Energy Literacy Advocates Newsroom

Obviously with oil resources becoming geologically more difficult and financially more costly to extract the level of exploration and production has a significant impact on future oil supplies. With major oil companies decreasing their capital expenditure budgets (and the little guys having trouble even getting credit so that they can drill) the future of oil supplies does not look good - especially if there is a rebound in global economies.

The excerpt below is from ASPO-USA's year end "best of" article series, and well articulates this issue. If you want to read more about oil supplies with those who are hard-core into it (no recommendation from ELA staff here - just another data source) try visiting the Oil Drum.



As the International Energy Agency has been warning for years, a slump in upstream oil investment now means an oil supply squeeze later; the only question is when and how bad it will be. IEA Director Nobuo Tanaka warned in November that “Sustained investment is needed mainly to combat the decline in output at existing fields, which will drop by almost 2/3 by 2030.” Tanaka added that global upstream spending was budgeted to drop $90 billion, or 19%, during 2009 vs. 2008—the first decline in a decade. While some of those declines are offset by lower costs for exploration and production work, the remaining deferred investment means less oil five to ten years out.

The super-major investor-owned oil companies report that they will maintain the bulk of their planned capital expenditures going forward. Total SA plans to keeps its capital investment budget at $18 billion, Chevron will trim theirs 5% from 2009 to $21.6 billion in 2010, while ConocoPhillips will cut their capital budget by 10% to $11.2 billion. It is the smaller companies, those that are more reliant on credit to finance drilling and other field operations that are already in more of a bind. Additionally, a large number of OPEC projects have been delayed.

The investment slowdown has already impacted Canada. During 2009, the nation’s production declined slightly for a second year in a row, despite their enormous tar sands resource. But building tar sands facilities costs more than any other commercial liquid fuel operation, so those investments were the first to be delayed and cancelled. In fact, when oil dropped below $40 a barrel, some tar sands operators shut down their operations, since at that price their costs exceeded revenues.

What few analysts mention is that the impacts of this “above ground” investment slowdown will combine with the geologic limits that are impacting an increasing number of countries worldwide.

Labels: oil supply, oil supply/demand, peak oil

The Peak Oil story sure has evolved over the last several years. From "who are those nutty people who talk about oil running out" to a better understanding by many that total worldwide production capacity may not increase much beyond today, no matter what the cause. This excerpt from a recent ASPO-USA "Peak Oil Review" highlights this progression:

During 2009 the most significant story about peak oil was published by The Guardian (UK) on
November 9th, when reporter Terry Macalister conveyed alarming statements by two whistleblowers from the International Energy Agency. Whistleblower #1, still with the IEA, said "The IEA in 2005 was predicting oil supplies could rise as high as 120 million barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year [2008]. The 120m figure always was nonsense but even today's number is much higher than can be justified and the IEA knows this. Many inside the organization believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further.” Such honesty isn’t tolerated by IEA member state USA, which apparently leaned hard on the Agency to bury this hard truth for years. While Time, CNN, the Financial Times and other mainstream sources carried follow-up articles on the whistleblower leak, the story largely disappeared within two weeks. But long-term doubts about the “big number” in IEA forecasts are probably here to stay.

The year opened with a similarly strong warning from a heavy-weight within the oil industry.
Christophe de Margerie, CEO of oil super-major Total SA, had previously issued warnings about
world oil supply constraints. In 2007, he stated that “production of 100 million barrels a day will be difficult.” He upped the ante during 2008, claiming that “world oil production would peak at or below 95 million barrels per day.” On February 10th, 2009, the CEO’s statement could have been issued by ASPO-USA: “world oil production may plateau below 90 million barrels per day.” Other CEOs— Jim Mulva of ConocoPhillips and John Hess of Hess Corp—continue with their own realistic wake-up calls. Houston and Wall Street appear to internalize the peak oil issue.

Yet despite these and other blunt warnings from a growing number of industry insiders, for much of the year the perception of peak oil as a looming issue lost ground in the media. Oil optimists like Daniel Yergin and Michael Lynch pushed back against the peak oil story on op-ed pages of several major US newspapers. Reporters wrongfully continued to link peak oil to “running out of oil,” which they then rightfully asserted wasn’t a near-term problem. A fog of sorts still plagues the issue.

Labels: peak oil