lynch's arguments are widely regarded as the best defence of the status quo argument. In other words, the argument against peak oil doesn't get any better than this.

According to Lynch, there has been no deterioration in global supply/demand, it is naive to believe that oil is finite and OPEC reserves are uncertain, and the UK (currently declining at 8% per annum) is a good example of recent improvements in the world oil supply picture.

 

[bigfish]

Bigfish - thanks for this. Michael (as seen in playboy) Lynch's arguments are widely regarded as the best defence of the status quo argument. In other words, the argument against peak oil doesn't get any better than this.

Oh, I don't know, Odell's arguments are also highly regarded by people in government and industry looking to get a more accurate handle on the numbers. See, for example, The Global Energy Market in the Long Term: The Continuing Dominance of Affordable Non-Renewable Resources...

http://www.gasresources.net/The Glo...nce of Affordable Non-Renewable Resources.htm

According to Lynch, there has been no deterioration in global supply/demand, it is naive to believe that oil is finite and OPEC reserves are uncertain, and the UK (currently declining at 8% per annum) is a good example of recent improvements in the world oil supply picture.

Here's what Odell had to say about Gordon Brown's energy policy in 2004

It is paradoxical that Gordon Brown chooses to castigate Opec's members for failing to produce enough oil to bring prices down while ignoring Britain's role as one of the world's top 10 oil and gas producing countries. He also fails to recognise that declining UK oil and gas output results from a less than proactive government policy for the country's hydrocarbons industry.
Initially, this arose from the government's ideological unwillingness to make public investments in oil and gas exploration and production. More recently, it has reflected the government's obsession with a perceived need to constrain carbon fuel use and to stimulate green energy production with generous subsidies.

Last year's energy white paper epitomised the government's anti-oil and gas attitudes. It devoted 60 lines to the UK's world-scale upstream hydrocarbons industry from a total of 5,000. Since 1974, it produced some 4,500m tonnes of oil equivalent, equating to more than 75% of the UK's total energy use in this period.

Apart from the 30 years of security of energy supply which domestic production has given, the impact on GDP, on industrial investments, on direct and indirect employment and - most of all - on its balance of trade has been formidable. Net export earnings from domestic oil and gas since 1998 have contributed almost £6bn a year to the balance of trade, while the value of the energy import substitution effect has averaged £9bn a year. Without oil and gas, the £30bn average annual trade deficit over the period would have been 50% greater.

Given these advantages, the absence of any calculations in the white paper of the resource costs for the country from the change from net energy exports of 28m tonnes of oil equivalent in 2003 to net imports of 190m tonnes in 2020 is inexplicable. At current price levels, the swing will generate an annual burden on the balance of trade of £25bn-£28bn, adding 65%-85% to the already formidable trade deficit. Moreover, the near-100% security of energy supply will be reduced by 75%.

The white paper and the policies based on it do not address these issues, nor the consequential GDP and employment losses, nor the impact of severely reduced investment to the upstream hydrocarbon industry - accounting for 16% of total industrial investment in the UK.

We need a comprehensive inquiry into the assumptions that underlie the government's acceptance of a decline in oil and gas production. Such an inquiry must include the following:

First, an examination as to why the government views the UK's remaining resources of oil and gas so pessimistically that it forecasts a 35% production decline by 2010 and 75% by 2020 - only about 16bn barrels of oil equivalent. Even the cautious estimates of oil companies suggest at least as many resources remain to be exploited as have been produced to date - 33bn barrels. Dr J Munns, a senior geoscientist at the Department of Trade and Industry, estimates there could be up to 47bn barrels of oil equivalent under the UK's North Sea section, most of which remains under-explored.

Second, an evaluation of the failure of the present antiquated discretionary concession system and its associated tax regime to ensure a continuity of exploration for, and exploitation of the UK's offshore hydrocarbons.

Third, consideration of other ways of exploiting remaining hydrocarbon resources, such as production-sharing agreements between a publicly owned entity - say, a strategic oil and gas authority - and companies. State investments in exploration and exploitation usually require a lower rate of return than those expected by the private sector, reducing the financial risk and enhancing production potential.

