Blogger Conference Call with Robert Ryan, VP of Global Exploration, Chevron

This post is a summary of a conference call for bloggers hosted by the American Petroleum Institute (API) on Friday, May 15th, 2009, from 12 to 1 pm. The conference call was set up as a Q & A session where questions from numerous bloggers were fielded by Robert Ryan, the Vice President of Global Exploration at Chevron. Other participants that fielded some questions were Justin Higgs, News Media Advisor (Chevron), Mark Kibbe, Federal Relations Director (API), and John Felmy, Chief Economist (API). The following is an abridged version of the transcript, focusing on some of the more interesting questions and answers. A complete transcript of the conference call and recording of the call can be found here.

Bloggers who participated in the conference call are as follows: Alan Stewart Carl, Donklephant; Bob McCarty, Bob McCarty Writes; Brian Westenhaus, New Energy and Fuel; Bruce McQuain, The QandO Blog; Buster Cagney, The Oil Drum; Chris Nelder, GetRealList; David Murphy, The Oil Drum; Devil’s Advocate, Right Wing News; Geoff Styles, Energy Outlook; Jim Hoft, Gateway Pundit; Joy McCann, Little Miss Attila; Krystle, Bearing Drift and Crystal Clear Conservative; Tony Eriksen, The Oil Drum; Tim Hurst, Green Options; Stephen Rhodes, The Republican Temple

I have organized this summary by subject matter, which included the issues of: peak oil, oil prices, exploration costs, new leases for off-shore exploration, climate change policy, and Chevron's new(er) projects. The first section, however, begins with excerpts from Mr. Ryan's opening statements.

(note: all block quotes are responses from Mr. Ryan, unless otherwise noted)

We [Chevron] explore, we produce, we refine, we market. And that’s kind of the basic picture. Some companies do all, some do just pieces of it. My piece of that value chain is way up front. And it’s the exploration component. And it’s probably one of the least understood pieces of that. The public doesn’t usually see it; it’s not the corner service station. They don’t drive by a refinery; they don’t see a field, necessarily, producing off in the distance…

When it comes to the exploration world, people focus on first discovery to first production. And that’s typically a lot of industry benchmarks, measures, the stock market looks at us and how quick we are, et cetera. But I go back way before that. And to give you an example in Tahiti, we first started looking at the Tahiti play and transit around 1994.

In ’96, they had improved the concepts enough where we started to bid and we started to bid aggressively. And by 2002, had a discovery and of course, first production a week ago. So you might say my measure – my teammates’ measures – it’s not first discovery – or say discovery to first oil. It’s first hunch to first oil. When is that geologic concept first being developed?

When I was first working in the Gulf of Mexico out of our New Orleans office, deep water was 600 feet. We now have – Chevron has a well we drilled a few years ago in just over 10,000 feet of water – unheard of. Early in my career, when we hit salt, we stopped drilling; we were done. That’s all Mother Nature provided in the sense of rocks to look for. Now, we drill through 10- to 15,000 feet of salt just to get to the prospect, which is an example, for instance, at Tahiti.

So things have changed fundamentally. Does it make a difference? You bet it does.


The Devil’s Advocate: “I was wondering if you could comment or respond to any of the people that claim that we are eventually going to reach peak oil.”

Well, sometimes I view that as an academic exercise, it’s difficult to get your arms around it, and let me give you an example. Years ago I did a Google search in the Gulf of Mexico, and you type in Dead Sea and you type in Gulf of Mexico and you’d find all kinds of stories about the Gulf of Mexico had reached its peak and it’s over. And, lo and behold, we got new geologic concepts; we’ve got the capability to drill deeper, we’ve got 3-D seismic, we’ve got the ability to look below salt, et cetera, et cetera, et cetera.

And the point is we’ve got plays there that we never dreamed of, for instance, the Wilcox – which, by the way, Chevron’s one of the top leaseholders there in that play. No one would have ever dreamed of an oil province like that in that water depth in the Gulf of Mexico. If you can apply some of that same thinking to some of the other hydrocarbon basins around the world – what have we not found yet? Where does it end?

To quote my colleague Paul Siegle we might start talking about peak oil when we’ve addressed peak technology or peak geologic concepts. It is a non-renewable resource? You bet. Is there a peak one day? You bet. But, at the moment, things just keep moving forward, and I don’t think we’ve tested everything we know.

Emailed question: “despite technological improvements, global oil discoveries have been declining. What do you make of that?”

Yeah, that’s a fair statement. I looked at – I plotted the discoveries for about the past decade from Wood Mackenzie, just to give you my source. And we looked at it, and you could – if your eyeball just went across the bar graph, you could see, well, the number of discoveries was – (audio break) – the size of discoveries – the number of discoveries greater than 500 million barrels, if I recall – I don’t have the chart in front of me – was dipping. You could say, well, is that a trend, that the big ones are getting fewer, or not? And yes, I mean, you do see that trend.

