Petrobras Shares Some Considerations in a Response

Lucio Pimentel of Petrobras sent The Oil Drum a response to Tony Eriksen's post World Oil Capacity to Peak in 2010 Says Petrobras CEO that TOD published last week. In the spirit of courtesy and the exchange of ideas, it is posted below the fold in its entirety with the permission of Mr. Pimentel.

Petrobras would like to share some considerations regarding the "World Oil Capacity to Peak in 2010 Says Petrobras CEO" post, published on February 4:

The post written by Anthony Eriksen (ace) right in its title makes an erroneous interpretation of the graph presented by Petrobras in December 2009. In no moment was the graph intended to provide an estimate of peak oil date. The mentioned slide was put together intending to show a reasonable estimate of the “challenges” that oil supply will face in the long term. In order to provide a better view of such supply “challenge,” we used an oil supply project database that separates future projects based on their likelihood of coming on stream. We believe this approach introduces valuable information about projects that have already been sanctioned and fields that are ramping up production into the analysis. This information provides a view on short-term production growth and allows us to evaluate its impact on long-term oil production capacity, affording us a better view on the Oil Supply “challenge.” In our graph, we used the “on stream” and “under development” categories because they contain the projects that are very likely (almost certain) to add production growth in near future. In our view, the mentioned categories reflect a conservative view of future supply and provide adequate figures to express our intent. Although unsanctioned projects and oil yet to be discovered are not represented in the graph, this fact does not mean that we do not believe that these projects will add production capacity in the long run. Once again, we do not believe it is possible to predict a peak oil date. In particular, we do not believe it will happen in 2010.

Insofar as the decline rates are concerned, they were applied only to on stream production that was already declining according. The on stream capacity that was still ramping up was labeled under the “expansion projects” category. If you look at the graph carefully, you will see that these “expansion projects” provide the bulk of production growth in the early years.” Your estimate of 5% in the decline rate applied to declining production was almost right. The exact number is 5.1%. This estimate was the result of a study carried out by the International Energy Agency, comprising 580 fields and using data from IHS, Deloitte & Touche Petroleum Services, the USGS, the DOE, and a number of data obtained from official statistics published by governments, companies and consulting services. More information is available in the 2008 World Energy Outlook, more precisely in chapter 10. A caveat to this analysis is the fact that the decline rates can change over time on account of a variety of factors such as technology, investments, and even politics. Provided the high degree of uncertainty and the unknown quantitative influence of those variables over decline rates, we found it reasonable to apply the 5.1% to the entire horizon.

Regarding our demand scenarios, they are the result of a broad set of political, technological, economical, and social assumptions. Precisely about the Sustainable Development scenario, conclusions cannot be drawn from its name. In broader terms, this scenario is shaped by a combination of strong economic growth, successful policies regarding energy efficiency, and a strong presence of first- and second-generation biofuels in the energy matrix. In essence, it has assumptions that render it fairly similar to the 450-ppm scenario issued by the IEA in the last World Energy Outlook, in 2009.

Lucio Pimentel
Petrobras Press Management/Institutional Communications


Thank you for your response that clarifies the material presented by Mr. Gabrielli. The challenges presented still illustrate the difficulties of producing enough oil to meet the current and predicted demand, even as larger, mature oil fields exhibit steep declines. We can appreciate that an oil company might not want to be seen describing an alarming oil supply situation, so your clarifications can and are being interpreted through the lens of polite rhetoric.


Like many an oil company, I have a business plan also.
My business plan is to live forever.

I have prepared some charts that outline the development of the enterprise over time.
The charts note some "challenges" at the 70, 80 and 150 year marks.
None of these are hard core limitations mind you. They are merely "challenges".

Yes, my business people have noted some "declines" and "depletions" after the 20 year mark and the 40 year mark. However we believe that market forces and technological innovations will easily overcome these minor setbacks. No one should be misinterpreting my charts as an admission that my mission statement might be at risk for collapse. The future is merely a welcomed set of "challenges". Yes. That's it. Challenges.

I'd like to join you, Will, in thanking Petrobras for clarifying their position. I'd also like to add that this is a bit of a breakthrough for TOD to have been directly addressed by an oil major. It shows that somebody is listening :)

Petrobras's own oil production of 1.97 mbpd for 2009 is up 6.9% over 2008 and their plan is to be at 2.37 mbpd in 2010, exploration and discovery.
Heady stuff!

Frankly given the recession it seems to me rather implausible that Petrobras will reach its lofty goal.

