Peak Oil (was "petroleum geologist explains US war policy")
- Thread starter Bernie_Gunther
- Start date
Bernie Gunther
Fundamentalist Druid
Pretty good summary of where we stand.
Hanoipete said:
I'm merely noting that the fabulously wealthy Anglo-American Astor family are the money behind ODAC.
Let me see if I've got this straight. According to you, Campbell is "an ok guy really", even though as editor in chief of ASPO's newsletter he has recently published a decidedly disturbing fascistic tract wherein a more doom-laden future for humanity is difficult to imagine. http://www.peakoil.ie/newsletters/588
On the other hand, you describe Lynch and Odell as both being "very right wing ideologically", but then you neglect to provide any evidence to support your assertion. Do you have anything - like a recently published fascistic tract, for example?
Crispy
The following psytrance is baṉned: All
Jesus, we covered that 'fascistic tract' months ago. It was one writer (a dodgy one) and the editorial paragraph said something like "Let's hope it doesn't come to this, but the massive forces we're talking about mean that some people will be taking this sort of thing seriously. Ulp."
I've got nothing against giving fascists a platform, as long as they get taken down publicly. I seem to remember there being a pile of letters against this piece in the next issue.
I've got nothing against giving fascists a platform, as long as they get taken down publicly. I seem to remember there being a pile of letters against this piece in the next issue.
Bigfish - you seem on some kind of mission - im not sure what it is.
ODAC are two bob, no big deal this way or that, they just send out emails with links to other published articles. They are peak oilers but they arent very important. The Astor thing i still dont get - are you implying Nazi/fascist sympathy? Thats a bit bonkers imo.
Campbell - yeah that piece by some nutcase was a big mistake, no doubt about it. It did damage his credibility. Right now i'd give him the benefit of the doubt as he doesnt appear to discrimate against anyone in his personal life. but i'd advise him just to stick to oil and not related soothsaying about the collapse of society.
Peak oil is inhabited by some serious weirdos, also very true.
Lynch and Odell would not - do not - mind being called right wing they are quite open about it. They are believers in market economics solving everything which is why they take umbrage to this geological problem that oil and gas arent everlasting. They parrot the same free market line over and over again about high prices creating new reserves via exploration, new technology and so on, but that is becasue they BELIEVE in the market - they are fundementalists to an economic religion which is why they are trotted out over and over again. Even their very short term predictions have been waaaay out...
ODAC are two bob, no big deal this way or that, they just send out emails with links to other published articles. They are peak oilers but they arent very important. The Astor thing i still dont get - are you implying Nazi/fascist sympathy? Thats a bit bonkers imo.
Campbell - yeah that piece by some nutcase was a big mistake, no doubt about it. It did damage his credibility. Right now i'd give him the benefit of the doubt as he doesnt appear to discrimate against anyone in his personal life. but i'd advise him just to stick to oil and not related soothsaying about the collapse of society.
Peak oil is inhabited by some serious weirdos, also very true.
Lynch and Odell would not - do not - mind being called right wing they are quite open about it. They are believers in market economics solving everything which is why they take umbrage to this geological problem that oil and gas arent everlasting. They parrot the same free market line over and over again about high prices creating new reserves via exploration, new technology and so on, but that is becasue they BELIEVE in the market - they are fundementalists to an economic religion which is why they are trotted out over and over again. Even their very short term predictions have been waaaay out...
bigfish said:
I don't know what is stranger - the original article or the first response, which refutes it using bible quotes.
I'm afraid any article that uses political correctness and wooly thinkers as it's main reasons for imminent-collapse-of-the-world is really rather off the deep end - and by the time I got to inifanticide, I'd had enough.
One woman one birth though, don't see what's wrong with that (if we do end up in a sh*tstorm, not just as a fun thing to do now).
That article really really sucked...it has no place in any intelligent discourse about oil/energy...or any other discussion in fact. On that I agree with Bigfish, that one item really damaged Campbell in many people's eyes, including many other `peak oil` people. Currently I give him the benefit of the doubt as he seems an ok guy but one has to be vigilent...
Ae589 said:
You should have pushed on to the second response...
