by Jerome a Paris
Sat Sep 16th, 2006 at 11:03:51 AM EST
Recently, there has been a quite visible backlash in the media against peak oil theory. If the past few months had seen the sudden emergence of the concept in the mainstream press, the recent fall in oil prices (from a high of $78 to about $62 today in just a few weeks) has brought back the cornucopians in force.
The announcement of a significant find in the deep offshore area of the Gulf of Mexico was hyped (see quotes below); now there appears to be a concerted effort by big industry players, starting with Saudi Arabia and ExxonMobil, to downplay concerns.
the Gulf of Mexico find
The BusinessWeek view:
Plenty of Oil--Just Drill Deeper
The discovery of reserves in the Gulf of Mexico means supply isn't topping out
You can tune out all the scare talk about Peak Oil for a while--probably a long while. Peak Oil is the theory, on the verge of becoming conventional wisdom, that the world's petroleum supply is topping out and will not be able to meet global demand soaring along with the economies of China and India. But a successful test in a mammoth field deep beneath the Gulf of Mexico, announced on Sept. 5 by Chevron (CVX), Devon Energy (DVN), and Norway's Statoil (STO), should help put that scary scenario on hold for decades.
given the powerful combination of high oil prices and new technology, the industry is gaining confidence that supplies will grow. It's pushing hard to produce oil and gas from difficult tar sand and shale fields as well as rejuvenating older fields with enhanced recovery methods. Cambridge Energy Research Associates predicts world oil and natural gas liquids capacity could increase as much as 25% by 2015. Says Robert W. Esser, a director of CERA: "Peak Oil theory is garbage as far as we're concerned."
The Oil Drum's view (by Dave Cohen)
Jack-2 and the Lower Tertiary of the Deepwater Gulf of Mexico
The LTGOM play consists of a number of fields as shown in Figure 1 below. All of these fields have a EUR in the 350 million to 500 million-barrel range according to Rigzone and other unpublished sources. The production capacity of the various fields and the types of fluid they can deliver vary considerably. Aside from their great depth, the reservoirs and fluids present many challenges. Some of these fields will get produced, others will not. It is important for everyone to understand that the large EUR numbers quoted do not apply to any one field but rather represent the entire Lower Tertiary region.
The Jack-2 well test indicated a flow of 6000 barrels per day. This one data point encourages further appraisal but does not guarantee flow rates that will justify the massive (billions of dollars) investment required to put the LTGOM into full-scale production. Whether the economics of commercial exploitation is favorable for the various fields remains an open question.
Implementing development plans, where they exist, for these fields pushes the limits of deepwater technology. A myriad of questions exist about completion and production of the wells. Unanswered logistical concerns include securing rigs, transporting produced oil to market and what to do with associated natural gas.
Realistically, initial production of some fields (eg. Great White and Cascade) may happen by 2009 or 2010 at the earliest. The other fields that do get developed, including Jack, will likely not achieve first production before the 2012 to 2014 period. Delays are likely given that many technical problems are being solved for the first time. Under most forecasted scenarios, production from the LTGOM will likely only offset declines in US production that will have occurred by then.
In the best case, the whole area (not just the one field) has the potential to provide 5-10% of US consumption. While nothing to be sneered at, it's equally obvious that this will not change the worldwide oil balance.
Recent price decreases
The new "optimistic view, via the Seattle Times:
Analyst predicts plunge in gas prices
WASHINGTON -- The recent sharp drop in the global price of crude oil could mark the start of a massive sell-off that returns gasoline prices to lows not seen since the late 1990s -- perhaps as low as $1.15 a gallon.
"All the hurricane flags are flying" in oil markets, said Philip Verleger, a noted energy consultant who was a lone voice several years ago in warning that oil prices would soar. Now, he says, they appear to be poised for a dramatic plunge.
Crude-oil prices have fallen about $14, or roughly 17 percent, from their July 14 peak of $78.40.
But many of the conditions that drove investors to bid up oil prices are ebbing. Tensions over Israel, Lebanon and Nigeria are easing. The hurricane season has presented no threat so far to the Gulf of Mexico. The U.S. peak summer driving season is over, so gasoline demand is falling.
With fear of supply disruptions ebbing, oil prices began sliding. With oil inventories high, refiners that turn oil into gasoline are expected to cut production. As refiners cut production, oil companies increasingly risk getting stuck with excess oil supplies. There's already anecdotal evidence of oil companies chartering tankers to store excess oil.
All this is turning financial markets increasingly bearish on oil.
Should oil traders fear that this downward price spiral will get worse and run for the exits by selling off their futures contracts, Verleger said, it's not unthinkable that oil prices could return to $15 or less a barrel, at least temporarily. That could mean gasoline prices as low as $1.15 per gallon.
There is a reasonable case to be made for lower oil prices in the short term, as made by HiD in his competing diaries Countdown to $50 oil (4) or his comments.
Or you have the permanent anti-peakoilers like Alan Caruba
Suffice it to say that the new Gulf of Mexico discovery rivals that of Alaska's giant Prudhoe Bay oil field in 1968. President Bush may think we're "addicted" to oil and, along with other politicians, call for oil "independency", but the fact is we, like every other modern nation require oil for transportation, plastics, heating homes, and the countless other uses to which we put petroleum.
Recently, Abdallah Jum'ah, president and CEO of the state-owned Saudi Arabian Oil, better known as Aramco, said the world has the potential of 4.5 trillion barrels in reserves. At current levels of consumption, that's 140 years worth of oil to power the world. Even at the lowest level of estimated reserves, there's still enough until 2070 and does anyone believe we will not find more?