But at least we should thank them for a press release.

even if we disregard the "peak" graph, there is the little matter of finding a saudi arabia sized field every two years to replace declining production. i would invite mr. pimental to detail where several of these sized fields might be found. i only know of three countries, the u.s., saudi itself, and russia that ever produced in excess of 10 MBD . so, where are the remaining spots, mr. pimental?

I'll admit right up front that I truly dumbfounded when it was stated that the decline rate was 5.1% and not 5.0%. I had to read it several times to make sure I read correctly. I'm sorry but I've been doing this type of analysis for 34 years and anyone that seriously makes such a statement is delusional to point of needing to be committed or is a self-known bald face liar. I don’t like to jump on folks too hard. Even I, on rare occasions, have been wrong. Difference of opinions are fine. But such an arrogant statement deserves a harsh verbal slap IMHO.

Let's see, 5% for 10 years would result in production being 60.7% of 2010 rate, while 5.1% for 10 years would be 60.0% of 2010 rate. Are you suggesting that engineers can't estimate production 10 years hence with a less than 1% margin of error?

Good point WT. Granted we reservoir geologists can't be as accurate. But wildcatters like yourself are fully capable of being accurate 100.000000000000000000000000000% of the time. I can handle naive, stupid, stubborn, etc. But such arrogance is just too hard to swallow.

Rockman, surely you meant 100.000000000000000000000000001% of the time. :-)

Seriously, I get your point, and while I myself can be rather pedantic I'd just like to ask Mr Pimentel to justify his numbers.

He did justify them in the next few sentences -- they just took the number from the EIA survey, the one that looked at figures for 580 wells. Sounds reasonable to me. He tells you where to find it in the same paragraph, too.

Let's just say that I would consider that to be a rather lousy basis for his justification, unless he can show that those numbers actually have merit. I think I'm with Rockman on this one with regards the numbers. Though I'm willing to cut Mr Pimentel some slack and consider his statement within a necessarily politically correct context. He is after all just doing his job and I will take his statements with a rather large grain of salt. I would not want to be in his shoes.

How did you get to that number? Can you explain please?
I did the calculation with 100*0.95^10 and it gives 59,8736...

Thx in advance.

I don't think that is how the oil companies are looking at it.
75 mbpd x 5% = 3.75 mbpd, which is about what Megaprojects says for the last few years.

The oil companies are saying,

New Production = Production Decline
IOW, everything is equal---NO PROBLEM

OTOH, this ignores demand growth due to population, Exportland and rising standards of living, Chindia, etc.

However, it's slightly irritating seeing people extrapolating from decline future production without any additions.

For example, a 5% decline over 50 years without additions
would only total 502 Gb of oil assuming 75 mbpd starting.

Int( exp^.05*x dx, x=0..50)

If there was a 5% decline offset with 3% additions also assuming 75 mbpd, the total would be 846 Gb per year.

Int(exp^.02*x dx, x=0..50)

If there were a 5% decline offset by a constant 2.25 mbpd addition every year then the total would be 1040 Gb between 2010 and 2060--per Excel.

There is about 1200 Gb yet to be produced per Colin Campbell last I checked.

I don't see an issue with what Mr. Pimental said regarding the 5.0% versus 5.1% decline rate. What he says is, "Your estimate of 5% in the decline rate applied to declining production was almost right. The exact number is 5.1%."

We would like to be able to start a positive dialog with companies like Petrobas, so I would prefer that we not be overly critical of the way something is stated. I think Mr. Pimental is really saying that Tony managed to figure the percentage out correctly, within a small range of error.

I get your point Gail. Without boring everyone with the details let me just say I can take the detailed production history of a single completion in one well and not justify the degree of accuracy he offers. Not even close. No one could. And I mean using every piece of detailed production history and using the most complex computer models I couldn't offer accuracy any closer then a few percent. No one could. And they are looking at general information of ten's of thousands of wells. Information that has not been analyzed for accuracy by any independent analyst.

I do appreciate the need to be diplomatic but when one party starts out from a completely indefensable position where do you go? Do you pretend to believe what can't be believed? Do you try to change the position of someone who allows no possibility of error...even the smallest? The best I can allow for this fellow that he felt obligated for political reason to make that statement. But if he feels forced to make such a statement how can one expect any meaningful conversation?

Just to lighten the tone I'll remind you of the old question: 2 + 2 = ?

Engineer: 4.0000
Reservoir geologist: something between 3 and 5
Lawyer/Gov't Spokesman: What do you want it to be?