Now, in the case of Chevron, to just get kind of on a micro scale, we’ve averaged an add of over a billion (barrels) a year since we put in a new exploration strategy back in 2002 with the Chevron and Texaco merger. That’s more than we expected to find. It’s now over eight-and-a- half billion. We continue to have a very strong queue of exploration opportunities for what we called impact wells – we define that as greater than 100 million barrels, the prospect size. We continue to have a strong queue. Every time we think it’s going to dip and say okay, the queue is running out, we’re running fewer impact wells, impact prospects, it seems to continue to hold up.

And so that’s just a small, micro view in the sense of Chevron, we’re just one piece of this giant puzzle. I can’t speak for my colleagues but, you know, so far, so good. But I’d be naïve to not say that, over time, yes, I mean, things would probably get smaller. And you could look at different data sets and say some of them are getting smaller.


Mr. Nelder: "Given the incredibly high expense of doing these deep-water projects, I wonder what Chevron’s current target is for the price of oil for the next five years or so in making it’s business decisions to proceed."

Well, I wouldn’t be able to share with you what our forecast of oil and gas prices would be, but I can tell you that we look at a myriad of price ranges and we also test all of our projects at a low end as well as a high end to look at their economic viability.

From an exploration sense, certainly I’d be naïve to say price isn’t important. So that’s kind of the wrong way to say it. But our piece is so long term that we try to just make sure that the projects are viable from both a technical and risk point of view as well as an economic test.

And we keep moving forward. For instance, when we bid on the Tahiti play in general in 1996 who would have ever dreamed of the prices we’ve seen on and off just even in the past year. So any assumptions we made on price would have been incorrect. But the project was viable at the price we tested it at then and we were willing to take that risk to drill the first well.

Emailed question: “the Chevron share price tracked crude oil prices pretty closely from 2002 through January of 2007. As the oil prices moved above the $100 per barrel range, Chevron’s share price stalled. Other major oil companies saw a similar situation. Do you think that the market was saying that Chevron would either be nationalized or suffer major windfall taxes if oil prices rallied above $100 a barrel on a sustained basis?”

Answered by Mr. Felmy: Remember, these companies are not just upstream producers. They also have refining operations. And for a substantial component of last year, when you saw these ramped-up prices of crude, refined products did not follow. And so that is – any kind of analyst will look at the combination of the operations in assessing what’s going on. So it’s probably more likely, just fundamentals.


Mr. Murphy: “I was wondering if you could give me a sense of how the expenditures in the exploration and development and production have changed through the lifespan of these projects in the last 30 years. For instance, has the amount of expenditures for exploration increased while production has remained relatively flat, or whatever the case may be?”

Yeah, we definitely – of course costs have gone up. And some of that is a fundamental of just cost increases as the economy heated up over the past few years. But on the other side of the coin, you look at it if we were drilling in the wells in the past in 100, 200, 300 feet of water, now we are drilling in the six- , seven-, 8,000 feet of water. You, of course, you can understand just fundamentally it’s going to be more costly because of the capabilities of the rig, et cetera.

Within the past, say, eight years that I’ve been involved with Chevron’s exploration from a senior leadership role, both in my international position prior to this one and the global one, we’ve gone from about a billion dollars a year to approximately 2 billion (dollars) a year. So you could say we doubled it.

Now, did we double the number of wells, exploratory wells, we drilled in that? No. The good news is a lot of that funding increase was due to appraisal wells. We have had a lot of success, the success in wildcats, triggers, appraisal well -- appraisal wells typically don’t add new resources but what they are doing is reducing the uncertainty with the discoveries. But that comes out of an exploration budget. And it’s good news.

Pre-development costs, where you start to get your ideas and concepts around what the field could be, that’s in an exploration budget. So with our success, those went up. So you might say a good piece of that increase is due to success. Another piece of that increase was of course due to costs going up for both wells and both seismic.

Our exploration budget this year in ’09 is about flat with ’08. And we’ve been hovering at say, just under 2 billion (dollars) for a couple of years now.


A good portion of the conversation was on the topic of new leases for offshore drilling and Mr. Ryan had some very insightful points on the subject. Here are some excerpts.

Will there be exploration allowed in the east Gulf of Mexico, the East Coast of the U.S. and the West Coast? That’s difficult to predict. But it would have potential, just like these other unexplored areas would.

And you’ve probably all about the MMS Outer Continental Shelf assessments of the potential there. Right now, those are just numbers done by studies with very old data. And until we get a better sense with more modern seismic we’ll never know, and in fact, until one day we ever put a well there, we’ll never know.

Mr Westenhaus: “There’s a lot of Gulf of Mexico besides just the western shore of the Gulf that’s explored now. I’m curious as to how much more the major independent oil companies are going to get access to. Things are changing in Mexico so I’m curious as to what your feel is as what might become an opportunity there.”

