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Old 08-04-2009   #41
Rick M
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Default Strategic Shocks: Review & Application

Review and application of SSI study, “Known Unknowns: Unconventional Strategic Shocks in Defense Strategy Development” (Nathan Freier, Nov. 2008).

The Strategic Studies Institute (SSI) at the US Army War College has issued many stimulating research papers in recent years, several of which deal with energy security issues.
Nathan Freier’s recent SSI paper does not focus on energy issues.
Rather, the central purpose of his study is to present a paradigm for the examination of potential strategic shocks.

I recently summarized the key points of Nathan Freier’s “Known Unknowns” and then applied his paradigm to emerging energy security issues, primarily the phenomenon known as “peak oil” and its corollary, export decline.

The central point of my application of Freier’s paradigm to the issue of peak oil may be summed up thus: there are well-established trend-lines which point to impending energy security concerns (witness yesterday's warning from the IEA, #40 above).
Meanwhile, industry and government officials largely deny these concerns.
This ongoing situation provides a classic and real-time illustration of an evolving potential shock.
It is precisely the sort of situation which Freier says needs to be noted and scrutinized by military analysts.

This analysis was posted at Energy Bulletin this morning:
http://www.energybulletin.net/node/49779

Last edited by Rick M; 08-04-2009 at 01:17 PM.
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Old 08-05-2009   #42
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Rick,

Back to this after a while away... I don't always keep track!

Too much to bite off all at once, but on this IEA report...

Quote:
Originally Posted by Rick M View Post
This WEO marks a significant departure from the IEA’s traditional confidence in future oil supply.
Its opening sentences state, “The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable…. “
It then warns of “dwindling resources in most parts of the world and accelerating decline rates everywhere (p. 3). The WEO calls for “an energy revolution” and concludes, “Time is running out and the time to act is now” (Executive Summary, p. 15).

This sudden tone of concern is confirmed by subsequent verbal statements made by IEA Chief Economist Fatih Birol...

Despite this recent tone of concern and the evidence which the WEO presents, the IEA remains very reluctant to state that the peaking of global oil production (whatever combination of factors “cause” the constriction) will present some very serious challenges, that effective mitigation will require decades of cooperative effort, and that that the world appears to be most unprepared for this event.

To provide some context, it should be noted that only four years ago IEA Executive Director Claude Mandil referred to peak oil analysts as "doomsayers" and went on to say that "none of this is cause for concern."
But barely 1000 days later, the IEA has suddenly told the world that "time is running out...."
As I said previously, this issue is constantly evolving, perhaps nowhere more rapidly than at the IEA.

There are two WEO graphs in particular which I would like to post here and which are highly illustrative, if I could only figure out how to do it (I am hopeless with computer stuff, much to my brother's amusement).
As far as posting graphs, I haven't tried it on this site, but you probably have to save the graph (right click on the image, then "save image as"). Then you upload it to a photo hosting service, like Photobucket, and paste a link into your post.

For the IEA study, it seems to me that reading the executive summary creates a rather different picture than the quotes you post. According to the summary, the IEA projects a rise in production to 106 mb/d in 2030 - they certainly do not see a "near peak" in production. They explicitly state that the main hazard is not insufficient resources, but the possibility of insufficient investment - pretty much exactly what I said in a previous post.

Examples

Quote:
The world is not running short of oil or gas just yet. The world's total endowment of oil is large enough to support the projected rise in production beyond 2030.
and

Quote:
The volume of oil discovered each year on average has been higher since 2000 than in the 1990s, thanks to increased exploration activity and improvements in technology
To the above I would add that increased exploration activity since 2000 has obviously been driven by higher prices: nobody commits major resources to exploration during a glut.

I see nothing here at all that supports the "near peak" hypothesis: quite the opposite. The EA Executive Summary suggests that the peak oil scenario is alarmist, and that the immediate hazards referred to are shortfalls in production due to underinvestment, political and security-related constraints on investment, and the impact of increasing hydrocarbon use on climate change.

I'm not saying a production peak will not occur: it obviously has to. According to this IEA report, and similar data from EIA, it would occur sometime after 2030, not in 2005 as much of the "peak oil" literature insists. What we have seen in the 2005-2008 production plateau is a peak in the production capacity of currently installed infrastructure, not an absolute peak in production.