While the vast Middle Eastern reserves remain an important source of oil for the world, the geopolitical game just changed for the better as far as America is concerned. The Gulf of Mexico discovery insures a new degree independence and security. Think how much more we could achieve now that the twenty-five year old federal ban on offshore exploration has been lifted?
Basically, if American companies could drill in Alaska and in waters around the USA, all would be solved for a long time. He also makes reference to the recent Saudi pronouncements, which were given a lot pf prominence on the front page of the WSJ (sub. link, alternative link below) a couple of days ago:
Some insiders reject 'peak-oil theory'
Leading players in the petroleum industry, including Saudi Arabia and Exxon Mobil Corp., are aggressively arguing that plenty of crude oil remains for world consumption, in an effort to counter critics who contend crude output is about to plateau.
That argument, known as the peak-oil theory, has provided intellectual backing for the boom in crude prices and sowed doubts among some policy makers about crude's long-term reliability as an energy source. Such doubts, coupled with concern over sky-high prices, have added impetus to the search for oil substitutes--including in Washington, where President Bush this year declared the U.S. "addicted to oil" and sparked a boom in interest in ethanol.
Some in the industry now are keen to fight the threat posed by such fears.
Tuesday, Abdallah S. Jum'ah, chief executive of Saudi Arabian state-owned Saudi Aramco, the world's largest oil company by production, argued during a speech in Vienna that the world has more than a century's worth of crude left at current rates of production. His talk followed similar remarks by a senior Exxon executive this week. Spokesmen for Exxon and Aramco said they aren't coordinating their remarks.
At an OPEC seminar yesterday, Mr. Jum'ah of Aramco said the world had produced only about one trillion barrels, or about 18%, of the earth's producible potential of 5.7 trillion barrels of oil. "That fact alone should discredit the argument that peak oil is imminent, and put our minds at ease concerning future petroleum supplies," he said. The remaining 4.7 trillion barrels should be enough to last more than 140 years at current output rates, he said.
Mr. Jum'ah's speech came two days after Exxon's Australia chief, Mark Nolan, told an industry conference in Adelaide, Australia, that "the end of oil is nowhere in sight." Mr. Nolan cited a U.S. Geological Survey estimate of more than three trillion barrels of conventional recoverable oil resources, of which one trillion barrels has been produced. Conservative estimates of heavy-oil and shale-oil resources push the total to four trillion barrels, while a 10% increase in recoverability will deliver an extra 800 billion barrels, Mr. Nolan said.
"I think there's a lot of misconceptions of what peak oil is," Mr. Raymond said in an interview last week. "The resource base is continually changing, driven by economics and technology." But he said his views won't dictate the results of the National Petroleum Council's study. "I may learn something."
So, there you go. The resource base is continually changing and new technologies increase it all the time.
We'll be fine. Right.
Earlier "Countdown Diaries":
Countdown to $100 oil (30) - senior politico fears looming oil wars
Countdown to $100 oil (29) - Alaska joins axis of evil (unreliable oil suppliers)
Countdown to $100 oil (28) - New records suggest more to come
Countdown to $100 oil (27) - 'Mission Accomplished' - High oil prices are here to stay
Countdown to $100 oil (26) - Time to bet again (eurotrib)
Countdown to $100 oil (26) - Time to bet again (dKos)
Countdown to $100 oil (25) - Iran vows that oil prices will not go down
Countdown to $100 oil (24) - What markets are telling us about future energy prices
Countdown to $100 oil (23) - Running out of natural gas in North America
Countdown to 100$ oil (22) - gas shortages in the UK - 240$/boe
Countdown to 100$ oil (21bis) - long term vs short term worries (dKos)
Countdown to 100$ oil (21) - 8-page extravaganza in the Independent: 'we're doomed'
Countdown to 100$ oil (20) - Meteor Blades is Da Man in 2005
Countdown to 100$ oil (19) - Your bets for 2006 (Eurotrib)
Countdown to 100$ oil (19) - Your bets for 2006 (DailyKos)
Countdown to 100$ oil (18) - OPEC happy with oil above 50$
Countdown to 100$ oil (17) - Does it matter politically? A naked appeal for your support
Countdown to 100$ oil (16) - We'll know on Monday
Countdown to 100$ oil (15) - the impact on your electricity bill
Countdown to 100$ oil (14) - Greenspan acknoweldges peak oil
Countdown to 100$ oil (13) - Katrina strikes / refinery crisis
Countdown to 100$ oil (12) - Al-Qaeda, oil and Asian financial centers
Countdown to 100$ oil (11) - it's Greenspan's fault!
Countdown to 100$ oil (10) - Simmons says 300$ soon - and more
Countdown to 100$ oil (9) - I am taking bets (eurotrib)
Countdown to 100$ oil (9) - I am taking bets (dKos)
Countdown to 100$ oil (8) - just raw data
Countdown to 100$ oil (7) - a smart solution: the bike
Countdown to 100$ oil (6) - and the loser is ... Africa
Countdown to 100$ oil (5) - OPEC inexorably raises floor price
Countdown to 100$ oil (4) - WSJ wingnuts vs China
Countdown to 100$ oil (3) - industry is beginning to suffer
Countdown to 100$ oil (2) - the views of the elites on peak oil
Countdown to 100$ oil (1) (eurotrib)
Countdown to 100$ oil (1) (dKos)