BNP embrace "Peak Oil"
http://www.bnp.org.uk/news_detail.php?newsId=560
Gas is the perfect fuel for Europe, says industry guru Peter R Odell
http://www.statoil.com/STATOILCOM/S...ang=en&artid=2D0C1480FFB609B14125692700494022
http://www.statoil.com/STATOILCOM/S...ang=en&artid=2D0C1480FFB609B14125692700494022
The key to understanding this piece is to recognise that Statoil (which is a state run oil firm which has no real parallel in the UK or US) is making it their business to position Norway to benefit from the distressed energy market that is to come. UK oil and gas is now played out, Norway oil is playing out and Norway now needs to make the best of what remains of its gas resources. That involves stimulating (and then of course supplying) a European gas market - at a time when Europe is seriously considering nuclear power again. This is a fairly transparent piece of lobbying.
"In his view, increased gas supplies explain why nuclear power stations are no longer built in Europe."
Of course, it is the inverse. Nuclear power stations are no longer built in Europe because they are perceived to (and from time to time, do) blow up, because tax payers can't afford them, because private investors can't stomach the risk when the contingent liabilities are so large, the decommissioning costs are so huge. To say it's because we got taken by surprise at how wonderful a fuel gas is is clumsy, even by today's Corporate PR standards.
"If you also add gas hydrates, you can multiply by a factor of 20," he adds. "That'll take us into the 22nd century."
This is classic reverse engineering thinking. It is the answer to the question "how much would there have to be for the problem to go away". Politicians love it - who the hell is going to bother with the boring experts who know that gas hydrate production will produce associated methane (one of the most aggressive form of greenhouse gasses) in volumes that will dwarf current emissions, or do the simple sums that work out how big a coal mine would have to be to evolve enough gas to provide even a tiny fraction of current demand, or the number of wells you would have to drill into tight formations (and we know the ones Odell is referring to, and they are very tight) and point out that you would spend more energy drilling the wells than the wells themselves would provide etc. etc.
"All the years of analyses and research have at least convinced Prof Odell of one thing – the chances of finding new gas depend on the commitment made to exploration and exploitation."
The guys who have lost millions in the last few years searching the North Sea for it may lack judgement, but they certainly haven't lacked commitment. The amount of commitment hasn't made any more difference to their chances of success than your commitment to flapping your arms harder would to the chances of you flying. (I wonder if bigfish checked up on their success rate like I invited him to.)
"Supply to meet demand will increase regardless, either by boosting Europe's own gas production or by expanding imports from other countries."
That would be the point of this thread. Efforts to boost European gas production are failing, and other countries are busy picking which of the soon-to-be-distressed Superpowers (US/China) to service while investing in the liquification technologies that will be required to transport the gas over the Atlantic and Pacific (i.e. away from Europe). Meanwhile, it is difficult for even the most optimistic to interpret the sound of the Russian jackboot on the European gaspipe this winter as the sound of a country competing for our business. Some heard it as a country who knows Europe has almost no viable import alternatives of a scale sufficient to offset its own decline, and wants to use its monopoly position to force the sale to it of large parts of European infrastructure.
Odell's lamenting over what could have been are entertaining enough, but an argument that more could have been done with it before it ran out is not an argument that it is not running out.
A fact which Statoil are hoping you won't notice.
"In his view, increased gas supplies explain why nuclear power stations are no longer built in Europe."
Of course, it is the inverse. Nuclear power stations are no longer built in Europe because they are perceived to (and from time to time, do) blow up, because tax payers can't afford them, because private investors can't stomach the risk when the contingent liabilities are so large, the decommissioning costs are so huge. To say it's because we got taken by surprise at how wonderful a fuel gas is is clumsy, even by today's Corporate PR standards.
"If you also add gas hydrates, you can multiply by a factor of 20," he adds. "That'll take us into the 22nd century."
This is classic reverse engineering thinking. It is the answer to the question "how much would there have to be for the problem to go away". Politicians love it - who the hell is going to bother with the boring experts who know that gas hydrate production will produce associated methane (one of the most aggressive form of greenhouse gasses) in volumes that will dwarf current emissions, or do the simple sums that work out how big a coal mine would have to be to evolve enough gas to provide even a tiny fraction of current demand, or the number of wells you would have to drill into tight formations (and we know the ones Odell is referring to, and they are very tight) and point out that you would spend more energy drilling the wells than the wells themselves would provide etc. etc.
"All the years of analyses and research have at least convinced Prof Odell of one thing – the chances of finding new gas depend on the commitment made to exploration and exploitation."
