Oil in plentiful supply
By Carl Mortished
Doom-laden forecasts that world oil supplies are poised to fall off the edge of a cliff are wide of the mark, say leading oil industry experts who warn that human factors, not geology, will drive the oil market.
A landmark study of more than 800 oilfields by Cambridge Energy Research Associates (CERA) has concluded that rates of decline are only 4.5 per cent a year, almost half the rate previously believed.
CERA therefore concludes that oil output will continue to rise over the next decade.
The author of the report, Peter Jackson, , said: “We will be able to grow supply to well over 100 million barrels per day by 2017.” Current world oil output is about 85 million bpd.
The optimistic view of the world’s oil resource was also given support by BP’s chief economist, Peter Davies, who dismissed theories of “Peak Oil” as fallacious.
Instead, Mr Davies warned that world oil production would peak as demand weakened, because of political constraints, including taxation and government efforts to reduce greenhouse gas emissions.
Speaking to the All Party Parliamentary Group on Peak Oil, Mr Davies said that peaks in world production had been wrongly predicted throughout history, but he agreed that oil might peak within a generation “as a result of a peaking of demand, rather than supply”.
He said it was inconceivable that oil consumption would be unaffected by government policies to reduce carbon emissions. “There is a distinct possibility that global oil consumption could peak as a result of such climate policies,” Mr Davies said.
The BP economist’s remarks were echoed yesterday by Mr Jackson, who said: “It is the above-ground risks that will influence the rate (of oil output).”
CERA analysed the output of 811 oilfields, which produce 19 billion barrels a year, out of total world output of 32 billion. These included many of the giants, including Saudi Arabia’s Ghawar, the largest known oilfield, which has been at the centre of the debate between peak oil analysts and their detractors.
In his book, Twilight in the Desert, Matthew Simmons of Simmons & Co, the consultancy, said the big Saudi fields reached their peak output in 1981, but CERA yesterday said that Ghawar was not failing. “There is no technical evidence that Ghawar is about to decline,” said Mr Jackson.
CERA reckons that oil output, including unconventional oil, such as tar sands, could allow oil to peak at much higher levels - up to 112 million bpd, with average rates of more than 100 million bpd.
The CERA analysis targeted oilfields producing more than 10,000 bpd of conventional oil and concluded that overall output was declining at a rate of 4.5 per cent a year, and that field decline rates were not increasing.
This is much lower than the 7-8 per cent average rate that is generally assumed in the industry. Typically, peak oil theorists believe that the output of oil reserves can be plotted on a graph as a bell curve, rising to a peak and then falling rapidly.
It was proposed in 1950 by M. King Hubbert, a US geologist, who had successfully predicted the peak of onshore oil production in the US.
His analysis is disputed by many geologists today, who argue that technology has changed the equation, allowing oil companies to produce more oil from reservoirs than was previously possible.
At the same time, increases in the price of oil have made the extraction of difficult reserves economically viable.