That does NOT mean there is no problem. There are serious potential problems. I don't want to go into the climate change stuff, but the underinvestment risk is severe and the potential for security related supply disruptions is huge... and of course the peak does eventually come.

To me the single most important move that needs to be undertaken is a concerted effort to keep prices at a sustained high level. A spike to $140 doesn't do much, but 10 years at an average of $100 and you have a real incentive to explore, to invest in new production, to reduce consumption, and to invest in alternative energy sources. No matter how much we talk and how many alarms we raise, this is not gonna happen if oil is cheap.

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Old 08-05-2009   #43
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Originally Posted by Rick M View Post
IEA chief economist Fatih Birol continues to sound the alarm on oil supply, most recently in an interview published this morning in The Independent (UK).

Mr. Birol’s key points include [these are quotes from the article]:
- the public and many governments appear to be oblivious to the fact that the oil on which modern civilization depends is running out far faster than previously predicted [emphasis added].
- Global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated.
- We will have the risk that the [economic] recovery will be strangled with higher oil prices.
- The UK Government, along with many other governments, has believed that peak oil will not occur until well into the 21st Century, at least not until after 2030. The IEA believes peak oil will come perhaps by 2020. But it also believes that we are heading for an even earlier “oil crunch” because demand after 2010 is likely to exceed dwindling supplies.

Mr. Birol also mentioned the fact that oil is essential for our global food system and that it “is a strategic asset for the military.”

This morning’s Independent article is here:
http://www.independent.co.uk/news/sc...t-1766585.html

"
Saw this on another thread, figured best to keep it here.

If you read this quickly, it seems to openly contradict the projections in the IEA report referred to in the post above. Read it more slowly, and you catch the critical distinction between oil fields and oil reserves. Existing oil fields are seeing rapid depletion, but existing fields do not cover even close to all of the known reserves. Very few new fields have been developed since the start of the oil glut in the late 80s - it was cheaper to just keep pumping the easy oil from the existing fields. When demand spiked in the last 5 years, producers responded by running existing fields to their maximum capacity, hence rapid depletion.

The problem is not that the oil is running out, the problem is thast the existing developed oil fields are running out. To respond to that, as IEA report stresses, is that massive investment is needed to develop new fields, and many countries with large oil reserves are under-investing on their own account and are not presenting conducive environments for foreign investment. The vast majority of current investment in new production is in the GCC... a bit more in the Caspian, and some, mainly Chinese-financed, in Africa. In the West investment and exploration are constrained by environmental and NIMBY concerns. In Venezuela, Iraq, Iran, Nigeria, Russia, and many others it is constrained by the political and security environment.

I agree with the IEA report's conclusion that the quantity of oil available is not going to be the problem that causes the next crunch (and there will almost certainly be one). When that crunch comes there will be plenty of oil in the ground and plenty of demand above ground, but decades of underinvestment will leave us incapable of moving the oil from underground to where it's needed.
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Old 08-05-2009   #44
Rick M
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Default Clarification on WEO

Thanks, Steve

You beat me to it... I see you have a second posting before I was able to respond to #42, which is the subject of what follows.

I’ll try to get those graphs up.

Let’s start with our points of agreement, which are mostly at the end of your post:
- There are serious potential problems, especially supply disruptions.
- The peak does eventually come.
- We need sustained higher prices (and I think $100 is about right as a minimum).
- The immediate problem is not a lack of resources (but I will qualify that later on).
- Insufficient investment is a more imminent hazard.

I think we can also agree on some other points:
- Both the content and the tone of the 2008 WEO are quite different from its predecessors
- Its tone of concern is reinforced by subsequent verbal statements by Mr. Birol.
- People can haggle over terminology (call it a peak or a plateau or maxing-out) and which combination of factors “cause” this limitation of production (physical resources, net energy, investment, geopolitics, infrastructure, climate change, sea-level rise, terrorism or war, etc.), but the bottom line is that it will surely present “an unprecedented risk management problem” (to quote the Hirsch Report).
- Our world (and North America most of all) is most unprepared for such an event, whenever it may arrive and whatever the causes.

I disagree with your point that "reading the Executive Summary creates a different picture."