The guys who have lost millions in the last few years searching the North Sea for it may lack judgement, but they certainly haven't lacked commitment. The amount of commitment hasn't made any more difference to their chances of success than your commitment to flapping your arms harder would to the chances of you flying. (I wonder if bigfish checked up on their success rate like I invited him to.)
"Supply to meet demand will increase regardless, either by boosting Europe's own gas production or by expanding imports from other countries."
That would be the point of this thread. Efforts to boost European gas production are failing, and other countries are busy picking which of the soon-to-be-distressed Superpowers (US/China) to service while investing in the liquification technologies that will be required to transport the gas over the Atlantic and Pacific (i.e. away from Europe). Meanwhile, it is difficult for even the most optimistic to interpret the sound of the Russian jackboot on the European gaspipe this winter as the sound of a country competing for our business. Some heard it as a country who knows Europe has almost no viable import alternatives of a scale sufficient to offset its own decline, and wants to use its monopoly position to force the sale to it of large parts of European infrastructure.
Odell's lamenting over what could have been are entertaining enough, but an argument that more could have been done with it before it ran out is not an argument that it is not running out.
A fact which Statoil are hoping you won't notice.
First Oil Achieved From 3rd Phase Development of UK North Sea Captain Field
http://www.ccnmatthews.com/news/rel...earchText=false&showText=all&actionFor=602277
http://www.ccnmatthews.com/news/rel...earchText=false&showText=all&actionFor=602277
Bigfish, I'm genuinely curious. What is your point? Do you have a view, or do your thoughts genuinely consist only of the newsprint renderings of the thoughts of others?
Are you aware of how little 15,000 barrels per day is, or are you making the point that 15,000 barrels per day is very little?
Are you aware of how little 15,000 barrels per day is, or are you making the point that 15,000 barrels per day is very little?
15k bopd is hardly another Forties (which produced 500k bopd at peak). New developments such as Captain Area C fit well with the long established declining N Sea discovery pattern whereby typical new discoveries are currently running at sub 30k bopd. The saying in the oil patch that 'elephants are found first' holds true.
The overall impact of such small discoveries will be to stretch the production tail out somewhat but in no way can they possibly make up for ongoing declines in the N Sea 'Kings and Queens' i.e. giant oilfields which were typically discovered in the early 1970's.
Here's a link to chart which shows just how far N Sea oil (UK/Norway combined) is along the depletion curve, 69% of Qt as of 2004: N Sea Hubbert Linearization. No oil province has ever been able to regain peak production from anywhere near this level of depletion and N Sea will prove no exception. Even Texas (which peaked at 56.5% of Qt in 1973) has subsequently seen 33 years of constant production declines despite their embarking on a 'crash' drilling program and having a totally business-friendly leasing system and lots of oilfield experts on hand. Texas' production is now just 25% of 1973 value.
The overall impact of such small discoveries will be to stretch the production tail out somewhat but in no way can they possibly make up for ongoing declines in the N Sea 'Kings and Queens' i.e. giant oilfields which were typically discovered in the early 1970's.
Here's a link to chart which shows just how far N Sea oil (UK/Norway combined) is along the depletion curve, 69% of Qt as of 2004: N Sea Hubbert Linearization. No oil province has ever been able to regain peak production from anywhere near this level of depletion and N Sea will prove no exception. Even Texas (which peaked at 56.5% of Qt in 1973) has subsequently seen 33 years of constant production declines despite their embarking on a 'crash' drilling program and having a totally business-friendly leasing system and lots of oilfield experts on hand. Texas' production is now just 25% of 1973 value.
Let's focus in a little more detail as to the potential impact of future discoveries on UK N Sea URR which currently stands at 24 Gbbls based on 228 oilfield discoveries. Looking at the chart 'Effect of the total number of oilfields on the URR' doubling the number of oilfields would add just 2 Gbbls. Put another way we'd need to discover as many oilfields as have been discovered in UK NS since the 1960's just to add 2 Gbbls to URR...and at average of just under 9m bbls URR per discovery. No wonder exploration is now generally proving uneconomic in NS - companies find there are better prospects for positive returns elsewhere or it's more attractive to leave funds on deposit or return them to shareholders.
