2005 Peak Oil Report Concerning 2007

Follow Peak Oil Here here. Plus I'm putting up a blog post that I found online from "Jonathan":

Posted by Jonathan at January 28, 2005 10:20 AM

You can read more from Jonathan's blog here: post.

In a recent post, I noted that oil companies' actions (not their words) show that they realize oil exploration is no longer a profitable exercise. Nearly all the world's oil has already been discovered; all that's left to discover are the scraps, and oil companies know it.

In fact, the situation is so critical that "the net present value of all discoveries for the 5 oil majors during 2001/2/3 was less than their exploration costs." (Energy Pulse, November 17, 2004, via FTW) Let that sink in. It now costs more to find new oil than the oil is worth.

Here's more evidence that the oil companies know the oil endgame is beginning. Dow Jones Newswire, January 17, via FTW:

Major oil companies are replacing dwindling reserves by acquiring other oil companies instead of exploring for new fields, a strategic shift with implications for global oil supplies, investment bank Credit Suisse First Boston said in a report Monday.

Integrated oil companies are spending only 12% of their total capital expenditures on finding new oil fields, down from nearly a third in 1990, the report said. [...]

In addition, with the world's biggest oil companies convinced exploration is too costly and risky, the steady growth of the world's total oil reserves has fallen sharply, the bank said. Global oil reserves are being replaced at a rate of 1.2% a year in the last three years, compared to 2.3% over the last 20 years, even as oil demand growth is hitting new records with China and India becoming industrial powers, the bank said. [My emphasis]

With record and ever-growing demand, you'd think that oil companies would be scrambling to find new oil fields. Their reluctance to invest in exploration speaks volumes. It should, in fact, be setting off alarm bells all over the world, but the human capacity for denial is boundless.

It takes on average six years to bring new oil fields online, so one can look ahead by analyzing the totality of planned projects. Such a review of planned projects was recently published by the journal Petroleum Review. It shows that 2007 could be the year that the world really discovers it's running out of oil. EMS:

Global oil supplies could start to have difficulty meeting growing demand after 2007, according to a recent analysis (PDF) of existing and planned major oil-recovery projects published this month in Petroleum Review.

While a flood of new production is set to hit the market over the next three years, the volumes expected from anticipated new projects thereafter are likely to fall well below requirements, the report says.

"There are not enough large-scale projects in the development pipeline right now to offset declining production in mature areas and meet global demand growth beyond 2007," said Chris Skrebowski, author of the report, editor of Petroleum Review and a recently appointed Board member of the Oil Depletion Analysis Centre (ODAC) in London.

"Since it takes, on average, six years from first discovery for a mega project to start producing oil, any new project approved today would be unlikely to come on stream until the end of the decade," Mr Skrebowski noted.

The report, 'Oil field mega projects 2004', analysed all known projects with estimated reserves of over 500 million barrels and the claimed potential to produce over 100,000 barrels of oil a day. Projects on that scale account for about 80 percent of the world's oil supplies.

The report found that just three such projects are expected to come on stream in 2007 and three more in 2008. No new projects could be identified for start-up in subsequent years.

"Ever-growing demand for oil means there is a ready market for additional supplies so substantial new discoveries tend to go into development in a very limited time," Mr Skrebowski noted. "But between a quarter and a third of the world's oil production is already in decline and it appears that giant new discoveries to replace lost capacity are becoming very scarce."

The rate of major new oil field discoveries has fallen dramatically in recent years. There were 13 discoveries of over 500 million barrels in 2000, six in 2001 and just two in 2002, according to the industry analysts IHS Energy. For 2003, not a single new discovery over 500 million barrels has so far been reported. [The falling discovery trend is confirmed by another recent report by energy consultant Wood Mackenzie, according to a January 23, 2004 article in The Wall Street Journal.]

The report says 18 large projects are scheduled to come online in 2005, 11 in 2006, only 3 in 2007, 3 in 2008, and after that: zero.

The bottom line:

From 2007, the volumes of new production will likely fall short of the combined need to replace lost capacity from depleting older fields and satisfy continued growth in world demand. [My emphasis]

In other words, barring a miracle, 2007 is the year world oil production peaks. After that, it's all downhill.

No one in our political leadership says a word about any of this. They rush us to war to grab control of the world's oil regions, but never tell us why. That's not how a democracy is supposed to work.