Peak Oil News: The 'Peak Oil' Myth: New Oil Is Plentiful

Monday, June 23, 2008

The 'Peak Oil' Myth: New Oil Is Plentiful

Seeking Alpha

By Jason Schwarz

The data is becoming conclusive that peak oil is a myth. High oil prices (USO) (OIL) are doing their job as oil exploration is flush with new finds:

1. An offshore find by Brazilian state oil company Petrobras (PBR) in partnership with BG Group (BRGYY.PK) and Repsol-YPF may be the world's biggest discovery in 30 years, the head of the National Petroleum Agency said. A deep-water exploration area could contain as much as 33 billion barrels of oil, an amount that would nearly triple Brazil's reserves and make the offshore bloc the world's third-largest known oil reserve. "This would lay to rest some of the peak oil pronouncements that we were out of oil, that we weren't going to find any more and that we have to change our way of life," said Roger Read, an energy analyst and managing director at New York-based investment bank Natixis Bleichroeder Inc.

2. A trio of oil companies led by Chevron Corp. (CVX) has tapped a petroleum pool deep beneath the Gulf of Mexico that could boost U.S. reserves by more than 50 percent. A test well indicates it could be the biggest new domestic oil discovery since Alaska's Prudhoe Bay a generation ago. Chevron estimated the 300-square-mile region where its test well sits could hold up to 15 billion barrels of oil and natural gas

3. Kosmos Energy says its oil field at West Cape Three Points is the largest discovery in deep water West Africa and potentially the largest single field discovery in the region.

4. A new oil discovery has been made by Statoil (STO) in the Ragnarrock prospect near the Sleipner area in the North Sea. "It is encouraging that Statoil has made an oil discovery in a little-explored exploration model that is close to our North Sea infrastructure," says Frode Fasteland, acting exploration manager for the North Sea.

5. Shell (RDS.A) is currently analyzing and evaluating the well data of their own find in the Gulf of mexico to determine next steps. This find is rumored to be capable of producing 100 billion barrels. Operating in ultra-deep waters of the Gulf of Mexico, the Perdido spar will float on the surface in nearly 8,000 ft of water and is capable of producing as much as 130,000 barrels of oil equivalent per day.

6. In Iraq, excavators have struck three oil fields with reserves estimated at about 2 billion barrels, Kurdish region's Oil Minister Ashti Horami said.

7. Iran has discovered an oil field within its southwest Jofeir oilfield that is expected to boost Jofeir's oil output to 33,000 barrels per day. Iran's new discovery is estimated to have reserves of 750 million barrels, according to Iran's Oil Minister, Gholamhossein Nozari.

8. The United States holds significant oil shale resources underlying a total area of 16,000 square miles. This represents the largest known concentration of oil shale in the world and holds an estimated 1.5 trillion barrels of oil with 800 billion recoverable barrells – enough to meet U.S. demand for oil at current levels for 110 years. More than 70 percent of American oil shale is on Federal land, primarily in Colorado, Utah, and Wyoming. In Utah, a developer says his company already has the technology to produce 4,000 barrels a day using a furnace that can heat up rock using its own fuel. ``This is not a science project,'' said Daniel G. Elcan, managing director of Oil Shale Exploration Corp. ``For many years, the high cost of extracting oil from shale exceeded the benefit. But today the calculus is changing,'' President George Bush said. Sen. Orrin Hatch, R-Utah, said the country has to do everything it can to boost energy production. ``We have as much oil in oil shale in Utah, Wyoming and Colorado as the rest of the world combined,'' he said.

9. In western North Dakota there is a formation known as the Bakken Shale. The formation extends into Montana and Canada. Geologists have estimated the area holds hundreds of billions of barrels of oil. In an interview provided by USGS, scientist Brenda Pierce put the North Dakota oil in context. "Of the current USGS estimates, this is the largest oil accumulation in the lower 48," Pierce says. "It is also the largest continuous type of oil accumulation that we have ever assessed." The USGS study says with todays technology, about 4 billion barrels of oil can be pumped from the Bakken formation. By comparison, the 4 billion barrels in North Dakota represent less than half the oil in the Arctic National Wildlife refuge which has an estimated 10 billion barrels of recoverable oil.

The peak oil theory is a money making scam put out by the speculators looking for high commodity returns in a challenging market environment. Most of the above mentioned finds have occurred in the last two years alone. I didn't even mention the untapped Alaskan oil fields or the recent Danish and Australian finds. In the long term, crude prices will find stability at historic norms because there is no supply problem. How much longer will investors ignore these new oil finds? Probably until they can find other investment alternatives which won't happen in the broad market until financials (XLF) stop hemorrhaging. Respect the trend but understand that this is a bubble preparing to burst. When oil hit it's high of $139 it represented more than a 600% increase in crude since the bull market began, returns eerily similar to the craze.