There's more - Professor Kemp has recently reported that size of future NS fields is likely to be sub 20m bbls (20m boe for gas): Tax Grab Threatens NS Spending. Professor Kemp's report tends to endorse the Parabolic Fractal Law analysis upon which the chart referred to my 1st parag (above) is based. The key point to note is that sub 20m bbl / boe fields in NS are uneconomic unless they are closely clustered together...and this will not change much as energy prices rise reflecting the trend toward unity of ERoEI (energy return on energy invested) as new discoveries trend smallerl. Not least there is the problem of ageing infrastructure in NS - the pipelines and platforms which comprise gas / oil gathering systems. As an example the Forties pipeline was easily justifiable in the early 1970's by the 2.8 Gbbls Forties field alone whereas a couple of sub 20m bbl finds could in no way justify such investment. Key systems such as Brent and Forties are approaching the end of their design life given the North Sea's corrosive environment. On this basis discovery and development of potential nearby prospects will need to happen soon otherwise the 'window of opportunity' will no longer be available.
Professor Kemp's report has been discussed in more detail here: 20 new fields needed every year in the UK
There's more - Professor Kemp has recently reported that size of future NS fields is likely to be sub 20m bbls (20m boe for gas): Tax Grab Threatens NS Spending. Professor Kemp's report tends to endorse the Parabolic Fractal Law analysis upon which the chart referred to my 1st parag (above) is based. The key point to note is that sub 20m bbl / boe fields in NS are uneconomic unless they are closely clustered together...and this will not change much as energy prices rise reflecting the trend toward unity of ERoEI (energy return on energy invested) as new discoveries trend smallerl. Not least there is the problem of ageing infrastructure in NS - the pipelines and platforms which comprise gas / oil gathering systems. As an example the Forties pipeline was easily justifiable in the early 1970's by the 2.8 Gbbls Forties field alone whereas a couple of sub 20m bbl finds could in no way justify such investment. Key systems such as Brent and Forties are approaching the end of their design life given the North Sea's corrosive environment. On this basis discovery and development of potential nearby prospects will need to happen soon otherwise the 'window of opportunity' will no longer be available.
Professor Kemp's report has been discussed in more detail here: 20 new fields needed every year in the UK
It's also necessary to consider just where UK is headed economically given that both oil and gas in UK sector of NS is in terminal decline. As I'm about to show it does not matter over much whether one believes in an early or late global peak for oil (and gas) production; UK will have major economic problems regardless of any global peak.
The DTI Report Energy Trends June 2006 shows that, comparing 1st Qtr 2006 with 1st Qtr 2005 oil production has declined by 8.5% and gas production by 4.5%. In round numbers the combined production decline amounts to some 250k boe/d which is valued (at $75/boe) at approximately £10m. Given that UK energy demand is not reducing to match declining indigenous production it follows that the gap has to be made up by imports; in this case the cost of imports would be around £3.65bn over a 12 month period.
The problem for UK economy is that the above production decline (and corresponding import increase) is going to be a far from one-off affair. Consider Tony Blair's comments in a recent interview:
Taking relevant mid points in above quote i.e. 85% oil/gas imports in 17.5 years and assuming 2%pa growth in energy demand (recent JESS report indicated UK gas demand growth at 2.2%pa) UK would need to import some 4.3m boe/d (oil / gas combined) by 2023. At $75/boe cost to UK would be £64bn pa which would be in addition to any non-oil / gas trade deficit which is currenty running at c£36bn pa.
I'm not an economist but the above numbers are enough to give me cause for concern and I don't believe that UK proceeding down a path which would involve eventually borrowing £100bn pa is a viable option. On this basis there would appear to be 2 choices - either produce the energy internally or do without. Given that NS is in terminal decline, coal is dirty and many of the best UK deposits are exhausted, NP has long lead time and cannot readily power automobiles and aircraft and renewables cannot properly address the issue of 'base load' I suspect there will have to be a significant amount of 'doing without'.
I appreciate that 2023 sounds a long way ahead but remember that the energy trade deficit is already building and UK is likely to experience resulting economic difficulties well before then. We also need to consider that $75/boe may be conservative for 2 reasons - 1) price of WTI today is $75.50 (new high) and rising and 2) many future UK energy imports will be in form of LNG which is very expensive to transport and handle and also the whole process incurs major energy losses thus a higher price for the LNG component is likely to apply. Not least if consumers are really going to have to 'do without' there will need to be major infrastructure changes across UK to reflect declining availability of cheap energy; such changes take decades to implement and the process of change requires both energy and capital both of which will be in shorter supply once the impact of energy declines is widely felt.