Well, I’d hate to speculate on the plans of the Mexican government and Mexican people. As you know, there’s no access to that for international companies as we speak. Do geologic trends stop at international boundaries? No, they don’t. And so when you look down at some of our discoveries and prospects down in the southernmost Gulf of Mexico – southern meaning closest to the U.S.-Mexican border – some of those trends do continue across. It’s a setting that, as you can imagine, it takes a significant technical capability to be able to drill in those water depths. And you might say that drilling is the easy part. If you make a discovery, you then have the challenge of developing it. And that’s a huge challenge, as evidenced by just you seeing our projects now: Tahiti and Blind Faith and others while the water gets even deeper as you head there.

Ms. McCann: “Just wondering what would be required to get modern, state-of- the-art seismics for some of the areas, particularly off of the U.S. coast? What would it take? And some of these other more promising arenas around the world, what would it take to do that?”

Well, we shoot seismic, of course, all over the world every day. And we don’t do it ourselves; we hire seismic vendors, different companies that actually do the work. But we typically would design the survey if it was one shot for us and work with that vendor to get it done.

If you were to go onto the East Coast, you’d have to get a permit to get this done, and the seismic companies would pursue that. And of course, the struggle would be, if you never had any chance at all of exploring, why would they go shoot it, and why would we buy it, or why would we work with them to acquire it?

Follow-up by Ms. McCann: “Does this imply a level of catch-22? I mean, if you can’t really get terrifically accurate surveys of what’s out there, then how do you convince people that it’s worth consenting to have this done?”

You’re right, it is sort of a catch-22 because people can – they see the big numbers, but you remember, those are big numbers from basically old data sets.

So I think a phased approach, where the country would really get to understand its resource base – and that’s what this all boils down to, you know, if you make the claim that it’s better for the economy, which I believe it is, and the experts, I believe, agree. If you believe it’s better for national security, then we should have a better handle on our resources. It’s an inventory; it’s no different than going back to understanding the inventory in a warehouse, and what you have, and what’s back there supporting your business.

This is the same thing; supporting your economy, supporting your national security, supporting jobs. Hey, let’s get an understanding of those numbers; let’s get an understanding of what the country’s resource base is. First step: Shoot the seismic, understand if the numbers are holding up. And then if they are move forward, and if they aren’t, we have an answer and we move on to the next thing.

Follow-up question by Mr. Styles: “I’ve heard people articulate the view that major oil companies would actually prefer to go into this totally blind and be able to capture the entire upside from resolving precisely those uncertainties, as opposed to having a national inventory done to actually assess what might be there so that by the time you bid, there’s a lot less uncertainty and presumably, the price is a lot higher. Could you comment on that?”

Well, yes, I think my words might have come across like I was looking for a national inventory, but when you think about it, it’s not. Back to the Gulf – seismic shot by – speculative seismic is shot by seismic companies all the time. And let’s go back 15 and 20 years ago, or even longer, when deep water was 1000 feet and things like that. Well, companies were shooting seismic in the deep water, then – 2-, 3-, 4000 feet. You might say they were taking an inventory. You might say they were going to understand what is there before we even want to bid.

Is that a national inventory? Well, you might say it is, because those are federal leases and the government does get the seismic. So in a sense, it is. But at the same time, it’s just a data set to allow companies to make good business decisions. And so maybe there are some companies that would just like to bid, you know, on a big swath of acreage without knowing anything about it, but prudent business decisions, we usually would prefer to know what we’re bidding on.


Mr. Hoft: “Congress next week is likely to vote on the cap-and-trade plan in the committee and Henry Waxman had announced that this week. I’m wondering if Chevron has any idea how this will affect their exploration or their industry as a whole?

Answered by Mr. Kibbe: Primarily what is being looked at in the Waxman-Markey climate bill are provisions that primarily will affect the downstream, the refining sector of the industry.

The two main issues are, what they’re looking at, the allocations: basically the allowances or permission to release greenhouse gases going forward and how those are allocated among industries. And our message has, again, just been, look, we’re going to rely on all of these energy resources going into the future so let’s treat everybody on an equitable basis.

Some of our concerns there is the Waxman-Markey bill starts with a 2005 baseline. And, as we look into the future, more and more of the fuel that refineries are going to have to use will come from heavier crudes, Canadian oil sands, for instance, and things along those lines, which will be more difficult to refine and could very well have a larger carbon content.

So if you’re starting from the 2005 baseline and go down from there, it’s going to be very difficult to satisfy energy needs with respect to transportation and still meet your carbon- reduction commitments.


Mr. Eriksen: “Could you please just give a bit of background of how the feed process in Jack and St. Malo was going and so if any more appraisal wells are going to be drilled on those structures?”

I mean, we’re in that feed phase as we move it into the first quarter of ’09. It’s looking like it’s something we could work to produce both fields or both discoveries together through one common facility.