Rockman, I think you need to look at the context of the comment.

The person who made the statement has the role of "Petrobras Press Management/Institutional Communications." A person in that role is charged with accurately portraying the company message, they are not an engineer and may or may not have significant math skills to understand that a single digit of significance is difficult enough. Two digits is non-sensical.

I also imagine that part of their job description is to be precise with numbers since, well, people jump all over mistakes such as this (as you are doing).

I greatly respect your comments here. AND I suggest that an apology to the spokesperson would go a long way. We just don't need to jump all over that sort of stuff. Mention it if you feel you must, but let's keep the conversation focused on the bigger picture and moving forward. In my view, we want people on our side, not as adversaries.

aangle -- I thought I did offer a little olive branch by acknowledging he might have offered a ridiculous proposition as a result of political pressure on him. Accurately repeating a totally indefensable proposition doesn't make the proposition any more valid. And that's exactly what I challenged. If that were acceptable then anyone on TOD can make any totally rediculous statement and rebuke any challenge by saying they were just repeating what someone else said.

But to show you how nice we Texans can be I'll make you an offer: I submit a complete and humble apology for my statement. If, of course, he ackowledges the foolishness of the statement he was required to make. And if he can't understand that it was such then I think I understand how he got the job in the first place. I deal with geologists and engineers on a regular basis. I readily challenge them when they make indefensible statements. I'm not sure why I should offer the talking head of a foreign gov't any greater leeway.

Perhaps I'm not allowing you enough leeway also. If so I'll readily apology to you. Sincerely. But as someone who understands this science as well as I do I take his statement as an extreme insult. As an example you might better appreciate: what if I told you that the global temperature increase in the year 2070 would be 6.1 degrees and that you were wrong by predicting it would be 6.0 degrees. Would you readily admit your error and acknowledge my superior abilities to yours? Me...I would tell them to kiss my butt. But then I'm just regular oil field trash.

Rockman, thanks for being open to my suggestion! You truly could have told me to jump in a lake and you didn't.

How you respond is of course completely up to you. However, you could, for instance, have a commitment to be generous in your communication with other people. Being generous means allowing for mistakes, for people not yet knowing what you know — even for people being completely misguided. But that generosity allows the conversation to continue.

In the case above you could have asked a question instead: "Are you aware that it's difficult enough to get the decline rate within a few percentage points never mind to one decimal place? You may not know that so I thought I'd mention it here for you and the other readers." You would have made your point and the relationship would have remained intact.

Being generous takes practice (I certainly never do it all the time, but it's never far from my mind) and makes for effective teamwork and relations of all sorts. The opposite, which could be called "being prickly" (there are much less generous terms), may feel good in the moment (probably a good jolt of dopamine, is my guess) but it diverts the conversation and sets people's emotions on edge. It also makes teamwork difficult if not impossible.

Couples at the beginning are often very generous with each other. Over time they allow their generosity to dissipate and that leads to all sorts of consequences, divorce included. Notice that I say "allow their generosity to dissipate." Generosity is always in our hands although in English we tend to say things like "They made me so mad!" We always have a choice in our response to how the world unfolds.

If we are going to get through these upcoming trying times, I'd like to see much more generosity than there is out there. I hope other people will take this up, starting here on TOD. I know there are people who think the exact opposite of what I am saying and think "the only way to handle this is with force!" or similar. That may be true from time to time but most times it's not — not even close.

Thank you for letting me respond.

Rockman, I'm gonna go have some ice cream in your honor (B&Js New York Super Fudge Chunk!) Want to share some? Cherry Garcia maybe?

BTW, oil peaked yesterday, at 3:02 am EST.

Hi Rockman,

the sentence we talk about says: "Your estimate of 5% in the decline rate applied to declining production was almost right. The exact number is 5.1%."

I think it should be understood "You looked at our graph and you said that we applied 5% decline rate in our model. This is almost right - we applied 5.1% there." It does not say what the decline will really be, it is just the assumption they made - and ace guessed correctly what the assumption would be.

They do not claim what the real decline would be, as you can see they are quite cautious when talking about commitment to the predictions of the given model. Nevertheless, they could have assumed 5.13259782987% as well :), which would still look like 5.0000000000% when we include the likely error marigin of say 2%. But 5.1% had the advantage that it came from IEA so they didn't have to make it up themselves. I actually see this part of the letter as showing their willingness to share the details of what they did in order to facilitate deeper discussion. This could also mean that they regard TOD as a group of people "worth talking with".

