"“We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” "

Chinese premier Wen Jiabao 12th March 2009

""We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system."

Timothy Geithner US Secretary of the Treasury, previously President of the Federal Reserve Bank of New York.1/3/2009

Tuesday, April 17, 2007

We are running out of oil

Petroleum Intelligence Weekly have produced their annual Global Oil Reserves Survey which is based (they claim) on liquid hydrocarbons, natural gas liquids, tar sands and crude oil, that are economically recoverable at current prices.

They claim that for the first time reserves of approximately 1.459 trillion bbl at the end of 2006 shows a decline of some 13 Mn barrels or nearly 1%. = the Global oil industry is producing more oil than it finds and can define as exploitable reserves.... we are starting to run out of oil.

Big increases have been declared for both Brazil, and Kazakhstan but generally reserves have declined or were not expanding. The survey also confirms recent comments about OPEC producers overstating reserves to allow larger output under OPEC "rules" e.g Kuwait.

PIW published a detailed report in January 2006 which stated that the Kuwaiti data indicate that, of the current remaining 48 billion barrels of proven and nonproven reserves, only about 24 billion barrels are so far fully proven - roughly equivalent to the US reserves or double those of the North Sea. It is also suggested that far from declining at a modest 4% they posibly may be declining (as per the North Sea) at near 10%.

Dr Colin J Campbell wrote a book called The Coming Oil Crisis in which he laid out the arguments for his belief that worldwide production of conventional oil will head into permanent and irreversible decline in the 2005-10 timeframe.

The term "conventional oil" is used by him to refer to oil that is produced from conventional reservoirs and does not include oil from tar sands, polar areas, or deepwater areas, or oil from coal or shale. Conventional oil accounts for 95 percent of all oil produced today and will remain the determining factor in world oil production for the foreseeable future. According to Campbell, world oil discovery peaked in the 1960s and has declined steadily since. When he wrote the book we produced four barrels for every one we discover. If the PIW report is correct we are now beyond the balancing point.Clearly, this is an unsustainable situation, since long-term discovery and production must be roughly equivalent.

At the time Campbell contended that OPEC reserve estimates were politically motivated and exemplified this with the behaviour of reports of Kuwait reserves.. Kuwait is an excellent example of what is wrong with the way OPEC countries report reserves. The country reported a gradual decline in its reserve base from 1980-84. This should be expected from a mature producing country. However, in 1985 the country reported a 50 percent increase in reserves with no corresponding discovery. The Kuwaiti government increased its reserve estimate because of the implementation of an OPEC production quota system that based country production levels on country reserves. Kuwait was not alone in increasing its reserve estimates for political reasons. In 1988, Abu Dubai, Dubai, Iran and Iraq all significantly increased their reported reserves for political reasons. Even OPEC heavyweight Saudi Arabia reported a massive increase in reserve estimates in 1990 for similar reasons.

Such overstatements are not restricted to undemocratic countries Royal Dutch/Shell reported a whopper of a reserve writedown in January 2004. The company reported that its reserves had been regularly overstated by a stunning 20 %.

It is a sobering thought that the main reason for the poor performance in growing reserves is a lack of additions to reserves from new discoveries, which account for 20% or less of additions in the last few years. Against this exploration costs are rising fast, and recovery costs increasing .

Baker Hughes undertakes rig counts which gives a broad figure for activity as BH says ," Rig count trends are governed by oil company exploration and development spending, which in turn is influenced by the current and expected price of oil and natural gas."

The oil industry has never been busier looking for and exploiting oil and gas. These are the average rig figures for the last 5 years starting 2002 : 1,829, 2174, 2395, 2764, 3043, and for March 2007 3247. So this indicates the industry is working harder, faster to sustain and meet output.

Meanwhile crude oil for June delivery, reached a record high today.


Anonymous said...

I would worry more about news emerging along these lines:

Gulf oil bourse to open soon

The Gulf Petroleum Exchange will begin operating in the near future, said the Saudi Oil Minister Ali Naimi after a meeting of the GCC sunday.

Ali Naimi said Saudi Arabia and the Gulf Cooperation Council have decided to establish a Gulf Dinar based oil exchange on the Persian Gulf in Dubai, UAE, because "there was no such oil trading body in the region."