We’re excited about it. I mentioned the Wilcox earlier. If you don’t mind, I’ll just touch on that. I mean, it’s a 300-mile-long play, plus. It’s got, you know, you’ve seen ranges of, say, three- to 15 billion barrels of potential and, of course, when you see a wide range like that, that tells you that it’s early in its exploratory phase as an industry, not just Chevron’s.

So far the industry and Chevron have had good success rates. They are quite good success rates. The oil that’s been – we found a good bit of oil so far and numerous discoveries both Chevron and our competitors. The key is, you know, getting that oil out of the ground. In fact, you may recall that press release we had a few years ago on the flow tech with Jack. That was very, very good news because, at those depths, with those reservoir conditions, to get that flow rate we did, I think some 6,000 barrels a day, we were quite excited about that.

Mr. McQuain: “Speaking of all those capital projects, how many does Chevron have ongoing right now, or under development right now around the world?”

Yeah, that’s something, as a shareholder, I’m quite proud of, to tell you the truth. We’ve got forty, plus or minus, over a billion dollars our share. So that’s quite a queue, and I guess what puts a smile on my face is the fact that those things come from – well, not all of them, of course, from recent exploration – but in general, where does a new field come from? It comes from exploration. So it’s really nice to look at that list and check off how many have come from success that we’ve had in exploration in the past eight years, since we revamped our approach to exploration. And so that forty is – keeps us busy.

Thanks, Dave, for putting this together.

I notice that Chevron says that their exploration budget for 2009 is about flat with that for 2008, at a bit under $2 billion dollars. With some of the costs down, it is even possible that budget will go a bit farther than in 2008.

Chevron is a huge, very diverse company. They can afford to do this. A lot of smaller companies were so hurt by the financial crisis and lower oil and gas prices that all they could do was cut back on exploration and development budgets.

Well, I wouldn’t be able to share with you what our forecast of oil and gas prices would be,

Does this statement not speak volumes or am I missing something?

Well yeah, I think you're missing some things:

1) Price premise is a component of estimated value of assets, so most companies keep this information confidential so as not to tip their hand in negotiations for M&A/divestment.

2) All premises are wrong most of the time, it's embarrassing to be wrong, so don't announce publicly.

3) Like Ryan said, they have multiple scenarios, including a low price premise for screening investments.

Exxon was the exception to the rule during last year's big run up, forecasting (generally) a return to lower prices.

I'm still confused. Why not have some transparency to help alleviate/justify fears from consumers and not just CYA for shareholders?

At the risk of repeating myself:

The IOC's don't know the future and they use multiple scenarios for planning. Announcing those scenarios with hard numbers puts a company at a disadvantage in negotiations for acquisitions, divestments, farm-ins, and farm-outs. Why announce a prediction (really a range of scenarios) when you know that you'll be criticized for getting it wrong? I don't think there's any motivation to "hide" peak oil concerns to the external world, but it's likely true that they don't want to do anything to panic consumers or shareholders.

I don't think there's any motivation to "hide" peak oil concerns to the external world, but it's likely true that they don't want to do anything to panic consumers or shareholders.

Thanks, I think that your statement is probably accurate though contradictory. It is high time for oil companies to show some social responsibility. Your prediction may be a wide range of scenarios but I would guess that Chevron has a much tighter range and I'm also guessing that range is not $50-$60.

I actually know one company's numbers - you might be surprised at the range of scenarios. I'm not sure that the IOC's really have any more insight or unanimity into the medium-term future oil price than any other knowledgeable source, and they prefer to stay out of the public forecasting game for the above reasons.

In the long run, I think everyone knows we'll be producing less oil, but price depends on what else happens to the planet''s ecology (including the human part).


Lonnie, Just re-read your post. I guess I agree on the "contradictory" part in the sense that they are just delaying the panic that we are likely to face. I don't think any company wants to be the first to wholly endorse the need for drastic action, but certainly Total and Chevron are basically saying this, albeit in understated terms. Even Shell vaguely endorsed this view in recent comments by Van der Veer (you kinda have to read between the lines though).

Thanks for the insight. Have a good day.

LONNIE -- I'm not sure what more transparency or info you're looking for. Chevron, like all other public oil companies, has their reserves audited by third parties and that info is published as per SEC rules. As far as what price is used to establish future value the assumptions used are dictated by SEC rules also. Chevron can use their own internal guess for future pricing. They might not choose to disclose that number but then again I don't think there 's much to be gained from such knowledge myself.

I'm not sure what socially responsible action you're looking for from Chevron. To offer their internal prediction of future oil supplies or prices? What would you do with that number? Do you think all the companies are using the same magic crystal ball and they aren't telling anyone? How about pricing? Do you think anyone at Chevron predicted $147/bbl a few years before it happened? Do you think anyone at Chevron predicted $38/bbl oil last summer when it hit $147/bbl?