(I do not commit to the 2% and I do not claim that this number is right :)

Just to try to clarify what I think the whole point is:

It is not that he was saying that ace was wrong at 5%, and that 5.1% was correct. What was wrong is that they would take a position that 5.1% IS correct! IMO the position that needs to be taken in any discussion of PO is that "the depletion rate is somewhere between, say 5% and 7% at present." To make an assertion that it is any single figure is simply wrong, and somewhat arrogant. It detracts from flexibility in the discussion, and once accepted it places limitations on interpretation that are not justified.


I believe that Mr Pimental meant to say that the Tony did indeed come up with nearly the exact same answer as his company, working alone, without a support staff probably, and that the comment can thus be interpreted actually as recognition that Tony did a very good overall job interpreting the data..

Overall Pimental's reply seems to me to be a bit convoluted and hard to follow, which is an earmark of a person having to explain remarks made in private (or in ameeting that would not be covered in the news) coming to the attention of the public.

He should have hired Alan Greenspan.

Greenbean would have come up up with a more obtuse and spin city term than "challenges".

How about "head winds"?

Our good ship the Titanic is on course with its destination. However there may be some headwinds of the crystallographic precipitated dihydroxide kind in our path as we move forward. Classic economic models demonstrate though that these headwinds will merely be of the climatological challenging kind and they are not expected to present difficulties beyond the normal range found in nay business undertaking. In other words, and to clarify what should be abundantly evident to petrological aficionados in the diverse fields of ontological analysis, the prognosticated predictions point to a perspicacious outcome.

A complimentary statement might have been "Your figure of 5% is essentially the same as the one we use from the IEA (5.1%)." The subtext of his statement("Your estimate of 5% in the decline rate applied to declining production was almost right. The exact number is 5.1%.") is: "Tony is an amateur, and probably poor and unsuccessful. I am an executive in a suit, representing other executives in suits, and everything I say is correct. The 0.1% difference proves our numbers are different, and therefore, because we are richer, we must be right. And since he has made this 0.1% error, everything else he says is probably incorrect too. You should be pleased that I am humouring you by even replying." Mr. Pimental's response is spin, pure and simple, designed to cast doubt on Tony's work, not to profess collegiality. I agree that it would be nice to have a positive, open dialogue with the oil companies, but the legal and corporate communications departments of large corporations do not, as a general rule, make me feel all warm and fuzzy. They don't want to be my friend. They wish to make their point, not to engage in debate. They don't, as a rule, imply things in press releases that they don't intend to. Mr Pimental is a professional. If he did not mean to imply that Tony's figures were not as good as Petrobras', he wouldn't have.

I re-checked the data and found that both of you are incorrect. The true vision is 5.1000001%. So we'll need exactly 0,500256 Saudi Arabias per year.

In the interest of being thorough I should remind everyone that the 70 in the rule of 70 for estimating halving or doubling time is actually 100 * ln2, or approximately 69.314718055994530941723212145818. With this we should be able to estimate the projected declines in oil production down to the nearest picogram per femtosecond or better. I know I'll sleep easier!

On this topic, did you see this (which I re-posted) on Energy Bulletin, yesterday?

Prof Al Bartlett's exposition of exponential growth

The piece shows how Bartlett's calculations are good for small % increases but increasingly inaccurate for large numbers. Of course, it's the small numbers that matter and that's precisely Bartlett's point.

Damn Taylor Series.

Right on ROCKMAN.
The bloke is a weasel and typical of the oligarchy that gets to tell us what to think while demonstrating their lack of knowledge to do the job.
Just a mouthpiece then the bloke feeding him lines is a weasel.

That's about my take on it too. Stating flatly that he has "the exact number" (arrived at by summing the same rough estimates everyone uses) is just a boneheaded way of establishing his failed concept of a pecking order - an insider talking to outsiders. In my trade, we'd say (crudely) he just came out to wave his balls around, but failed badly at it.

Not a 'rough' trade is it ;¬)

I certainly concur with Mr. Pimentel that the peak in oil production will not occur in 2010. Nor do I believe there is any reason to believe it will occur at any time after 2010. Barring further redefinitions of what constitutes oil, the peak in oil production occurred in 2005.

Still, this fixation on the timing of the peak in oil extraction is a misleading distraction. Peak oil is multifaceted, consisting among other things of troughs in the cost of producing hydrocarbons, peaks in net energy from oil and oil available for import. And so on and on...