Let’s consider various details (emphasis added):
a. Projected growth in production
Yes, this WEO projects 106 mbpd in 2030. The previous WEO projected 116, and we have seen earlier projections from various quarters of 130.
For a world that has enjoyed all the cheap petroleum it wanted for 150 years, these recent downward revisions indicate that we will not have this luxury in the future.
We are in for a serious shift.
Note the beginning of its final paragraph: “For all the uncertainties highlighted in this report, we can be certain that the energy world will look a lot different in 2030 than it does today. The world energy system will be transformed, but not necessarily in the way we would like to see” (p.49).

b. Near peak
You said that “they certainly do not see a ‘near peak’ in production” but I can’t find where they said that.
What they did say is this:
- “Non-OPEC conventional oil production is already at plateau and is projected to start to decline by around the middle of the next decade, accelerating through the projection period” (p. 41).
- Translation: We have already maxed out on the easy oil from the non-OPEC sector (ie. all but 12 countries), and the flow-rate from this sector will be less starting around 2015, decreasing more rapidly to 2030 and beyond.
- “Production has already peaked in most non-OPEC countries and will peak in most others before 2030” (p. 41).
- Translation here is less clear: the first part simply restates what they said in the previous sentence. But what do they mean by “most others”: the non-OPEC countries that haven’t yet peaked (eg. Canada) or do they mean that most of the 12 OPEC countries will peak by 2030?
- I presume they mean the latter, which fits with the Chatham House study which foresees at least half of the OPEC countries with reduced export capacity prior to 2030 (see #28 above). Furthermore, four of the 12 OPEC countries already appear to be post-peak (Venezuela, Libya, Iran & Iraq).

Also, you will note in Birol’s interview with Monbiot (above, #39) that he says in response to Monbiot’s request that he be more specific on the “before 2030” time-frame, “Assuming that OPEC will invest in a timely manner, global conventional oil can still continue [to increase] but we still expect that it will come around 2020 to a plateau, which of course is not good news for global oil supply….”
Translation: The flow of conventional oil from OPEC may increase for another decade but not beyond, and this potential growth cannot occur without timely and massive investment.
But if non-OPEC conventional has peaked and is about to decline, and OPEC conventional peaks in a decade (sooner without investment), then what is left?
Does anyone seriously believe that unconventional can deliver the volumes required? At an affordable price? At a sustainable net energy ratio?

Steve, you said, “I see nothing here at all that supports the ‘near peak’ hypothesis: quite the opposite. The IEA Executive Summary suggests that the peak oil scenario is alarmist….”
I don’t know what “near” means to you, but when we consider our collective dependencies, the volumes involved, our existing infrastructure and the apparent lack of viable alternatives to liquid fuels, I consider a decade or two to be an historical eye-blink and not worth quarreling over.
As for “alarmist”, the IEA (and many others) may have used that term a few years ago, but I did not find it in this WEO. Their final sentence, “Time is running out…” sounds rather alarming to me, especially given its source.

That’s all for now.
Last month was our wettest-ever July, and the hay (which I raked yesterday and got soaked overnight) has to be re-raked… it’s sunny out so I'd better run.

Which brings up another point: affordability is a key element of energy security, and the WEO is very explicit on that one: “the era of cheap oil is over” (p. 49).
But what does that mean for my tractor and your food, to choose just one example? (On this web-site, I guess I should have asked, "What does it mean for our military?")
Our Ag ministry believes our energy ministry’s determination that “there is no imminent peak oil challenge” and will not begin research on the effects to the agri-food system of the “end of cheap fossil fuel” until the energy ministry says that this is a foreseeable problem.

So farmers have no direction on this at all, and most of us are near the bottom of the income scale and will have difficulty contending with the high fuel prices that you and I agree are necessary to effect an orderly transition.
But a transition to what? Solar and wind cannot do field-work.

Our problem will be in affordability long before physical supply, though the result is effectively the same for low-income folks. And as Robert Hirsch continually emphasizes, our problem will be primarily in liquid fuels… the very stuff that keeps us fed, mobile and protected.

I think you could drop the word “potential” from your prognosis, Steve.
There are serious problems with our future supply of affordable liquid fuels, especially here in North America.
If I have a large tree with an increasing lean over top of my house, I would regard that as a problem, not a potential problem, since its falling is not a potentiality but rather an eventual certainty, and the threat of it falling is continual and can only increase.
To me, that's a problem, and the sooner I acknowledge it and address it, the better.