"The GPEX could help many countries transact petroleum under more favorable conditions," he said.

He did not say exactly when the GPEX oil bourse would open.

The official also said that senior officials from the Oil Ministry and the Gulf Cooperation Council will meet with members of the GCC Energy Commission in the near future to discuss issues related to making the groundbreaking project operational.

Naimi said the Saudi Oil Ministry and a number of other GCC bodies have made large investments in the project.

The oil bourse would transact petroleum, petrochemicals and gas in various non-dollar currencies, primarily the Gulf Dinar. It would also establish a Gulf Dinar based pricing mechanism for oil trading, or oil marker as it is called by traders.

The three current oil markers are all US-dollar denominated.

The two major oil bourses are the New York Mercantile Exchange (NYMEX) in New York City and the International Petroleum Exchange (IPE) in London. The Gulf Petroleum Exchange (GPEX) in Dubai would establish a fourth oil marker, denominated by the Gulf Dinar.

By Neville Parker 1 April 2007

Khaleej Times

Shutter said...

There has been chat for some time and this report passed us by. Maybe it was this that caused Mr Cheney to leave the comfortable hospitality of King Abdullah recently.

If this does happen .. and the threat is bad enough then the ordure will hit the air conditioning...

There are many events that point to a quickening tempo and the shifting of chairs and alliances, marking of boundaries in Turkey, the Emirates, Saudi and Iran, and sabre rattling by the US (Mimitz steaming to the Gulf ect.,) that presage some fairly momentous changes, and shifts in th textonic plates of the ME in the near future.

.. a sense of a calm before a fucking big storm.

Perhaps the rise and rise of the FTSE means that a lot of US money is shifting into Europe? How long can the $ continue to drift down against the Euro and the £ Sterling?

Anonymous said...

'Peak oil' doomsayers fall silent as reserves grow ever larger


OTTAWA -- You will have noticed the marked decline these days in the number of "peak oil" people making cataclysmic pronouncements. Global oil production set records throughout 2006 -- for all-time highest production day, month, quarter and year. For the single-year record, production reached 31.3 Gb (billion barrels), an average of 85.2 million barrels a day. Affirming the trend, production set a new global single-day record before the end of January, 2007.

Along with record-setting production came record-setting increases in reserves -- moving "peak oil" deeper into the century and ultimately beyond.

The "peak oil" hypothesis, relentlessly propounded for decades, holds that the world has passed (or will momentarily pass) the highest point it can ever reach in oil production -- at the halfway mark in the depletion of global oil resources. It holds that this imminent peak necessarily marks the start of an irreversible decline in production. It holds, in other words, that the end of oil is nigh. The principal problem is that the hypothesis is demonstrably wrong -- and is vigorously proven wrong year after year.

In 1979, the "life-index" of global oil reserves was calculated as 35 years -- suggesting, superficially, that known oil reserves could support the current level of production only through 2007. In 2003, after decades of accelerated production, this index had risen to 40 years. It has now risen further to 45 years -- moving us safely through mid-century. Indeed, the record-setting oil production last year marked the umpteenth consecutive year that "peak oil" theorists have found it necessary once again to run the numbers and once again to postpone the end time of oil.


Shutter said...

"Along with record-setting production came record-setting increases in reserves -- "

Which is not what the PIW report supports and determine that reserves as they carefully define them have actually declined for the first time.

What most sceptics on "Peak oil" overlook is that there are 2 "Peak Oil moments"

1. When Peak Oil happens.

2. The preceding moment when everyone realises that event 1 is due to happen real soon now.

That's when you send for the guns, lawyers and money.

There is a school of thought that Mr Cheney's plan for the Middle East is prompted by Point 2 above.

"The "peak oil" hypothesis ....It holds, in other words, that the end of oil is nigh."

Overstates the case made by the less wild eyed prophets .. the end of oil is within a lifetime as determined by Point 2 above. This is probably most effectively demonstrated by the rise and declin of the North Sea as a national resource whose benefits have so recklessly been pissed up against the wall by a succession of UK Governments in contrast to say the Norwegians.

Their profligacy is of course good reason why UK inhabitants will increasingly suffer as energy prices rise as we are left to the mercy of the global market.

(C) Very Seriously Disorganised Criminals 2002/3/4/5/6/7/8/9 - copy anything you wish