I have to agree. One of the reasons that I thought publishing this response was so important was simply because a) assessing the timing of the peak is riddled with mismeasurement and error over the concept of what's actually being measured (e.g., your point being that light sweet did indeed peak in '05...) and the availability of data, and b) that everyone's basically saying the same thing, it's just that there are so many different ways of saying it.

Dr. Colin Campbell's prescience in matters energetic and economic is ever more noteworthy, as is that of those on whose shoulders he stood.

Disagree - about the importance of pinning down when we have truly peaked, that is. History is riddled with bad calls on this topic. Others can focus on post hoc solutions, but my primary interest is in assessing whether we are really on the downslope, whether it is a permanent state of affairs, how steep the decline is, how society will attempt to adapt - which will involve things like CTL and CAFE first, not gardening. Many decry this but that's how modern civilization works, and this is what interests me personally. People like personal automobiles and food on the shelves - if they didn't we wouldn't be in the pickle we are now, after all.

I think we can agree that the world has been on a plateau since 2004 of aprox 73 MBD.

We are now in the seventh year of the plateau, and this has been maintained despite dramatic economic turmoil, extreme price volatility, and huge new additions to the resource base.

... so, can we keep it up?

The post written by Anthony Eriksen (ace) right in its title makes an erroneous interpretation of the graph presented by Petrobras in December 2009. In no moment was the graph intended to provide an estimate of peak oil date. The mentioned slide was put together intending to show a reasonable estimate of the “challenges” that oil supply will face in the long term . . . Once again, we do not believe it is possible to predict a peak oil date. In particular, we do not believe it will happen in 2010


If the authors would give an estimate of the error these arguments would go away. 5.0 and 5.1 may fall within the accepted error.

I think Mr. Pimentel's remarks need to be put into context.

First, his company has been handed the responsibility of propelling what is a 3d world country into the ranks of the developed nations. Oil development has only done so in a few instances; the US, Great Britain and ... UAE? Most oil producers remain 3d world countries as resource revenues are closely held by oligarchs or squandered on military adventures.

Even though Saudi Arabia has a high per- capita income, as I consider that country to be backward and uncivilized.

The current Brazilian government was not given much chance of escaping the sorts of economic problems that plagued prior Brazilian regimes. That government is placing a lot of pressure on the oil development to continue to improve standards of living for Brazilians both by providing cheap fuels and a positive trade balance. Trade balances and current account deficits have been a problem for Brazil in the past leading to money panics and inflationary episodes.

One reason for big Brazilian reserve claims is the desire for Brazil to become swing producer. This requires sufficient reserves on tap to swing the market price in dollars and keep the upper bound below the point of demand destruction. Being able to do so prevents the price mechanism from 'cycling' and hitting the painful $35 a barrel level. KSA is now the swing producer but countries like Iraq and now Brazil are jostling for position as massive USA and Eurozone consumption - with China's increasing fast - depletes Saudia's reserves to zero. Right now Iraq has the advantage as its oil fields are relatively shallow and on dry land. Brazil can become swing producer if the West ignores the strategy of conservation and burns through the remaining easy to produce oil.

Unfortunately, Mr Pimentel has bet on the wrong horse in this race; the world is taken over by cronyism and backroom deals between well- dressed criminals. One outcome of the KSA hard- dollar strategy is that the dollar cannot be 'reflated'. This is because the crony establishment in the US - and in the Eurozone and China - possess both dollars in large amounts and leverage with banking authorities. They will not allow any actions that devalue their dollar holdings. This plays into the hands of the Saudis which appreciate receiving value for their depleting oil.

The right horse would be the banking cartel which would appreciate a pat on the back from the Brazilians. People here at TOD are too honest!

Does anyone on TOD recognize that 3rd world is now a derogatory term for developing countries (or emerging economies) ? I've never heard anyone from any of these countries call themselves 3rd world. I cringe everytime I read it.

3rd world is actually a cold war era term - referring to the countries that sided neither with the 1st world (US etc), nor with the 2nd world (USSR etc). French demographer, anthropologist and historian Alfred Sauvy first used the term in 1952.

The term Third World arose during the Cold War to define countries that remained non-aligned or not moving at all with either capitalism and NATO (which along with its allies represented the First World) or communism and the Soviet Union (which along with its allies represented the Second World). This definition provided a way of broadly categorizing the nations of the Earth into three groups based on social, political, and economic divisions. Although the term continues to be used colloquially to describe the poorest countries in the world, this usage is widely disparaged since the term no longer holds any verifiable meaning after the fall of the Soviet Union deprecated the terms First World and Second World.