For those who believe in forecasts of c$40/boe as per CERA, BP's CEO etc even these prices i.e. just over half of those currently prevailing would still present a major challenge to UK as oil / gas imports would still amount to some £35bn pa thus roughly doubling existing trade deficit.
As usual there are precious few signs of Gov't and industry, chambers of commerce etc thinking anything other than short term; unfortunately energy matters require long term strategic planning.
The DTI Report Energy Trends June 2006 shows that, comparing 1st Qtr 2006 with 1st Qtr 2005 oil production has declined by 8.5% and gas production by 4.5%. In round numbers the combined production decline amounts to some 250k boe/d which is valued (at $75/boe) at approximately £10m. Given that UK energy demand is not reducing to match declining indigenous production it follows that the gap has to be made up by imports; in this case the cost of imports would be around £3.65bn over a 12 month period.
The problem for UK economy is that the above production decline (and corresponding import increase) is going to be a far from one-off affair. Consider Tony Blair's comments in a recent interview:
(Transcript of interview).
Taking relevant mid points in above quote i.e. 85% oil/gas imports in 17.5 years and assuming 2%pa growth in energy demand (recent JESS report indicated UK gas demand growth at 2.2%pa) UK would need to import some 4.3m boe/d (oil / gas combined) by 2023. At $75/boe cost to UK would be £64bn pa which would be in addition to any non-oil / gas trade deficit which is currenty running at c£36bn pa.
I'm not an economist but the above numbers are enough to give me cause for concern and I don't believe that UK proceeding down a path which would involve eventually borrowing £100bn pa is a viable option. On this basis there would appear to be 2 choices - either produce the energy internally or do without. Given that NS is in terminal decline, coal is dirty and many of the best UK deposits are exhausted, NP has long lead time and cannot readily power automobiles and aircraft and renewables cannot properly address the issue of 'base load' I suspect there will have to be a significant amount of 'doing without'.
I appreciate that 2023 sounds a long way ahead but remember that the energy trade deficit is already building and UK is likely to experience resulting economic difficulties well before then. We also need to consider that $75/boe may be conservative for 2 reasons - 1) price of WTI today is $75.50 (new high) and rising and 2) many future UK energy imports will be in form of LNG which is very expensive to transport and handle and also the whole process incurs major energy losses thus a higher price for the LNG component is likely to apply. Not least if consumers are really going to have to 'do without' there will need to be major infrastructure changes across UK to reflect declining availability of cheap energy; such changes take decades to implement and the process of change requires both energy and capital both of which will be in shorter supply once the impact of energy declines is widely felt.
For those who believe in forecasts of c$40/boe as per CERA, BP's CEO etc even these prices i.e. just over half of those currently prevailing would still present a major challenge to UK as oil / gas imports would still amount to some £35bn pa thus roughly doubling existing trade deficit.
As usual there are precious few signs of Gov't and industry, chambers of commerce etc thinking anything other than short term; unfortunately energy matters require long term strategic planning.
Thanks zceb90 for thoughtful posts. Another way to state your post is to observe that the only way to reverse decline in an existing area is to find new oil outwith that area. The nature of exploration is to find the largest deposits first, followed by successively smaller deposits. The average deposit size eventually becomes so small that there is no rate of discovery that can offset decline in the previously discovered volumes. Then the only way to restore production is to discover oil in previously unexplored areas.
So infield drilling is never going to restore production. There are very few undrilled areas left in the UK - the so called 'white zone' West of Shetland being the least unpromising.
This effect is most clearly exhibited in Lower 48 US production - no amount of drilling and technology after the peak of production in 1970 was capable of causing the decline in production to be anything other than a mirror of ramp up prior to peak. The only inflexion occurred when deep water deposits were discovered in the Gulf of Mexico outwith the original Lower 48 area.
At the time, BP boasted that GoM production would one day contribute 1/3 of the company's production. Of course, it never did, but it did wonders for the share price at the time - which was (and is) the intended effect. Meanwhile, the failure to do so stands as a symbol of the industry's long track record of overplaying the significance of discoveries - most people today have forgotten that boast, and industry has moved on to equally improbable boasts about shale oil, biofuels, etc. without challenge.