But there is critical information out at there that is intentionally being withheld from the public: the reserve studies of the IOC's. Saudi in particular. Much time is spent at TOD speculating on the future of Ghawar et al. The KSA has a pretty good handle on that subject. But they won't tell.

I'm don't mean to sound like I'm fussing with you. Perhaps I'm wrong but I get the impression you think the US oil patch has very accurate ideas about future reserves/prices. We might be better at guessing then many folks but they are still guesses. The reserves numbers are all on public record. And they are accurate to a degree. Daily production numbers are very accurate. We've all known about PO for decades. Estimates vary widely of course. But when you're involved in the daily hunt for new reserves it's easy to see the situation clearly. But it's not the job of an officer of a public company to make statements detrimental to the value of the company's stock. In fact that's strict prohibited by SEC law. IOW, that would be very irresponsible. The folks who are primarily responsible for laying out the cold hard facts to the public are our political leaders. and so far they all have done a lousy job IMO.

Years ago I did a Google search in the Gulf of Mexico, and you type in Dead Sea and you type in Gulf of Mexico and you’d find all kinds of stories about the Gulf of Mexico had reached its peak and it’s over.

The connection being...?

Robin Mills opens up a chapter in his book the Myth of the Oil Crisis with that quote from Golda Meier about that ingrate Moses leading her people to the one part of the Middle East that doesn't have any oil. Mills winds up the chapter by relating how a small field has been found near the Dead Sea.

Nothing to do with the ME. Back in the late 80's, the joke in industry was that the Gulf of Mexico was "the Dead Sea" because it appeared to be at the tail end of the exploration creaming curve. Since then, several new deep-water plays have resuscitated the patient.

Actually just came across that explanation in Mills's book. Huh. So what are the hurricanes in this analogy? Nurse accidentally kicking the drip IV out?

Yeah, I guess, but they put the IV back in pretty quickly.

I know of at least one example where after restart the field production rates were surprisingly robust.

I think the hurricane factor in the GOM is a bit over hyped by some on TOD.

Some smaller, older shelf fields with heavily damaged infrastructure were abandoned because the remaining potential didn't justify the costs of rebuilding. I think most, if not all, of the deep water fields were brought back online. Even the unfortunately named and rather small "Typhoon" field, which had it's spar totaled by Rita, is being redeveloped by a smaller company.

The most significant effects of the hurricane threat to the offshore GOM is higher costs associated with new engineering and operational requirements by the MMS (undoubtedly a good idea), the costs of evacuations and pause of operations every season, and the losses associated with temporary shut-in and repair costs.

I'm thinking about trying to compile a list of fields and how far they made it before peaking; nothing more scientific that "trendology," which was wildcatters drawing lines between fields and drilling in the spaces between. These fields can't produce forever, no field can; all this talk of EOR and URR and P90 is just so much noise! In fact in all likelihood this has been covered statistically in some manner, but I want to just run some simple numbers for laughs. Kind of an actuarial approach, come to think of it. What is the premium for insuring Ghawar will maintain flat production for another decade?

Unsurprisingly self- serving collection of remarks. It's probably true enough there is and will be some oil into the undeterminate future. How much?

Uh - mmm, I ... well, I'm not ... Hnmm, uh, okay! What was that question again?

So I think a phased approach, where the country would really get to understand its resource base – and that’s what this all boils down to, you know, if you make the claim that it’s better for the economy, which I believe it is, and the experts, I believe, agree. If you believe it’s better for national security, then we should have a better handle on our resources. It’s an inventory; it’s no different than going back to understanding the inventory in a warehouse, and what you have, and what’s back there supporting your business.


Ryan is just another case of someone gathering anecdotal evidence for a few new discoveries occurring here and there and then concluding that we are in good shape for the near future. I would really like to see how he dismisses a real statistical approach such as dispersive discovery. He is the authority on exploratory work at Chevron and if he doesn't understand something that basic, he is deluding himself. All this other double-speak is simply evasive maneuvering to delude others.

It seems that nothing really changes. This is M. K. Hubbert himself after making his 'Peak Oil' presentation in 1956:

Hubbert also plotted oil on a scale of 10,000 years – 5,000 years ago to 5,000 years in the future – showing how mankind’s use of petroleum is “a unique event in human history, a unique event in biological history. It is non-repetitive, a blip in the span of time.” He then posited nuclear power as a possible substitute.

Hubbert’s forecast caused shock, consternation and denial in various parts of the petroleum industry. He would later say “That caused a jolt… The first reaction was honest incredulity. Then the industry split. One side refused to accept the situation and started changing the figures. The other side, people like Shell, found they could not change the figures.

“Well, after about a week, when the responsible people did begin to come back, I think there were some pretty red faces in the New York office and maybe even in Houston. For one thing, they had a chance to look at their data and they found they couldn’t disprove anything I’d said. So the whole thing had been a tempest in a teapot by people who didn’t know what the hell they were talking about.”