There are many theories that sound good but just aren't true. Take Al Gore's global warming crusade. It sounded great, it made perfect sense but there was just one problem, the facts didn't support it. It seems that the masses who were loudly calling for a global warming crisis have shifted their energies to oil. We are bombarded on a daily basis by those who tell us that we should be fearful. They spin good news into bad. The latest absurdity had Goldman Sachs telling investors that China's 18% price increase will actually increase demand! That's a new one. Just like global warming, the rationale for peak oil sounds great, it makes sense, but there is just one small problem, the facts don't support it.


At 7:58 AM, June 24, 2008, Blogger Ceredwyn said...

Yes, there's lots of oil out there, but its all hard to get and expensive to produce. These are not viable finds if oil is $50 per barrel, but they become important supplies when oil is over $100. Get used to it America!

At 8:06 AM, June 24, 2008, Blogger delacruztaylor said...

interesting facts, where r u getting ur information, I really don't know what to believe anymore. About the only thing I know is there is other oil out there and even if it doesn't help out immediately they need to start drilling for the future. The more i think about it i'm not sure if ethanol is the solution, land taken away from making food doesn't seem to be working, plus the products there using for ethanol is just planned stupid, corn ethanol is not the answer, the best gallon per acre product is switchgrass, but no incentive for farmers to plant that, i guess all i know is the world is messed up, watching George Carlin clips last nite, although he seemed really negative he spoke the truth

At 8:46 PM, June 24, 2008, Anonymous Anonymous said...

Whenever I see an article like this, I really hope that there is a convincing argument contained in it. Unfortunately, the writer just rehashes claims which have been made and refuted many times over.

At 5:17 AM, June 25, 2008, Anonymous Anonymous said...

Short lesson about EROEI

Contrary to what says Jason Schwarz, Peak Oilers know very well that oil still remains plentiful. But they also know what EROEI means and that any author ignoring it can only write rubbish when they express their opinion about Peak Oil. And it is obvious that Jason Schwarz ignores what EROEI means.

EROEI (Energy Returned on Energy Invested) is the ratio of the amount of usable energy acquired from a particular energy resource to the amount of energy expended to obtain that energy resource. For better understanding, let us consider two examples.

First case : EROEI = 16 (high value) ; we expend 1 energy unit, we get 16 units. The net usable energy is therefore 15 units when 16 are produced.

Second case : EROEI = 2 (low value) ; we expend 15 energy units, we get 30 units. The net usable energy is therefore 15 units when 30 are produced.

In the second case, the cost of producing a same amount of usable energy (measured in energy units) is 1.9 times higher than in the first case. And the depletion rate is also 1.9 higher.

More generally, as EROEI declines and gets ever closer to 1, energy production must accelerate just to maintain at the same level the net energy amount available to society. Practically, it means that 1°/ the cost of producing net energy increases, 2°/ the exhaustion of non renewable resources accelerates and 3°/ it becomes more and more difficult to increase year after year the annual net energy amount needed to feed economic growth.

(For more details and calculations about EROEI, I advise Jason Schwarz to look at the article titled “ Understanding EROEI ”, posted on Scitizen (7 March 2008) by Robert Rapier )

From 1945 to around 2005, thanks to conventional oil (high value EROEI) our world has been able to 1°/ produce energy at low cost, 2°/ sell it at low price and 3°/ satisfy a growing demand. This is how fast economic growth was generated. But in the decades ahead the average EROEI of the still plentiful remaining energy resources will get lower and lower, getting ever closer to 1. Therefore the pace of economic growth will get slower and slower, reducing the investment capabilities of our economies, and it will become more and more difficult to increase year after year the annual net energy amount needed to feed economic growth. At some point, beyond a certain threshold, those capabilities will vanish and we will then reach Peak Energy, the summit of world annual net energy production.

Thus Peak Oil will happen, sooner or later. Those who denie such a fact believe that in a finite world the annual energy production can go on increasing indefinitely. Nonsense.

André Sautou

At 10:53 AM, June 25, 2008, Anonymous Anonymous said...

Proven reserves are not a measure of future supply

Good website to review. Peak oil predictions are make by the media based on current reserves.

In 1980 the world reserves were estimated to be 648 billon barrels.
While todays estimate is 1.2 trillon billon. Almost twice of what was estimated in 1980. What changed? Technology!! And quess what it's still changing daily.

Also people behavior changes based on the price of a commodity. At $130 a barrel everybody is looking for more oil or alternatives. At $130 a barrel the average consummer is looking for alternatives to reduce his expense.

Peak oil has been predicted many time already. But Peak oil will not occur because we ran out of oil
Peak oil will occur when we switch to cheaper alternatives. And the with todays techonolgy those alternatives are growing by the Day.

At 1:00 PM, June 25, 2008, Anonymous Anonymous said...

The page with URL shown in the previous comment can be reached by clicking above.

At 1:07 PM, June 25, 2008, Anonymous Anonymous said...

and the page whose URL is given in André Sautou's comment can be reached by clicking above.


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