So infield drilling is never going to restore production. There are very few undrilled areas left in the UK - the so called 'white zone' West of Shetland being the least unpromising.
This effect is most clearly exhibited in Lower 48 US production - no amount of drilling and technology after the peak of production in 1970 was capable of causing the decline in production to be anything other than a mirror of ramp up prior to peak. The only inflexion occurred when deep water deposits were discovered in the Gulf of Mexico outwith the original Lower 48 area.
At the time, BP boasted that GoM production would one day contribute 1/3 of the company's production. Of course, it never did, but it did wonders for the share price at the time - which was (and is) the intended effect. Meanwhile, the failure to do so stands as a symbol of the industry's long track record of overplaying the significance of discoveries - most people today have forgotten that boast, and industry has moved on to equally improbable boasts about shale oil, biofuels, etc. without challenge.
Falcon said:
That was 1975, right?
It seems to me that an essential feature of markets is that the traders who've been burned retire and die, leaving a new generation of spotty youths with superiority complexes to get burned...
Forget complicated "wave" explanations, this one is sufficient
Yes, bigfish, and they drilled their wells with their new licences and they discovered nothing.
This would be a more persuasive post if it was along the lines of "U.K. Energy Minister underscored the credibility of the 2005 Offshore Europe Oil and Gas Exhibition and Conference in Aberdeen when he used that venue to announce the discoveries arising from the latest North Sea bidding round"
You won't find such an announcement.
As for Norway's "massive projects", the definition of "massive" has been revised downward over the past decade. I wrote to the BBC at Christmas asking them why they had applied the term "massive" to a recent discovery that was, in fact, only 5 days of world supply, when the term 10 years ago was reserved by convention for discoveries that represented 1+ years of world supply. According to the BBC, their policy was to quote Oil Company press releases verbatim - it was the responsibility of the reader to judge for himself what the terms meant ...
Here is the context of Norway's recent "massive" projects ...
This would be a more persuasive post if it was along the lines of "U.K. Energy Minister underscored the credibility of the 2005 Offshore Europe Oil and Gas Exhibition and Conference in Aberdeen when he used that venue to announce the discoveries arising from the latest North Sea bidding round"
You won't find such an announcement.
As for Norway's "massive projects", the definition of "massive" has been revised downward over the past decade. I wrote to the BBC at Christmas asking them why they had applied the term "massive" to a recent discovery that was, in fact, only 5 days of world supply, when the term 10 years ago was reserved by convention for discoveries that represented 1+ years of world supply. According to the BBC, their policy was to quote Oil Company press releases verbatim - it was the responsibility of the reader to judge for himself what the terms meant ...
Here is the context of Norway's recent "massive" projects ...
Falcon said:
That's odd because as noted here in April:
http://www.thebusinessonline.com/Sto...208762F&page=0
Bigfish, the link in your above post doesn't work but I've found the quoted article elsewhere via a search.bigfish said:
The article doesn't state whether these discoveries pertain to the latest license bidding round referred to by Falcon but I'd expect a fair proportion of them are in longer-held blocks where drilling has been encouraged by recent big price hikes. The article, not untypically, does not go into specifics and the following needs to be clarified:
1) How many of these discoveries are of sufficient size to justify stand alone platforms and pipelines or are they in 'clusters' referred to by Prof Kemp and others thus, in combination justifying such facilities? Alternatively, are they sufficiently near existing infrastructure to utilise it economically?
2) If the latter applies in 1) above, does the major infrastructure still have sufficient 'shelf life' to accommodate the new production to full term?
I have some serious concerns as to just how well press reporters understand the difficulties of working during a long 'tail of production' in the N Sea. Taking again the example of Texas, production is now less than 25% of its peak (1973) value and a significant proportion of current production comes from many thousands of stripper wells i.e. wells which produce 15 bopd or less and are often owned / operated by 'poor-boy' independents. The N Sea is a different animal entirely as it is hugely more expensive to operate (both in monetary and energy terms) v land based operations in Texas. On this basis a much sharper cutoff of production will occur regardless of the prevailing oil price - no one could operate NS wells at 15 bopd or anywhere near it.