You will never see a statistical approach from these guys. It's also counterproductive and the obviousness of this is so self- evident I feel I have to beat my head against the wall repeatedly.

I guess we are at 'Peak Lies'.

BTW ... this is just a wild guess, but Chevron probably makes as much money on speculative trading in commodities/spt/deliveries markets as they do in producing and delivering product. I didn't see a question about how much tankerage Chevron has leased ... of course this wouldn't be germaine to a Q & A about discoveries.

Chevron is actually the one who ran the series of advertisements a couple of years in the "willyoujoinus" series, that talked about how little oil had been discovered in the last 20 years, and other peak oil related topics. Their investments are skewed toward things that will likely do better, with declining production (heavy oil, pipelines, some electricity, deep water oil). So they certainly are peak oil aware.

Unless he is interpreting things by a different metric: "Can Chevron continue to grow profits into the future, by finding and developing new fields?". The answer to that question could be yes -even if global production has peaked i.e. if the price rises faster then production declines, then he is in a sense correct. And if the audience is potential investors in the company, that is a perfectly valid way of looking at things. From the standpoint of national planning, of course the larger question of future production rates, and the like trajectory of price is paramount.

Right on.self serving indeed.And I don't believe,given thier choice of words, that a street smart 12 year old would buy a watch from these guys.

In 2008 Chevron added 1.34 Gb in to its reserve while pumping 2.53 mbpd or .923 Gb out. It used to have about 12 Gb of reserves in 2003. How much was/is Venezuelan or oil sands?

They had 2.2 mbpd of refining capacity in 2003. Are they producing just for themselves--not a real exploration company?

There are lots of news releases that they just started pumping .4Gb sized Tahiti of GOM this month. Jack of GOM hasn't happened yet.

Chevron is the third richest US corporation.

Looks like PR show, IMO.

It was very kind of Mr. Ryan to take these questions. Reading between the lines, he is saying the same thing most peak oilers are saying. I am amending his comments with my own interpretation.

1. Discoveries peaked and are in long term decline. Since you can't pump what you don't find, this means production will peak.

2. The fields remaining are trending smaller. Euan has often posted a graph of the North Sea showing how the small fields could not make up for the declines in the larger fields. And Robelius Phd thesis saying the same for the world.

3. Costs of exploration are going up. And we can estimate that EROI is falling. Jump back to Nate's EROI post and look at his modified Hubbert curve with net energy removed, and the picture is pretty scary.

4. The future of oil is in junk like tar sands. If there was lots of light sweet oil to be found, Chevron would care a lot less about climate change emissions. The oil industry can see the end of the road if climate legislation passes.


It was great to hear Mr. Ryan talk about the business of exploration, but as you inferred from the comments, it almost sounded like he wanted to say that "yeah, of course we hit peak oil" and "yeah, of course everything is much harder to find and develop". Alas, he did (could) not.

My question was about costs:

I was wondering if you could give me a sense of how the expenditures in the exploration and development and production have changed through the lifespan of these projects in the last 30 years. For instance, has the amount of expenditures for exploration increased while production has remained relatively flat, or whatever the case may be?

He responded by telling me that "costs have gone up" which I, and everyone on earth, already knew. What I am interested in knowing, and I guess I should have framed by question better, is how the cost structure of finding, developing and producing a field has changed over time, i.e. what % of the total budget was allocated to exploration 20 years ago and is that the same today?

Costs of exploration are going up.

Inflation will do that. But the squeeze is not the cost its in the 'so we found 10 barrels worth here, 20 there - meanwhile the other guys have 50 over there and it costs about the same to get the 10 the 20 or the 50'.

The future of oil is in junk like tar sands.

The future of oil "we" just burn for transport or happy meal toys - yea. The long term future is plant oils and re-formulation of them into lube and other forms.

Has any oil company admitted the hard truth that DEMAND for oil in the OECD nations has almost certainly peaked? This has huge implications for their industry and financial projections.

The pressure on carbon release issues is growing daily and logistical and technology improvements in industry combined with lifestyle changes by the consuming public mean that oil will almost certainly never grow in year on year consumption back to it's old highs.

Peak oil is indeed here in the fully developed world. This should call for rejoicing, not fear, unless your in the business of producing oil. All growth now will come from the developing world.


So Chevron is still finding a billion barrels per year while we are burning over 30 billion barrels per year. Why are we supposed to find that comforting - unless of course we own Chevron stock.

What I'd like to see: a table of discovery rates for the top 5 oil companies. Is ExxonMobil finding oil faster than Chevron? How about COP? BP? Royal Dutch Shell? Total? Anyone have a good sense of this?

[W]e might start talking about peak oil when we’ve addressed peak technology or peak geologic concepts.

