Peak Oil News: Shell President Forced to Address 'Peak Oil' Theory

Friday, February 03, 2006

Shell President Forced to Address 'Peak Oil' Theory

Resource Investor

By Adam Porter

Shell announced their record profits at two press conferences this week. The first in Hague in Holland and the second later in the same day in their London centre. The London conferences were attended by Chief Executive Jeroen van der Veer and Chief Financial Officer Peter Voser.

At the conference, Shell [NYSE:RDS-B; LSE:RDSB] revealed 2005 profits of $22.9 billion on revenues of $379 billion, which were up 30% from profits of $17.6 billion in 2004. These were the biggest profits ever made by a British company.

Also in attendance at the conference was author David Strahan. Strahan is currently writing a book on energy supply issues having moved from broadcast journalism at the BBC. Strahan was producer of the seminal BBC Money Programme on ‘peak oil’ theory back in 2000 shortly after the first British fuel protests. He also produced War for Oil for the BBC Money Programme in 2003.

“I was about to start my book’s chapter on the international oil companies,” started Strahan. “As you seldom get access to these people [like van der Veer] one on one I thought I would go to the conference.”

Strahan was interested in the way that Shell was able to announce such large revenues in the current supply situation.

“It struck me that if this is how well the majors do when the market is just ‘tight’ what would happen if there was ever a real shortage of oil,” said Strahan. “So I put this to Mr. van der Veer and asked him what would happen in a real peak of global production and how much money would Shell make?”

Strahan also asked what van der Veer thought of the idea of peak oil and whether or not Shell had looked at the situation itself.

“I asked whether Shell had done any detailed modelling on this question,” said Strahan. “Mr. van der Veer replied that his argument basically was that the world will not [arrive at a peak oil situation]. He said that peak oil is correct as applied to regional areas of production like the North Sea, Texas or the Lower 48, but does not apply to the world as a whole.”

Van der Veer’s actual reply to Strahan on Shell’s webcast was “That is a great question it is much more complex than many people think. That (peak oil) is not how we will go. Because peak oil theory itself is correct, if one takes easy oil close to the markets. If you look at West Texas the oil has gone, or even the North Sea…but if you look at oil sands you don’t know where the peak will come…if you think about coal…there are huge reserves. If you assume we can develop clean coal technologies, [then] there will not be one peak.”

“So there is no one peak. There will be many peaks [for different fields, regions and fuels] and they will be in many different time frames and how that will develop, we don’t know.

We think [for prices] that it is prudent for our company to evaluate projects in a very [many] differing pricing scenarios.”

Strahan then asked if van der Veer expected oil sands to make up the difference in any decline of conventional oil.

“What I do expect,” replied van der Veer, “is at the present price level there is a huge incentive to develop additional forms of energy, hydrocarbon energy and alternative energies, people will respond but it will take some time.”

Strahan considered van der Veer’s replies.

“His basic argument was that as the peaks happen at different times,” concluded Strahan. “So you get a plateau not a peak. But one is not just adding up a bunch of peaks, you are adding up some areas that are rising in production and some that are falling.”

“[Van der Veer] did say that ‘easy oil has peaked’ but then said ‘look at what is elsewhere like the arctic, deepwater and so on.’ But if you listen to people like PFC Energy, the Washington based consultancy, they have suggested that deepwater will peak early in the next decade. He also mentioned oil sands but the overall plan for oil sands is to make just 5 million barrels a day by 2030. I must say it was not terribly convincing,” Strahan said.


At 10:44 AM, February 05, 2006, Anonymous Anonymous said...

Just a point on oil sands.

The fact that "plans are to produce 3 or 4 million barrels per day by 2020 or some other date ..." is not a reflection of the capability of the oil sands to yield beyond that for a very long time.

It is a reflection of the degree of will that exists to pursue alternative, safe sources of hydrocarbons (ie. alternative to the reserves of hot areas like Iran, Iraq, Libya, Saudi Arabia, Indonesia, Nigeria, Venezuela).

The Canadian oil sands offers us a chance to localize and control efficiently, the environmental impact of petroleum production. Right now it is a terrible source of energy waste and greenhouse gas emissions. However the technology exists to overcome these problems. With the application of a fraction of the amount of ingenuity spent in the West, on weaponry and war to access oil from hostile locations, we could easily get as much as we want or need - particularly if we learn to practice rudimentary conservation.

By the way, rather than ranting about losing jobs to China and India, we could be employing thousands of people in energy generation and conservation with marvelous spin-offs to the betterment of our environment.

I am perpetually astounded by the half-baked nonsense that is trotted out in media like this blog - not the fault of the media or the blog - in lieu of a stark and honest look at the facts.

Back to oil sands . . . as a for instance.

Americans do not have to take the word of wierdo's or Canadian oil industry interests. The oil sands industry was largely developed by Americans using American risk capital. It is located in the Province of Alberta (largely) which has long been profoundly pro-American. In fact though Albertan are happy to be Canadian, on the whole they have proven over and over for the past 100 years that they would give up their attachment to the eastern government and provinces long before giving up their attachment to the United States.

Furthermore, Canada is a confederacy. We are what the USA was until Abraham Lincoln and the Republicans decided to centralize the USA government at the expense of Staes' rights. Here in Canada, the Provinces still have the balance of power. If we don't like the federal attitude or the weight of the argument unfairly drifts to the east, we'll up and leave. Not only is it illegal for the central or eastern influences to stop it, they haven't got the guts or conviction to try.

We had a prime minister once that tried to create a central, "republic-type" structure. He was Pierre Elliot Trudeau. Alberta took him on and we won.

Anyway our armed forces only have three tanks, two leaky submarines and a small collection of out-dated jeeps bought from English war surplus stores (just kidding).

We have not had a Prime Minister in 20 years (until last month) that could decide whether to scratch his ass or rub his nose. We could separate, declare war and conquer the remainder of Canada before the old federal government could gather its dithering thoughts.

So, the point (between all the mirth) is that America is welcome here, to help develop these resources and put them to good use. We in Alberta only wonder why it is taking so long and why you guys keep wandering into minefields along the way - Iraq for example. Come home to North America and let's have a party. We are after all, "Americans" as much as you are .... residents of America. Most of those who trace their roots only so far back as mid-20th century, have relatives and friends in the United States. We visit there, retire there, shop there ....


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