Peak Oil News: Oil Major CEO talks about "the real problem of peak oil"

Tuesday, April 11, 2006

Oil Major CEO talks about "the real problem of peak oil"

Energy Bulletin

by Jerome a Paris

I've been cut off the internet in the past two days, and I still have access only via a very slow dialup, (and I have some serious issues to solve) so I won't be around much for the rest of this week, but this is too big to pass up.

In an interview with the Times of London, Christophe de Margerie, who is the head of exploration and production and the likely next CEO of Total, the French oil major (which is the 4th or 5th biggest around, depending on the metrics), say the following:

People are failing to deal with the reality of the price, which has nothing to do with speculators or even any lack of reserves, which are ample. "It is a problem of capacities and of timing," de Margerie says. "This is the real problem of peak oil."

The oil is there, he says, but the amount you can deliver today depends on how many wells you can drill and how fast you can deplete an oilfield, not to mention gaining the co- operation of governments, which guard access to the precious resource jealously. There is no prospect of reaching the lofty peaks that economists at the International Energy Agency, predict will be needed to satisfy world demand for oil.

There are not enough engineers, rigs, pipelines and drillers to increase current world output of 85 million barrels per day to 120 million, he says.

It would be possible only in a world without politics, he says. "If there were no Americans, no Iranians, no English, no French and no Italians. Not a world I know."

So, he is essentially saying that the problem is not with reserves per se, but with the rates of production, and that we will never be able to reach the production levels predicted by the IEA (International Energy Agency) - or by the US Department of Energy, for that matter - simply because it is taking increasing efforts to get the oil out of the ground and that effort cannot be accomplished with today's industrial resources.

He underlines a point that I have been making repeatedly: the oil majors are running out of opportunities where to invest. Their investment budgets are stable or slightly increasing, but in a context of skyrocketing prices for a number of items (rigs, for instance), they are not developing more fields than before. They are constrained by lack of resources, lack of people, and lack of access to the remaining reserves, which are mostly located in countries closed to them, and which do not seem in a hurry to invest themselves.

Whatever the reasons, we have the number two guy of one of the top oil companies saying explicitly that the production hypotheses that everybody uses for long term planning are bunk. will that be enough for people to notice? When are the people at Boeing and Airbus, the car makers, the power companies, the civil works and construction companies, etc... - and the people that finance them over 20-30 years start noticing that the long term hypotheses are more and more absurd?

I finance windfarms, so I figure that it's a safe business to be in the long term. My colleagues down the hall finance new highways and bridges, on the basis of tolls to be paid by drivers, and they usually assume a steadily, if slowly, growing traffic, over periods like 30 years or more. When I ask them, "but who will pay for your tolls in 30 years when oil is scarce and/or incredibly expensive?", they just look at me and say that some substitute will have been found by then....

Well, scientists had better hurry, and it's not the US government who's going to help...

Get it in your head: no sane oilman believes in the rosy production increase scenarios still touted by the authorities. It's time to act on it.


At 9:41 PM, April 12, 2006, Blogger montestruc said...

I work as an engineer in the oil patch. I agree that a bottleneck in oil production exists, but do not see that as a very long term issue, more one that will cure itself over the next 5-10 years. Oil companies can now produce oil from deep difficult to produce far offshore wells at around US$15 ~ 25 /bbl, and oil prices are approaching US$70 per bbl. Boom time in other words, and it looks like it is not a flash in the pan like the late '70s oil boom (the Saudis who can [or could] produce all the light sweet crude the market could eat, cranked open the taps, screwed over all the other oil producers). Now the Saudis seem to be flat out and cannot keep up.

Day rental rates on drilling rigs are very high and rising fast and shipyards are very busy. That is the bottleneck in my humble opinion, more than 50% of the world wide offshore drilling rig fleet is over 25 years old, this is changing fast, but I think it will take 5-10 years for production of new rigs to catch up to demand.

On thing most people who are "peak oil" hounds seem to miss is that for strictly legal reasons no one has ever produced a well further than 200 nautical miles away from shore, that leaves well over 50% of the earth's surface untouched. Yes it costs more to produce oil from deep water, but it is a money making proposition at current prices.

At 5:33 PM, April 23, 2006, Anonymous Anonymous said...

What you may find is that deep water oil is actually very scarce due to the geological reason that oil is produced by trapping organic material in large quantities and that simply isn't done in areas that have been under water for the majority of the earth's existence.

At 5:45 PM, April 23, 2006, Anonymous Anonymous said...

Deepwater oil production should reach about 8.5 mm bpd by 2010. This includes 2 mm bpd contribution from yet-to-find (YTF) discoveries. In 2004, the deepwater will supply about 5 % of global oil demand. By 2010, this share of global supply will have risen towards 9 %.

What these figures indicate to me is that deepwater already plays a signifcant role in oil supply and is increasing at quite phenomenal rates- almost double its quotient of oil production in six years.
The conclusion I draw is that the rate of exploitation of deep water resources is already very high and that if we are facing a peak in global production soon then having more access to deep water isn't going to help much when what there si already access to is being developed hell for leather as it is


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