I'll say more after the haying.

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Old 08-08-2009   #45
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Default WEO graphs

Here are the two graphs from the Nov.08 IEA World Energy Outlook.
Neither graph was included in the Executive Summary (I got these from Matt Simmons' presentations).

The upper graph indicates a steep decline in crude oil production from currently producing fields, starting now and dropping to around 25 mbpd by 2030.
The anticipated growth in production to 104 mbpd requires 64 mbpd of actual production (ie. the "six new Saudi Arabias" that must be found and brought on-stream, all within 20 years).

Please note the relatively flat line for crude oil from 2005/6 onward. Even adding in the "yet-to-be found" and enhanced oil recovery, the line barely lifts and does not reach 80 mbpd.
This is consistent with the claims of Matt Simmons and several other analysts that "peak oil is already past tense" since crude oil production has been stuck between 74 and 75 mbpd since early 2005.
The WEO indicates that we are likely to move much beyond that and that any growth in liquids must come from other sources.
(How much of that energy will be net energy is another story....)

The second graph reveals how reliant our past and current oil production is on giant fields which have been producing for 40 years or more (let's not quibble over a few months... 2010 will be here soon enough and we're talking decades).
Meanwhile the Santos Basin off the coast of Brazil has been touted as the largest discovery of oil & gas in over 20 years. Some analysts believe that there may be up to 31 billion barrels.
Even ignoring the issue of net energy, 31 billion is equal to current annual global consumption... 365 days.
Attached Images
File Type: jpg WEO- oil to 2030.jpg (75.5 KB, 319 views)
File Type: jpg WEO- vintage giants08.jpg (53.1 KB, 323 views)

Last edited by Rick M; 08-08-2009 at 05:16 PM.
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Old 08-08-2009   #46
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Default 'The Global Security Implications of Climate Change'

Rick and others here,

Not my subject, although I do try to follow some of this thread. The link is to an IISS conference on 'The Global Security Implications of Climate Change' http://www.iiss.org/about-us/offices...he-21-century/ You may find the linked blog of value, even if little populated.

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Old 08-09-2009   #47
Rick M
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Default Security Implications of Climate Change

Thanks, David

I will try to learn more about the IISS conference.
The blog entries were interesting, esp the Himalayan water issue.

The (glacier-fed) Athabaska River is vital for tar sands production, so there are long-term concerns on that one as well.
Water may be a limiting factor for oil shale production also.

Meanwhile, CNA did a fairly thorough analysis on CC two years ago (around 65 pgs):
http://securityandclimate.cna.org/report/
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Old 08-28-2009   #48
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Default Media coverage of Peak Oil

An article appeared yesterday which examines media coverage of Peak Oil (including this week’s exchange in the New York Times).

The author’s central point is:
"The fact is that if the Peak Oil proponents are correct, it amounts to one of the biggest stories of our time, right up there with global warming."

As the link below indicates, some of the most progressive mainstream coverage of PO is coming from the UK.
Brits are now awakening to the brevity of oil, having gone from importers to major suppliers and now to net importers, all within 40 years, half a human lifetime.
Same with natural gas, I believe.

http://www.huffingtonpost.com/gabrie..._b_270347.html
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Old 08-30-2009   #49
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Default Saudi oil security

On Thursday evening the Saudi anti-terror chief (and member of the Saudi royal family) emerged relatively unscathed from an al-Qaida suicide attack at his home.

This follows increasing warnings during the summer about Yemen and the potential for a spill-over into Saudi Arabia.

Security has been tightened at major Saudi oil facilities (as indicated by this, which was posted a few hours ago):
http://uk.reuters.com/article/idUKLU...090830?sp=true

Abqaiq and Ras Tanura are the only facilities in the world that handle more than 3 million bpd (each handles about double that, more like 5-6 mbpd).
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Old 09-03-2009   #50
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Default New Brookings study on Defense Energy

This 10-page analysis is entitled “Fueling the Balance: A Defense Energy Strategy Primer” and is authored by two members of the Obama ’08 defense policy task force.

This report builds on concerns which are increasingly being expressed about the vulnerabilities which are inherent in current energy consumption patterns (both in terms of physical supply and affordability).