...while were at it, "developing countries" has been a notion going around for a long time. Has any nation ever developed since they started using the term? What does it mean to be developed - to be like the US? Is that really such a good idea at this point, or an actual goal? I don't think any nation would make it a sane goal, at least taking two big issues in mind - climate change and energy depletion. Perhaps they'd just like to become wealthy industrialists, without destroying their corner of the planet, but where has that ever worked? Needless to say, the whole "developing" thing has been a pet peeve of mine, as we in the US are likely going in the other directions, willing or not.

"Has any nation ever developed since they started using the term?"

Chile, South Corea, and Singapore, for example.

"What does it mean to be developed - to be like the US?"

As I see it used, it means to get rich, on US dollar nominated production. That may make the countries more like the US, as Chile, or keep them very different, as Singapore. Anyway, I've never seen anybody using more ample indicators, like life quality for that measurement. It is a sane goal if you keep it into perspective, and doesn't forget to keep what you already have while craving for more, but man is alike everywhere, and will destroy the enviroment and trade the long term for short term advantajes, wherever he lives, poor or rich.

"Needless to say, the whole "developing" thing has been a pet peeve of mine"

I also don't like it, but only because it divides the world in two categories, where no two countries are equal.

BTW, the title of this thread should be just as direct as the title of ace's article. May I suggest, "The Oil Drum Retracts Petrobras' Peak Oil Date Prediction." Or perhaps, "Correction: Petrobras CEO did NOT Predict 2010 as the Date of the Peak." The title of this article, as written, is . . . shall I say, a bit vague. I think someone is trying to minimize their embarassment.

That's probably a good idea. It does seem like overreach in this case. No one likes to issue retractions but they are unfortunately needed from time to time. I asked the Washington Post for a retraction and they obliged...and I have great respect for the editor because of that.

Edit: on further reflection, it was only a half retraction. Hmmm... maybe he only gets half my respect!

I titled the thread. I thought the title was straightforward (in fact using words from Mr. Pimentel's response) and framed it as such in the introduction above the fold.

Not only should the title and introduction of this thread clearly indicate the correction about the peak oil forecast, but a correction in bold red letters and a link back to this thread should be put in the introduction of World Oil Capacity to Peak in 2010 Says Petrobras CEO (Feb. 4, 2010).

The paragraph he mentions on his short term production growth will impact his plans for long-term production capacities to get a better view on "supply challenges". Supply not a short term problem? Then it's the cost, of getting to the "long-term" production. Higher Taxes on Oil Companies, government restrictions on reserves could repeat 1976 as a false "oil peek". After Jumma Carter we got rid of a lot of government challenges on energy.

Once again, we do not believe it is possible to predict a peak oil date.

I think, in theory, this is correct. You could always find a super duper giant under Mt Everest that has not been looked at before.

I think we should focus on the supply gap because of high rate of demand growth in China/India, rather than a particular peak date or amount.

Supply gap is the flashing red light. Man made intrusions or natural disasters or resource nationalism or cumulative oilfield inability to match flow to demand, who cares. Most likely all these factors are about to gang up on us this decade. Any one of the above leaves us more vulnerable to the next, "Cascading Failure" is the term of art here...

The battle of semantics is a dreary commentary on plain refusal to get to work on remedies, ladies & gentlemen. Some can plant trees, fix waterworks, relearn local skills of fixing things. One thing in America, a very extensive legacy of railway branchline footprint needs to be brought to the attention of those responsible to keep food & fiber and resources and goods moving as the oil economy is starved.

See for US Rail Map Atlas volumes, using carpe diem syndrome, get copy of volume to refresh recollection of planners in your region/state/county/city. Begin with existing rail mains and ask for container handling gear at points of junction with previous rail branch-offs. Talk to your State National Guard officials about recommissioning the Railroad Operating & Maintenance Battalions, state by state. Assess the most critical branchlines for rebuild, based on things like agricultural traffic, manufacturing enroute, resources, building material, etc.

This is all baby step stuff, and the reformed military rail logistics units can enhance the clinic level medical requirements in their respective locale. This concept of replacing railway infrastructure is not sexy nor high tech, simply emplacing "Guarantor of Societal & Commercial Cohesion" come what may with imported oil cut-off, homeland attack, or regional disaster or drought. It is not Amtrak or High Speed Rail, or Mag-Lev. Just generic railway link to cover trucking gridlock.

