Random Image
iceland_305
Oil Companies on Peak Oil
World Oil Supplies
"The world is not running out of oil and gas" [BP]
"We can continue to meet our growing demand for energy"[Shell]
BP and Shell are repeating this statement loud and clear. There is no doubt about their public position. However, they are also making it clear that the challenges to meet energy demand are becoming much greater.
"while securing our future energy supplies is possible, it will not be easy or cheap. There are major challenges ahead." [Shell]
"There are decades of available supplies of both oil and gas. At least forty years of oil and at least 65 years supply of natural gas taking into account just proven reserves. Beyond that there is undoubtedly more oil and gas yet to be found and substantial reserves of so called unconventional resources such as heavy oil in Canada and Venezuela which are identified but which have not yet been developed." [BP]
From a major oil company this is quite misleading. Middle East reserves are less than those stated by OPEC countries. There is no verification of their numbers and clear evidence for how and why they have been overstated.
Even if we have 40 years of oil reserves at current production levels, it cannot be pumped at this high rate for 40 years and then suddenly stop. Instead, the rate must begin to decline with a long tail of much lower production extending for several decades. This is a fundamental nature of the way oil is produced and is apparent in every field and every region after peak production.
"In areas like the North Sea, the industry has been very successful in prolonging the productive life of fields for far longer than originally expected." [Shell]
Shell talks of 'recovering more' from existing fields and developing unconventional resources as the means to deliver increasing supplies. But in the North Sea, a Shell heartland and a key area for 'recovering more', the 1999 'oil peak' caught Government and Industry by surprise and production continues to decline at a rapid rate. After the easy oil is gone, the harder work begins to extract the remaining oil, but production rates never match the heyday for the field or the region as a whole.
Russia and the Middle East
"I find it very striking that our industry is one of the very few businesses in the world where the private sector share of activity is actually declining." [BP]
"energy security is about investment in the areas which can supply even more substantial amounts of oil and gas. That means Iran, Iraq, Russia and Saudi Arabia." [BP]
"The Middle East remains largely closed to international investment and the development of the resources on which the world will depend lies predominantly in the hands of state companies and their Governments. The International Energy Agency in making its projection of the world's supply demand balance suggests that as soon as 2010, more than 22 million barrels of oil each day will be required from the five Gulf states, with Saudi Arabia accounting for a major share of the increase. That is around 20 per cent more than the level of output now." [BP]
They want help from Western Goverments to open up these countries to foreign oil investment.
"The question is whether that investment will be made by the Governments of those countries and by the state companies to the scale and pace required and whether those markets will be opened to international companies who can bring both the resources and the technology required." [BP]
The western oil companies (and Governments, the markets and economists) are casting the National Oil Companies as the bad guys, unwilling to make the rapid investment required to deliver cheaper oil and lacking the technical capacity. In fact, Saudi Aramco is one of the most technically competent oil companies in the world. Over several decades, they have developed enormous production capacity from technically challenging fields.
Producing oil in the Middle East is not as easy as the economic commentators would have you believe. In "Twilight in the Desert", while demonstrating the technical capacity of Saudi Aramco, Matthew Simmons presents strong evidence that even Saudi Arabia is already near 'peak' and will not be able to make up for declining production from other regions, let alone meet increasing worldwide demand.
Renewable Energy
"One day alternatives and renewables will provide a significant share of the total, but that day is still a long way off. We and others are doing a lot of work in that direction but the processes of research, development, commercialisation and change in the capital stock will take many years to work through." [BP]
Since there are few market mechanisms in place to drive faster development of renewables, the slow increase in renewables is inevitable. However, even with the right impetus behind it, the oil companies are illustrating the engineering reality - it would take several decades to build up a significant capacity of renewable energy. We cannot in the forseable future, if ever, even come close to replacing fossil fuels with the same capacity of renewables.
Nuclear Power
"No nuclear stations have been commissioned here in the US in the last twenty years and in Europe the outlook is for nuclear to decline rather than grow as a contributor to primary energy demand." [BP]
Although some made a start in nuclear, the oil companies decided to leave nuclear out of their strategy many years ago. Though now branding themselves as 'Energy' companies, it appears very unlikely that they will change that decision. A convincing sign that nuclear is not very profitable, even if Goverments underwrite the accident and waste disposal liabilities. And then there is the lack of uranium reserves as well.