The 'Peak Oil' Myth: New Oil Is Plentiful 92 comments
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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 dot.com 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.
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Frankly, I find myself somewhere between the polar positions. We have a liquid fuels problem--and solar, wind, geothermal, and wave energies (and the like) will not solve that problem. I suspect in the near term oil will go higher (maybe much higher), but in the longer term oil will fall as both new oil fields and liquid coal (or new technologies) come on-stream.
For a peak oil denier, first let me give you credit for providing proper data and sources to support your argument.
Peak Oil is a term that is misused often.
I believe conventional oil (sweet crude) has peaked.
Non-conventional oil is a different story.
Conventional oil production has reached a peak recently.
The EIA data shows global production peaking and plateauing at 85 mbls/day in 2003/2004. Increased demand has increased oil prices 6 times as a consequence.
All the data you provided confirms conventional peak oil. Why would we go through 2 kms of ocean, 2 kms of unstable salt and another 2 km of hard rock to get oil from Tupi oil fields off the coast of Brazil, if easier alternatives exist ?
Same arguement for the oil sands, why mine oil sands, boil them in water and them dilute it with naptha, if easier alternatives exist ?
The extraction of oil from oil shale is possible (when oil > $100/bl), but is even more painful.
Deep Sea, Oil Sands and Gas-to-Liquids all confirm conventional peak oil, but also show with human ingenuity non-conventional peak oil can be pushed out for a while
If we ran out of deep sea oil, oil sands and oil shale as well, I am sure we can convert road asphalt, rubber tires and plastic waste into oil if the economics justified it.
The rest of the "facts" just confirm that "cheap" - "easy" - oil is behind us. Therefore "confirming" not "refuting" the so called peak oil myth.
Peak oil means production has reached zenith, not that we are running out. So get the definition right, please. Otherwise it's just another "straw man" argument.
It's great to list all of the new projects. That gives people some ideas about investment possibilites. But how about including the concepts of demand, decline and depletion? The world is burning 30 billion barrels per year. Demand has proven to be very inelastic as price approaches $150 per barrel. Existing fields are being depleted and their rates of production are declining. Are we finding 30 billion barrels per year? How fast are the new fields being brought to production and at what cost?
SavingAlpha keeps publishing shallow, cheerleader type pieces that demonstrate a poor grasp of the subject. Try the oil drum or one of the Investor Village boards (brys, cwei) for some depth. www.theoildrum.com/
I would agree with your argument if infrastructure to produce oil required no effort and no time. The fact is that almost all these large oil reserves you mentioned require great human effort to produce. For example Canadian Oil Sands will go from 1mbd to 3mbd by 2015. That is 7 years to add the infrastructure for an additional 3mbd. This is what peak oil is about. It is not about what is in the ground it is about what rate you can produce at.
Also your comment "The peak oil theory is a money making scam put out by the speculators looking for high commodity returns in a challenging market environment."
As a person who trades commodities, and has researched and read articles from other traders I can tell you your comment is false. Some things you should know about commodities trades:
They sell short - not just go long.
They look at supply and demand fundamentals - if they are betting in medium and long term.
There are many traders that are SHORT oil.
If traders thaought that there was plenty of (producable oil) around they would short oil.
I also noticed you failed to provide any material data that speculators have made up peak oil theory. On the contrary in 1998 Jean Lehare and Colin Campbell wrote a Scientific American Article called "The End of Cheap Oil." These people are seasoned geologists not oil speculators and their prognostication that we would be having serious consequences in 10 years time - 2008 - turned out to be correct.
Please do a little more study of the subject because you don't seem to "get it"
To assume that is will never run dry is absurd.
65% of all Saudi oil produced between 1948 and 2000 came came from this ONE field. If Matt Simmons thinks Ghawar is begining to water out... I'm listening. He worked for Aramco for years.
The finds you list in your article are great and are needed to replace the decling fields around the world. I am reading that Briatan is about to become a net importer of Oil. Mexican production is falling quickly. You seem to assume that production one established remains in place forever.
