BP Economist: No Imminent Peak To Oil Production
By Lananh Nguyen
A BP PLC (BP) economist Wednesday said the world isn't facing an impending oil shortage, rejecting the so-called 'peak oil' theory.
"An imminent peak in production has been repeatedly and wrongly predicted," said Peter Davies, special economic advisor to BP and formerly the company's chief economist.
The peak oil argument states world oil production is approaching, or has already reached, its maximum. But Davies said limited access in oil-rich nations to outside investors, unfavorable tax regimes and lack of investment were to blame for the limits on oil supply growth.
"It's not a resource issue, it's an investment issue," Davies said, speaking at a meeting held by the U.K.'s All Party Parliamentary Group on Peak Oil and Gas.
Davies said world oil production would peak eventually - but not any time soon, and not for lack of oil in the ground. He argued climate change policies encouraging a shift away from oil consumption would lead to "peak demand," and discourage further oil production growth.
"There's a distinct possibility that global oil production could peak because of climate change policies," rather than a shortage of oil, he said.
Data for 2006 show world oil reserves stood at 1.2 trillion barrels, according to BP's 2007 Statistical Review of World Energy.
"Proved oil reserves continue to climb in the long run," BP said in the report. "Reserves have grown 72.9 billion barrels since 2001 and 159.2 billion barrels or 15% over the last decade."
Meanwhile, the world still has 14 trillion barrels of conventional and unconventional oil "in place," with conventional oil accounting for half the total, according to Davies. Oil in place refers to the total amount contained in a reservoir, and isn't a measure of the amount of crude that can be recovered or produced.
New technologies could also add to world's oil resource base - including enhanced oil recovery techniques, biofuels and unconventional oils such as tar sands, Davies said.
Davies' comments echo BP Chief Executive Tony Hayward's rejection of the peak oil argument, but executives from other major oil companies have recently expressed concern over oil supply growth.
ConocoPhillips (COP) CEO James Mulva said in November he doubted world oil producers would be able to meet forecast long-term energy demand growth.
The International Energy Agency, the energy watchdog for western economies, has projected 2030 world oil demand of 116 million barrels a day, but Mulva said he doesn't believe oil supply will ever exceed 100 million barrels a day. He didn't offer a price forecast.
"Demand will be going up, but it will be constrained by supply," Mulva said. " I don't think we are going to see the supply going over 100 million barrels a day and the reason is: Where is all that going to come from?"
Also, Total SA (TOT) CEO Christophe de Margerie said in October it was " optimistic" to expect oil production to surpass 100 million barrels a day. The world contains adequate oil reserves, but the oil industry and producer countries would struggle to develop those reserves, De Margerie said.
But BP's Davies believes 100 million barrels a day "is achievable," if adequate investments are made.
A recent study by Boston-based Cambridge Energy Research Associates asserts while output from the world's existing oil fields is declining at a rate of about 4.5% annually, new projects in the works will make up for the decline.
"This study supports a view that there is no impending short-term peak in global oil production," the paper concludes. CERA, led by oil historian Daniel Yergin, is a prominent adviser to oil companies.
But according to the U.K.-based Oil Depletion Analysis Centre, global oil production will peak and go into sustained decline in roughly a decade.
"Many forecasters - including those employed by the French and German governments - now expect global oil production to peak between now and 2020," ODAC said in a report. It said peak production had already been observed in over 60 of the world's 98 oil-producing countries.