This got me to wondering if there aren't two entirely different PO concepts: (1) PO de facto as a technical, geologic concept, which may be affected by the geologic concept or technology, and (2) PO de jure for where PO should come if we add CC as an additional limit or environment within which CO2 emissions occur. It seems to me that TOD and others go easily back and forth between these two: between what is the case concerning oil access and what should be the case given the perils of climate change.

Thank you, Mr. Styles for question:

"Follow-up question by Mr. Styles: “I’ve heard people articulate the view that major oil companies would actually prefer to go into this totally blind and be able to capture the entire upside from resolving precisely those uncertainties, as opposed to having a national inventory done to actually assess what might be there so that by the time you bid, there’s a lot less uncertainty and presumably, the price is a lot higher. Could you comment on that?”

The view is absolutely right. If oil industry is "giant puzzle" the players (major company) use poker methods, especially bluff. They ignore new exploration technologies (for example,BSE ) to get real national inventory. They do not need it, becouse for majors it is better a doubling oil price than doubling production.
As a result, modern civilization is hostage of oil industry which tasted $147/bbl and wants nothing more. Therefore we will have resource shortage anyway. Peak Oil can be mitigated with BSE technology which provides a threefold increase in oil field discoveries.

A. Berg, Ph.D
San Jacinto, California

You might be right about the oil companies intent, but I want to comment about another assertion you make.

You cannot guarantee a 3-fold increase in oil field discoveries. To be accurate, I bet you would amend that to say that your search efficiency is 3 times as fast as traditional methods. Because when it comes down to it, when you run out of good places to search, being 3 times as fast may yield nothing.

Peak Oil can be mitigated with BSE technology which provides a threefold increase in oil field discoveries.

Pinch me. Must be dreaming.

Name of Field
% of Total
Fields Listed
Number of
oil wells

(Production in barrels)
Daily average **
Year 2006
Total Pre-1900's 17 0.5% 870 129
Total 1900's 29 1% 466 1,083
Total 1910's 18 0.6% 617 4,343
Total 1920's 49 1% 5,810 193,063
Total 1930's 78 2% 4,025 135,267
Total 1940's 134 4% 20,042 381,963
Total 1950's 349 11% 34,715 4,129,034
Total 1960's 519 15% 56,975 6,168,579
Total 1970's 743 22% 14,410 5,898,110
Total 1980's 856 25% 17,690 2,706,643
Total 1990's 510 15% 3,581 3,488,182
Total 2000's 65 2% 240 146,911
Grand Total 3367 100% 159,441 23,253,308

Peak Oil: Is It Real? When Might It Occur? (pdf)

Actually that overall number's likely low for this decade, but nothing I've seen suggests the average production figure is off by much.

1.About a 3-fold increase in oil field discoveries.
BSE technology has been successfully tested in the Barents and Black seas, as well as in the Gulf of Mexico. It employs a new physical mechanism to initiate a response from hydrocarbon deposits directly, explained in given link. It is called Binary Seismo-Electromagnetic (BSE)technology/method. BSE technology provides registration of deposit responses from a vessel moving with the speed 1.5 – 5 knots, depending on the depth of the sea (15-6,000 ft). These responses are observed and registered in the real-time of the vessels movement. The productivity of a vessel is 20-70 miles a day. Commercial deposits of average thickness (60-150 ft) can be detected up to 18,000 ft deep. The technology has 75% discovery rate for wildcats as compared to 25% rate for industry on average.
2. Good pleces to search...
For BSE technology there is no good or bad places to search. If a region has nothing reserves you will not drill any wells.
3.About national inventory.
Conventional seismic prospects give "inventory" with about 25% success rate and less for non- anticline traps. It is bad inventory. Much better inventory can give BSE technology with 75% rate
for any traps. But majors will lose a place in "giant puzzle" and oil industry will lose a treasure hunter image.

Every time one of these API conference calls happens, I have to remark on how unbalanced the list of bloggers is with respect to a partisan political basis. I count 6 bloggers on the list who come from politically right wing blogs and 2 from moderate (read wishy-washy tilting right) political blogs. I count 0 from progressive political blogs. I don't include TOD or the energy blogs in the count as they do mainly technical and not political blogging.

The righties and moderates will likely sit on any breaking information they get. Or they will easily get duped. Clearly the API anticipate this outcome and that seems to be why they stack the invitation list. It would be so obvious to get a knowledgeable progressive blogger such as Kevin Drum or Ezra Klein to participate.