Fourth, a comparison of Norwegian state involvement in the exploitation of that country's hydrocarbon wealth with Britain's essentially reactive approach to oil and gas development. In the latter case, the effective decision-takers are the concessionary companies, demonstrated by the recent partial withdrawal of BP and Shell from commitments to the UK's upstream hydrocarbon activities in order to finance operations elsewhere in the world.

Fifth, consideration of the need for an entity independent of the producers for ensuring the timely development of optimal offshore pipeline networks to collect and deliver the oil and gas to markets, as with the recently formed, state-owned Norwegian company, Gassco AS.

Sixth, analysis of the degree to which actions by the regulator Ofgem to enhance competition in gas and electricity markets have discouraged investments in upstream gas developments.

More intensive exploitation of the UK's remaining resources of oil and gas will not even be at odds with the government's desire to move the country towards a "low carbon economy". The additional domestic hydrocarbons production will significantly reduce the country's high-cost imports of oil, gas and coal at a time when there are only limited possibilities of switching to renewable energy.

The creation of additional national income through full exploitation of hydrocarbon resources seems the only way to sustain the subsidies required for the establishment of a low-carbon economy.

http://society.guardian.co.uk/environment/comment/0,14125,1289113,00.html

 

[Falcon]

He also fails to recognise that declining UK oil and gas output results from a less than proactive government policy for the country's hydrocarbons industry.

Well, no, actually. Declining UK oil and gas output results from geology. The UKCS basin is one of the most intensively mapped basins in the world. We know where all the source rock is, where the reservoir rocks are, where the cap rock is, where the trapping structures lie and what is and isn't fractured. The inverse relationship between recent (increasing) exploration activity and (deteriorating) discovery success (which is now one of the worst in the world) has nothing to do with government ideology and everything to do with the absence of one or more of those critical determinants of commercial hydrocarbon volumes.

an examination as to why the government views the UK's remaining resources of oil and gas so pessimistically that it forecasts a 35% production decline by 2010 and 75% by 2020

As it happens, I know a fair amount about how the DTI estimates Yet To Find volumes. I'm sorry to tell you that, far from being pessimistic, both industry and the DTI recognises that its method results in wildly optimistic estimates. Briefly, they generate probabalistic estimates of remaining volumes from a database of remaining targets which range in quality from poor to improbable. Their 'official' estimate of remaining reserves represents the likely reserves at a specific level of uncertainty. The problem with their number is that they choose a level of uncertainty of 5% i.e. an assumption that an explorer will accept a risk of up to 1 in 20 to find it. To be absolutely clear, this means an assumption that explorers will be able to find the capital to drill up to 19 dry wells before finding a productive well, and that that productive well will be sufficiently productive to ensure that the 20 well sequence is commercial. (Amusingly, even the DTI aren't quite sure why they use 1 in 20. It's worth noting that performing analytical calculations of any sort is something of a recent phenomenon for them and it is entirely possibly they just don't understand what they are doing yet).

In practice, a success rate of one in four represents the limits of commerical acceptability. Current success rates (2004/2005) are down to one in twelve. The Soviet Union was forced to accept 1 in 20 success rates at the point that its industry collapsed. A 35% production decline by 2010 is, unfortunately, an upside case.

It is easy to work out, given the average (deteriorating) success rate, the average (deteriorating) discovery size and the supposed remaining volumes how many wells you would have to drill per year to commercialise those volumes before the infrastructure fails (around another 15 years). The answer is between 5 and 10 times the current rate, or between 2 and 3 times the historuical maximum rate. This is assuming there was confidence that these reserves exist, which there isn't, as plummeting success rates demonstrate. No amount of tweaking of concessions, tax breaks, production sharing agreements or regulation can change that, or encourage large oil companies, new entrants or even a hypothetical state oil company to burn the money to demonstrate that geological fact.

But we don't need to speculate about whether exotic new incentives would transform the prospectivity of the North Sea - we already have data that was generated after Odell's misinformed 2004 piece. The DTI modified licensing arrangements in 2005, which produced a flurry of new entrants, speculators, exotic commercial deals and drilling. If you want some data, find out how many found oil, and how many are still investing (or in business?) Hint: I don't think the DTI have published the data because the results were so dismal, but if you get hold of it you'll find the answer is pretty much the nail in the coffin of the argument that the only thing that stands between the North Sea and some magic transformation is some crafty incentives ...