Writers like Jim Kunstler & Richard Heinberg constantly mention railway rebuilding, but it is important to do more than hit & run with the topic of railway rebuild. Gentlemen, why not help us blog bashers with specific steps to take at the local level? At the Chamber of Commerce, or County Supervisors meeting or stockholders annuals? Tea Party people? Big Corps like Fedex, WalMart, Sears USPS & UPS, anyone who ships should take a personal interest in Parallel Bar Therapy. See articles 374 & 1037, Mr. Emmanuel.

Teamsters! Mr. Hoffa, I presume? Are you Peaking Oil savvy? Consider asking the membership to get personal copy of Christopher C. Swan's "ELECTRIC WATER". I see not a word on the oilfield depletion threat in the "TEAMSTER" magazine. Ignorance is bliss?

It seem all types of people are watch what is said on this site.

It's very good that Petrobras has replied to my previous post! I wish that Saudi Aramco would also reply to some of my Saudi posts.

I appreciate Petrobras' reply but it would have been good if some positive statements could have been made rather than negative ones such as "we do not believe it is possible to predict a peak oil date" and "we do not believe it will happen in 2010".

Peak oil capacity will probably be this year if you believe OPEC's surplus capacity numbers, but of more importance is peak oil production. According to IEA historical data, the peak oil date was July 2008 as shown in the chart below updated for the IEA Oil Market Report for Feb 2010.

The chart also shows that oil supply and demand have been well balanced since Oct 2009. Oil supply has been just under 86 mbd since Oct 2009 and is expected to remain just under 86 mbd until about Jun 2010. Thus, oil supply and demand should stay in balance until about Jun 2010.

From Jul 2010 to Sep 2010, it is estimated that a supply shortfall of over 1 mbd will happen unless OPEC can increase production further. This means that Saudi Arabia needs to increase production to help meet expected world demand in 2010Q3. We won't have to wait long to see if Saudi Arabia does or wants to increase production to a higher level.

The IEA OMR Jan 2010 report said that Dec 2009 world oil production was 86.17 mbd.

The IEA OMR Feb 2010 report says that Jan 2010 oil supply was 85.8 mbd, down by 45 kbd from Dec 2009. This means that the revised figure for Dec 2009 production is 85.85 mbd, revised downwards by 0.33 mbd. It appears that world oil production is struggling to exceed 86 mbd, creating a temporary oil supply plateau from Oct 2009 to Jun 2010. The OPEC OMR Feb 2010 also stated that Jan 2010 world oil supply was just under 86 mbd, at 85.67 mbd.

Parts of the world oil supply chain have become more fragile as Middle East stability is not improving as Iran faces more sanctions and Iraq's production is not increasing yet, Venezuela is having serious power shortages, big oil companies are looking to exit Nigeria and increased US Gulf of Mexico production is vulnerable to hurricane outages.

Production in the US GoM Federal in Sep 2009 was 1.65 mbd up from lows of about 1.3 mbd in 2007 and almost surpassing its previous peak of 1.69 mbd in Jun 2002.
If hurricane outages occur in 2010Q3 then world supplies could be reduced further which would place enormous pressure on OPEC to increase production.

Oil prices could easily exceed $100 later this year if demand continues to increase and supply is unable to meet demand.

I appreciate Petrobras' reply but it would have been good if some positive statements could have been made rather than negative ones such as "we do not believe it is possible to predict a peak oil date" and "we do not believe it will happen in 2010".

Those were not "negative" comments. Given the bad history of predicting peak dates, they were brutally honest.


Peak oil capacity will probably be this year if you believe OPEC's surplus capacity numbers

For example, how about this prediction?

His comments sort of have the feel of JD's comments.

Same techno-brutalism.

Not JD. He posts as OilFinder2 on

Unlikely to be JD - it was posted from the US, not Japan (and JD would be ruder !).

New STEO out as well:

EIA says 5.20 mb/d spare capacity for this year. What level of production is KSA supposed to be capable of now - >13 mb/d? 1450 + July '08's 11.2 mb/d, almost there.

OPEC capacity caps prices - Oil & Gas Journal

Feb 1, 2010
By Sam Fletcher

The International Energy Agency in Paris estimated in December the sustainable production capacity for the Organization of Petroleum Exporting Countries at 35.4 million b/d, with actual output at 29.05 million b/d, leaving a spare capacity of 6.35 million b/d. That spare capacity drops to 5.37 million b/d if less dependable producers such as Iraq, Nigeria, and Venezuela are eliminated.