Although this study focuses almost exclusively on DoD consumption, many of its concerns apply to the civilian sector as well, and of course it is the productivity of the domestic economy which funds DoD and other government services.
Clearly, our reliance on petroleum is suddenly emerging as an urgent issue.

Its bibliography reflects the incorporation into this study of the recent concerns of Col. Gregory Lengyel, the Defense Science Board, Cdr. Jeffrey Eggers, and the recent CNA study.

This study points to the upcoming Quadrennial Defense Review and states that “a closing window of opportunity must not be missed…. the energy nexus…. cannot be deferred again” (p. 1).

This is a concise and highly relevant study, well worth reading.
Thanks to Lisa Wright at Congressman Roscoe Bartlett’s office for passing along the link:
http://www.brookings.edu/~/media/Fil...egy_singer.pdf
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Old 09-04-2009   #51
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Interesting piece of news today: new oil discovery in the Gulf of Mexico, estimated at a billion recoverable barrels. Deep, will be expensive to recover: $200 million per well, not all the wells will produce, and there's the transport infrastructure to consider. But still, with a billion recoverable barrels at, say, $70-100 each, you can afford to put $10-20 billion into production.

A billion barrels is significant, but the real significance of the find is the location, which is an impressive demonstration of what modern exploration and recovery techniques can do. The Gulf of Mexico is probably the single most explored oil-producing region on the planet. 20 years ago they were calling it "The Dead Sea"; it was considered all dried up. Clearly not so.

What we're seeing now (the 28 billion barrels off Brazil, discovered in 2007, is another example) is the beginning of the next wave of discoveries. They will be complex and expensive, but they are there.

I mentioned this in an earlier post, but it's worth repeating: most of the world's oil-producing regions have not seen systematic exploration in 20 years, often more. From the late 80s through 2002-2003 there was anb oil glut, offering little incentive to explore. From 2003-2006 the price spike was seen as just another transient spike due to instability in the Middle East. It's only in the last few years that we've seen real exploration beginning. It takes a good deal of time to produce results, both because of technical and political constraints.

Many traditional oil producing regions still aren't getting attention: Mexico, Venezuela, Indonesia, Libya and many others are still pumping from deposits discovered 30 years ago and more. In these cases National oil companies don't have the technology and government policies make investment by oil majors unattractive. Iran and Iraq have not seen significant exploration in 30 years. Even the GCC states have let exploration languish for years: given their known reserves they simply had no reason to go looking.

How much more is out there? We don't know. Probably a fair amount, and as long as oil remains expensive the next 20 years are likely to see an interesting range of technologies developing for getting more out of existing fields. Today we assume that only 20-30% of a given reserve is recoverable; that is likely to change. Today's technology is likely to look as primitive in 20 years as the technology of 20 years ago (which seemed really impressive back then) looks today.

Again, we do face major problems, but the geological problem (is there oil there) is less immediate and less vexing in many ways than the political and investment-related problem (can the oil that's there be brought to market). From the reactive perspective, the conclusion is the same either way: we need to prepare for potential shortage. From the proactive perspective, the actions needed to maintain supply are very different. This is the danger of the obsessive focus on absolute reserves: it distracts from the essential focus on confronting the political and investment-related concerns.
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Old 09-05-2009   #52
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Default New oil discoveries

Hi, Steve

Regarding the GOM discovery, this article mentions at least 3 billion, which is of course significant:
http://newsok.com/oil-discovery-exte...rticle/3397994

However, the exuberance of its headline surely is not warranted in light of other info.
A BBC article indicated that they should reasonably expect to retrieve only 30% or so, which fits with the 1 billion that you mentioned.

Even at 3 billion, that would supply the world for a few weeks, the USA for about 5 months.
If Tupi and the Iranian discovery are both around 8 billion, then that’s global consumption for about 12 weeks from each field.
Not exacting what I would call “extending the petroleum age.”
Most Ages are measured in centuries, not weeks.

Both the Santos Basin discoveries and the new GoM field are ultra-deep water (the latter at record depth), and thus cannot be cheap.

Our perspectives on this are different… you are clearly more optimistic than I am.

But there is much that we agree on: that we face major problems, and that the investment and geopolitical aspects may catch us long before the geological constraints.
I especially agree with your point that “the conclusion is the same either way: we need to prepare for potential shortages.”