Forgive me all for not reading Mr. Ryan's entire speech. I know the company line by heart. First, though, the reports he refers to about the GOM being dead were completely correct. Those reports were discussing the GOM shelf areas and, at times, included the onshore regions. This is an undeniable fact. Yes...the Deep Water plays did add greatly. In fact, they have been THE major reserve additions in the GOM. But the shelf/onshore areas were dead and still are. I watch the daily effort to dig out the last few crumbs from these areas. But guess what? The DW GOM isn't dead yet but it's heading that way. Every play in the history of oil exploration has died (at least with respect to adding significant volumes of new oil). No exceptions. Those that aren't dead today will be in X years. There are new areas to explore. There may be significant reserves to be found yet of the west and east coasts of the US. Great new reserves in the DW Brazil. Maybe in the Arctic Basin... and maybe not. But with every new play discovered we have one less area to search for the next play. About 20 years ago no one was poking around the offshore areas of West Africa. Now it a major oil producing region. But there isn't another offshore West Africa to drill. Other offshore areas...yes. But the DW Africa and Brazil plays have been discovered. Where next? There is a finite volume of sedimentary basins on the planet. Some already heavily developed and some not. But there is a finite limit that cannot be denied.

About "But the DW Africa and Brazil plays have been discovered."
You are absolutely right: the plays have been discovered. Many plays in the world have been discovered too: the North Sea, the Gulf of Mexica, the Caspian Sea, the Barents Sea and so on. But all of the plays have been studied by seismics only. The seismic data gives a structure image only. There is no reliable data about fluid content. Therefore many pays was lost in old and new plays. It is great reserve for oil industry.

True for the most part geolog but two significant points. Seismic today actually does give can do a good job of predicting fluid content. This is especially true with NG reservoir. In certain circumstances the seismic will show a high amplitude (HCI: hydrocarbon indicator or "bright spot"). Bright spots were the source of the most successful exploration program I have ever generated...and at a time when NG was $.90 mcf. Can also ID oil reservoirs if there is enough NG dissolved in it. Doesn't work in all plays/depths. But in some plays no operator would dream of drilling if this evidence were lacking.

But the primary goal is structural mapping as you point out. And in areas which are lightly drilled it's difficult to measure the importance of the presence or lack of HCI's. The most difficult aspect in undrilled played is not structure or reservoir quality. It the hydrocarbon generation history. No way to understand this complex aspect without punching some holes. Temperature history is particularly critical. Not my expertise but I suspect this is THE critical assumption which will determine how accurate (or not) the prediction for the Aortic reserve potential.

Thank you, ROCKMAN,
1.Tell me, please, what is oil industry discovery rate for wildcats on average? and
2.If you look some seismic profile for relative complex region how many potentional traps can you detect? Sometimes up to 20, isn't it? Can we drill every potentional trap? Discovery may be in any trap from 20. I believe it is big problem. BSE technology can metigate the problem.I hope you did open my link.

geolog -- I don't keep track of such stats. The number will vary greatly between frontier areas like the Artic and mature plays like the GOM shelf. Offshore Brazil has been a big surprise. I think the first 14 wells drilled in the Santos Basin found oil (not sure if all were commercial). The geology there is actually very simple. It was the great water depth that kept it from being developed sooner. Such factors can make the stats difficult to intrepret and even more difficult to project to new areas.

I read your link. I've been exploring such "black box" tecniques for over 25 years. I've done successful pilots with electro-telluric equipment, radiometrics and a nifty little silver box called the Petrosonde. Unfortunately, with the demise of research departments by the majors decades ago the inudstry doesn't pay much attention. Even with my limited sucesses it's difficult to get the attention of most folks. I gather you've run into similar problems.

Thank you, ROCKMAN for answer and as well as for attention to my web.
Oil industry prefer to be "treasure hunter" with low discovery success rate than ordinary manufacturing with high rate. High rate allows to get good field inventory. Then good buy exploration romantic and connected bluff with it including prices manipulation. Modern civilization is hostage of oil industry.
It is not my problem only, it is problem of everybody. It is very shame.
Albert Einstein was right: "Two things are infinite the universe and human stupidity; and I'm not sure about the former"

If there is so much oil that hasn't been discovered, why did Texaco and Chevron merge in the first place? Texaco was out of reserves when they wrenched Getty from Pennzoil. Pennzoil is no longer in business because they lost of Getty. It's all about reserves and all of the majors are short.

idont -- Very true. As I've pointed out many times here PO was recognized at least 20+ years ago by the majority of the industry. We always called it the reserve addition problem. This is especially true for public companies. It doesn't matter how these companies expand their reserve base. Wall Street demands that they do so or they will punish the stock price. I've seen the Street reward companies who make big acquisition even when that buy was going to hurt long term profits. Company X bought Y who bought Z for the same reason: add to the reserve base because they were able to do so with the drill bit. A bbl of oil bought is almost always more expensive then one found by drilling. Even when it's a pure stack trade and no cash changes hands it usually leads to a big dilution of value.

I'm watching now to see if there is a shift underway with the pubic companies. Cash flow/profit is the major key today...not reserve increases. We'll just have to wait to see if this holds when the next up cycle begins in a couple of years or so. I doubt it though. As the public becomes more aware of PO they'll bid an even higher premium for companies that appear to be adding reserve base regardless of how they do it and at what price.