Wednesday, June 22, 2005

Peak Oil: Extreme Optimist Edition.

More details on CERA's views that the peak may be as far off as 2020. These folks are clearly optimists in more ways than one.

On the other hand, if we can embrace the Dark Side..

Philly Inquirer: Fueling Fears.


Peak-oil proponents are not saying that the Earth's store of crude is nearly gone. Rather, they say it is nearly half gone, and daily production will begin slowing - while growth in demand continues, according to Deffeyes.

"I'm very concerned about the five-year time scale. There's not much we can expand rapidly on a five-year time scale" to make up for a shortfall in oil, he said in a recent interview at his home in Princeton.

But Cambridge Energy Research Associates asserted just the opposite yesterday in a report predicting that oil production capacity could exceed demand by more than six million barrels per day by the end of this decade - far above the current margin of one million barrels per day.

That projected capacity increase could push prices below $40 a barrel again by 2007 or 2008, the Cambridge, Mass., firm said.

Cambridge Energy expects major new contributions from Russia, the Caspian Sea region, and West Africa. Unconventional crudes, such as extra-heavy oil, oil from wells drilled below more than 2,500 feet of seawater, and other liquid hydrocarbons will increase to 30 percent of total production capacity in 2010, up from 22 percent now, the company said.

Cambridge Energy predicted that much of the increase in supply will be light, sweet crude oil - good news for Philadelphia-based Sunoco Inc., whose refineries are designed to process that type of oil.

Peter M. Jackson, Cambridge Energy's director of oil industry activity, acknowledged during a teleconference with reporters yesterday that last year's discovery of 13 billion barrels of new oil worldwide did not nearly offset the 30.7 billion barrels pumped out of the ground. That propels the belief that rapid depletion is at hand.

But that is not the case, Jackson said, because upgrades and expansions of existing fields have made them capable of producing more oil than was previously thought possible.

Cambridge Energy does not see a peak in overall production until around the middle of the century. Even then, it will be an "undulating plateau rather than a peak," he said.

Deffeyes, however, does not buy predictions that production can keep increasing for decades, especially since in 1986 the world began burning more oil annually than it was finding.

Although oil production has continued increasing worldwide, discovery of new oil reserves has been in a relentless decline for 40 years.

"There are a few juicy places," said Deffeyes, who worked for Shell Oil in the 1950s before leaving for an academic career. Among those places are Russia, where political instability is a serious concern, and Iraq, which is the only Middle Eastern country that has not been thoroughly explored, Deffeyes said.

To move the peak of oil production a few decades forward, "they've got to find another Middle East, plus another North Sea on top of that," Deffeyes said.

Note to Darth Kunstler:

If his prediction turns out to be correct, Deffeyes still is not predicting a long-term apocalypse. "On a 20-year time scale," he said, "we'll figure out a lot of things."

NPR: Predicting the Future of Oil Prices.

CS Monitor: One energy forecast: Oil supplies grow.


Instead of the wells running dry, CERA says petroleum supplies will be expanding faster than demand over the next five years, according to an analysis oil field by oil field. In good news for the SUV set, the new oil will be light, sweet crude - ideal for making gasoline. And since supply will grow, CERA forecasts prices will fall, possibly below $40 a barrel.

"We expect supply to outpace demand growth in the next few years, which would take the pressure off prices around 2007-2008 or thereafter and even lead to a period of price weakness," says Peter Jackson, a coauthor of the report.

Still, CERA maintains that higher prices are encouraging production and that technology is helping to capture oil from older fields. It foresees non-OPEC production expanding rapidly through the rest of the decade, particularly as new supplies come onstream from Russia, the Caspian, Brazil, Angola, and Canada.

Much of the production increase is already starting to happen as oil-rich nations begin to dig deeper and produce faster. According to the report, there are approximately 20 to 30 new major projects (producing more than 75,000 barrels per day) coming onstream every year until 2010. These will add 3 million to 4 million barrels of oil per day each year.

Over the next five years, there will be 10 million barrels per day of new light or medium crude and 3 million barrels per day of new heavy crude. Altogether, supply will exceed demand by 6 million to 7.5 million barrels per day later in the decade, according to CERA.

While many of the oil-depletion theories claim that Saudi production will falter, CERA predicts that the oil-rich nation will expand its production by as much as 2 million barrels of oil per day by 2010. In fact, the CERA analysis concludes that OPEC production will expand the fastest - to 45.6 million barrels per day, up from 36.8 million last year.