I have spent the past few months going through numerous GAO documents from the 1970s and 80s. They are very detailed, blunt in their assessment, and I commend the GAO for its persistence.
But it appears that little has changed… the issue seems to have faded away and North America remains highly vulnerable to an oil shock.
Such a shock would not require physical shortages: all it requires is widespread & prolonged unaffordability: our continent would then surely have a problem of unprecedented magnitude and complexity.

I also agree with your final comment about the obsessive focus on absolute reserves: such a focus would indeed distract from the many interacting above-ground factors.
But I also think that the credible peak oil analysts moved beyond that many years ago.

But in some respects, the inclusion of above-ground factors makes the situation more tentative, not more secure: the geological limits then provide a best-case scenario which can only be achieved in sensible, orderly geopolitical & investment climate, which may not in fact be maintained.

In fact, there are many factors which point to the difficulty of maintaining the relative peace & stability that we have enjoyed since 1946.

Other views are welcome.
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Old 09-05-2009   #53
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As far as supply is concerned, yes, I'm more optimistic than you are. I strongly suspect that the Santos basin and the recent Gulf discovery are the minimal tip of a very large iceberg. It is only in the last few years that there has been any incentive to look for "deep oil", the process is very complex and very time consuming, and only a very small number of areas with potential have seen systematic exploration. I think there's a whole lot more out there. We've only just begun to look.

I also think there will be a whole raft of new technologies emerging for getting more oil out of existing deposits. Right now the rule of thumb is that only 20-30% of a given deposit is recoverable, and I think that's going to change. Again, there was little incentive to develop those technologies in the face of a glut and perceived glut that persisted up until a very few years ago, but if the price of oil stays high, that changes the incentives radically. You put a few hundred billion dollars underground, there's going to be some real effort put into getting it out.

The development costs will be very high, but as long as oil stays in the $70-120 band the numbers still work out.

Again, the problems - and there are very large ones - lie more on the political and financial factors. The technology for finding and extracting new reserves is in the hands of the oil companies. The new exploration is very expensive and the oil companies will not invest without assurances of return on investment. Many countries with potential reserves are reluctant to make deals with oil companies.

In some areas we are seeing these problems addressed: the GCC countries in particular have led the way in developing win-win relationships between national oil companies and oil majors. Of course some level of political stability is essential. Some countries that have been driven by nationalist impulses in the past (think Mexico, Indonesia, and eventually Venezuela) will be forced by financial necessity to take a more pragmatic approach. It is in the interests of Western governments to promote such deals, but unfortunately "big oil" stands only slightly behind "wall street" in the demonology of anti-corporate sentiment, and in many places official support for oil companies is seen as politically unacceptable, even when the national interest coincides with the private interest.

Again, the danger of the excessive focus on absolute supply is that it distracts from desperately needed efforts to resolve the political and investment constraints on further exploration and production.
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Old 09-05-2009   #54
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Default Solid points, but more to consider

Quote:
I also think there will be a whole raft of new technologies emerging for getting more oil out of existing deposits. Right now the rule of thumb is that only 20-30% of a given deposit is recoverable, and I think that's going to change. Again, there was little incentive to develop those technologies in the face of a glut and perceived glut that persisted up until a very few years ago, but if the price of oil stays high, that changes the incentives radically. You put a few hundred billion dollars underground, there's going to be some real effort put into getting it out.
No disagreement on the political and financial being the primary long poles in this tent, but I'm not as confident as you are that the technology currently exists, and this is not a financing friendly economy at the moment. However, let's assume energy demands overweigh political and financial issues and that the technology is developed. We still live a world where we have "the rise of the rest", and that means India, China and a lot of other nations will have an increased demand to sustain their growth. Not sure punching a few more soda straws seven or more miles deep into the ocean will meet that demand.

Other issues, if oil prospects for the U.S. look better in our backyard, why would western oil companies invest in places like Nigeria? What impact will that have on their economy and subsequently their security and our security interests?
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Old 09-05-2009   #55
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No disagreement on the political and financial being the primary long poles in this tent, but I'm not as confident as you are that the technology currently exists, and this is not a financing friendly economy at the moment. However, let's assume energy demands overweigh political and financial issues and that the technology is developed. We still live a world where we have "the rise of the rest", and that means India, China and a lot of other nations will have an increased demand to sustain their growth. Not sure punching a few more soda straws seven or more miles deep into the ocean will meet that demand.
There would have to be a whole lot of new holes being drilled.