Opec quotas for Iraq’s oil won’t come quickly, says cartel chief | FT Energy Source |

In total, Opec members are planning 140 oil projects over the next five years Abdalla El- Badri, its secretary-general, said today, but later clarified that this did not include Iraq’s raft of ambitions, which he believes will take “a long time” to yield 12m b/d.

“The current investment is going to be enough to satisfy demand and provide a cushion of spare capacity of 6 million barrels by 2013,” he said.

Oh well, it's a lot of oil, right?

OPEC says most of their projects will just make up for depletion (about a third of the way in):
Global Economic Forum — Global Energy Outlook

Thanks aangel for that!

Here's the transcript and Al Falih, President and CEO Saudi Aramco, says on page 3:

a third of our capacity is idle but it is idled and at the same time ready to come on stream on a very short notice. So today our investment for the foreseeable future is only to replace decline and depletion of our existing capacity. Long term, if we see that the demand supply balance is calling on us to add capacity we will certainly consider it.

You're welcome. And notice how Total's chief is the only one who can see (or is willing to say) what we all see.

Do you believe OPEC's statements on spare capacity? OPEC key member Saudi Arabia does not allow independent auditing of their field production and reserves so are their numbers to be believed just because they say so?

Although the EIA doesn't qualify spare capacity anymore, the EIA really means spare capacity which is good for 90 days. In the August 2007 EIA STEO, the bottom of Table 3a OPEC Oil Production states "“Capacity” refers to maximum sustainable production capacity, defined as the maximum amount of production that: 1) could be brought online within a period of 30 days; and 2) sustained for at least 90 days."

In the September 2007 EIA STEO, Table 3c replaced Table 3a and has conveniently omitted the qualification above ever since.

In contrast, the IEA continues to qualify OPEC spare capacity by stating that "Capacity levels can be reached within 30 days and sustained for 90 days."

Iraq has the most potential of all countries to increase oil production but it won't change the peak oil date. Instead it will slow the decline rate which is good. The chart below shows that Iraq's production in 2009 was almost the same as in 2008. For Iraq to increase production to 8 mbd by 2021 requires stable petroleum legislation, construction of necessary infrastructure including pipelines and ports, and all oil production facilities to be safe from terrorist activity.

Do you believe OPEC's statements on spare capacity?

No, not after the lackluster spare capacity response to oil priced over a 100 dollars in the run up to 147 in July 08.

Please, if you or anybody know what is the definition of "demand" as it is used by the oil forecasting industry, state it.

EIA: "Energy demand: The requirement for energy as an input to provide products and/or services."

These numbers for spare capacity are nothing more than margins of error, OPEC nations being black boxes in almost every instance. I'm even prepared to entertain the idea that the KSA surge in '08 was purely manufactured by the EIA, led by Caruso, who Aleklett chastized as one of the most dangerous people in the world. Who the hell knows! All we can do is work with the data at hand, which is fishier than the Grand Banks.

You see all kinds of nutty things parsing the production data. For instance June '04-March '05 KSA production was 11046.171 kb/d. Every month. To the 3rd decimal place. Then they must have brought something online, for April-Sep production was 11146.171. Then they needed to boost prices apparently, because it was back down to 11046.171 for 3 months...from Jan '04 to Oct '09 it's .171 on every number as well. Does EIA have a disclaimer for this? Because it isn't documentation in any sense of the word. It would be fodder for a story here, too. I call dibs!

I noticed last month that some Venezuelan numbers had been revised down either 100 or 200 kb/d for about half a year, too. Also, the spread between the peak in July '08 and trough in '09 is 3475.58 kb/d - is that the real SC, or do we take KSA at their word that Khurais and its two phases of 600 kb/d each is viable?

Incidentally wasn't Khurais Ph 2 supposed to come online last month? Heard nary the peep myself, Google News has two hits this morning - one of which was the 1st story here about Petrobras. Other one is a Portuguese piece on that Forbes monster field article.

Until we get rid of the rank empiricism in oil depletion analysis, we will always get this run around. Big oil basically toys with us because they have the data and we don't. In the end it doesn't matter because some of us have the recipe to the secret sauce. This happens all the time when a science matures.

Speaking of business plans, this You-Tube is a hoot:

Yes, let's draw a line on a graph representing the desired "growth". (see 1.45 minutes into the 3 minute business plan for growth)