 

[bigfish]

Falcon: You are quoting Peter Odell NOT bigfish.. can you make that quite plain - Thanks.

 

[Hanoipete]

Peter Odell is one fruitloop short of a breakfast cereal.

The north sea is in decline, at some point you could plateau it for a bit of it declines far enough and enough is spent drilling. Drilling is already happening just like its hapening in mainstream places like Angola and Nigeria and very obscure places like Uganda, Bulgaria, Tanzania, Madagascar, Cyprus, offshore France, Sicily and the rest...

Its because all the really big stuff is gone, there's still loads to get, its just in very small bits. These days if you find 1 billion barrels you are superstars. 3.5 like cairn and whoopee!!

Also even with proven reserves you rarely get out more than 75%, sometimes as low as 10% is all you can get out. See Chinguetti in Mauratania looking dodgy for example...

 

[Falcon]

Falcon: You are quoting Peter Odell NOT bigfish.. can you make that quite plain - Thanks.

I'm quoting you quoting him. The 'Quote:' refers to what you posted, not what he said, and serves to signpost the fact that I am addressing my subsequent post to you. I think that's plain enough.

 

[bigfish]

Venezuela: estimated total of 1,360,000,000,000 barrels of oil reserves

http://www.vheadline.com/readnews.asp?id=58107

A New Interpretation of "Hubbert's Peak"

M. King Hubbert may have been a fine geologist deserving of the his reputation. But today we know much more than Hubbert did in his time, and it's currently believed by some savvy analysts that we're nowhere near peaking or running out of oil. Palast sides with that view and concludes that we have enough oil left untapped to last many decades into the future. Why? Because there's oil and then there's oil - there's the easy to find and refine kind called "light sweet" like what's abundant in the Middle East, and there's also the harder to find, more expensive to refine so-called "heavy crude" and oil available from tar sands. When the latter two categories are added in, the amount of total oil available skyrockets to off-the-chart numbers.

Palast makes a key point related to the price of crude. At $10 a barrel the supply is low because only the easy to extract and refine kind are economically feasible. But at $70 a barrel it's a whole new oil market. The heavy stuff and tar sands then become economical to extract and refine, and a new far higher finite supply is realized almost magically. In short, it's just a question of supply and demand and how the price of a commodity depends on how much of it consumers want. Too little demand and the price is low, but when it's high like now and rising, then so does the price.

How This Relates to Venezuela

From what we know for sure plus what we think we may know about Venezuelan "total" oil reserves, I suggest the reader first take a seat and buckle up. In previous articles, I reported Venezuela may have reserves of about 350 billion barrels if all their known heavy and light crude are counted. That total is far more than is now officially recognized by OPEC which means unofficially the country has greater reserves than Saudi Arabia by that number alone.

But wait, there's more, a lot more. Palast reports a US Energy Department expert believes Venezuela holds 90% of the world's super-heavy tar oil reserves - an estimated total of 1,360,000,000,000 (1.36 trillion) barrels. Let me repeat that - 1.36 trillion barrels. That alone is more oil than Hubbert believed 50 years ago lay under the entire planet.

Again, back to the key issue. Whatever the true highest estimate of reserves is from all varieties of oil, those reserves are only available at a price. If it ever gets too low again, which looks unlikely, those heavy reserves and tar sands oil will again go off the charts and be uncounted. However, with today's heavy demand and the likelihood of it continuing to grow in the future, the price of oil may continue to rise and all reserves from all sources may be needed and used to supply the market.

So with a report like this coming from an apparent credible source (according to Palast) in the US Energy Department, it takes little imagination for VHeadline readers to understand more than ever that Venezuela is likely viewed by any US administration as the world's most important source of future oil supply. And to readers who understand US imperial intentions, it takes even less insight to realize the Bush administration intends to go all out to get its hands on it even if it takes a war to do it. The US goal isn't access to the oil. It's control of the supply and its price, what countries get it and how much and which ones don't, what companies profit from it, and overall how this ocean of oil can be used as a strategic resource and weapon. Beyond question, the stakes are enormous, and the battle lines are now drawn more clearly than ever.