One of the keys to managing the medium-term energy future is keeping oil prices high. That will have impact on both the supply and demand sides. High oil prices will call up new supply and will lead the development of new technologies, if they are sustained. It won't happen overnight, and if high prices are seen as just another risk-driven spike, they accomplish nothing.

On the demand side, if you look at energy use per unit of GDP, you see very quickly that India and China in particular are exceedingly inefficient users of energy. That's because the infrastructure that underlies their current growth was laid down during the 90s oil glut. Sustained high oil prices will force a redirection of development... would the US have developed its personal transport economy and its energy-intensive ways if oil had been at $100 a barrel from 1950-1975? Not likely. If oil stays expensive, you will see concerted efforts by these countries to move in non-oil directions, out of self interest. I suspect we're going to see a surge of nuclear and coal construction in China in the next decade. Greenpeace will have fits but the Chinese don't care, nor do they have to deal with the NIMBY situation.

One of the most critical energy policy objectives I can think of for the next decade, counterintuitive though it may seem, is to keep oil prices up.

Quote:
Originally Posted by Bill Moore View Post
Other issues, if oil prospects for the U.S. look better in our backyard, why would western oil companies invest in places like Nigeria? What impact will that have on their economy and subsequently their security and our security interests?
If the US won't the Chinese will.

As we've both mentioned, the impact of political risk on potential for investment recovery - particularly as the size of the needed investments grows - is going to be a major problem, probably as great or greater than the issues of absolute supply. If risk is high enough not even the Chinese will invest, and once they are burned a few times (it will happen, given the way they are managing their business now) their risk tolerance may shrink a bit.

Another of the great energy policy challenges of the next decade will be to work out arrangements that will allow the governments of the nations that have the oil to make deals with the companies that have the technology to find and extract the oil on terms that will allow reasonable ROI and risk mitigation for the companies without overstepping the demands of nationalism on the part of the countries. Again, this may be a more vexing problem than any absolute supply constraint.
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Old 09-06-2009   #56
Rick M
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Default More on Tiber field

Here is some more info on Tiber & GoM oil, both from GLG.

Lynch is (as always) optimistic:
http://www.glgroup.com/News/BPs-Tibe...ig--43001.html

The other (unnamed) analyst is less so:
http://www.glgroup.com/News/Tiber-Di...Oil-43004.html
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Old 09-07-2009   #57
Rick M
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Default Latest warning re. oil supply crunch

This appeared today in the The National (out of the UAE).
It provides the latest warning of an imminent supply crunch if serious investment does not kick in.
The author warns that "$147 a barrel oil [will] seem like a blessing" compared to what's coming if we can't get our collective act together.

This is a sensible article which links the concerns of peak oil, depletion rates and the urgent need for investment:
http://www.thenational.ae/apps/pbcs....ate=columnists

Surely it would be prudent for North Americans authorities to dust off & review our fuel emergency plans (at every level: federal, state/provincial and local).
It's possible to have a serious fuel emergency without physical shortages: all it would require is widespread unaffordability (which would almost certainly lead to public unrest).
Consistent warnings are being issued on this impending supply crunch, but there is little public awareness, no political or media interest, and therefore no observable action.
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Old 09-08-2009   #58
Rick M
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Default Warnings re oil supply crunch (2011-2015)

As for other evidence on the imminency of the expected "supply crunch" and price spike, I would point to several documents:

1. last summer's Chatham House report: "The Coming Oil Supply Crunch."
This report by Paul Stevens was written in Aug.08 and updated in May 09.
His 40 page analysis warns that "a supply crunch appears likely around 2013" (p.8).

In his May 09 update, Stevens stands by this prediction: "the developments since publication of the report in August 2008 have done little to change its original
conclusions" (p. 37).

This link provides an intro and link to the complete study:
http://www.chathamhouse.org.uk/publi...view/-/id/652/

2. last summer's Chatham House report on oil exporters
In July 08 a 40-page study was released by Chatham House in the UK.
Entitled "Ending Dependence: Hard Choices for Oil Exporting States", their assessment is stark:
"Of the twelve countries in this study, oil production is in decline or at a plateau in three: Indonesia, Malaysia and Norway.
In a further seven countries, the plateau will be reached around 2010.
Saudi Arabia and Kazakhstan will reach a plateau before 2020" (p. 35).