Reference the $1/bbl finding cost it sounds a bit on the low side for wells being drilled now. In the 1980's we could easily spend $10m on an exploration well especially if downhole problems occurred or multiple targets required plug back and sidetracking etc. There have been a number of reports that rig rates have doubled if not quadrupled in the past 2 or 3 years; on this basis exploration wells in NS might cost $20m - $25m. Furthermore the discovery well represents just a tiny portion of the total project development cost - planning, construction, setting platform, laying pipeline, drilling of development wells and their subsequent tieback, processing facilities etc. Not least NS operating costs are far from trivial - boats, helicopters, platform crew, etc. The cost of boats and helicopters and many materials used offshore will have increased signficantly as a result of rising global energy and commodity prices.
We also need to consider that much of the risk for new oilfield projects tends to be on the downside. I've seen several fields where the reservoir proved to be more highly faulted and less productive than originally prognosed but seen far less surprises on the upside. A couple of decades ago when new field sizes were a lot larger the industry could better cope with 'nasty surprises' - a 100m bbl field which turned in at 50m bbl would still generate a return, just not so much so quickly. Typical new projects now are 20m bbl or less and if URR is later determined to be just half the whole project is likely to have a negative return. Combine this possibility with the trend away from majors to 'tail of production scavengers' in N Sea and risk taking such as I've just described here will become more difficult - the smaller independents just don't have the resources to cope with loss making projects.
Let's also look at what 732m bbls actually means, remembering that it's the aggregate for both oil and gas. UK consumption in bbls (boe for gas) is c1.3 Gbbls pa rising at around 2% pa (numbers from DTI website, JESS report etc). New offshore projects have a lead time of 4 - 6 years thus, by the time projects come online (assuming they are all developed) they will barely represent 6 months of UK consumption. In other words they will not significantly alter the move by UK from self sufficiency until around 2004 to at least a 50% oil/gas importer next decade.
From the same report:
According to WoodMackenzie data (via the United Kingdom Offshore Operators Association), industry made 7 discoveries in 2005, averaging 10 million barrels per discovery. This 70 million barrels compares unfavourably with total discoveries in prior years of 120 mmbbl (2002), 125 mmbbl (2003) and 280 mmbbl (2004) despite "surging" drilling rates.
Hannon and Westwood gave up salaried positions and invested their life savings to form a consultancy. They make money if confidence is high, specifically when people drill wildcat wells, for which they sell their consultancy skills. They loose their houses if confidence is low.
In this business more than most, motive is everything when considering the factual accuracy of any press announcement. Beware press releases from foxes declaring the henhouse to be secure ...
The article gives no indication of the period over which the 732m bbls was discovered, and we are left to assume it was the year 2006 to which the rest of the article refers. It is not, and is in fact the combined discoveries of the prior 4 years.
According to WoodMackenzie data (via the United Kingdom Offshore Operators Association), industry made 7 discoveries in 2005, averaging 10 million barrels per discovery. This 70 million barrels compares unfavourably with total discoveries in prior years of 120 mmbbl (2002), 125 mmbbl (2003) and 280 mmbbl (2004) despite "surging" drilling rates.
Hannon and Westwood gave up salaried positions and invested their life savings to form a consultancy. They make money if confidence is high, specifically when people drill wildcat wells, for which they sell their consultancy skills. They loose their houses if confidence is low.
In this business more than most, motive is everything when considering the factual accuracy of any press announcement. Beware press releases from foxes declaring the henhouse to be secure ...
Shell's announcement re gas discoveries is 3bcm in 2 fields combined. Compare this to the giant gasfields discovered in nearby blocks in the 1960's (btw URR's I'm quoting are what the industry worked with for these 2 fields back then):bigfish said:
49/27 etc, Leman, URR=298bcm
49/18 etc, Indefatigable, URR=127bcm
3bcm is barely a 'drop in the bucket' compared with the above which, unsurprisingly after 3-1/2 decades have output of just a tiny percentage of their respective peak rates.
Those who support the theory that all fields / oil provinces peak and decline at some point are not saying that new discoveries won't occur; they estimate future 'yet to find' reserves of which those announced by Shell are part. They are stating clearly, however, that as each oil / gas province matures the discovery trend will be ever downwards. N Sea, Texas, US lower 48, Indonesia, Australia etc are all displaying such a trend.
Btw DTI report UK gas consumption at approx 100bcm pa rising at 2.2% pa (as per JESS report) thus Shell's announcement amounts to just under 11 days' supply for UK. It's not the number of announcements re commercial oil and gas finds which counts but the number of such announcements times average current URR. The product of the latter is small....and getting smaller.
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