 

[Falcon]

In short, it's just a question of supply and demand and how the price of a commodity depends on how much of it consumers want.

Unfortunately, that is only one of the questions. The other question is the amount of energy involved in the extraction process. It takes energy to get energy. With light crude, the ratio of energy out over energy in is so high (around 100 to one) that the manufacturing energy is insignificant. Until now, the energy system has been dominated by light, sweet crude and we are as unaware of its unique energy ratio as fish are of water. (The ratio is so high that oil is effectively free, which is why a cup of McDonalds Coke costs £1 while the same volume of crude would cost around £0.10).

With deep water and remote areas, this ratio even for conventional oil is falling to around 5-8 barrels of oil out for every barrel of energy spent. Tar sands and other unconventional sources, while existing in large quantities, require between one half and one barrel of oil in manufacturing energy for every barrel of oil extracted - in other words, after meeting its own processing energy needs, there is no oil left left for us. That is why they are 'unconventional' i.e. they have been left until last. To put another way, to process 1,360,000,000,000 barrels of Venezuelan Tar Sand oil will require around 1,360,000,000,000 barrels of oil.

To make 1 barrel of oil from tar sand, you need 2 tonnes of sand, 8 tonnes of water and one thousand standard cubic feet of gas. You superheat the water with the gas and boil the sand in the water to produce 10 tonnnes of slightly radioactive slurry and three times more CO2 than is produced in conventional oil production.



At 2 million barrels per day of tar sand, Canadian tar sand production assumed by the USGS projection (the amount that is necessary to avoid failure of the world economy) would have required one quarter of Canada's daily gas production. Canada will be unable to meet existing (non-tar sand) gas consumption in 8 years time. It literally does not rain enough in Canada to maintain replacement volumes in its aquifers even at today's water offtake rates - the Canadian government is already having to withdraw water permits from conventional oil production operations due to the unsustainable depletion of its water aquifers, and the associated impact on irrigation and food production. There is no means of supplying a further 16 million barrels a day of water to drive tar sand manufacture. The slurry disposal volume represents about the capacity of Lake Ontario each year, for which there is no known technical storage or (net positive energy) processing solution.

There is no oil price at which these underlying physical constraints ease and Tar Sand operations (including Venezuela's) maintain the illusion of being net energy suppliers only to the extent that they benefit from hidden conventional hydrocarbon energy subsidies (look at the size of the truck in the image above, consider that Shell runs hundreds of these vehicles nose to tail in chains tens of miles long, and then ask yourself, for the materials used to construct them, where the energy comes from to mine, refine, transport to manufacturing facilities and assemble the trucks, and the energy required to operate them). Tar sand oil operations are, in effect, an energy-negative system for converting gas into gasoline for the U.S. automotive market. No gas - no tar sand oil.

The economic system and the underlying physical system are quite separate, and governed by quite different laws. The sort of naive analysis that bigfish presents is typical of that provided by those who don't really understand the physical system (i.e. economists), and cannot therefore differentiate reliably between the laws that govern energy systems and those that govern, say, sportswear apparel systems...

 

[Hanoipete]

And Palast's articles on oil are utter rubbish, they are loopy crap. He really has not bothered to check up on the subject. It's a shame, he seems to have fallen in love with himself, as per his terrible interview with Chavez on Newsnight.

 

[clv101]

If... The Oil Runs Out

Tue 30 May, BBC2 11:20 pm - 12:20 am 60mins
http://news.bbc.co.uk/1/hi/programmes/if/4989146.stm

It's 2016 and the world is in crisis. The Oil Age is coming to an end.

Global supply can't keep up with soaring demand and the price of petrol is going through the roof. So now the oil companies are in a race, to the ends of the earth in a desperate search for Black Gold. But what happens if the oil isn't out there anymore? What then?