Clearly, if export capacity is headed for such near-term limitations, a supply crunch should be on everyone's radar.
The study is available here:
http://www.chathamhouse.org.uk/news/view/-/id/457/

3. the IEA's most recent World Energy Outlook
The Nov. 08 WEO is striking in its tone, warning that "global trends in energy supply and consumption are patently unsustainable" (p. 37) and that "time is running out" (p. 49).
It states, "Some 30 mb/d of new capacity is needed by 2015. There remains a real risk that under-investment will cause an oil supply crunch in that timeframe" (p. 41).

Paul Stevens (#1 above) has a concise analysis of the WEO in his May 09 update (p. 35).

4. public statements by Fatih Birol
Mr. Birol is the Chief Economist of the International Energy Agency.
He has provided several presentations and interviews since the release of last year's WEO and has repeatedly warned of the dangers of under-investment and of a potential supply gap "after 2010."

His recent interview with Steve Connor of The Independent (UK) is cited here:
http://www.independent.co.uk/news/sc...t-1766585.html

Mr. Birol is further quoted as saying, "the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted."

My concern is that despite this credible information, the potential for a near-term oil supply crunch & price spike does not seem to be on the radar of our policy-makers or the public.
Whether a crunch occurs in 2015, "after 2010" or somewhere in between, the time-frame is very tight when we are looking at something as colossal as the global supply of affordable liquid fuel.
This urgency is greatly compounded by our reluctance to acknowledge that a problem even exists.

Surely we need to prepare for such a situation.
I have several questions which I hope this group can assist with:
Can anyone shed light on the status of US plans for liquid fuel emergencies (LFE)?
Has anyone seen a written LFE plan at any level?
Does anyone know anyone who has?

Has anyone examined the recent LFE work in Australia and the UK?
Should we not be conducting similar reviews of our fuel emergency plans here in North America?

Since the military and National Guard are often called upon when domestic emergencies are beyond the capabilities of local authorities, this information and the the subsequent questions should be of some relevance to this audience.

Thanks very much for considering this, all of you.
Other views are welcome.
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Old 09-08-2009   #59
Bill Moore
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Default Rick, relax it isn't a crisis yet.....

Posted by Rick M,
Quote:
Surely it would be prudent for North Americans authorities to dust off & review our fuel emergency plans (at every level: federal, state/provincial and local).
It's possible to have a serious fuel emergency without physical shortages: all it would require is widespread unaffordability (which would almost certainly lead to public unrest).
Consistent warnings are being issued on this impending supply crunch, but there is little public awareness, no political or media interest, and therefore no observable action.
Rick, you know how we are, we like to admire and discuss problems and potential crisises, but we don't solve them until they are a crisis.
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Old 09-09-2009   #60
Rick M
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Default North American responses (or lack there-of)

Hi, Bill

You are correct, it isn't a crisis yet, and maybe it won't be a crisis for several years (though it is unlikely that we can carry on for many decades).
But you are also correct in noting that we tend not to address things until a crisis hits.

That is my central fear... despite the evidence that oil production must eventually peak, that exports will be curtailed first, and that a near-term supply crunch (because of under-investment, not below-ground reserves) appears increasingly likely, we still carry on our merry way.

There is something almost Shakespearean about all this... human hubris... we attribute so much of our modern achievements to human ingenuity, when in fact much of it was the result of our ingenuity at getting this energy-packed liquid to do fantastic work for us.
We conveniently overlooked the fact that the stuff is finite, and we have made no provision for that unhappy fact.

Admiral Rickover was right a half-century ago... we have been "selfish and irresponsible" in squandering this one-time bonanza and putting our kids at increasing risk.

When it comes to petroleum supply, this issue is so complex and of such a scale that a major supply problem won't simply be a matter of fine tuning at the last minute.
We could easily get caught, but most North Americans appear to have no clue that such an event is even possible.

That is not an encouraging starting point, and we may actually find ourselves up against something (even though "that something" was reasonably predictable) which we cannot solve in a safe & orderly manner.

Pride goes before a fall, as they say, though I certainly hope that we can prevent a recurrence of this timeless human pattern.
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