But because of political uncertainty, it has shaved its estimates for oil production from Russia. Any decline of Russian crude production would also be mirrored by a continued decline in production from other non-OPEC countries, such as the United States.

CERA does not foresee an actual "peak" in oil production. Instead, with huge projects coming onstream on a regular basis, it predicts an "undulating plateau" in terms of supply and demand for decades. An "inflexion" point will come in the third or fourth decade of the century, according to CERA.

"There is no indication to suggest peak oil is imminent," says Daniel Yergin, CERA chairman and author of several books on petroleum.

The main risks to its forecast, says Mr. Yergin, are political and operating changes that could delay expansion. If that happens, CERA predicts that oil production will increase by only 11.5 million barrels of oil per day between 2004 and 2010.

AP: Report: Oil Peak Not Coming Soon.


CERA chairman Daniel Yergin said the extra supply of oil he anticipates is only part of the solution to relieving the stress in the energy market. He assumes more efficient energy use, particularly in transportation, will be critical to stabilizing prices.

"The way that we consume energy in 2025-2030 is likely to be different," he said.

At the same time, as the supply cushion grows, the Organization of Petroleum Exporting Countries can be expected to rein in production to keep prices from falling too far. "The history of the oil industry is a history of cycles," Yergin said.

The CERA report acknowledges that there will be fewer giant oil fields found and produced after 2010, but it argues that with new technology and multibillion dollar investments the petroleum industry has the ability to provide more than enough supply to meet rising demand for several more decades.

Yergin said the main threat to this supply expansion scenario are geopolitical uncertainties. For example, "Iraq has the potential to be a very big player, but its timing is very uncertain," he said.

MarketWatch: CERA: Capacity to meet, beat demand.


"Following development of the current worldwide inventory of major discoveries, we also foresee far more capacity expansion in the medium term from field upgrades than through exploration," Jackson and Esser said.

Both men expect non-conventional sources of crude to play a major role in meeting demand. Those include condensates, natural gas liquids, Canadian oil sands, and the ultra-deepwater. Those sources could account for nearly 35% of supply by 2020, CERA said.

CERA said it doesn't accept the view that world oil production is close to a peak. Rather, the analysts see the so-called "inflexion" point materializing in the third or fourth decade of the century, and in contrast to a "peak", they expect an "undulating plateau" to persist for several decades.

"One of the biggest challenges will be to find the giant projects of the next decade, which will put great pressure on the search for high-quality, significant opportunities that in themselves meet the criteria of 'big," Esser and Jackson said.

After analyzing the data, CERA predicted that the capacity of the Organization of Petroleum Exporting Countries will rise to 45.6 million barrels per day in 2010 from 36.8 million barrels per day in 2004.

The analysts expect non-OPEC capacity to quickly increase by the end of the decade with additions of 7.5 million barrels per day to 55.8 million barrels per day.

Calling Saudi Arabia "underexplored," the analysts predicted that the kingdom's capacity for production would increase by 1.5 to 2 million barrels per day to 12.5 million barrels per day in 2010.

Additionally, there are about 20 to 30 major projects coming on line every year between now and the end of the decade.

"The balance of supply over demand has the potential to expand significantly over the next five years, and this could drive oil prices to the downside," the authors found. "If demand growth averages a relatively strong 2.2% through 2010, prices could weaken from recent record highs and slip well below $40 a barrel as 2007 to 2008 nears."

Globe and Mail: World now facing oil glut?


Total capacity will surge by almost 20 per cent to 101.5 million barrels a day by 2010, the widely respected and closely followed consultancy predicted, basing its assessment on field-by-field research. In 2010, capacity could be seven million barrels or so higher than demand -- a huge surplus.

The significant capacity gain is expected to come on the back of a long slate of massive development projects, including Canadian Natural Resources Ltd.'s Horizon oil sands project, among the 10 biggest on the go anywhere.

More than half of the additional oil will come in the form of light oil, the most valuable kind that is the easiest to turn into gasoline and jet fuel. The consultancy also said "unconventional" oil supplies -- such as those in the Alberta tar sands -- will be much more important than people think, as will output from ultra deepwater oil wells, more than 700 metres below the seabed. Other positive factors include getting more oil out of existing fields.