Blending drama and documentary, this film investigates the scenario which experts fear will come true when the cheap oil on which we depend starts to run out. Suddenly we won't be able to take anything for granted any more.
link

Shame it's not got a better slot but this programme sounds like it's going to address peak oil. Of course I think their 2016 date is optimistic but it should be interesting none the less.

 

[bigfish]

Oil price likely to fall, says Browne

· BP chief predicts drop to as little as $25 a barrel
· Fears of declining petrol supplies dismissed

Terry Macalister
Tuesday June 13, 2006
The Guardian

Lord Browne, BP's chief executive, held out the prospect of a big drop in crude oil prices to $40 a barrel as he dismissed views that petroleum was running out very fast.

His optimism came despite a 1 cent rise in the price of Brent crude or July delivery to $70.49 a barrel in morning trading in London as traders continued to fret about tensions in the Middle East.

It was barely a month ago that some industry experts were talking about the possibility of price spikes of $100 a barrel and BP had condemned financial speculators for artificially pushing up prices.

But yesterday Lord Browne was eager to outline his belief that the value of oil on world markets should begin to return to more normal levels. "It is very likely that, in the medium term, prices will stand at about $40 on average. In the very long run, even $25 to $30 are possible," he said in an interview with the German weekly news magazine Der Spiegel.
Lord Browne accepted that it was unlikely prices would fall sharply in the short term but dismissed notions that the price could only go up as scarcity increased. Large oilfields were still being found, he said, and regions such as west Africa had more hydrocarbons that could be tapped.

http://business.guardian.co.uk/story/0,,1796064,00.html

 

[Falcon]

There are two things that drive the oil price:

1. market sentiment i.e. the fear of future scarcity
2. the scarcity itself

Lord Browne is doing what he can about (1) as he should - it is his job to maintain the share price by lowering fears about future revenue streams. In doing so he is acting in his and his shareholders interests (of which I am one).

The discerning reader should be careful not to mistake the information he supplies as intended to be "the truth", or provided in the reader's interests (unless he is also a shareholder). The data supporting of the probability of future scarcity, and high oil price, remain.

 

[zceb90]

As I've posted higher up this thread I find it much more revealing to 'follow the money' as opposed to 'follow the words' of Big Oil COE's such as Lord Browne. As a reminder of BP's proposed financial actions reported last February here's my earlier post. So to confirm again, BP propose to spend no less than $65bn on returning funds to shareholders over the next 3 years, funding which is thus denied to the effort involved in finding and producing 'all this extra oil' to which Lord Browne referred in recent Der Spiegal interview.

That's not all - let's examine this extract from the interview:

Lord Browne said that companies were finding large oil deposits in the Caspian Sea, while there was good production potential in countries such as Russia and regions including Western Africa.

Yet, despite reference to the Caspian Sea's prospects here's BP's action in 2002:

In the early nineties the Caspian seemed to be the next Middle East. In 2001 we had 20 out of 25 dry holes that dampened the enthusiasm for the Caspian significantly. In 2001 Kashagan was finally discovered, deemed to be the greatest field in the decade. In 2002 BP and Stat Oil quietly sold their 14% of Kashagan for 800 million dollars. In 2003 British Gas put their 17% on the block for 1.2 billion dollars. Which raises, in my opinion, the question, "What do these original parties know about the world's greatest field or do they merely want to spread the wealth?

Source: Interview, FTW / Simmons. In short, three of the original investors in Kashagan including BP had pulled out by 2003. More background to their decision here

Much more recently consider the following article in the Guardian: BP Selling $4bn Russian assets.

So we have BP selling substantial oil producing assets in 2 out of the 3 'promising' oil producing regions specified by Browne in Der Spiegal interview; again I suspect the proceeds are being returned to shareholders rather than invested in exploration, field development and refinery expansion. I don't doubt that oil prices could fall substantially from here, already they are 10% off the recent $75 high. Where I differ from Lord Browne is that I don't believe that substantial new supplies of oil will actually deliver such large price falls i.e. to $40 or even $25; instead potential new supplies will struggle to maintain the status quo as depletion of mature fields advances. The catalyst for falling oil prices is much more likely to be, imo, global recession or even economic depression brought about by a combination of big increases in energy and commodity prices together with high / unsustainable levels of debt and trade imbalances.