As for oil shale, tar sands.... they are not something pumped to the surface. If we are unwilling to produce oil on the East Coast of the U.S. are we really going to strip mine Colorado Utah and Wyoming? Interesting. I'll be watching for that.
I think its kind of funny that some people think the entire world market is in some deep comspiracy to screw the poor. Note some of the major oil companies had DECLINING production in recent quarters. With all time highs in the oil market.....how can that be?
Propaganda.
Edward Roche, Freedom Mountain Investments
Several even suggest the author go do some more research but offer little else.
My golden rule- " What can be asserted without evidence can be dismissed without evidence."
Present your facts or get out of the way and don't dirty up the boards.
Four Billion of that is imported from outside the country.
An hypothetical 40 Billion barrel oil discovery would represent what the U.S. imports -- imports -- in ten years. The most optimistic estimates of the Alaska and Bakken reserves totals 40 Billion barrels.
Okay, we drill in Alaska and we drill in Montana and North Dakota. How much do we pump and deliver from those fields? Maybe six million barrels per day at best (total production from all Saudi fields combined is ~11 million barrels per day). At that rate those Alaska and Bakken fields would be exhausted in twenty years and during that time the oil produced would cover far less than one third of our daily consumption and less than half of our daily imports. In addition, Alaska and Bakken oil would cost money just as oil from Canada and Saudi Arabia costs money. So what would be the price reduction in gasoline and why would Alaska and Bakken and offshore oil be cheaper than Canadian oil? We'd still be importing 7-8 million barrels of oil per day from foreign sources even if the Alaska and Bakken and offshore fields were delivering an additional (highly unlikely) 6 million barrels per day.
After twenty years when the Alaska and Bakken deposits are dry, and we're still importing a significant percentage of our oil from outside the country, then what? Do we just keep our fingers crossed during that time and hope for a magical 800 Billion barrel oil discovery on U.S. territory that would allow us to be energy self-sufficient for 100 years? Or do we launch an Apollo Moon Project-type alternative and renewable fuels program tomorrow -- as in 23 June 2008 -- to get the United States away from a petroleum-fueled economy?
Ref:
* U.S oil consumption - 2007
www.indexmundi.com/uni...
* U.S. net petroleum imports - 2006
www.eia.doe.gov/basics...
* Alaska North Slope may hold 36 bln bbl oil - U.S. Department of Energy - 29 Jan 2008
uk.reuters.com/article...
* 3 to 4.3 Billion Barrels of Technically Recoverable Oil Assessed in North Dakota and Montana’s Bakken Formation - 10 April 2008
www.usgs.gov/newsroom/...
* Saudi Arabia daily oil production - 2006 - 10.7 million barrels
tonto.eia.doe.gov/coun...
1) A huge find no doubt, the biggest for decades. But only enough to meet 1 years demand.
2) 15 billion barrels of oil and gas. So less then six months world supply here, maybe 3 months depending on how much of that is oil and how much gas.
3) No information is given on size, so it's impossible to comment on this one.
4) Norway. Again no sizes given, but Norway has announced their oil production will be in decline for the foreseeable future, so it's unlikely to be that large.
5) 130k barrels/day against world demand of 85 billion - so this field will meet 0.15% of world demand. Yup, that will make all the difference.
6) The Iraq find is 2 billion barrels, enough to supply the world for 20 days.
7) Iran 750 million barrels, 9 days world supply.
8/9) Shale - extremely hard to extract, so very low production rates. Not going to help in the short or medium term.
Then the author writes: "Most of the above mentioned finds have occurred in the last two years alone." Well for two years you need to find 65 billion barrels to cover depletion. These discoveries are insufficient. The author actually does an excellent job of making the peak oil case. The misunderstanding is, as usual, the scale of the problem. Yes lots of oil is being discovered, and will continue to be discovered. Just not enough to meet demand.