 

[bigfish]

Greg Palast - Keeping Iraq's Oil In the Ground

06/14/06 "AlterNet" -- -- World oil production today stands at more than twice the 15-billion a-year maximum projected by Shell Oil in 1956 -- and reserves are climbing at a faster clip yet. That leaves the question, Why this war?

Did Dick Cheney send us in to seize the last dwindling supplies? Unlikely. Our world's petroleum reserves have doubled in just twenty-five years -- and it is in Shell's and the rest of the industry's interest that this doubling doesn't happen again. The neo-cons were hell-bent on raising Iraq's oil production. Big Oil's interest was in suppressing production, that is, keeping Iraq to its OPEC quota or less. This raises the question, did the petroleum industry, which had a direct, if hidden, hand, in promoting invasion, cheerlead for a takeover of Iraq to prevent overproduction?

It wouldn't be the first time. If oil is what we're looking for, there are, indeed, extra helpings in Iraq. On paper, Iraq, at 112 billion proven barrels, has the second largest reserves in OPEC after Saudi Arabia. That does not make Saudi Arabia happy. Even more important is that Iraq has fewer than three thousand operating wells... compared to one million in Texas.

That makes the Saudis even unhappier. It would take a decade or more, but start drilling in Iraq and its reserves will about double, bringing it within gallons of Saudi Arabia's own gargantuan pool. Should Iraq drill on that scale, the total, when combined with the Saudis', will drown the oil market. That wouldn't make the Texans too happy either. So Fadhil Chalabi's plan for Iraq to pump 12 million barrels a day, a million more than Saudi Arabia, is not, to use Bob Ebel's (Center fro Strategic and International Studies) terminology, "ridiculous" from a raw resource view, it is ridiculous politically. It would never be permitted. An international industry policy of suppressing Iraqi oil production has been in place since 1927. We need again to visit that imp called "history."

More: http://www.alternet.org/waroniraq/37371/

 

[Falcon]

reserves are climbing at a faster clip yet ... Our world's petroleum reserves have doubled in just twenty-five years

No - reserves are falling at 11 Gb per year... They only appear to be climbing because of the mis-substitution of geological reserves accounting methods with reserves accounting methods which are intended for financial reporting. The intellectual credentials of the piece is nicely established ...

it is in Shell's and the rest of the industry's interest that this doubling doesn't happen again

The substitution of accounting methods is done BY the industry IN ORDER to project the impression that reserves will double again (a strategy which depends for its success on an inexhaustible supply of the easily mislead, and therefore one which is currently very successful).

On paper, Iraq, at 112 billion proven barrels

An unfortunate turn of phrase. Iraq added 28 billion barrels of reserves in 1986 without drilling a single well at a time when the OPEC countries added over 300 billion barrels - without drilling a single well. A substantial proportion of Iraq's 'proven' reserves exist ONLY on paper - put there without a shred of geological justification to protect their production quota based revenues in the face of gross OPEC reserves overbookings in the 1980's.

start drilling in Iraq and its reserves will about double,

Start drilling in Iraq and its PRODUCTION may about double. Increased drilling in Russia increased geological knowledge and caused reserves to fall. Reserves during the time when the greatest fraction of those 1 million Texan wells were installed have fallen - that's why they were drilled. There is every reason to suppose the same will happen in Iraq once the true magnitude of the overbookings of the 1980's becomes apparent.

The effect of increasing production without increasing reserves is to bring forward the date of maximum production and to increase the post peak decline rate - the decline rate in the North Sea is now around 8% per annum due to non-Reserves adding drilling in the 1990's. The effect of accelerating production is to increase the rate at which new oil will have to be found in the early part of the 2010's just to keep oil output constant. 2015 is a reasonable consensus for the date of global peak oil...

Even assuming Iraq's reserves could be doubled, and taking their pre-1986 reserves grab figure of 70 billion barrels as representative: 140 billion barrels is around four [edited] years world supply at 30+ billion barrels a year global consumption. Those who would bandy large reserves figures around in support of the oil abundance argument would also have you forget that consumption figures are equally large - and growing.

An international industry policy of suppressing Iraqi oil production has been in place since 1927

In the late 1960's, the production position for BP was so bad that it risked the entire company developing offshore platform technology. The result was the Forties field, the largest man-made structures in the deepest water at that time, in one of the most hostile marine environments in the world - the technology at the time was compared with that employed in the space race. To imagine they went to these financial risks when readily available oil was being suppressed in Iraq serves only to illustrate the desperation of the argument that oil will remain abundant.

Iraq is the equivalent to finding a tenner down the back of the sofa - it is not a substantial pay rise.

 

[Hanoipete]

i wouldnt quote much from Simmons on anything other than Saudi Arabia, there he has done interesting work. apart from that basically ignore him and his `tired and emotional` ego, same with From The Wilderness that is a cooks site, nutty nonsense. also on the peak oil side there are a lot of deluded, egotistical charlatans. Savinar, Heinberg, Julian Darley - fruitcake, Sanders, ODAC, Deffeyes, all with massively over infalted opinions. Im afraid Colin Campbell also touches this category though he keeps it together most of the time.

Good reliable ones are Michael Klare, Robert Hirsch, Ali Bakhtiari...they dont go in for too much grandstanding.

On the other side Lynch and Odell are very weak, they get far too much prominence, even in good publications. They say little of interest.

You guys should rely on your own data, stop using the phrase `peak oil` as it is now heavily contaminated and just crunch the numbers. Even the really top market gurus dont know the real figures, its part of what makes oil so interesting. Measuring liquids underground is difficult.

Oh and i read some bits on this thread about `abiotic oil`, that is just pure lunacy, but i take it no one believes that.

 

[Crispy]

Just bigfish, and he seems to have a consiparacy-prone mind.

 

[diego]

http://www.thetruthseeker.co.uk/article.asp?ID=4657

Sorry don't know if this is already on here somewhere.

 

[Fruitloop]

Falcon: interesting stuff. Cheers!

 

[Hanoipete]

Iran bourse isnt important, the article is part of the internet gold bug phenomenon. In 50 years maybe. That was another thread.

 

[bigfish]

i wouldnt quote much from Simmons on anything other than Saudi Arabia, there he has done interesting work. apart from that basically ignore him and his `tired and emotional` ego, same with From The Wilderness that is a cooks site, nutty nonsense. also on the peak oil side there are a lot of deluded, egotistical charlatans. Savinar, Heinberg, Julian Darley - fruitcake, Sanders, ODAC, Deffeyes, all with massively over infalted opinions. Im afraid Colin Campbell also touches this category though he keeps it together most of the time.

I'd agree with most of this save to say that all of Campbell's doom-laden predictions have proven to be wrong.

Good reliable ones are Michael Klare, Robert Hirsch, Ali Bakhtiari...they dont go in for too much grandstanding.

But doesn't Bakhtiari sit on the (Astor family's) ODAC board with Mystic Meg Campbell?

On the other side Lynch and Odell are very weak, they get far too much prominence, even in good publications. They say little of interest.

It seems odd that Odell and Lynch should get so much prominence in "good publications" if, as you say, they are "very weak" and "say little of interest".

 

[Hanoipete]

Ok...you're trying to pull apart my words on an internet forum. I think you probably understood what i was saying but anyway...
Bakhtiari is cool even if ODAC are a little over zealous, they are only a news clearing house really - what has the Astor connection got to do with anything? What are you implying?

Campbell is not that doom-laden. But he does get a bit over excited. He's an ok guy really.

Lynch and Odell are simply very right wing ideologically so anything that does not fit with market economics is attacked. But they are very very weak imo. They are the same as people ike Darley and Savinar, full of predictions no one can counter as they are in the future. Lynch said oil would be $35 by now. Only 100% out.

Cheap, easy to get oil is running out, so is light sweet - that's all fairly obvious to anyone in any part of the industry, see new refinery builds to process heavier grades, its not really up for dispute.

There is still plenty of oil to extract, but a lot of data is very very weak and the oil left is in expensive places. You can call it `peak oil` - i dont - or whatever you like but no one doubts that unless one is a consipracy/abiotic oil person.